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Lord Monkswell: I listened with interest to the Minister's response and I wonder whether it is entirely adequate. He suggested that if a trustee appointed by the authority was to levy or charge unreasonable fees, then the authority would remove that person as a trustee and not employ him on any other occasion. However, that would be shutting the stable door after the horse had bolted. That seems to be a thread running through the whole pensions debate.

The problem would already have occurred in that the trustee would have levied the unreasonable fees. Perhaps the Minister would consider that point and offer a hope that the unreasonable fees levied would not have to be paid.

Lord Mackay of Ardbrecknish: I imagine that the fees would be paid on some kind of time basis—either per day or even per hour. Quite clearly, if somebody charged unreasonable fees I fully accept that that person may obtain a few pounds or guineas, or whatever they charge, when they submitted their Bill for the first few hours worked; but the pension fund and the authority would then be alerted and could stop that happening again. I believe, therefore, that there is a protection in the Bill.

I take the point that somebody may get away with a few hours of unreasonable fees. But we are trying to

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prevent a trustee getting away with many hours, days, or weeks of unreasonable fees. As I explained, I believe that the powers in the Bill already do that.

Lord Monkswell: I am sorry, but I must come back to that point. I can envisage a situation where a lawyer or someone with legal expertise may be used as a trustee and after several years of work submit a bill that may be astronomical. One needs only to look at the problems faced by the Legal Aid Board to consider the horrors that may beset a pension fund. Perhaps the Minister will think again.

Lord Mackay of Ardbrecknish: The problem with issues like this is that one can create amazing scenarios. I shall not comment on whether lawyers may or may not charge excessive fees. I see the point being made by the noble Lord that a trustee may work for two or three years before putting in a fee note for the work already done and that fee being enormous. All I can say is that I doubt that that will be the way pension funds will remunerate their trustees. I believe it is more likely to be the way I suggested at the beginning of my response. However, I shall check that the situation envisaged by the noble Lord cannot arise because that would slightly undermine my argument.

The Earl of Buckinghamshire: I thank my noble friend for his words and for agreeing to check the position. Contrary to what was said by the noble Lord, Lord Monkswell, I believe that cashflow is also extremely important to lawyers. However, on the basis of what my noble friend said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Haskel moved Amendment No. 32:

Page 3, line 45, at end insert ("provided that the trustee appointed by the Authority under this section has been approved by a unanimous vote of the remaining trustees").

The noble Lord said: Amendment No. 32 is closely aligned with Amendment No. 31. The independent trustee can be both an individual and a company. Although I am sure that what the Minister has already said will apply, companies may have a conflict of interest. It is important that if a company is to be appointed an independent trustee it should win the support of all the trustees. I was told by my advisers that a case arose involving a company called Belling where a small group of people appointed a company as a trustee and the situation was exploited in the manner we discussed. I believe that to be a loophole in the making, to which I would like the Minister to give consideration. I beg to move.

Lord Mackay of Ardbrecknish: The amendment is based on the same ground as the previous one. The authority will be able to set the terms of appointment of any trustee it puts into a pension fund, if it so desires. I suspect that that will be another protection against the problem that has just been mentioned. The amendment we are now considering is slightly different. I hate to say to the noble Lord that I believe it is unacceptable. It will prevent the authority ordering an appointed trustee's fees to be paid from the scheme unless it is unanimously accepted by the rest of the trust board. That

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will give the remaining trustees on the board an unacceptable means of obstructing the appointment of an additional trustee by the authority. While, obviously, in the circumstances we are looking at, the authority will consider that the other trustees are fit to stay on, they may feel a little bruised and unhappy about another trustee being parachuted in on them. I believe that that will give them an unacceptable grip over the trustee that the regulatory authority may wish to put into the pension fund in order to sort it out.

I hope that on reflection the noble Lord will see that his amendment is too restrictive. We certainly do not wish to see that in respect of the regulatory authority's powers.

Lord Haskel: I thank the Minister for pointing that out. It is important to remember that a number of independent trustees are now companies which go around touting for business. It is incumbent on them to win the support of all the trustees. However, in view of the other point the Minister raised, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment Nos. 33 and 34 not moved.]

Clause 6 agreed to.

Clauses 7 and 8 agreed to.

Clause 9 [Civil penalties]

[Amendments Nos. 35 and 36 not moved.]

Lord Lucas moved Amendment No. 37:

Page 4, line 27, leave out ("or failed to comply with").

The noble Lord said: I beg to move Amendment No. 37 and speak at the same time to Amendment No. 170. Both amendments are minor and technical. Their purpose is to remove from Clause 9(2) and Clause 106(1) wording which duplicates the definition of "contravention" given in the list of definitions in Part I of the Bill, namely Clause 112(1). That definition specifically includes the words "failure to comply with".

On Question, amendment agreed to.

[Amendments Nos. 38 to 41 not moved.]

8.45 p.m.

Baroness Turner of Camden moved Amendment No. 42:

Page 4, line 31, leave out subsection (4).

The noble Baroness said: Amendment No. 42 is a probing amendment to find out what the Government intend by writing this clause into the Bill. Clause 9 is said to deal with civil penalties. The subsection that we seek to remove by our amendment reads:

    "The Authority must pay to the Secretary of state any penalty recovered under this section."

We wish to know why the authority cannot keep the money. Presumably, it will have been put to some expenditure in pursuing the case. Why is there a provision in the Bill that if a penalty is recovered it does not accrue to the funds of the authority, which has done all the work and spent money on the case, but to the

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Secretary of State? That does not seem very sensible. I should like to know from the Minister why that provision is in the Bill.

The Earl of Buckinghamshire: I support the amendment, to which I have lent my name. It is quite quixotic to find a provision which says that the money is to be returned to the Secretary of State and the Treasury and then presumably back to the regulatory authority, perhaps minus one penny. I shall be very interested to hear what the Minister has to say in response to the amendment.

Lord Ezra: I too find the proposition somewhat difficult to understand. If, in spite of what we have proposed, the state is not to pay the costs of the authority, I fail to see why any money that accrues to it for whatever reason should flow to the Secretary of State. At the very least, the money should be used to reduce the levy. I believe this to be a quite unreasonable proposition.

Lord Mackay of Ardbrecknish: We believe that although the authority should have power to impose civil penalties it should not have an interest in the number of penalties or the size of the penalties it imposes. Amendment No. 42 would remove the requirement for the authority to pay moneys collected from civil penalties to the Secretary of State.

It would be unacceptable for the authority to have direct, unfettered access to these funds. It would provide a perverse incentive to the authority to increase the number and size of the civil penalties that it imposed. I assure the Committee—this will perhaps comfort the noble Lord, Lord Ezra—that the moneys will be paid into the Consolidated Fund. However, they will go to defray the costs of the authority, including the costs of the case from which the fine has arisen, and therefore reduce the rate of the levy. Given the trouble I had in persuading your Lordships that the levy should be levied on the companies and pension funds themselves, I am sure that the Committee will be happy to know that any moneys which came into the Consolidated Fund by way of fines would be used to defray the costs of the authority and reduce the levy.

Lord Ezra: I am delighted to learn that, but I do not see how anyone studying the provision can read that meaning into it. Surely, we must have more than what the Minister has just said, unless we expect everyone to read Hansard along with the Bill. If what he has said is correct—I am sure it is —I hope that perhaps at the next stage he will bring forward a suitable amendment. There is no way at all that what he said to us can be read into Clause 9(4).

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