Clause
58
Functions
Mr.
Waterson:
I beg to move amendment No. 33, in
clause 58, page 27, line 26, leave
out paragraph
(b).
The
Chairman:
With this it will be convenient to discuss
amendment No. 34, in clause 58, page 27,
line 28, leave out subsection
(4).
Mr.
Waterson:
We are back on money again. Amendment No. 33
would curtail the powers of the trustee corporation to borrow money. I
am happy not to press the amendment if the Minister is able to give me
the assurance that he was not able to give on the previous
amendment—that any money borrowed would be borrowed on
commercial terms and repayable over a reasonable time.
Amendment No. 34 would remove
subsection (4). The hon. Member for Rochdale spoke on previous
amendments about the Secretary of State being a control freak when it
comes to dotting all the i’s and crossing all the t’s.
Surely, if we are setting up the corporation with proper people, any
power that they have, particularly under subsection (3), to enter into
agreements and to invest money, particularly if the power to borrow
money is to be removed from them, they can do on their own without
regularly having to go to the Secretary of State cap in hand.
Those are the reasons behind
the amendments. I commend them to the
Committee.
Mr.
Plaskitt:
Yes, indeed, we are back on money. I shall try
again to reassure the hon. Gentleman. We are clear in the intention
that the personal accounts should be self-financing in the long term,
something that we have already established. However, we know that there
will be periods when the scheme will have insufficient revenues to
cover its costs. Clearly one source of financing for those costs could
be borrowing, which could be from the private sector—the banks
or even other pension providers—or from the Government, or a mix
of both. We do not know at this point—we could not possibly
know—if borrowing will be required. I have touched on the
delivery authority’s role in recommending a financing strategy
for the personal accounts scheme, and we will have more opportunity to
consider it when we reach clause
61.
I reassure the
Committee that, if borrowing is required, like any non-departmental
public body the trustee corporation will need to comply with existing
guidance and legislation to show that value for money for the taxpayer
can be achieved. It is important to stress that a decision about how
the personal accounts scheme should be financed has yet to be taken. We
can only be certain of the right approach when the delivery authority
has been given time to finalise the scheme design, develop its
procurement strategy and engage with the market, which it can do only
when its functions are extended under clause 61. It is vital at this
stage that we do not restrict the options for financing the scheme.
Doing so would compromise the ability to get value for money for
members who are participants in the scheme. By taking away the
trustee’s ability to borrow, amendment No. 33 would do just
that.
Amendment No. 34
would allow the trustee corporation to borrow and invest, but without
the consent of the Secretary of State. As a non-departmental public
body, it is normal for functions such as borrowing and investing to
require the consent of the Secretary of State. That is because an
NDPB’s financial arrangements are to be taken into account in
its parent Department’s budgets. Therefore, it is right and
necessary that it is subject to scrutiny by its sponsor
Department’s Secretary of State. That provides a safeguard to
ensure that the wider interests of the taxpayer are taken into account,
as well as the NDPB’s objectives. In the case under discussion,
the trustee corporation would be responsible for balancing low charges
for members against ensuring that the scheme is commercially viable.
However, the Secretary of State’s consent is needed to ensure
that its actions would not jeopardise the sound management of the
Government’s finances.
I ask members of the Committee
to note that we have made one exception to that rule under clause 58,
which reflects the trustee corporation’s role as sole trustee of
the personal accounts scheme. Provision has been made in subsection (5)
to ensure that the trustee corporation retains an ability to act
independently when acting as the trustee of the personal accounts
scheme—for example, with regard to investing members’
contributions to the scheme. In the case of investing, it is clear that
that must be the responsibility of the trustee acting in the
members’ best
interests.
Mr.
Waterson:
I need to check that I am following the
Minister’s remarks correctly. Is he saying that, under certain
circumstances, subsection (5) could overrule subsection (4) so that in
some cases when the trustee corporation is exercising certain powers
under the scheme as set out in clause 50, it might not need the consent
of the Secretary of State, or are we into an entirely circular
situation?
