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Lord Higgins: Perhaps the Minister can give us a brief explanation of what is envisaged with regard to the board's attitude to new schemes that are created to replace existing schemes. Is there simply a provision that is designed to prevent employers avoiding their responsibilities in changing from one scheme to another? The Nikko Bank case may be an example of when that has happened.

Baroness Barker: I should like to take the opportunity of this stand part debate to ask a question that applies to Clause 139 as well as to many of the other clauses that relate to the board, which relates to our earlier discussion about time limits. I happened to spend my summer break learning about insolvency in a direct fashion—not personally, but on behalf of another organisation. I have had a crash course in the importance of time in insolvency matters. There appears to be no time limit to suggest when the board has to do things in almost all of these clauses. Crucially, neither is there any indication of when the board must notify other players, whether it assumes liability for a scheme or not.

For example, in Clause 139(2) there is a duty on the board to issue a withdrawal notice. There is no duty for it to do so within even the vaguest of terms such as "at the earliest opportunity". Given that the importance of when the board acts can be crucial to people trying to resolve the affairs of a pension fund, that is an oversight. The Minister rightly explained to us the importance of getting the wording right when we debated the difference between the rules of a scheme and scheme rules. Having no time limits or sense of urgency on the part of the board is an omission. Therefore, when the board is obliged to take certain action, an indication that it is under a duty to do so at the earliest opportunity is crucial. I hope that the Minister will take that into consideration in this clause.

Baroness Hollis of Heigham: It may make sense to spend a second stating the purpose of Clause 139. It enables the PPF to refuse to assume responsibility for new schemes that have been created to replace existing schemes for the purpose of enabling the members to become entitled to PPF compensation.
 
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For example, rather than manipulating a current scheme—we were talking about the three-year backdating rule earlier—a new scheme may be set up to replace an existing scheme in order to obtain PPF compensation. That may occur, for instance, when a current scheme has one member and is therefore not an eligible scheme, so the PPF board cannot assume responsibility for it. A new scheme could be created which is an eligible scheme, and the existing member of that old scheme transferred to it with additional members—perhaps the son-in-law of the garage owner or whoever. As a result, that scheme would then be eligible to PPF compensation should the board assume responsibility for it.

So, in a sense, this is a further version of seeking to avoid the manipulation of the rules, in order for the scheme that could be funded but which could arrange to be underfunded to come within the PPF. It is one such device by which we seek to ensure that that will not happen.

One of the conditions for the board refusing to assume responsibility for a scheme under this clause is that the new scheme must have been established during a certain period, which will be set out in regulations. Again, we expect the period to be three years in order to be consistent with the other moral hazard—a trip line, if you like—within the Bill. We just think that that is a reasonable point to follow.

Perhaps the noble Baroness could help me further on precisely what she wants some steer on in terms of the time line. It is clear that we are producing the three-year rule to try to block manipulation of any form or other. The States has a version of that which ensures that there is no artificial manipulation to take the assets somewhere else and dump the liabilities on the PPF, which is always the risk. We must have powers to thwart that, even if there are only five cases as opposed to 50 or 500. One of the problems is often that the number of words—whether they relate to ill health or whatever—may not reflect the number of people who come in. Perhaps the noble Baroness can help me on her particular query about the time period, in that the provision applies for three years and seeks to stop the creation of an artificial new scheme out of the bones of an old one to bring it within the eligibility of a PPF fund.

Baroness Barker: I shall try to help the noble Baroness. My point is that, throughout this clause, duties are placed on the board to take certain actions. Most of those actions are based on the board having arrived at a conclusion, having made a judgment about the eligibility of the scheme or about whether an action has occurred from an intention to avoid or ameliorate liability.

The point I seek to make is that, given that most of the board's actions will be based on judgments at which it has arrived, the board should be under a general and explicit duty to explain and take its action at the earliest opportunity. Most of those actions are to inform other bodies—the regulator, the trustees and so on. There should be an urgency about its doing so. Any delay on the part of the board in communicating
 
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that can have a material effect on the actions of all the other players in the process of determining the viability or otherwise of a scheme. That is so important that it merits being explicit and repeated throughout the legislation. That is the point that I am seeking to get across.

