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Lord Ezra: My Lords, the Minister's remarks disturb me on two counts. First, I think that his arguments about not including in the Bill anything about the general duties (however they might be defined) of the new authority fly in the face of precedent. The regulatory bodies that have been set up for the other industries that I mentioned are similar in that they are regulatory bodies. They have certain powers. It might have been argued that their powers could have been found by reading the whole of the relevant Bill and that there was no reason to state their general duties at the beginning of that Bill, but that is what was done. My noble friend Lady Seear made that point strongly.

The other difficulty is that the Minister said that paragraph 2 of Schedule 1 states that the authority can do anything within its powers according to the Bill. In fact, that is not the wording. The provision states that the authority can do anything that is "conducive" to carrying out its duties. That goes very much further than anything that I have seen in any comparable Bill. I was trying to identify more precisely what the general duties of the authority should be in these circumstances and in this Bill.

I do not agree with the view that that involves monitoring every single scheme. The word "monitoring" was introduced in the previous amendment on this matter, which was moved by the noble Baroness, Lady Turner. That word has been removed. Indeed, if it is felt that the words "general supervision" are too strong, I am sure that other words could be used. The whole burden of the amendment is to indicate that the authority would intervene only where it was necessary to do so. I believe that that is common ground. The purpose of the legislation is to ensure that intervention takes place only where it is shown that schemes are not conforming with the provisions of the Bill as laid down in Parliament.

I feel that a strong case has not been made against the amendment. If the wording of the amendment is not correct, I should be delighted if the Government would introduce their own amendment at the next stage. Indeed, the Minister's penultimate remarks suggested the possible wording of such an amendment. As I have said, if the term "general supervision" is shown to go too far, I am sure that it would be possible to think of other wording.

13 Mar 1995 : Column 566

This is an issue of principle. When statutory authorities are established in major legislation, I believe that the parliamentary draftsmen should introduce, and the Government should support, a general statement of their duties, however worded. It is quite wrong to leave people to trawl through the whole Bill to discover what the general thrust of those duties should be. Furthermore, I believe that people could be misled by the broad wording of the second paragraph of Schedule 1. In those circumstances, I commend the amendment to the House.

3.28 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 93; Not-Contents, 120.

Division No. 1


Acton, L.
Addington, L.
Allen of Abbeydale, L.
Allenby of Megiddo, V.
Archer of Sandwell, L.
Ashley of Stoke, L.
Bancroft, L.
Barnett, L.
Blackstone, B.
Bruce of Donington, L.
Carmichael of Kelvingrove, L.
Cledwyn of Penrhos, L.
Clinton-Davis, L.
Cocks of Hartcliffe, L.
Craigavon, V.
David, B.
Dean of Beswick, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Donaldson of Kingsbridge, L.
Donoughue, L.
Dormand of Easington, L.
Eatwell, L.
Elis-Thomas, L.
Ennals, L.
Ezra, L.
Falkender, B.
Falkland, V.
Freyberg, L.
Gallacher, L.
Gladwin of Clee, L. [Teller.]
Gould of Potternewton, B.
Graham of Edmonton, L.
Grey, E.
Halsbury, E.
Harris of Greenwich, L. [Teller.]
Haskel, L.
Hayter, L.
Headfort, M.
Henniker, L.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howie of Troon, L.
Irvine of Lairg, L.
Jay of Paddington, B.
Jeger, B.
Jenkins of Hillhead, L.
Jenkins of Putney, L.
Judd, L.
Kilbracken, L.
Kinloss, Ly.
Kirkhill, L.
Lovell-Davis, L.
Mason of Barnsley, L.
Mayhew, L.
McIntosh of Haringey, L.
McNair, L.
Merlyn-Rees, L.
Monkswell, L.
Monson, L.
Morris of Castle Morris, L.
Nelson, E.
Nicol, B.
Ogmore, L.
Phillips of Ellesmere, L.
Rea, L.
Redesdale, L.
Russell, E.
Sainsbury, L.
Saltoun of Abernethy, Ly.
Seear, B.
Sefton of Garston, L.
Serota, B.
Shannon, E.
Shaughnessy, L.
Shepherd, L.
Simon of Glaisdale, L.
Simon, V.
Stallard, L.
Stedman, B.
Stoddart of Swindon, L.
Strabolgi, L.
Taylor of Gryfe, L.
Tenby, V.
Thomas of Walliswood, B.
Tope, L.
Tordoff, L.
Turner of Camden, B.
Wallace of Coslany, L.
Wharton, B.
White, B.
Wigoder, L.
Williams of Elvel, L.


