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Finally, if the levy is frozen and there are no sudden jolts to the system by way of increased risks, do I understand that in the future we will not consider these orders unless things change? If that is what the Minister is saying, does that mean that they go to the negative procedure or do we just not ever see them again? Is that the case if the conditions he has explained continue to obtain and are not disturbed in any way? If that is the case, it is a bit early to start moving away from this important level of parliamentary scrutiny. While it is clear that no one is looking for extra sittings in Grand Committee or anything else, and I concur with the noble Lord, Lord Skelmersdale, that these orders are by and large perfectly supportable, that is a different matter altogether from removing them from the scrutiny of Parliament. If the Minister is saying that we are going to be denied opportunities like this in circumstances where the levies are not increased, I for one would be slightly nervous about that. I hope that the Minister can clarify my understanding of what he has just said. I am perfectly happy to have my interpretation of his introduction corrected. In the mean time, I agree with the orders.

4.15 pm

Lord McKenzie of Luton: I start by thanking both noble Lords for their contributions and their support for these three orders, notwithstanding that that support has come with a whole raft of questions

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which I shall try to answer. I shall deal with as many as I can, but perhaps I may start by dealing with the last point made by the noble Lord, Lord Kirkwood. The change to the administrative levy that we are dealing with is that if the levy itself does not have to change because the rate remains unchanged, there is no need to come back for an annual confirmation of it. That is the particular change being made here and it is proposed to try to maintain the levy at the present rate for a period of time. It is to avoid an entirely unnecessary process.

The noble Lord, Lord Skelmersdale, asked about the various rates by which we change the items before us and whether we could not align them. In theory we could align them with, for example, an April figure. However, when the policy on this was developed it was felt that more recent figures would be better where there is no need to stay in line with social security policy. It is a practical matter and does not make much difference to our deliberations. He also raised the issue of Northern Rock, and it is interesting to note the ingenuity of Members opposite in introducing it at every opportunity. I should say that Northern Rock has a defined-benefit scheme, but there is no insolvency event and therefore it is not in assessment. The issue does not arise.

Both noble Lords talked generally about the backdrop to the economy, in particular the international credit crunch and its ramifications for the UK economy. Obviously it impacts on growth, as the Budget Statement has made clear, but I should remind both noble Lords that we are still talking about growth in the economy. It may be less than originally forecast, but it is still growth.

Lord Kirkwood of Kirkhope: We will see.

Lord McKenzie of Luton: Indeed we will see, but Chancellors’ predictions since 1997 have been pretty good. Let us look at the record. We have had a period of continuing growth under this Government that is unprecedented. However, perhaps we should debate these issues on another occasion.

The noble Lord, Lord Skelmersdale, asked about the relative proportions of the risk-based levy and the scheme-based levy. I have a schedule which I am struggling to locate, so perhaps I will move on to another point while my officials find it for me.

The noble Lord asked about the assessment process and whether things were proceeding as quickly as we would want. The PPF is broadly in line with the business plan for completing assessments, and the government target for schemes to wind up is two years. Obviously, there are often complex legal issues associated with these processes, but the assessment process is in line with expectations.

On the previous point, on the basis of the levy that it was sought to collect for 2007-08, the figure was £675 million in total, of which the risk-based component was 80 per cent of £540 million, and the scheme-based element was 20 per cent of £135 million. I do not have the latest figures on how much of that has been collected, but for levy year 2007-08, 6,786 invoices have been issued, to a value of £476.1

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million, and £334 million has already been collected for that levy year. In terms of collections, I am not sure whether it is easy to identify which component of the levy it is, but I will have a look at that and write to the noble Lord if that would help.

The noble Lord, Lord Kirkwood, asked whether Gershon applied and what was happening to staff numbers. We expect staff numbers in the PPF to stabilise. Clearly, in the early years there was a progression in administration costs as the set-up was put in place, but we are approaching a time when it can be stabilised, and that is what is expected in terms of staff numbers. The noble Lord asked about powers to reduce compensation. There are several powers to reduce compensation in extremis following the recommendations of the board and consultation. I stress that we do not anticipate any immediate need for those powers to be exercised; but they are clearly an important safeguard and the noble Lord made a fair point on that.

