Clause
37
Offences
of failing to
comply
Andrew
Selous (South-West Bedfordshire) (Con): I beg to move
amendment No. 148, in clause 37, page 16,
line 40, at end
add—
‘(3) For the purposes
of subsection (1), “wilfully” shall be subject to the
same requirement of reasonableness as is generally applied in
employment
law.’.
The
amendment was tabled in an attempt to get the Minister to comment on
the use of the word “wilfully” in
clause 37. We have heard about the need for the
proportionate use of the big stick. We all know that small,
medium-sized and large businesses often come under intense competitive
pressures, and that employers might have genuinely neglected their
duties regarding pension contributions purely because of the demands of
the business, rather than because they have wilfully determined not to
pay the contributions that they should by law. I would be grateful if
the Minister could clarify how the word “wilfully” will
be interpreted and give the reassurance, which I know that many in the
business community seek, that there will be a graduated response to
non-compliance, that the response will be tough only when it needs to
be, and that minor inadvertent errors or omissions by employers will be
dealt with in a light-touch
way.
Mr.
Plaskitt:
Let me see if I can be reasonable in explaining
the use of the word “wilful”.
The clause
sets out the details of the new criminal offence for employers who fail
to comply with their duties under clause 3(2) in respect of automatic
enrolment, under clause 5(2) in terms of re-enrolment, and under clause
6(3) in terms of the jobholder’s right to opt in. The amendment
concerns the important issue of the criminal sanction for
“wilful” failure to fulfil the employers’
duties.
It
might help if I briefly outline the compliance strategy and how the
sanction fits into that. The compliance policy has been developed as a
three-stage strategy. The first stage is to educate and inform
employers of their duties, and the second is to enable them to comply
simply and easily with those duties. The third and final step is
enforcement. The criminal sanction is therefore a backstop to the
enforcement strategy. Our expectation is that it will almost certainly
be rarely used. However, the requirements that we have
outlined—automatic enrolment and establishing active membership
of qualifying schemes of a specified standard—are designed to
help jobholders to meet their aspirations in retirement. Failure to
fulfil those duties jeopardises individuals’ prospects, so
employers need to take their duties
seriously.
It is
right that an employer who “wilfully fails to comply”
should ultimately face a criminal sanction. The manner in which we have
designed the compliance and enforcement regime means that to reach that
ultimate sanction, an employer would have had ample opportunity to
fulfil their duties. Therefore, at that stage there is likely to be
evidence of “wilful” failure to comply because they would
have been given any number of reminders, encouragements and
inducements. If they were still non-compliant, that would be considered
“wilful”
failure.
Turning to
the amendment, there is no reason explicitly to mention reasonableness
in the clause, because there is an underlying understanding that to act
wilfully is unreasonable. The employer who does not comply because of
genuine inadequacy or stupidity would be unlikely to be found guilty of
wilfulness. The use of the term “wilful” ensures that if
employers have failed to fulfil their duties through haphazard
administration or forgetfulness, they will not be criminalised. The
compliance regime will address those employers much earlier in the
process and put them in a position that does not disadvantage them, but
encourages them to
comply.
That
distinction underlines why “wilful” is there, and I hope
that my explanation will be sufficient to enable the hon. Gentleman to
withdraw the
amendment.
5
pm
Andrew
Selous:
That was another helpful reply. The Minister
outlined the three-stage strategy and said very clearly that there will
be ample opportunity for employers to fulfil their duties. That is the
sort of language that I was hoping to hear, and I know that
employers’ organisations will have been grateful to have heard
it. I am interested in how the legal defence of stupidity would work. I
am not quite sure how that could be applied, but the Minister has been
reassuring, so I beg to ask leave to withdraw the
amendment.
Amendment,
by leave, withdrawn.
Clause 37 ordered to stand
part of the
Bill.
Clauses
38 and 39 ordered to stand part of the
Bill.
