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Lord Oakeshott of Seagrove Bay: My Lords, we strongly support this amendment and have tabled a similar one. We are concentrating on this amendment, which establishes a principle that we strongly support.
We discussed the matter at length on Second Reading and in Committee. Together with, I think that it is fair to say, all the major industrial and commercial firmscertainly, the great majorityin this country, the National Association of Pension Funds, EEF and the vast majority of representative bodies, we believe that it is essential to move to a risk-based levy as soon as possible. "As soon as possible", for most peoplecertainly for usmeans that the flat-rate levy should not last for longer than a year.
I have here, for example, the comments of Terry Faulkner, chairman of the National Association of Pension Funds, who said that the timetable that the Government were talking about was "absolutely unacceptable". He said:
"The purpose of the PPF is to protect benefits from those companies that go bust with an underfunded pension scheme. The right way to deal with the premium is on a risk-based basis like other forms of insurance".
Colin Hartridge-Price, chief pensions officer of the BT pension schemethe largest pension fund in the countrysaid:
"The risk-based levy should be introduced in full as soon as is practicably possible. It should surely be possible for the PPF Board to agree a formula within the first 12 months of its operation".
At Second Reading, we discussed the idea that, over several years, some funds could be allowed to stay on a flat-rate basis and others go on to a risk basis. I think that we exploded the idea that we could have an insurance scheme in which the good risks paid one rate and were flat rate, while the bad risks were not. We must go over within a year to a fully risk-basedor minimum 80 per cent risk-basedlevy. In any insurance scheme or policy, one will not know exactly what the risks are but, in this case, waiting for the best will be the enemy of the good. The one thing that we know is that the longer we go on with a flat rate policya poll tax on pension funds, in effectthe more unfair it will be to the better funded schemes and to the responsible employers who are doing their best to reinforce their funds.
The noble Baroness said a good deal about moral hazard. What greater moral hazard could there be than not going to a fully risk-based levy as soon as possible? We strongly support the amendment.
Baroness Hollis of Heigham: My Lords, the first thing to say is that I, too, support the amendment: I just cannot accept it. I hope to explain the reasons.
The noble Lord, Lord Higgins, clearly spoke about the initial period. The noble Lord, Lord Oakeshott of Seagrove Bay, talked about the initial and transitional periods put together. There is a wide chasm between those positions. We may be able to tease that out later.
Making the amendment moved by the noble Lord, Lord Higgins, would mean that the initial period would run from the appointed day until the following
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31st March or 12 months after the appointed day. In effect, therefore, the amendment would limit the initial period, when everybody will be on a flat rate, to no longer than 12 months. I point out to the noble Lord, Lord Oakeshott of Seagrove Bay, that we propose a transitional period thereafter in which we phase in the risk-related levy. I got the impression that he thought that the whole risk-related scheme could come in one day after the 12 months. If that is what he is saying, it worries me considerably.
Limiting the initial period to 12 months would, first, remove the in-built element of contingency that we have put in place, should it be necessary for the period to be longer. When I sat on the Benches opposite, the late, lamented Lord MacKay of Ardbrecknish came here to explain why, although the Bill said that the jobseeker's allowance would take effect from April 1996, it would, to his regret, have to be delayed for another six months until October 1996. That inconvenienced him slightly, as he had found some difficulty with the regulations and the primary legislation, which determined the timetable. These things happen. It was not intended; we had to accept it. Any Minister knows that things do not always go absolutely according to planwe do not need to talk about the CSA in that context.
Secondly, the amendment would also mean that the initial period could end after the start of the financial year. I said that I supported the amendment but could not accept it because we did not envisage the initial period being any longer than 12 months. However, as we are launching a new organisation, we think it prudent to build in an element of contingency to allow for unforeseen difficulties. Obvious examples would be computer hiccups: the Standish Group found that around two thirds of all computer projects ran over time. I do not want to get hung up on debates about computers but I can conceive that such problems could arisethey certainly did with JSA.
The formulation of the amendment means that the initial period could end after the start of a financial year. As the pension protection levies operate by reference to financial years, problems could arise. Sponsoring employers and schemes would find it more difficult to plan ahead financially, in line with current business and scheme requirements. It would also mean that the annual reporting requirements of the PPF and the general levy currently collected by OPRA, both of which operate by reference to financial years, were carried out at different times.
Again, we fully expect that the PPF will open its doors on the date anticipated and that the initial period will last no longer than 12 months. We just do not want to be tied to it by its inclusion in the Bill in case a contingency arises that has not occurred to noble Lords opposite or those on the government Benches. I hope that what I have said will enable noble Lords to withdraw their amendment.
Lord Higgins: My Lords, the noble Baroness asked whether the Liberal Democrats and the Conservatives were singing from the same hymn sheet. Yes, we are; that will become apparent in our debates on subsequent amendments.
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Today's sitting began with Question Time, during which a Question was asked on firearms legislation. It was pointed out that the Government had not carried through the legislation, seven years after the Bill was passed. The Minister replied, "They did not put a date in the legislation. If a date had been included, we would have stuck to it". It seems that there is a lesson to be learnt as regard legislation: apparently, if you do not give this Government a definite deadline, the process may drag on for seven years or moreI suppose that they get an itch at that moment.
I understand the noble Baroness's point about financial years and so on. However, we want to insert a very clear deadline. We think, therefore, that the amendment is appropriate. I regret that, although the noble Baroness agrees with it, she is not prepared to accept it. Not only do we agree with the amendment, but we think that it would be appropriate to test the opinion of the House.
On Question, Whether the said amendment (No. 208) shall be agreed to?
Their Lordships divided: Contents, 147; Not-Contents, 106.
[Amendment No. 209 not moved.]
Clause 173 [Pension protection levies]:
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