Aberdare, L.
Addison, V.
Ailsa, M.
Aldington, L.
Alexander of Tunis, E.
Astor of Hever, L.
Astor, V.
Belhaven and Stenton, L.
Belstead, L.
Birdwood, L.
Blaker, L.
Blatch, B.
Blyth, L.
Boardman, L.
Borthwick, L.
Boyd-Carpenter, L.
Brabazon of Tara, L.
Braine of Wheatley, L.
Brougham and Vaux, L.
Buckinghamshire, E.
Butterworth, L.
Cadman, L.
Campbell of Croy, L.
Carnegy of Lour, B.
Carnock, L.
Cawley, L.
Chesham, L.
Clanwilliam, E.
Clark of Kempston, L.
Colnbrook, L.
Constantine of Stanmore, L.
Cox, B.
Cranborne, V. [Lord Privy Seal.]
Cumberlege, B.
Davidson, V.
De Freyne, L.
Dean of Harptree, L.
Denham, L.
Dixon-Smith, L.
Elles, B.
Elliott of Morpeth, L.
Elton, L.
Faithfull, B.
Ferrers, E.
Fraser of Kilmorack, L.
Gainford, L.
Gardner of Parkes, B.
Geddes, L.
Goschen, V.
Gowrie, E.
Gridley, L.
Hailsham of Saint Marylebone, L.
Harding of Petherton, L.
Hayhoe, L.
Henley, L.
Hertford, M.
Hives, L.
Hogg, B.
Holderness, L.
Hood, V.
Hothfield, L.
Howe, E.
Inglewood, L. [Teller.]
Ironside, L.
Jellicoe, E.
Jenkin of Roding, L.
Johnston of Rockport, L.
Knollys, V.
Lauderdale, E.
Lindsay, E.
Long, V.
Lucas, L.
Mackay of Ardbrecknish, L.
Mackay of Clashfern, L. [Lord Chancellor.]
Manton, L.
Merrivale, L.
Mersey, V.
Miller of Hendon, B.
Milverton, L.
Monteagle of Brandon, L.
Mowbray and Stourton, L.
Moyne, L.
Munster, E.
Murton of Lindisfarne, L.
Newall, L.
Norfolk, D.
Norrie, L.
Northesk, E.
O'Cathain, B.
Orkney, E.
Orr-Ewing, L.
Park of Monmouth, B.
Peel, E.
Pender, L.
Peyton of Yeovil, L.
Platt of Writtle, B.
Rankeillour, L.
Rawlings, B.
Renwick, L.
Rodger of Earlsferry, L.
Roskill, L.
Seccombe, B.
Selborne, E.
Shaw of Northstead, L.
Skelmersdale, L.
Slim, V.
St. Davids, V.
Strange, B.
Strathcarron, L.
Strathclyde, L. [Teller.]
Sudeley, L.
Teviot, L.
Teynham, L.
Thomas of Gwydir, L.
Trumpington, B.
Vaux of Harrowden, L.
Wedgwood, L.
Wise, L.
Wynford, L.
Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

13 Mar 1995 : Column 567

3.36 p.m.

Baroness Hollis of Heigham moved Amendment No. 2:

Page 1, line 9, at end insert:
("( ) The Secretary of State shall, in consultation with the Authority, approve an annual budget for the work of the Authority, decide on reasonable levels of funding for the responsibilities of the Authority, arrange for such funds to be made available to the Authority and report annually thereon to Parliament.").

The noble Baroness said: My Lords, I shall speak also to Amendment No. 223. The amendment relates to the funding of the regulatory authority. We are seeking to persuade your Lordships that if the regulatory body is to be statutory, it must be independent, and if it is to be

13 Mar 1995 : Column 568

seen as independent, it must be funded not by the industry but by the public purse. Why? We are not talking about a large sum, we are talking about £10 million to regulate a £500 billion industry. The sum is not especially onerous for the industry itself, nor for us, the taxpayer.

However, given that pensions, as the noble Lord, Lord Marsh, argued in Committee, are a voluntary and non-profit making activity by employers—something which I am sure which we all want to see continued—we do not want to add to the burden of employers' costs if that can be avoided. Some additional costs, such as the compensation levy or the solvency standard, may be essential, and, in that case, must be borne by the industry. This cost does not have to be, and in our view it ought not to be; which would help secure more willing compliance by the industry.