The noble Lord also asked about the number of levy payers and what will happen if that falls. Currently, there are about 7,800 levy payers but only 50 schemes in the PPF. The PPF will consult in the summer on the future of the levy, including ensuring that the levy is sustainable and fair. The noble Lord also asked about administration costs, and I think that he was trying to reconcile the various figures that were floating around. It may be helpful if I set that out as follows. For the current year, the expenditure in terms of routine resource costs was £17.7 million, with a PPF start-up cost of £3 million, so the total expenditure was estimated to be £20.7 million. There was a deficit carried forward from the previous year of £1 million, and the levy receipts were £19 million, and that leads to a deficit at the end of the current year estimated to be £2.7 million. If you project that forward over the next three years, the resource costs for 2008-09 are expected to be a smidgen under £20 million, at £19.9 million. If you take account of the deficit that must be funded, the £2.7 million, there will be a deficit at the end of next year of £0.6 million, but with a £22 million levy for next year. On the basis of three years of levy at £22 million, at the end of that three-year period a small surplus should arise. I hope that has put the matter in context.

The noble Lord, Lord Skelmersdale, asked about Northern Ireland, and he confirmed that he was aware of and understood the process that I outlined. We have dealt with the issue about the risk-based levy and the scheme-based levy. The noble Lord, Lord Kirkwood, asked what would happen if there was a downturn and whether that would affect the levy. The size of the levy estimate will be limited by the levy ceiling, which is an important safeguard that has been agreed by Parliament, which is why we have it before us tonight. The PPF can reduce the levy estimate if necessary.

The noble Lord asked about scheme data. The Pensions Regulator has a team that is dedicated to improving the administration and governance of schemes. Most members are in large, well-run schemes, but again we need to be ever vigilant to ensure that scheme data are good and robust.



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I believe that I have answered each of the questions that have been asked, although the noble Lord, Lord Skelmersdale, looks as though he will challenge me on the basis that I have not. Perhaps I should ask him to do so.

Lord Skelmersdale: Although I am extremely grateful for the myriad figures that the Minister has produced, not least on the risk-based element of the levy, I commented towards the end of my few words that it is becoming increasingly difficult for firms which feel obliged to top-up pension schemes in order to reduce the risk-based levy that they would otherwise attract. I asked whether he had any comments to make on that subject.

Lord McKenzie of Luton: If one effect of the risk-based component of the levy is that it encourages schemes to manage their risks better, that is a really good outcome. It is right that some of the shortfalls in outcomes compared with the original estimates for some of the levies arise because the schemes have improved their risk management and there is therefore a smaller component. We should welcome that outcome, which may be part of why the scheme is designed that way.

Lord Skelmersdale: The Minister is looking through only one end of the telescope. My concern is that it benefits no one if such an operation brings the firm in question closer to bankruptcy.

Lord McKenzie of Luton: It would be odd to do something simply to try to reduce the levy. If there are risks in the scheme and the employer is a sponsoring employer with responsibility for that scheme, it is entirely reasonable that the employer should direct their attention to how that scheme can be properly funded. I therefore do not quite follow the noble Lord’s point. I do not believe that it could be argued that the structure of the levy drives sponsoring employers into difficulties. The focus and construction of the levy could encourage schemes to be appropriately funded. That is in part what is happening. I hope that that has dealt with the point that the noble Lord wanted covered and that it has dealt with each of the other points that noble Lords have made.

Lord Kirkwood of Kirkhope: I was trying to keep up with the figures, which obviously is difficult because the process is complicated and the picture changes all the time, but it would be very helpful if the noble Lord, Lord Skelmersdale, and I could get written confirmation of the latest available figures for the number of members and schemes in the assessment process. It may change by the end of the financial year, but I do not know. Perhaps we should hold our horses and wait until that happens, or perhaps we should be told to hold the horses completely until annual reports are produced when this will all become clear. An early indication of what has happened in the past 12 months since the last orders were considered would certainly assist me, if no one else.