Baroness Hollis of Heigham: I shall respond appropriately to the noble Baroness. Amendment No. 204D states:

"Where a withdrawal notice issued under this section becomes binding, the Board must as soon as reasonably practicable".

The noble Baroness has picked up two issues. One is the length of time of the assessment period and how that may be elongated with the uncertainty involved for the members. Equally, we have to accept that it is a very complicated process to try to see whether there has been any manipulation of the scheme. The second issue is the amount of information available to all the players in the scenario to ensure that they are in a position to expedite proceedings, so that we can reduce the timetable to as brief a period as possible. I take it that that is one of the concerns of the noble Baroness.

At this point, all I shall say is that we shall be discussing the position of information that goes out—I hope this latest point is addressed—under Clause 194, which will give us the chance to go into the detail. In this case, notice will be issued as soon as reasonably practicable, as referred to in Amendment No. 204D. Perhaps I can invite the noble Baroness to re-address the issue under Clause 194. If she feels that the quest for disseminating information and the need to expedite the time scale can be achieved coherently together, and not in ways that subvert each other, perhaps we can re-enter that debate when we come to Clause 194, which may be a more appropriate time. If I can give the noble Baroness any information before we come to that clause, perhaps she will write to me so that she has a better sense of where the regulations may go on this, and I will be happy to respond.

Baroness Barker: I am happy with that response and I shall talk to the noble Baroness further.

Clause 139, as amended, agreed to.

Baroness Hollis of Heigham moved Amendment No. 204E:

After Clause 139, insert the following new clause—

"WITHDRAWAL FOLLOWING ISSUE OF SECTION 116(4) NOTICE
(1) This section applies where—
(a) a notice under section 116(4) (inability to confirm status of scheme) is issued in relation to an eligible scheme and becomes binding, and
(b) a withdrawal event has not occurred in relation to the scheme in respect of a withdrawal notice which has been issued during the period—
(i) beginning with the occurrence of the last insolvency event in relation to the employer, and
 
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(ii) ending immediately before the notice under section 116(4) becomes binding,
and the occurrence of such a withdrawal event in respect of a withdrawal notice issued during that period is not a possibility (see section 140).
(2) The Board must determine whether any insolvency event—
(a) has occurred in relation to the employer since the issue of the notice under section 116(4), or
(b) is likely to so occur before the end of the period of six months beginning with the date on which this section applies.
(3) If the Board determines under subsection (2) that no insolvency event has occurred or is likely to occur as mentioned in that subsection, it must issue a notice to that effect (a "withdrawal notice").
(4) Where—
(a) no withdrawal notice is issued under subsection (3) before the end of the period mentioned in subsection (2)(b), and
(b) no further insolvency event occurs in relation to the employer during that period,
the Board must issue a notice to that effect (a "withdrawal notice").
(5) Where the Board is required to issue a withdrawal notice under this section, it must give a copy of the notice to—
(a) the Regulator,
(b) the trustees or managers of the scheme, and
(c) the employer.
(6) For the purposes of this Part, a withdrawal notice issued under this section is not binding until—
(a) the period within which the issue of the notice may be reviewed by virtue of Chapter 6 has expired, and
(b) if the issue of the notice is so reviewed—
(i) the review and any reconsideration,
(ii) any reference to the PPF Ombudsman in respect of the issue of the notice, and
(iii) any appeal against his determination or directions,
has been finally disposed of and the notice has not been revoked, varied or substituted.
(7) Where a withdrawal notice issued under this section becomes binding, the Board must as soon as reasonably practicable give a notice to that effect together with a copy of the binding notice to—
(a) the Regulator,
(b) the trustees or managers of the scheme, and
(c) the employer.
(8) Notices under this section must be in the prescribed form and contain such information as may be prescribed.
(9) A notice given under subsection (7) must state the time from which the Board ceases to be involved with the scheme (see section 140)."

On Question, amendment agreed to.

Clause 140 [Circumstances in which Board ceases to be involved with an eligible scheme]:

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