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Viscount Astor: My Lords, I thank the Minister for introducing the order. NESTA is a success, and one should congratulate the Government on bringing it into being. It occupies a part of the market that other funding bodies do not, particularly in giving small amounts of money to people who are involved in start-ups. As the Minister said, some of them work well and some do not—that is the nature of the game. NESTA has made more than 750 awards in its lifetime, and one can truly say that its funding is additional to government expenditure as opposed to some of the discussions and arguments we have had about other lottery fundings.

It is a success, and one must congratulate the trustees and the management. The only thing that made me nervous was the Minister saying that he would have a thorough review. All I can say is: it works—don't muck it up.

Lord O'Neill of Clackmannan: My Lords, I am happy to follow these two contributions. NESTA is one of the Government's unsung successes. It has been able to identify areas where no other conventional means of support for business start-up have been available. It has often been able to support activities which otherwise would have fallen between the cracks of various forms of government support. The examples given to us include the work of Dr Kevin Fong, who was doing work in anaesthetics at University College, London, where the multi-disciplinary character of the work he was engaged in did not attract funding from any of the normal research sources. Getting the support of NESTA has enabled him to continue with his research work. This is investing in what could be called exceptional UK talent.

Equally, it is fair to say that a number of the creative entrepreneurs coming out of our arts colleges and similar places would become distinguished crafts people if they were able to get the advice or the business start-up assistance to go on. Mark Bickers, a glassmaker who went on the Creative Pioneer course is now operating on a self-sustaining basis, selling to places such as Liberty.

We sometimes think that business support is for very large operations or ones which of themselves will create a great number of jobs. But one of the great and telling lessons of the past couple of decades has been the significance of small business and the way in which small businesses take on two or maybe three employees and account for a sizeable amount of the increase in our employment rates.

However, it is also fair to say that, where the money has gone in, in a number of instances it has been able to attract support from angels and venture capitalists
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on a ratio of £1 which would attract £5 from anywhere else. I imagine that the success of that is one of the driving forces behind the Government's review because it was set up with money from the Lottery—a source not available for any other purpose in this way—and it could be reaching the point of self-sustaining growth as an endowment. It is to that that we should look to the future. It is exciting that we have made this fairly modest contribution—because in terms of industrial support, £15 million per annum is not a massive sum. But Jonathan Kestenbaum, Chris Powell, the chair and their colleagues will be able to look forward to five years of sustained activity in which they will be able to establish the endowment as a means of giving young people—particularly young people involved in the creative areas, the grey areas of industrial and business activity—assistance and support. Just affording them the mentoring and network facilities that the endowment gives will help people who are on their own. They are often bewildered by the range of business opportunities that are supposed to be there and they never quite know how to take advantage of them, but they will be able to do so because of this endowment. It is a credit to the ingenuity of the first Labour government and it will be a credit to successive Labour governments because the success of our economy will come in large measure through the kind of work that the beneficiaries of the endowment have been able to take forward. A dynamic economy requires creative industry and creative industry hitherto has not been able to attract the kind of support that it is now getting, not only through the endowment but through the credibility which the endowment provides. It enables these individuals to go elsewhere and get the additional support that they need to make their businesses grow. I welcome the Government's courage in providing £75 million over the next five years and I welcome this order tonight.

Baroness Sharp of Guildford: My Lords, we too have no problem with this order. NESTA has been a great success. The Minister talked about it being an exciting development. It is not only exciting; it is very creative. He also said that not everything had been a success, but in the world of venture capital, you are lucky if one in 20 projects is a success. NESTA has hit rather more than one in 20, so it has a very good record. As the noble Lord, Lord O'Neill, mentioned, for every £1 that has been invested in NESTA, a further £5 has been leveraged for further financing.

One of the current enterprises in which NESTA is involved is what they call their future lab, which is developing new learning software. The DfES has put in £3 million, and Microsoft and Disney are also putting in similar sums of money. A spin-out company is emerging from NESTA this April. All the creativity, dynamism and innovation are to be welcomed.

Lord Davies of Oldham: My Lords, I am grateful for that whole-hearted support—more than I had dared anticipate—particularly from the noble Viscount, Lord Astor, who rightly upbraided me by asking why
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we need a review when he is documenting success. He has made me think twice about that concept, too. We are looking upon NESTA moving to a more substantial and mature role in terms of its finances. I think the noble Viscount will recognise that the first few years had their difficulties with investment and support, and we are now seeing NESTA grow into a more substantial role. That is the necessity for the review. I give the noble Viscount the assurance that it is not broke, and we are not going to go about fixing it in crucial areas. I was grateful for his support.

I was grateful to my noble friend Lord O'Neill. It is almost a NESTA-type innovation to have a Back-Bencher contribute to our orders, such is the restricted dialogue that goes on between the Front Benches, with limited Back-Bench contribution. I was grateful to him for contributing, particularly for his illustration of exceptional UK talent being nurtured by NESTA, and for emphasising the fact that there is some good value in the investment returns from the work which NESTA has done.