Clause
40
Requirement
to keep
records
Andrew
Selous:
I beg to move amendment No. 149, in
clause 40, page 17, line 18, at
end insert—
‘(1A) Records
required in accordance with subsection (1) may be kept in any
reasonable
manner.’.
I
return to a point I have made several times; the Bill is going to apply
to a vast range of hugely diverse employers, from sandwich bars,
hairdressers and small builders at one end of the scale to the ICIs,
Vodafones and Shells of the corporate world at the other. Clause
40(1)(a) stipulates a form and a manner to be prescribed in which
records should be kept. I merely seek reassurance that the Government
will not be overly prescriptive. Most employers, probably, are
reasonably computerised these days, but certainly not all. Some may
prefer to have manual records or to keep their records in a
multiplicity of ways. The point is that they need to be efficient,
there needs to be some kind of audit trail, and they need to be
complete. That is what we should seek, rather than being overly
prescriptive as to how employers in a huge range of businesses they
keep their records. If the Minister can reassure me regarding that, I
will no doubt be happy to withdraw the
amendment.
Paul
Rowen:
In terms of the discussion we have had about
compliance and how we expect the system to operate, the requirement to
keep records is a reasonable one. I think it important that we do get
assurance. We hear from employers all the time about the burden that
the legislation we pass places on them, and Ministers always talk about
cutting down on red tape. Often, when new laws are being put in place,
that principle is forgotten and we get carried away with ourselves. I
know this clause says that the details will be laid out in regulations,
but it would be helpful if the Minister explained what minimum he
expects, and what additional burden he expects it to place on a wide
range of employers for whom, at the moment, a very simple PAYE system
may be the extent of their employee record
keeping.
Mr.
Plaskitt:
I think we are agreed, given what is being
compiled here by way of pension records, that the keeping of records is
a very important part of those arrangements, and we must have
appropriate measures in place to ensure that employers are compliant
with that. However, as we have said before and as I will say also on
this clause, we are not setting out in any way to be unnecessarily
burdensome to employers, hence the regulations will be designed to
satisfy both objectives. We intend to set out in the regulations which
records should be kept, the form or forms in which they should be kept
and the period for which they should be kept. I think that, as it sets
out the basic requirements, that guidance will be welcomed by
employers. We can agree that it will be simpler and more efficient for
both employers and the regulator if the minimum essential records are
kept in a uniform manner. That will make it straightforward for
employers to respond to the regulator’s requests for
information.
Miss
Julie Kirkbride (Bromsgrove) (Con): This discussion
reminds me of a conversation that I had just a few days ago with
someone who sought to obtain some records from an employer. Inevitably,
that was in different circumstances, because this measure has not been
enacted yet. It transpired that that person’s employer had died
and the widow had thrown all the records, including their training
record, in the bin. Will the Minister comment on what might happen in
such circumstances under these
regulations?
Mr.
Plaskitt:
If the hon. Lady takes a look at clause
40(1)(b), she will see that there is a requirement in the Bill for
employers to retain records. There is an expectation that they will
retain them for up to six years. I hope that that will satisfy her on
that
point.
Miss
Kirkbride:
Will the sad and lonely widow be prosecuted
because she put all the records in the
bin?
Mr.
Plaskitt:
I draw attention again to paragraph (b).
Regulations will be made requiring any
person
“to preserve
those records for such period, not exceeding 6 years, as may be
prescribed”.
That is
already a legal requirement in respect of many other bits of
information. I think that there is a requirement on us as individuals
to retain information for tax purposes for up to that length of time.
It is essential to have those requirements in place, because it is
important to have the means to hand to deal with any dispute that may
arise over records that are
kept.
The important
point about records relating to contributions to pension schemes of
this type is that the scheme will also hold the records, presumably the
whole way through. There need not be a burdensome duty on employers to
retain the records for ever, but retaining them for a reasonable time
is sensible. The point about the clause is to what extent the
Government take powers to demand that employers maintain the records.
