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Lord Higgins: My Lords, the noble Baroness referred to exchanges in Committee. I think that it is true—the noble Lord, Lord Oakeshott of Seagrove Bay, may agree—that we did not see this coming and have not, perhaps, cleared our minds as much as we might have. I did not move the previous amendment because I thought that it might be easier to debate the issue with this government amendment.

There are one or two points about which we ought not to be confused. There is a growing feeling that there should be pensioner representation on trustee boards, as well as the normal arrangement for members to elect people from the workplace and so on. It is probably a good thing if it is not only those actively in the scheme but those who are retired who have some say in the way in which matters proceed.

Having said that, there is a big distinction between member-nominated trustees and member trustees. I think that, at the moment, normal practice in most good schemes is for the members to have arrangements for, in some cases, electing their fellow members to serve on the trustee board. In my experience, that can be extremely valuable. There will be an expression on the trustee board of a view that, if the board were made up entirely of technical people dealing with actuaries and everything else, might not be expressed. When I was in that position, I used to say in the strongest terms to any member trustee arriving on the board, "You must realise that you are in the same legal position as everyone else on the trustee board. If we do something wrong, you're as responsible as we are". They need good training. I found that valuable.
 
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Member-nominated trustees are something else. The members might nominate someone who is not a member of the scheme but has some expertise or represents a particular political viewpoint.

Lord Lea of Crondall: My Lords, I am sorry to interrupt the noble Lord. My question arises from the fact that he said that he was not moving Amendment No. 236. Now that we are on Amendment No. 237, he seems to be concentrating on Amendment No. 236. If that is allowed, we can both engage with the matter.

Does the noble Lord have examples of situations in which the practice—in any way that is of any significance—has created a political question? I know of no such occasions. We should exercise care before we make such broad statements.

Some trustees have come from the trade unions. The finance director and the personnel director can be on the board, but how will people who, say, work in a company with several plants throughout the country—quite a big scheme—have any dialogue among themselves, unless there is some framework for consultation among the 50 per cent? That is more important—not less—than the ability of people to have proper input if the position of having the 50 per cent is to work satisfactorily.

As the noble Lord sees the matter as being integral to Amendment No. 237, we should take it head-on and say, "OK. There will be an opportunity—it will not be compulsory—for people to get other colleagues to be part of their number". That equates to allowing the finance directors and others, as members, to be trustees.

Lord Higgins: My Lords, I have sought to indicate that there are three separate issues: first, whether there should be member trustees on the board—that is to say, members of the scheme—secondly, whether there should be non-members who are nominated by the members; and, thirdly, the issue of percentages. My experience suggests that it can be extremely valuable to have member trustees on the board. I have a more open mind about whether it is advisable for members to nominate outsiders who might have particular expertise.

I do not know whether the matter is political, but the new Secretary of State certainly seemed to think that it was important to raise it at the TUC conference. Clearly, it was thought to be important at that stage. Based on my experience, I have serious doubts about the 50:50 argument. Employers might be deterred from continuing schemes if they think that the outcome on an issue may be uncertain. Again, I know from experience that there is often conflict between the trustees and the employer. So if we are in a 50 per cent situation, what happens about the chairman's casting vote, for example; who appoints the chairman, and so on? There are real problems.

I am not against member trustees; I am in favour of them. I am not necessarily against member-nominated trustees. However, the 50 per cent issue raises serious questions. That view was expressed, for example, by
 
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the National Association of Pension Funds, which disagrees with the Government on the issue. On this side of the House we think that the amendment goes too far. It may create tensions and problems in schemes. For the reasons also mentioned by the noble Lord, Lord Oakeshott, we are not in favour of the government amendment.

Lord Lea of Crondall: My Lords, I ask the noble Lord to rethink his use of the word "political". I have made the point about the tremendous contribution that people make over the years; that is not on any political basis. The fact that the Secretary of State announced the reform at the TUC conference was no different from his announcing it to the CBI. Would that have made it political?