Mr.
Plaskitt:
I am making an important separate distinction,
which I have tried to explain. It concerns the importance of the
trustee corporation’s ability to act independently when acting
as trustee to the personal accounts scheme. That is a separate set of
circumstances, which is why the provision has been
made.
The hon.
Gentleman asked whether non-commercial rates would ever be
contemplated. As in other issues such as grants, it
is difficult at this point to anticipate the position. It would largely
be for the market to determine when loans are being sought. Again, I
say to him that, if we tried at this stage to impose severe
restrictions on any of the financial options, even though an individual
restriction that he sought might have reasons behind it, that would
damage the overall context of allowing flexibility and protecting all
of the other interests that he rightly wants safeguarded. Pinning down
any one restriction would potentially raise difficulties in others. I
am sure that he would want, across the whole of the funding
arrangement, to maintain flexibility, not only to ensure the success of
the scheme, but to minimise any set of issues that might arise if there
was over-reliance on one particular source of funding, as I tried to
argue in respect of charge levels.
Mr.
Waterson:
Is the Minister saying that in the case of the
trustee corporation, as opposed to PADA, it is envisaged that when it
borrows money, that will be in the markets rather than from the
Treasury?
Mr.
Plaskitt:
It will have a range of options open to it,
which is the whole point of my argument about flexibility. It may well
take private money, it may well have a loan from public sources. That
is all the more reason why it is important at this stage to retain
flexibility about funding requirements, so that all options are there,
in order to protect and maximise the options for the scheme’s
success, bearing in mind the point that I have made about transparency
and that any loan, or even grant support, to the authority would have
to be consistent with the European requirements. As it happens, those
requirements allow for the option
of grants because this is a service of general economic interest and in
those circumstances particular rules
apply.
Mr.
Waterson:
The Minister has been helpful, for a change. Is
he convinced that the European regulations are directly relevant here?
The Government are not proposing to give grants to a manufacturer of
aircraft wings or whatever. The personal accounts system will not be
competing in any sense with any similar organisation in other European
member states, so I wonder how relevant the European dimension is to
this
situation.
Mr.
Plaskitt:
Very relevant is the answer, because the
regulations that I refer to relate to what are known as services of
general economic interest. As the hon. Gentleman rightly says, that is
not comparable to a manufacturer in a competitive situation, but the
regulations are specifically set down because there will sometimes be
large-scale services that are deemed to be of general economic
interest. In those circumstances, where there are not the usual
commercial constraints, it is important to have a set of rules about
the degree to which they may be publicly funded. That is why I cite the
rules; they are specifically important for this precise set of
circumstances. With those reassurances, I hope that he will agree to
withdraw his amendment.
Mr.
Waterson:
I am grateful to the Minister for taking such
trouble over his explanation and I beg to ask leave to withdraw the
amendment.
Amendment, by leave,
withdrawn.
Clause 58 ordered to stand
part of the Bill.
Clauses 59 and 60 ordered to
stand part of the
Bill.
Clause
61
Functions
12.30
pm
Mr.
Waterson:
I beg to move amendment No. 35, in
clause 61, page 28, line 23, leave
out paragraph
(b).
The
Chairman:
With this it will be
convenient to discuss amendment No. 105, in clause 61,
page 28, line 26, after ‘Part’, insert
‘but excluding sections 14 to
24’.
Mr.
Waterson:
The efforts on this group of amendments are a
double-act, and I will leave the hon. Member for Rochdale to make his
case for amendment No. 105, partly because I am not
sure that I fully understand it. No doubt he will enlighten the
Committee in a moment. Amendment No. 35 seeks to remove paragraph (b)
of subsection (2). Clause 61(2)(b) adds to the functions of the
Personal Accounts Delivery Authority, allowing it
“to give any assistance and advice
that the Secretary of State or the Pensions Regulator may require, and
any advice that the Authority considers expedient, for or in connection
with arrangements to enable requirements imposed by or under Chapter 1
of this Part to be complied with and
enforced.”
