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Lord Oakeshott of Seagrove Bay: The issue is inevitably one of shades of grey, but we are persuaded that the noble Baroness's shade of grey is rather more persuasive than that in the amendment. We welcome the fact that she will consider the matter further.
Lord Higgins: I want to ask a simple-minded question. Does the clause as drafted give more priority to the board than the trustees would anyway have?
Baroness Hollis of Heigham: Perhaps I should write to the noble Lord or address the issue in a later point. I want to ensure that my words on the subject are entirely correct.
Lord Higgins: Okay, we will let it go at that. However, surely it is the central issue. Perhaps the trustees did not previously have the power in relation to the scheme of arrangement and so on. However, we will listen with interest to the noble Baroness's reflections on the matter.
Lord Borrie: In the course of his response to the debate, I should like the noble Lord, Lord Hunt of Wirral, to amplify a point that somewhat puzzles me. He said in so many words that the Pension Protection Fund ought to be treated along with other creditors and take due cognisance of arrangements that have been made and so on. In the context of the Bill and the
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public interest purposes of the Bill and the Pension Protection Fund, why should the fund be treated as if it were just one other creditor?
Baroness Hollis of Heigham: The noble Lord, Lord Higgins, is right that the provision allows the board completely to scrap the scheme of arrangement. So the answer is yes, it would have more power than the trustees. One of the problems may have been that the trustees were dominated by the employers' representatives and so on and they produced a compromise that perhaps secured other company debts at the expense of the fund. However, we believe that they would and could do that only very rarely.
Lord Hunt of Wirral: If I may, I should like to respond to the comments of the noble Lord, Lord Borrie, in the debate on clause stand part. I think that his point goes much wider than just a Section 425 scheme of arrangement. For now, I merely want to say that in view of the Minister's comments I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 129 shall stand part of the Bill?
Lord Hunt of Wirral: I have listened very carefully to the points that have been made. I say to the noble Lord, Lord Borrie, that he could make an even better case for Crown preference, the point about public money and why should the public be deprived and other creditors given an advantage. But his feet are firmly rooted in the pre-Enterprise Act environment, in relation to which, as a result of a government move that found support on all sides of the House, it was decided to abolish Crown preference. As the noble Lord knows exceedingly well in view of all the public offices he has held, particularly Director-General of Fair Trading, Crown preference has always been right at the bedrock of insolvency.
The Government, however, took what I thought was a very courageous step. As a result of Mr Gordon Brown, the Chancellor of the Exchequer, having been impressed by the American system, it was said that Crown and public money should not step in to reduce the rights of unsecured creditors and thereby perhaps jeopardise the survival of a potentially viable business. It has been implicit in a number of our debates that we have to find a way through this Pensions Bill that does not destroy jobs. I know that the trade union movement is very concerned that jobs are at risk if the Bill's retrospective elements mean that potentially viable businesses do not survive.
So it is not just a case of looking at Crown preference in its justification and it is not just a case of looking at the rights of the PPF. There is a case for looking at the whole realm of businesses in trouble and finding a way through that is consistent with the Enterprise Act.
The noble Lord, Lord Oakeshott, mentioned a shade of grey. I thought that the Minister's shade of grey could only have been from a speaking note that was not cleared with her colleagues in the Department of Trade and Industry. I have heard her colleagues in
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that department argue forcibly for removing this sort of preference. I therefore hope that she will give the noble Lord, Lord Sainsbury, the time of day, sit down with him and hear from him why he embarked on the route that he did. That Act is now on the statute book. It is being imperilled by this and other clauses.
It really is time for the Government to have a new look at how the Bill jeopardises jobs and to sit down with a number of interest groups which are very concerned about this issue. This is all part of what I hope will be a continuing dialogue within the Government that will result in a joined-up policy, so that at least we know where we are, particularly in relation to enterprise.
Baroness Hollis of Heigham: There are two points. First, the noble Lord refers to the provision somehow being Crown preference. The PPF is funded by either members' assets or a levy on industry. The money is not Crown money but industry money. I am not persuaded of an argument that basically says that other businesses, through their levy, should pick up the bill for employers to be able to forego some of their responsibility to their pension fund in order to meet other debts. I am not saying that there is right or wrong in this—there is an honourable dilemma between the jobs, the viability of the company, the rescue efforts and sustaining the pension funds—but there is no free money.
Let us take an example. The trustees may know that the scheme is sufficiently underfunded to go into the PPF. There is therefore no incentive to keep it afloat. They might just as well run it down and send the money across—particularly if the employees were represented by the trustees—deal with other debts and instead of allowing the PPF to pick up a deficit or shortfall of 25 per cent to pick up one of 75 per cent. Who is that 75 per cent to be made good by? It is not by the Crown or the by taxpayer but by levy payers and others in the industry.
The worry that has been expressed to me by some of the major financial players in the industry is that, if we are not careful, good companies will be cross-subsidising bad. At the end of the line, that seems to be where the noble Lord, Lord Hunt, would take us.
My second point is that the noble Lord talked about preference. Although it is clear that the PPF would have more powers than a trustee, it will not have a higher priority; the assets would still be shared equally between all creditors. We are trying to prevent the PPF being excluded from the compromise because it has come late into the game. It would have equal status with other creditors and a compromise would have to be satisfactorily reached. The option of subsequently unstitching matters through court procedures is, of course, available, but it would be lengthy.
As I say, we have not come to the last word on the matter. However, I do not want it thought that we are somehow reneging on a commitment to overcome Crown guarantees, preference, liability or immunity from prosecution in all areas. We are not. A shortfall has to be made good by someone and it is not always clear that the noble Lord's position is the equitable
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one. I hope that we will come back to the matter on Report as we may be able to find a better way of squaring this rather complicated and wobbly circle.
Lord Hunt of Wirral: I hear what the Minister says. I did not evoke a direct comparison with Crown preference; I merely said that she and the noble Lord, Lord Borrie, could make a stronger case for Crown preference, as Ministers have successively done over a range of Bills. We have a real prospect that viable businesses in trouble will lose their fight for survival. That means jobs being destroyed. I take the point that we have to talk the matter through to get the balance right and that good businesses may support bad businesses.
Perhaps the issue reflects on our court system; perhaps we need a super-highway for such applications. Where an arrangement has already been entered into, surely recourse to the court is all that is necessary in the kind of case referred to by the noble Baroness. That is why I hope that she will spend a little time looking at the policy words of the DTI and try to reconcile the difficult balance. I accept that there are shades of grey and of right and wrong, but we could be destroying jobs. That is why I am particularly concerned about the clause.
Clause 130 [Payment of scheme benefits]:
Baroness Hollis of Heigham moved Amendments Nos. 199A to 199F:
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