Lord Higgins: My Lords, that is a very good question; I do not know the answer. However, the Secretary of State might have got a different reception.

The amendment is a step too far. It will create a considerable number of problems if it becomes general practice. No doubt the noble Baroness could tell us what she thinks the position of the chairman of the trustees will be in those circumstances. Also, will the provision apply just to final-salary schemes or to defined contribution schemes also?

Baroness Hollis of Heigham: My Lords, I do not see how the provision can apply to DC schemes because they do not have trustees. Members will normally buy their package in the marketplace, so to speak. It will apply to where there are trustees of schemes. It depends on whether it is a DC company scheme; clearly, it would not apply to a stakeholder scheme.

Let us take, first, the canard of what was "political" and the tease about the CBI. It always amazes me that Members opposite think that their views are common sense but the views of those who oppose them are political. It so happened that on the day on which my right honourable friend the Secretary of State addressed the TUC conference, we discussed the issue in Committee—14 September. As noble Lords know perfectly well, the timing of where we get to in the Bill in Committee and on Report is entirely in the Opposition's hands. So the noble Lord opposite chose the day on which we discussed the issue, which happened to coincide with when my Secretary of State announced it at a conference. If that means that there was consensus rather than political confrontation, that is admirable. So the noble Lord greatly assisted my Secretary of State in the timing of the announcement, for which we were grateful.

The noble Lord raised the "member" and "member-nominated" issue. Our concern is, as the noble Lord has expressed, that a "member" is not necessarily someone nominated by members. As far as I know, he or she could be appointed by the employer. He could be the finance director. It could be that the members, the workers, in the company might have no control
 
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over who is on the board because all that is required is members—even the finance or personnel directors are likely to be a member of the pension scheme—as opposed to people who are nominated by the body of members to reflect their interests. That is why there is this distinction that my noble friend has picked up.

Lord Higgins: My Lords, perhaps I may clarify that. I was speaking from experience. In fact, the schemes with which I have been involved made arrangements for the members to elect one or more of their number to serve on the trustee board. But I did not take that to be the debate that we had in Committee, which was that the members would nominate outsiders to serve on the board. If I understand it correctly, that is what the Government have in mind.

Baroness Hollis of Heigham: My Lords, that is my next point. Perhaps we may keep this debate structured. There are two separate issues here. There is the amendment that the noble Lord chose not to move, which refers to "member" as opposed to "member-nominated". My noble friend was right to ask whether we are in fact revisiting a previous issue that the noble Lord chose not to move. The point here is that, under the noble Lord's amendment that he chose not to move, there could be a board made up of members of the scheme, none of whom were "member-nominated". That is why I would have been very happy to oppose that. Almost everyone employed in the entire company—management or otherwise—would be a member of a scheme but not necessarily member-nominated.

The noble Lord indeed raised his second point in Committee, which was that they could be outsiders. Yes, it is the case that members could choose to nominate as their "voice" on the trustees board someone who is not employed in that scheme. The reason is obvious. There can be quite modest-sized companies in which membership, at least for a time, may feel under equipped through training and so forth to take on all of the responsibilities. They may well wish to stiffen the expertise on their side by bringing in a colleague from outside the company.

But—this is the key—a member-nominated trustee who is not a member of the scheme has to be approved by the employer. We said that in Committee. It could be that the employer is concerned that the member-nominated trustee who is an outsider works for, say, a rival company, which is perfectly legitimate. The employer has the power to veto without having to give cause, so to speak.

Therefore, it is within the employer's hands if he thinks that that is unreasonable. I hope that employers will not take that step. Very often, they would much prefer to deal with a professional or a semi-professional, possibly from the trade union movement, who knows what he or she is doing and has a breadth of experience across other similar companies in similar schemes. Ultimately, all such schemes are voluntary. Under Clause 239(5)(c), the employer has a veto. We are going for "member-nominated" rather than "member", although the two may of course overlap considerably.
 
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