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Lord McKenzie of Luton: I am happy to write to the noble Lord with the most up-to-date assessment that we have of what is happening. I visited the Pension Protection Fund on Friday and saw some of the charts that it has on the wall and the plans that it has to deal with all this, so I am sure that we can give him very up-to-date information. That reminds me of one other point that the noble Lord made about accountability for all this. Clearly an annual report and accounts of the Pension Protection Fund must be laid before Parliament, and the usual channels will have the usual opportunities to debate them if they wish. If that has satisfied each of the noble Lords, I commend the orders to them.

On Question, Motion agreed to.

Occupational Pension Schemes (Levies) (Amendment) Regulations 2008

Lord McKenzie of Luton: I beg to move the Motion standing in my name on the Order Paper.

Moved, That the Grand Committee do report to the House that it has considered the Occupational Pension Schemes (Levies) (Amendment) Regulations 2008.12th Report from the Joint Committee on Statutory Instruments.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

Occupational Pension Schemes (Levy Ceiling) Order 2008

Lord McKenzie of Luton: I beg to move the Motion standing in my name on the Order Paper.

Moved, That the Grand Committee do report to the House that it has considered the Occupational Pension Schemes (Levy Ceiling) Order 2008. 11th Report from the Joint Committee on Statutory Instruments.—(Lord McKenzie of Luton.)

On Question, Motion agreed to.

Offender Management Act 2007 (Consequential Amendments) Order 2008

4.30 pm

The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Hunt of Kings Heath) rose to move, That the Grand Committee do report to the House that it has considered the Offender Management Act 2007 (Consequential Amendments) Order 2008.

The noble Lord said: This order makes amendments across the statute book that are consequential to Part 1 of the Offender Management Act 2007, which contains the new arrangements for the provision of probation services. The amendments made by the order are largely technical in nature—where there are references in legislation to the current probation structure of local probation boards, the order amends that legislation to include references to the new probation arrangements. By making these amendments we are ensuring that the duties and responsibilities required of a local probation

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board are applied equally to a probation trust and, where relevant, other providers of probation services. The amendments do not result in any policy change.

Although a number of consequential amendments are made by Schedule 3 to the Offender Management Act 2007, it was made clear during the passage through Parliament of the then Offender Management Bill that those consequential amendments were illustrative of the Ministry of Justice’s approach and that the ministry would subsequently put before Parliament further consequential amendments using the power in Section 38. My noble and learned friend Lady Scotland said:

now Section 38—

The provisions in Part 1 of the Offender Management Act 2007 make two distinct changes from the previous legislation on probation provision, the Criminal Justice and Court Services Act 2000. First, the Offender Management Act 2007 places the statutory duty for the provision of probation services on to the Secretary of State. Under the 2000 Act, this statutory duty had been placed on local probation boards. Secondly, the Offender Management Act 2007 allows for the establishment of probation trusts, as the public sector bodies to provide probation services, and to eventually replace local probation boards.

The Secretary of State can either provide the probation provision that he is now responsible for himself, or he will be able to contract with others in the public, private or voluntary sector known as “providers of probation services” to deliver the probation provision. One key element of the probation provision is, however, retained by the public sector, and that is assistance to courts. This can be more widely contracted, beyond the public sector, only after agreement by both Houses of Parliament via an order. Further, there has been a commitment to retain the assistance to court work within the public sector for at least three years.

The amendments made by this order ensure that the duties and responsibilities placed on local probation boards across the statute book will apply to providers of probation services with whom the Secretary of State has contracted under the new probation arrangements.

