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Lord Dean of Harptree: My Lords, the noble Baroness, Lady Hollis, mentioned car drivers. All noble Lords know that in recent years car insurance has risen by leaps and bounds. That has been due partly to the fact that there are more cars on the road and that car thieves have greater opportunities to steal cars. Furthermore, many of us are careless about car security. However, I do not believe that as a consequence anyone has suggested that the taxpayers, some of whom are unable to own cars, should assist with the payment of car insurance.
The analogy relating to the provision is precisely the same. Those of us who are lucky enough to be members of an occupational pension scheme and who are drawing occupational pensions should help to pay the costs of effective regulation. Why should the taxpayers, some of whom have had no opportunity to join occupational pension schemes, bear the costs in this regard?
I do not believe that the analogy drawn with the Occupational Pensions Board holds water. It was the job of that board to administer as an agency of the Government the question of whether schemes fell within the rules laid down by statute. In this case, the regulator has an entirely different job. It is his job to seek out fraud where it exists. No one has a stronger vested interest in avoiding fraud than members of occupational pension schemes. Therefore, it is right that the costs of the authority should be met by those of us who are fortunate enough to belong to occupational pension schemes and not by the general body of taxpayers.
Lord Clark of Kempston: My Lords, I hope that my noble friend resists the amendment because it will provide a precedent. The Securities and Investments Board is funded by the industry. The cost of the Personal Investment Authority is borne by the people who are regulated. It has always been the principle that the industry or the service must pay for self-regulation. If the Government told the taxpayers that they must take on the funding of this new organisation that would be a retrograde step. It should be funded by those who participate and not by the general taxpayers.
I recall from our debates in Committee that both the noble Baroness, Lady Hollis, and the noble Lord, Lord Ezra, acknowledged that even without the amendments which we are now discussing the Secretary of State would determine the authority's budget. We believeand I do not think there is any quarrel between usthat that is quite right. Indeed, paragraph 8 of Schedule 1 already provides for that.
But the point at issue is whether the authority is paid for by a levy on pension schemes or by taxation. The fact that the Secretary of State has budgetary control has been put forward as an argument for state funding. I do not accept that there is any logical connection between ensuring financial accountability and the source of the funding.
We are committed to keeping the costs of the authority to a minimum compatible with effective regulation. We shall be able to apply checks and balances on its expenditure. The authority's financial affairs will be monitored and scrutinised closely. It will be required to draw up annual statements of accounts which will be examined and certified by the Comptroller and Auditor General. Copies of all statements of accounts and reports by the Comptroller and Auditor General will be laid before both Houses of Parliament and published. They will be available for purchase by the general public.
Most occupational pension schemes are tax exempt approved and members of those schemes enjoy the benefits resulting from a number of special tax reliefs. Members' and employers' contributions are tax deductible. Income and gains from investments are exempt from income and capital gains tax and lump sum retirement benefits are free of tax. Other taxpayers who are not able to join such schemes are not so privileged. As both my noble friends have said, it would be wrong to expect the general taxpayer to foot the bill for the regulation of pension schemes. In effect, they would be paying twice: once for the tax reliefs enjoyed by pension schemes and again for the privilege of having those schemes policed.
We consider that it is right that the costs of the authority should fall on those who establish and run pension schemes because they are responsible for ensuring that their schemes are run properly. It is in their interests to promote members' confidence in them. Employers are able to set up pension schemes within a beneficial tax regime. Each year employers pay well over £18 billion of tax deductible contributions to occupational pension schemes. The current estimated total running cost of the authority is about £10 million per year. We do not consider that to be too great a burden.
While pension schemes are not established to make profits for their sponsoring employers (as the noble Baroness, Lady Hollis, pointed out) that is not to say that employers do not benefit from setting them up. Employers principally establish pension schemes as a means to recruit and retain staff. They are a vital element in the remuneration package, enabling
The levy will cover the full running costs and the start-up costs of the new authority. I wholly reject the argument that it will compromise the authority's independence. The authority's board will be appointed by the Secretary of State and, through him, will be fully accountable to Parliament. Its functions and its obligations are set out in the legislation before us today. As now, the rate of levy will be set by the Secretary of State and will be prescribed in regulations. That will allow the levy structure to be amended in the light of experience and to allow rates to take account of changes in costs over time.
The principle that the cost of the authority should be met by those who establish and run pension schemes is important. I very much hope that after listening to the arguments, the noble Baroness will withdraw the amendment. But if she feels that she cannot do that and wishes to continue to impose another £10 million of expenditure on the ordinary taxpayer, I hope that my noble friends will join with me in rejecting the amendment.
Baroness Hollis of Heigham: My Lords, I was disappointed by the Minister's reply because we have not progressed since Committee stage. Two basic arguments have been put forward. The noble Lords, Lord Dean and Lord Clark, have said that other analogous industries pay for their own regulation. I had hoped that I had addressed that point by indicating that, for example, the PIA regulates a profit-making industry. I have no problem with those bodies that are seeking to make a profit having to pay for their own regulation. It is precisely because the provision of pensions is not a profit-making activity but a non-profit making trust that it seems unreasonable, first, to burden the industry with additional costs and, secondly, to treat it in the same way as though it is seeking to make a profit.
The substantive issue that has emerged from all the remarks made is whether there is a wider interest in the regulation of pensions sufficient that the cost of it should be borne not only by those who hold the pensions but by all of us. That is the issue.
That depends on what one believes that job of regulation to be. The Minister said in a very revealing comment that he did not think that it was reasonable to ask the general taxpayer "to pay twice over"; namely, once for the tax privileges afforded by the Inland Revenue and secondly for the policing function. The reason that we are moving the amendment is precisely so that the general taxpayers' investment in the first of thosethat is, the Inland Revenue privilegesis protected and policed properly, which requires the second expenditure. In other words, if I, as a taxpayer,
Therefore, in my judgment the very argument which the Minister usedthat because the taxpayer is paying for the Inland Revenue privileges he should not therefore pay for the policingshould be turned on its head. If one invests as a taxpayer, one has a need, a right, a duty and a responsibility to ensure that that investment is protected. That means that one must pay also for the policing.
One either accepts the argument or one does not but I believe that it applies to every other area of public life of which I am aware. For example, both central government and local authorities make grants for repairs and maintenance of listed buildings from taxpayers' money. Inspectors from both English Heritage, on the one hand, and from the local authority's conservation department, on the other, then check that the money has been spent properly. That checking is not done and paid for by the recipient of the grant. It is paid for by the taxpayer. Why is that? It is because, in the first place, taxpayers' money has been used to maintain historic buildings as it is public policy that that should be done. We then pay to ensure that our money has been well spent. That applies in this case, but even more so to the field of pensions. If we have a public policy interest in the security and independence of our pensions, we must all expect to pay for that. I wish to seek the opinion of the House.