As the clause says, it is for up to six years. Employers will obviously
need to be aware, and will be informed by the education process that we
will have to go into when this measure is introduced, of the importance
of retaining the records. As I said to the hon. Lady, this is not a
unique provision; it exists in respect of many other requirements to
retain records for similar
purposes.
Miss
Kirkbride:
Inevitably, the proposed regulations will apply
to very small family businesses in which the keeping of records will
be, by definition, much more burdensome. Although we all understand
that we keep our own tax records, keeping other people’s
information is so much more difficult for a small employer, especially
in the circumstances that I have described. Given that the agency
collecting the contributions will have the records, should the Minister
not think again about whether the widowed lady should keep them for six
years
afterwards?
Mr.
Plaskitt:
The hon. Lady is slightly over-egging this. It
is not that difficult to keep the records that are required in this
case. As I have tried to say, we will ensure that the regulations are
not over-burdensome. We want to make absolutely sure that the
information
is very straightforward and simple. I do not accept that it will be
significantly burdensome, as I think the hon. Lady said, to retain
records of this type, even for small employers. From my knowledge of
small employers, they are already retaining quite a lot of information.
This will not be a completely new and isolated requirement that is
imposed on them. It will not be much out of line with requirements that
they are already fulfilling. I want to stress that we are trying to
make this straightforward for employers, including small employers,
since they would be holding the information in the format that the
regulator needs. The common standards of holding information will also
make things easier, because the employers will understand what they
have to hold and how they have to hold it. The regulator, on receiving
the information, could judge more easily whether the employers in
question have or have not been
compliant.
The
regulations, which set out the details of the record-keeping duties,
will of course be subject to consultation. Those covered by the
regulations will have every opportunity to give their views on how the
regulations should be set out. We recognise that the intention of the
amendment is to give employers flexibility in how they keep the
required records, but it would give too much flexibility, with no
boundaries, which is what we intend the regulations to prescribe.
Furthermore, as tabled, the amendment would conflict with the power in
clause 40(1). That subsection gives the Secretary of State the power to
specify the forms in which records must be kept. The amendment would
allow employers to choose for themselves how to keep their records, so
long as it was somehow in keeping with the concept of reasonableness.
On those grounds, I hope that the hon. Member for South-West
Bedfordshire will agree to withdraw the
amendment.
Andrew
Selous:
I am grateful to the Minister. The amendment was
probing. The debate has been useful, not least for the contribution of
my hon. Friend the Member for Bromsgrove, who raised some real issues,
particularly about sole traders and unincorporated businesses, where
there are small family issues. Think about where, if the premises have
gone, the widow keeps all the documents. Are they to go up in the loft
or something? There is perhaps a need for some further consultation
with very small business organisations on such issues—perhaps
the records could be lodged in some central place, so that the widow
would not have to keep them in her own home, if her husband’s
business no longer exists. There are some practical issues like that.
However, I have accepted the points that the Minister made. I am
grateful to him for the explanations. I beg to ask leave to withdraw
the
amendment.
Amendment,
by leave,
withdrawn.
Clause
40 ordered to stand part of the
Bill.
Clause
41
Powers
to require information and to enter
premises
Andrew
Selous:
I beg to move amendment No. 150, in
clause 41, page 17, line 31, after
‘such’, insert ‘reasonable’.
I noted a curiosity in clause
41: “reasonable” appears in subsection (3)—new
subsection (A1)—relating to the power to enter premises. That
must be at a “reasonable time” for an employer. We would
all accept that as sensible. Therefore, I was curious and a little
concerned as to why in subsection (2), under paragraph (b) of new
subsection (1A), people may be
required
“before the
Regulator at such time and place as may be
specified”.
We
all know that the Pensions Regulator has a good record so far. It has
not behaved in an out-of-hand manner. There is always a possibility
that has to be guarded against, that perhaps at some future time
employees of the Pensions Regulator might be so exasperated by one
employer that they might place demands—of when and where someone
come before them—that were not reasonable. Only a small point,
but this will be the law of the land when it goes through.
