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I am conscious that this issue will recur in your Lordships’ House and elsewhere from time to time, but I urge the House to support the proposition that I have advanced.
On Question, Motion agreed to.
3.45 pm
Lord McKenzie of Luton moved Motion. C:
“Financial assistance scheme: scheme manager(2) In regulation 5(1) for “Secretary of State” substitute “Board of the Pension Protection Fund (“the Board”)”.
(3) In regulation 5(2)(a) omit the words from “Secretary of State” to the end of that paragraph and insert “the Board”.
Because it is inappropriate to replace the Secretary of State as the manager of the Financial Assistance Scheme with the Board of the Pension Protection Fund.
Because they would involve charges on public funds, and the Commons do not offer any further Reason, trusting that this reason may be deemed sufficient.
Because they make provision connected with that made by Lords Amendments Nos. 17 and 18, to which the Commons have disagreed.
The noble Lord said: My Lords, I beg to move Motion C, that this House do not insist on its Amendments Nos.15 to 21, 23 and 24, to which the Commons have disagreed for their reasons Nos. 15A to 21A, 23A and 24A.
A great deal has happened since this House amended the Pensions Bill to reflect concerns about the generosity and efficiency of the financial assistance scheme. We have a new Prime Minister, a new Secretary of State for Work and Pensions and a new Minister of State for Pension Reform. We still have the same old Lords’ Minister, who has not yet been churned out of office. And we have the interim findings of the Young review into assets remaining in failed pension schemes.
As a consequence of those findings, the Minister of State for Pension Reform announced on 17 July that the Government will match the extra value available from scheme funds that the review identifies. Our goal is to move towards 90 per cent of expected core pension for all qualifying members. This is a potential commitment of some £225 million in addition to the £1.9 billion already promised, in net present value terms, to FAS.
The work done by the Young review so far is impressive, especially as it was completed by the review team in such a short time. The interim findings demonstrate that a better outcome is possible for scheme members. By approaching the winding-up process
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I was also pleased, though not surprised, that the review’s interim findings have confirmed what the Government have been telling the Opposition for some time—that other non-tax sources are unlikely to play a significant role in any solution.
I can also announce today that we have decided to accept the review’s recommendation that we should not enforce a cut-off date for employer insolvency.
On the 27 February 2007, the Minister of State for Pension Reform announced that he would extend to 31 August 2007 the date by which an employer of a scheme in wind-up had to experience an insolvency event for that scheme to qualify for FAS. I can confirm today that we will not now enforce that date. We will consult on whether there should be a cut-off date and bring forward regulations in due course.
The other place has asked us to reconsider the bulk of the amendments made to the Bill on the financial assistance scheme on the grounds of financial privilege. The noble Lord, Lord Turnbull, warned us in Committee that the proposals to fund higher levels of assistance by using unclaimed assets were straying into dangerous territory. He has been proved right.
Notwithstanding the fact that the Young review has determined that the non-tax sources of funding that it looked at are not suitable, the proposals to guarantee the lifeboat fund and on-account payments by trustees rely on taxpayers’ money being made available to plug the gaps that would inevitably occur in such uncosted and untested bodies.
Amendments Nos. 16 and 24, bringing in schemes with solvent employers and paying PPF levels of benefit, represent obvious calls on the public purse, perhaps running into hundreds of millions of pounds. It would be fiscally irresponsible to insist on them.
The other place disagrees with Lords Amendment No. 15 on the grounds that it is inappropriate to replace as FAS scheme manager the Secretary of State for Work and Pensions with the board of the PPF. That would be inappropriate at this time, and without substantial preparatory work.
Last year’s review of FAS administration, which enjoyed input from the PPF, was well received. It concluded that, although lessons could be learnt from the PPF’s approach to proactive data gathering, there would be significant constraints on its ability to manage FAS operations. The issues involved in FAS are complex and outside the experience of the PPF. The Government would not want PPF operations to be hampered by having to come to terms with an
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I acknowledge the criticisms that have been made of FAS, but I emphasise once again the professionalism and commitment of the staff, who are working with schemes that may have inadequate records and where members may have long since abandoned hope of seeing anything of their pension. To quote Andrew Gaspar of Pitmans Trustees:
“The FAS is doing its best in fairly trying circumstances. People there are trying to get the job done while the press is continually on their back. I am not sure they are at fault”.
He is the independent trustee of a scheme where we have received data for all 52 members and assessed them for annual payments from the FAS.
I do not rule out wanting to look again at the issue, especially if the Young review identifies different approaches to funding, but I do not think that it is sensible to pre-empt those findings or to cause disruption and distraction to FAS operations at this time.
The Government have given a commitment to raise the levels of assistance towards 90 per cent if, as we believe will be the case, the Young review is able to get better value from funds remaining in schemes. The Young review is also gathering information on schemes with solvent employers to allow us to make a considered decision on to how they should be treated. We must wait for the review’s final report, which we have asked to be brought forward to November, before committing to any additional spending.