This is a
probing amendment: I want the Minister to tell us the sort of
situations in which he envisages that subsection (2)(b) would apply.
Subject to that, I would not dream of pressing it to a
division.
Paul
Rowen:
This is an important aspect of the Bill. We are
looking at the functions of the Personal Accounts Delivery Authority,
and amendments Nos. 35 and 105 seek to clarify the relationship of PADA
to chapter 1 of the Bill. Chapter 1 sets the context in which personal
accounts will operate in the pensions market. It mentions occupational
pensions schemes, quality requirements, tests schemes and test-scheme
standards—a whole range of issues that affect the pensions
market. My support for amendment No. 35 and the reason we have tabled
amendment No. 105, is because we were unclear, looking at its functions
and at clause 61(2)(b), why PADA should advise the Secretary of State
on a range of issues for which it is not responsible.
PADA is the delivery authority
that will set up personal accounts. It will then hand that over to the
pension trustee. In my view, it should not take an interest and
involvement in the wider area. Occupational pensions schemes are
already regulated, both here and in earlier Bills. It is important that
PADA’s functions are clear from the beginning. Chapter 1 sets
out the overall content of pensions. It moves on to define the
responsibilities of various groups. That could be the responsibilities
of the Pensions Regulator—another body whose modus operandi is
changed by the Bill—or those of the Secretary of State, or of
PADA. PADA should not be advising the Secretary of State on the
totality of chapter 1 and if we accept clause 61(2)(b), that is what we
will do.
Our
amendment is slightly clumsy. It seeks to remove from chapter 1 clauses
14 to 24 which, in our view, have nothing to do with the operation of
PADA. They may not be the responsibility of the Pensions Regulator, or
those of the Secretary of State, in terms of the operation of the
pensions market. However, given that it is PADA’s responsibility
to set up personal accounts, we do not believe that it should have the
responsibility or possibility of giving advice to the Secretary of
State on issues that are not within its responsibility. The operation
of occupational pension schemes and the job of the Pensions Regulator,
which are covered in chapter 1, are not issues for PADA. It has to be
focused and clear. It has a job to do in a short space of time, and if
it is advising the Secretary of State on everything else to do with
pensions, it will not do the job that it was set up to do. That is why
amendments Nos. 35 and 105 are
appropriate.
We think
that the clause is another example of civil servants going awry. They
are trying to include everything, including the kitchen sink, but we do
not believe that that is appropriate in this
case.
Mr.
Plaskitt:
We are moving into another important part of the
Bill. Clause 61 deals with the functions of PADA. I am grateful to hon.
Members for introducing their amendments and for giving me the chance,
I hope, to reassure them on the points that they have raised. I
understand why they raised
them.
The clause sets
out the scope of the authority’s functions, allowing it to
continue to advise on policy but also to undertake the detailed
implementation work necessary to establish the personal accounts scheme
and to support the regulator in establishing the processes to maximise
employer compliance with the
new duties. The amendments would prevent the authority from undertaking
some, or all, of the second part of that role, but it is absolutely
important that it does, for reasons which I shall try to set
out. The Bill
introduces an obligation on employers to enrol eligible workers into a
workplace pension and to make contributions to it. We could not
introduce such a duty on employers without also having an effective
compliance regime—the two go hand in hand. Otherwise, there
would be no way of ensuring that more workers have the opportunity to
benefit from the reforms, nor of ensuring that employers comply with
the law and do not in any way disadvantage their work
force.
Paul
Rowen:
Does the Minister accept that
compliance is the responsibility of the Pensions Regulator, not
PADA?
Mr.
Plaskitt:
I am about to come to that very point. I am sure
that if the hon. Gentleman will just hang five, we will get
there.
