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.
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 jobholders 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 outlinedautomatic enrolment and establishing active membership of qualifying schemes of a specified standardare 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.
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.
Requirement to keep records
(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 regulators 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 persons 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 peoples 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
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 issuesperhaps 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 husbands 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.
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 demandsof when and where someone come before themthat 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.
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 issuedall very light touchand 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 Majestys 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
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 Ministers 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 oclock till Thursday 31 January at half-past Nine oclock.
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