During Committee stage, my noble and learned friend Lady Scotland further said:

The amendments in the order can be divided into three broad categories. The first, and the largest, category relates to provisions on core probation activities and duties such as the supervision of offenders on licence or as part of a community order and the provision of information to victims of a crime. Section 199 of the Criminal Justice Act 2003, for example, contains provisions on unpaid work requirements that are made as part of a community order or suspended sentence order. A court can impose such a requirement only if it is satisfied that the offender is a suitable person to perform the work. In taking this decision, the court may hear from an appropriate officer, who in the case of adult offenders is an officer of a local probation board. The order updates the definition of appropriate officer to include an officer of a provider of probation services.

The second category relates to legislation that places requirements on local organisations, including local probation boards, to work collaboratively to achieve certain goals such as the reduction of crime and disorder in their local government area. Such requirements also need to be placed on providers of probation services under the new arrangements.

The third category concerns statutory obligations placed on public authorities, including local probation boards. The order ensures that these requirements are placed on probation trusts as the public sector providers, and, where appropriate, on other probation providers in relation to their activities of a public nature under their contractual arrangements with the Secretary of State for probation provision. The Disability Discrimination (Public Authorities) (Statutory Duties) Regulations 2005, for example, require listed public authorities to produce and update at regular intervals a discrimination equality scheme. We have included both probation trusts and providers of probation services where they carry out activities of a public nature in this list.

I am sure noble Lords will have noted that the approach adopted with the consequential amendments in the order ensures that legislation referring to probation arrangements will refer to both the current arrangements of local probation boards and the new probation arrangements. This reflects the phased approach to establishing the new probation arrangements that I spoke of briefly earlier, and makes the legislation easier to understand. The order therefore seeks to include a reference to the new arrangements under the Offender Management Act 2007 alongside current arrangements, rather than simply replacing references to the previous legislation. Once all local probation boards have been abolished, we will repeal references to local probation boards, again using the power in Section 38 of the Offender Management Act 2007.

The order also makes the necessary amendments to legislation to reflect the new name of the probation inspectorate under Section 12 of the Offender Management Act 2007. From 1 April, the probation inspectorate will be called Her Majesty’s Inspectorate of Probation for England and Wales. The new name reflects the broader objective of the new probation

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arrangements of developing a range of providers of probation services that include private and third sector organisations. I beg to move.

Moved, That the Grand Committee do report to the House that it has considered the Offender Management Act 2007 (Consequential Amendments) Order 2008. 10th Report from the Joint Committee on Statutory Instruments.—(Lord Hunt of Kings Heath.)

Lord Henley: I thank the Minister for that detailed explanation of what he, and the title of the order, make clear are only consequential amendments to the Offender Management Act 2007. It is important that the regulations are affirmative, even though the amendments are only consequential, because the order amends primary legislation. Governments of whatever persuasion should be wary of that unless it is unavoidable. The order amends Acts going back as far as the Reserve and Auxiliary Forces (Protection of Civil Interests) Act 1951 and right up to Acts of Parliament of only last year—I do not think it amends any Acts of this year—and various orders of various dates. For that reason, I am grateful for the Minister’s detailed explanation. I am also grateful for the Explanatory Notes that the Minister’s department provided, which brings me to my only question.

The noble Lord will remember that during the passage of the Bill, the noble and learned Baroness, Lady Scotland, said in response to amendments tabled by the noble Baronesses, Lady Gibson and Lady Turner:

Some of that was done by Schedule 3 to the Act, and I presume that some will be done this order. I understand that at some point later in the summer, the noble Lord’s department, presumably in consultation with a whole range of other departments, will bring forward a new draft equality Act that will bring together a wide range of matters in this field. Will that require yet further amendments to the Offender Management Act and the other legislation that we are discussing, and will further amendments be required in due course? The simple question is: is this only the first of many Offender Management Act 2007 consequential amendments orders?

Baroness Falkner of Margravine: We, too, thank the Minister for his very detailed explanation and particularly for the useful Explanatory Memorandum. I am rather new to this area and was not involved in the Criminal Justice and Courts Services Act 2000 and the Criminal Justice Act 2003, so I appreciate having the background information.


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