Let us not lose sight of the fact that we will, from Royal Assent, be able to pay more money to more people immediately as a result of raising initial payments. I urge Your Lordships not to stand in the way of getting that help to people now.
Moved, That this House do not insist on its Amendments Nos. 15 to 21, 23 and 24, to which the Commons have disagreed for their reasons Nos. 15A to 21A, 23A and 24A.—(Lord McKenzie of Luton.)
Lord Skelmersdale: My Lords, the Minister has sketched out the background to the problem and I am extremely grateful to him for that. I am also glad that the cut-off date is to be extended. The amendments that we moved originally would have set up a fund taking any unclaimed assets identified by the public assets register, with the exception of those in banks and building societies, which have already been allocated by the Government to another public good—that of assisting children and charities—as their unprecedented Statement on future legislation told us.
I rather wonder whether the Minister has been reading the same Young report as I got from the Printed Paper Office yesterday. On page 5, it clearly states:
- “the Review team believe it should still conduct some further investigation of the complex legal and operational issues raised by unclaimed assets, involving Government and industry as required”.
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The story of unclaimed assets is by no means dead. It may become dead at the end of the day, but as of this moment it is not.
When the lifeboat fund is being set up, the Government will kick-start it with a loan in exactly the same way that the previous Conservative Government treated the collapsed pension schemes of the late Robert Maxwell’s commercial venture.
When the Bill returned to the Commons last week, the Government said—I paraphrase—“No way”, and the great clunking fist came down, manifesting itself in the Commons reason of privilege to all but one of the group of amendments, which we will discuss shortly. It is with great regret that I tell your Lordships that, despite what the Minister rather surprisingly said in his preamble, we must accept the reason produced by another place.
Shortly before your Lordships’ activities in Committee, the Government rather sold the pass by setting up the Young committee to look at whether the assets of the failed schemes could be better used once they came under the remit of the FAS. Indeed, we have just had a little exchange about the results of that. In its interim report at the end of last week, it decided that they could but that the final report would flesh out exactly how much might be available and by what means. Ministers immediately announced that they would produce matching funds. This is yet another ratcheting up of government money for the FAS—something of which I of course approve. However, I note with a certain amount of irony that one of the Government’s objections to the lifeboat scheme was that it was uncosted. So, too, is the matching money that the Government have promised. What is sauce for the goose should be sauce for the gander. The expression “the pot calling the kettle black” rather springs to mind.
We have not even been given a clear idea of how the Government intend to calculate the savings to which the Young review might lead. Do they perhaps intend to backdate any savings to the start of the FAS? The history of the FAS is shabby, to say the least. It was originally set up to quell a Back-Bench rebellion in another place, and was given the least amount of money—£400 million—that the Government felt they could get away with. To spread this evenly, they decided that they could not afford to pay the 90 per cent of expected pensions, which was the amount that would be paid to members of pension schemes that came under the PPF; so they invented what they called the core pension, with a de minimis limit. There is no lump-sum initial payment, no indexation and no widow’s rights. No one gets anything before the age of 65 and, even then, only after a protracted checking process that can leave people whose funds are still in wind-up with nothing at all. The number of people so far granted any sort of pension under this scheme is just under 1,500. The Minister may have an update on that figure.
The Government realised that £400 million was nothing like enough, especially as they had committed themselves to paying 80 per cent of the core pension. Subsequently, £8 billion in total was eventually prised out of the Treasury’s greedy maw,
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Lord Oakeshott of Seagrove Bay: My Lords, I welcome the Minister’s acceptance of the Young review’s recommendation not to enforce a cut-off date for solvent schemes. However, does he accept the Young review’s key conclusion on page 29 that,
- “the current FAS scheme is not the best way of ensuring good value, as there is a complicated process and benefit structure, considerable duplication of administration, insufficient risk pooling etc”?
Even the Government’s own review comes to that damning conclusion.
One hundred and twenty-five thousand members of failed pension schemes have been robbed twice; first when their funds collapsed, and now by a government ruse to block House of Lords amendments to the Pensions Bill today. Almost all Bills where the House of Commons and the House of Lords disagree involve some public expenditure, but the Government suddenly decided that they were losing the argument in Parliament and the country on justice for the robbed pensioners, so they forced through, by a 3:2 vote over Opposition protests in a reasons committee, to,
- “disagree to Lords Amendments ... Because they would alter provisions relating to taxation, and the Commons do not offer any further Reason, trusting that this reason may be deemed sufficient”.