There are other reasons why we should like to see state-funding of OPRA. A publicly funded OPRA would also inspire greater public confidence in its independence. The Government will say, I am sure, that it is independent already; that government will appoint the chairman and the members, determine the budgets, determine the staff and, by regulation—having refused the last amendment—will determine its powers, duties, and competence. In that case, why is the state not willing to finance what it is so closely prescribing?

If the authority is to be independent in the sense that the state is regulating its activities, why not ensure that it is seen to be independent by funding it? After all, the regulator's job is often to impose on trustees behaviour which is extremely delicate: holding the balance between investment policy, solvency surpluses, and the like. In such difficult and delicate issues of trusteeship, integrity of decision making is ensured by impartiality—not beholden to either party. That is the meaning of "independence". Independent funding would help underpin that.

No one denies that self-regulation, or this, its step-sibling—that is, statutory self-funded regulation—has a bad name. Yet in contributing to pensions, employers and employees are showing huge confidence: confidence by the employer that he can deliver the pension promise; confidence by the employees that the right to invest considerable savings for 25 years or 40 years is building up their single most valuable financial asset.

The size of that asset, the long timescale over which it is built up and the need for its guardianship suggests that the state can provide the most effective guarantee. Companies may come and go, be sold, merged, taken over and go into insolvency. Does anyone doubt that the state, funding the regulator, acts as a stronger trustee of the pension promise than any self-financed body?

In Committee, the Minister advanced two arguments against such a similar amendment. His first argument was that other bodies levy the industry. He gave as an example insurance companies which pay for regulation by the DTI. But insurance companies are commercial, profit-seeking and profit-taking bodies. At this stage, I have no problem with them funding their own

13 Mar 1995 : Column 569

regulation. However, pension funds are not commercial, profit-seeking, profit-taking bodies: they are non-profit making trusts.

The second argument that the Minister advanced was that occupational pensions benefit only a proportion of the population—about half—and that therefore the rest should not be expected to contribute. That is a new rule in public finance: unless benefit is enjoyed by everyone there is no public policy interest in funding its policemen. Are we now saying, for example, that only car drivers should pay for traffic wardens; that only restaurant owners and users should pay for the inspection of restaurants and their kitchens; that only the noisy tenants and their neighbours seeking peace from the hi-fi should pay for noise pollution officers; or that only people with children should pay the 50 per cent. of the local authority council tax bill that is spent on schools? No, we never use that argument in public policy. We make a distinction, and rightly so, between the activities of a local authority or any other body which give private gain and private enrichment—for instance, planning fees for enlarging one's house or car parking charges for parking one's car—and the regulatory and policing functions—for instance, drawing up local plans and employing traffic wardens—which indirectly or directly benefit us all. Those are publicly funded.

We all need to have those policing powers and regulatory controls in place, even if at any snapshot in time only a minority are users of the service. In other words, no one is saying that the state should pay for occupational pensions; that is a private matter for personal savings and enrichment. However, we are saying that the state should pay for the regulation of the system because it is in the public interest and we all stand to benefit from it. Why is that? As taxpayers, we are either helping to finance SERPS if individuals do not opt out into occupational pensions or, if they do, we are helping to finance the tax privileges from the Inland Revenue which make pensions such a special form of savings. It is a special form of savings precisely because we as taxpayers recognise that we all have a public policy interest in encouraging as far as possible the policy of provision for oneself in old age.

We believe that the state—that is, we, the taxpayers—should fund OPRA in order to ensure, first, that it not only is but is perceived to be truly independent and, secondly, because the regulating and policing of pensions is of such vital interest to us all directly as pension holders or indirectly as taxpayers and therefore it is a matter of public policy. I beg to move.

3.45 p.m.

Baroness Seear: My Lords, I support the amendment that was so fully and adequately moved by the noble Baroness, Lady Hollis. It is in the interests of us all that there should be good occupational pension schemes. If that had been the case 50 years ago the burden on social security would be much less. It is an insurance by the taxpayers that in the years to come we will not have to bail out people who in old age have inadequate incomes

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because they did not have proper occupational pensions. That is what we are now suffering from and we wish to avoid that for the future.

The Minister has always said—and I know that he will repeat it many times today, tomorrow and on Third Reading—that we must not discourage employers from setting up occupational pension schemes. If he wants to encourage them to do so, surely he is interested in reducing the charges that are laid on employers. One such charge that he can most easily remove is the cost of running the authority. It is obvious that an authority financed by the state will be seen to be more independent. Whether in fact that is the case is another matter but such a perception is of great importance. The authority will be seen to be independent, which is a strong reason for supporting the suggestion that the payments should come from the taxpayers and not from the industry.

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