This is a major
project, and although the regulator will be leading on delivery, there
are benefits at this stage to be gained from sharing expertise. Many of
the challenges in setting up an effective compliance regime are not
dissimilar to the challenges in establishing the personal accounts
scheme; for instance, specialist planning and project support for what
is, clearly, a large programme. There is a significant amount of
preparatory work to be done on the design of the compliance
processes.
That work
needs to start quickly, and we do not want to jeopardise the timetable
for delivery. We think that the most effective approach to the scale of
the project is for the regulator and the Department to utilise the
authority’s resources, skills and expertise in the design of the
personal accounts scheme, and in support of the establishment of a
compliance process. I believe that the hon. Gentleman accepts that that
is of critical
importance.
Amendment
No. 35 would prevent the regulator having access to
the authority’s experts in such areas as project management,
procurement and design. I am aware that in taking the approach that we
are, there could be a perceived conflict of interest between delivering
the personal accounts scheme and supporting delivery of the broader
compliance regime. I believe that that is what is exercising hon.
Members in this group of
amendments.
Let me be
absolutely clear: the regulator, not the delivery authority, will be
responsible for ensuring that the compliance regime is fit for purpose.
That is a clear distinction. The role of the
authority will be restricted to supporting delivery of the compliance
processes, and clause 61 simply enables it to carry out that role. Its
detailed remit will be set out in other documentation, largely the
framework document still to come. It will clearly specify the degree of
the authority’s responsibilities in supporting the regulator,
and also its more substantial role in respect of personal
accounts.
Mr.
Waterson:
We have been here before. A
few months after the passing of the 2004 Act, which set up the
regulator and the Pension Protection Fund, it became
apparent that a written protocol was needed to work out the boundaries
between the two. Are we not heading for the same problems in this
instance?
Mr.
Plaskitt:
No, I do not think that we are. I am saying that
these bodies need to show their authority and expertise during the
building process. Once we move into the regime,
however, the functions are very clear and do not have the overlap that
the hon. Gentleman is concerned about. The boundaries will be very
clear once the scheme is in operation. Furthermore, the
authority’s annual business plan will set out its key objectives
and targets. Both of those will be published along with the framework
document once the authority has legal authority to carry out its
extended role. Those governance and practical arrangements, supported
by robust stewardship from our Department, will ensure that any
potential conflict of interest is removed from the decision-making
process.
Paul
Rowen:
On the framework document, can the hon. Gentleman
give us a time frame in which he expects it to be published? Clearly,
the document is key to removing some of our concerns about how the
clause will
operate.
Mr.
Plaskitt:
It is a key document, and the hon. Gentleman is
right to describe it as such. I cannot tell him precisely when it will
be available. It will be available for study in the Library of the
House in plenty of time before the scheme is up and running. I am
grateful to the hon. Gentleman for clarifying amendment No. 105, which
seeks to exclude the authority from even giving advice and assistance
on clauses pertaining to qualifying
schemes.
Let me try to
reassure the hon. Gentleman that there will be no conflict of interest
here. While the authority will be able to advise the Secretary of State
on setting the criteria for qualifying schemes, there will be no role
beyond that. Any body or stakeholder that the Government consult when
drawing up the regulations will have no additional role. It will be for
the Secretary of State to satisfy himself that the regulations achieve
the appropriate policy outcomes and to ensure that the criteria
continue to support all good quality provision. In due course, it will
be for the House to pass those precise
regulations.
Moreover,
excluding the authority from providing support to the regulator, under
clauses 14 to 24, as the amendments seek to do, could, in fact, lead to
a confused and fragmented approach. That is another kind of problem
that I am sure the hon. Member for Rochdale would want us to avoid. It
would be very difficult for the authority to offer constructive support
on the compliance process without regard to the spectrum of schemes
that could fulfil those duties.
In summary, robust Government
arrangements will ensure that the regulator will be responsible for
questions of design in the compliance regime and the authority will be
restricted to supporting delivery. With those reassurances, I hope that
the hon. Gentleman will agree to withdraw his
amendment.
Mr.