4 pm
In a Written Answer from the noble Lord, Lord McKenzie, the Government have admitted that it would cost only £19 million a year over the next five years or £25 million a year over the next 10 years to give robbed pensioners the benefits that they would receive from the Pension Protection Fund. With the Minister’s remarks about making extra value and matching forward, clearly those figures will be even less if further money is made available. I do not know whether the Minister can update and say how much less even than £19 million a year over five years or £25 million a year over 10 years it would now cost from where the Government have got to to pay the benefits we are asking for. Even the £19 million a year or £25 million a year are, frankly, small change compared to the major spending commitments in this Bill. The pension pots of the current Cabinet total more than £25 million.
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This House does not seek to challenge the other place on financial privilege, but there is no fundamental breach of Commons financial privilege involved in the blocked Lords amendments. The Pensions Bill already has a hugely wide money resolution which sets no upper limit on the public expenditure it entails. There is no need to pass a supplementary resolution to cover any expenditure incurred by Lords amendments.
Parliament as a whole deserves a proper explanation of the reason why the Government—in a straight party vote in a committee chaired by a Minister, not some independent non-partisan ruling by the House of Commons, as people might think—have suddenly decided to pull up the drawbridge on debate now. Members of this House and the 125,000 robbed pensioners outside want to know why this decision does not have to be openly, properly and publicly debated and defended on the Floor of the House of Commons. Stifling debate by a majority of one vote in a committee of five people sitting behind closed doors is democracy in the dark. Britain deserves better from our Parliament.
The Minister said that we have a new Prime Minister, a new Secretary of State and a new Pensions Minister, but we have the same old spin on the FAS and the same old refusal to pay robbed pensioners their PPF benefits. We have this constant cheating with talking about core benefits whereas what the Government are proposing is more like 65 per cent of what people would be entitled to under the Pension Protection Fund. It is high time that they stopped spinning and started facing up to the demand for justice in the country.
Lord McKenzie of Luton: My Lords, financial privilege has been raised again. I dealt with the position in relation to that when we discussed the previous amendment; that is, the Lords accepts those judgments of the Commons and the reasons given. It is also not right to say that the use of financial privilege has stopped debate on this issue. What have we just been doing? It would be perfectly in order for someone to move an amendment in lieu of the amendment that came forward so long as it did not impair the financial privilege of the other place. There was the opportunity to do that. We have not been stifling debate on this issue. Our exchanges have been reflective of the strength of feeling on this issue expressed in both Houses during the passage of the Bill.
The Government have always been sympathetic to those who have lost their pensions. Given this sympathy, we have always sought a satisfactory solution for those who suffered. We have had to balance this desire with the responsibility to ensure that any solution is fair on the taxpayer. The contributions of noble Lords and Members in the other place have helped us clarify where we might strike this balance.
We have moved forward. An amendment introduced by the Government during Report stage in the other place will guarantee that all 125,000 people affected will receive at least 80 per cent of their expected core pension. Let me make it clear: I believe that we have always used that term. If I have not in my earlier presentation, I reiterate it now. It is to do with core
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During the other place’s consideration of amendments originally tabled in this House, my honourable friend the Minister of State for Pensions Reform gave a further commitment: we will use the assets that we expect to be identified in the Young review, together with a matched contribution from the Government, to raise the levels of assistance towards 90 per cent of expected core pensions. The noble Lord, Lord Skelmersdale, said that that was an uncosted commitment, and we chided the Opposition for their position, as that was not a fair analysis. Our pledge to match the extra value available from scheme funds as a consequence of the assets review is not an uncosted commitment. The Government will match funds to get to 90 per cent, up to a maximum, we estimate, of £225 million in net present value terms. The lifeboat amendment promised PPF-level benefits. That is a £640 million commitment without any real evidence for where that money might be found. We will be working with trustees in order to maximise the assets in their schemes to make a real, not a possible, difference to the assistance level for members.
The noble Lords, Lord Skelmersdale and Lord Oakeshott, asked whether we accepted the recommendations of the Young review that we could do better out of the assets of those schemes. That comes from the interim work that he has done, although we will have to await the final report. He believes that by a variety of mechanisms we can do better, and the amendment we are coming to next will illustrate the Government’s support for the position he has taken.
There are tangible commitments that will make a difference to the lives of thousands of those who have suffered. Both the noble Lord, Lord Skelmersdale, and the noble Lord, Lord Oakeshott, quoted the figure of 125,000 people. That is right, but it should be borne in mind that most of those have not reached pension age. To date, about 10,000 people have reached the age of 65 and are eligible. We are currently paying 1,367 people, 246 of them in annual payments and 1,111 in initial payments. A further 67 members will be paid once personal details are confirmed. Gross expenditure on payments to date is £5.28 million. One hundred and two schemes have completed notification, 867 schemes have completed qualification, 682 schemes have qualified and 288 schemes have provided data on their members that have been assessed.
I am sure that this issue, like the other amendment we have just discussed, will not go away, but I hope in the circumstances that the House will accept the Motion I have put to it.
On Question, Motion agreed to.
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