I was also grateful to the noble Baroness, Lady Sharp, who expressed her enthusiasm for the work of the organisation. It is the single largest provider of early seed-funding in this country, willing to invest at a stage where it is notoriously difficult to get others to do so. It fills a crucial gap, and also explores what can happen when you merge the boundaries between science, technology and the arts. Having an endowment as a model of investment is essential to achieving its aims. My real answer to the noble Viscount is that we move from that degree of necessary support from the lottery into a situation where we hope the endowment will flourish sufficiently to guarantee the necessary resources. NESTA's influence is important in these terms.

I am aware of a number of other criticisms which noble Lords were too kind to voice this evening. One is entirely valid, and I would have accepted it from any source. NESTA is not too good at blowing its own trumpet. It could do better with its own publicity, and that is something which we hope to impress upon it for the future. Success breeds success, but only if people are aware of that fact.

On Question, Motion agreed to.

Pensions Act 2004 (PPF Payments and FAS Payments) (Consequential Provisions) Order 2006

5.57 pm

Lord Evans of Temple Guiting rose to move, That the draft order laid before the House on 9 January be approved [14th Report from the Joint Committee].

The noble Lord said: My Lords, in moving this order I shall speak also to the Pension Protection Fund (Pension Compensation Cap) Order 2006. I remind noble Lords that the Pension Protection Fund, or PPF, was created under the Pensions Act 2004 and began operating on 6 April 2005. The PPF was established to pay compensation to members of
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eligible defined-benefit pension schemes when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover PPF levels of compensation.

Noble Lords will be aware that, when an employer has an insolvency event, an assessment period is triggered during which time the scheme's assets and liabilities are valued to determine whether the PPF should assume responsibility for the pension scheme. The assessment period must last at least 12 months meaning that the earliest date from which the PPF can pay compensation is 12 months from 6 April 2005. Noble Lords are all aware of the importance of the Pension Protection Fund and the Financial Assistance Scheme—or FAS, as I will refer to it during the course of this debate.

I turn to the first order before us today. The Pensions Act 2004 (PPF Payments and FAS Payments) (Consequential Provisions) Order will insert Pension Protection Fund payments, together with a definition of those payments, into existing regulation-making powers within a variety of Acts to enable income-related and contributory benefits to take into account the receipt of Pension Protection Fund payments by individuals when calculating the amount of benefit due in relation to contribution-based jobseeker's allowance, dependency increases in respect of incapacity benefit, maternity allowance, state pensions, carer's allowance and severe disablement allowance, incapacity benefit and state pension credit. In addition, Financial Assistance Scheme—FAS—payments are inserted into the Jobseekers Act 1995 so that they may be treated as income for the purposes of contributions-based jobseeker's allowance. The relevant powers are contained within Section 319(2)(a) of the Pensions Act 2004.

When a member's occupational pension is replaced by PPF or FAS payments, those payments will not impact on certain income-related and contributory benefits unless current legislation is amended. Amendments to other benefit regulations are being taken forward separately by negative amending regulations as certain existing Acts already provide sufficient powers to make the necessary amendments without the requirement to amend primary legislation powers. These include housing benefit, council tax benefit, income support, and income-based jobseeker's allowance.

The Financial Assistance Scheme was created to offer help to a number of people who have lost out on their defined-benefit pension scheme because their pension scheme was underfunded when it was wound up and their employer has been unable to make up the deficit. FAS became operational on 1 September 2005, and the first payments by FAS were made in December 2005. Because most FAS payments will not be made until the scheme members reach 65, only certain social security benefits need to be amended to take account of FAS payments. This order will amend the primary legislation for contribution-based jobseeker's allowance, by inserting a definition of FAS payments into regulation-making powers and by adding
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a reference to FAS payments in the list of payments in respect of where deductions are to be made within the contribution element of jobseeker's allowance.

Noble Lords may be aware that regulations relating to FAS and state pension credit came into force on 18 December 2005 to take account of FAS payments that came into force in December 2005. The order ensures that individuals in receipt of benefits and PPF or FAS payments are no better off than individuals in receipt of benefits and occupational pensions.

I shall now move on to the second instrument before us, the PPF (Pension Compensation Cap) Order 2006. This order follows the requirement in paragraph 27 of Schedule 7 to the Pensions Act 2004 to increase the amount of the compensation cap from 1 April 2006 in line with the increase in average earnings in the previous tax year. A compensation cap is applied to scheme members who are below the scheme's normal pension age at the start of the assessment period. These members are then eligible for a 90 per cent level of compensation when they retire.

The amount of the current compensation cap was set from 6 April 2005 using data for average earnings and income available up to April 2004. The cap was set at £27,777.78 and currently provides a maximum amount of compensation, once the 90 per cent rule is applied, of £25,000 at age 65. Total average earnings, as published by the Office for National Statistics, increased by 4.2 per cent for the 2004–05 financial year. Applying this 4.2 per cent increase to the current cap provides an increased cap of £28,944.45, which provides a maximum amount of compensation, once the 90 per cent rule is applied, of £26,050.01 at age 65. That level of compensation is appropriate only to those members who became entitled to its 90 per cent level on or after 1 April 2006. The order therefore ensures that the compensation gap is uprated in line with the increase in average earnings.

The two orders before us, which I am content are compatible with the human rights convention, ensure that compensation payments made to individuals out of the PPF are treated fairly and consistently with occupational pensions and earnings. I beg to move.

Moved, That the draft order laid before the House on 9 January be approved [14th Report from the Joint Committee].—(Lord Evans of Temple Guiting.)

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