Waterson:
I am grateful for the Minister’s
reassurances. It seems that we have to wait for the framework document,
which will answer all our concerns and worries. I beg to ask leave to
withdraw my amendment.
Amendment, by leave,
withdrawn.
Mr.
Waterson:
I beg to move amendment No. 36, in
clause 61, page 28, line 36, leave
out paragraph
(b).
The
Chairman:
With this it will be convenient to discuss
amendment No. 37, in clause 61, page 28,
line 37, leave out subsection
(7).
Mr.
Waterson:
The amendments may have a familiar ring to them.
The Minister can just read out what he said in answers to previous
amendments. Amendment No. 36 seeks to take out the authority’s
power to borrow money, which is a bigger concern for us than the
trustee corporation. I do want not want to rehearse those arguments. We
need clarity about where PADA is going to get its money from, whether
it will get a bung from the Government if it gets its figures wrong and
whether it will be lent money at absurdly low interest rates, or no
interest rate at all, and so
on.
12.45
pm
Amendment No.
37 would remove subsection (7), which has the Secretary Of State
getting in on the act yet again. That is the right approach and it is
encapsulated neatly in the two amendments, which set out clearly the
parameters for the PADA to operate in and let it get on with
it.
Mr.
Plaskitt:
As the hon. Member for Eastbourne said, there is
a certain familiarity about the arguments that we are engaged in, so I
will try to be as brief as
possible.
As
we have already established in debates on previous
amendments this morning, there will be an initial period when the
scheme has insufficient revenues to cover all its costs. For example,
it is envisaged that the authority will incur costs in finalising the
design of the scheme and making payments to contractors before the
scheme has actually opened its doors to its first members. Clearly,
given our intention that the scheme be ultimately self-financing, the
likely source of financing for those costs could, indeed, been
borrowing. However, as I hope I have already made it clear in earlier
debates, no decision on how the personal account should be funded has
yet been taken and we have not yet decided whether any borrowing will
be from the private sector, the public sector or from a mixture of
both: that will depend on a number of factors, including the scale of
any borrowing requirement and the willingness of the private sector to
engage with a project of this scale.
We can only be certain of the
right approach once the authority has been given time to finalise the
scheme design, develop its procurement strategy and engage with the
market. If borrowing is required, then, like any other non-departmental
public body, the Personal Accounts Delivery Authority will need to
comply with all the existing guidance and legislation to show that
value for money can be
achieved.
As we have
heard in previous debates, it is vital that we keep all the options
open at this stage and allow the authority to recommend the best
financing strategy for the personal accounts scheme. We should, at this
stage, try to tie the authority’s hands by removing any of the
options that are open to us.
Conversely,
amendment No.37 would allow the authority to borrow, but, again, it
would remove the requirement for the Secretary of State's consent. As
the Committee will be aware, it is normal for borrowing by
non-departmental public body to require precisely that consent, because
its financial arrangements are required to be taken into account under
its parent Departments’ budgets. Therefore it is right and
necessary that such an arrangement is subject to scrutiny by the
sponsoring Department’s Secretary of State. That process also
provides a crucial safeguard to ensure that the wider interests of the
taxpayer are being taken into account and, indeed, that the personal
accounts scheme will be self-financing in the long run and will meet
the non-departmental public body’s objective to set up a scheme
that balances low charges for members against ensuring that the scheme
is commercially viable.
For reasons that are, by now,
somewhat familiar, I hope that the hon. Member for Eastbourne will ask
leave to withdraw his
amendment.
Mr.
Waterson:
The familiarity of the arguments makes them no
more persuasive. The Minister’s reiteration of what Donald
Rumsfeld calls the known unknowns—let alone the unknown
unknowns—is tedious to the point of rendering us comatose. I
will not tempt the Minister to say any more about this, so I beg to ask
leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
61 ordered to stand part of the Bill.
Further consideration
adjourned.—[Mr.
David.]
Adjourned
accordingly at nine minutes to One o'clock till this day at Four
o'clock.
| 