“Reasonable” appears further on in the clause and could
usefully be in the subsection I have
indicated.
5.15
pm
Paul
Rowen:
I just wanted to ask the Minister whether there is
a discontinuity between subsections (1) and (2) and subsection (3), and
between the compliance regime in the Bill and provisions in the
Pensions Act 2004. In particular, I picked up on the word
“inspector” in subsection (3). Everything before that
point is talking about the regulator, the regulator requiring
information and compliance notices being issued—all very light
touch—and yet in subsection (3) the Bill suddenly goes back and
uses parts of the 2004 Act, talking about regulators and entering
premises, all of which implies a heavy gang from Her Majesty’s
Revenue and Customs suddenly turning up to grab the records to find out
why somebody has not been paying. That is at variance with what this
chapter is attempting to do in terms of getting a light-touch
compliance regime that is easy to operate and which has penalties that
are easy to
understand.
Rather
than using sections of the 2004 Act, should we not ensure that those
are amended to be more in tune with the rest of the Bill? Subsections
(1) and (2) seem different from what has been proposed beforehand. Who
are the inspectors? That is not the language that is used elsewhere in
the
Bill.
Mr.
Plaskitt:
I appreciate hon.
Members’ contributions. The short answer, on which I shall
expand a little bit more in a moment, is that clause 41 makes
alterations to the 2004 Act and therefore incorporates the same
language and terminology in it. We cannot revisit that Act. The simpler
way of inserting into the Bill the essential powers that we must have
is to take them from the 2004 Act. However, the two powers in the
clause should be regarded as backstop powers to be used for extreme
purposes, where there is non-compliance. They have to be included
because not to have them would leave the regulator disarmed in certain
circumstances and I do not think that the Committee would want that to
be so. As I have just outlined, clause 41 amends section 72 of the 2004
Act. The amendment would force the regulator to ensure that such
meetings as are indicated take place at a reasonable time and
place.
I recognise
the intention of the amendment and understand the principle behind it,
but it should be remembered that the regulator will require people to
meet it only in exceptional circumstances. If the regulator is of the
opinion that an employer is not complying or may not comply with their
duties, it will need the appropriate powers to conduct further
investigations. It will also need sufficient flexibility in the
legislation to be able to implement processes that will ensure that it
meets its objectives in an effective and efficient
manner.
Inserting the
word “reasonable” where the amendment would insert it
could make the powers unworkable. It is almost certain that instances
will arise in which there are differences of opinion between the
regulator and the person required to attend about what is a reasonable
time and place to meet. We do not want to hinder those important
powers. I hope that with that explanation the hon. Gentleman will agree
to withdraw the
amendment.
Andrew
Selous:
These things are always more complicated than they
appear on the surface. I heard the Minister’s explanation. There
could be a counter-argument that might prevent the powers being
inserted into the 2004
Act.
I just hope that
the Minister takes my general point that we expect the powers that are
given to the regulator to be exercised in a reasonable manner.
Requiring someone to appear at 7 in the morning would clearly be
unreasonable. Requiring them to appear somewhere far away from their
business location would be unreasonable. I hope that those concerns
will be in the minds of the regulator and the Government when the
provisions become
law.
We know that the
intentions will be good, and that the regulator has a good record.
However, given the wide scope of the Bill, there is concern about
whether businesses will be treated fairly. I detected that that was the
intention behind what the Minister said, and I hope that we do not have
cause to revisit this
area.
On the basis of
what I have heard, I beg to ask leave to withdraw the
amendment.
Amendment, by leave,
withdrawn.
Clause
41
ordered to stand part of the Bill.
Further consideration
adjourned.—[Mr.
David.]
Adjourned
accordingly at twenty-one minutes past Five o’clock till
Thursday 31 January at half-past Nine
o’clock.
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