| Previous Section | Back to Table of Contents | Lords Hansard Home Page |
The report from PADA deposited in May is similarly vague in referring to a “launch in 2012”. These are weasel words. They can easily encompass getting the scheme into its preparatory stages—issuing documentation and the like—but not being open for business in the sense of being able to accept contributions. That is what we mean by a scheme being in operation. I hope today the Minister will be much more specific about the start date and I have a number of specific questions for him. When will the first contributions be accepted? Is there any possibility of a start date other than the beginning of a tax year? Is there a precise project plan with timelines which lead to full implementation in 2012 and, if not, what will be delivered and when? I should say that the pretty little diagram on page 8 of the PADA document is not what I am talking about. Are robust project management arrangements in place? Has the Office for Government Commerce vetted the plans and, if so, what has it found? Is there a risk register for the project and, if so, will that be made available to Parliament? Why is it not possible to share the detailed planning arrangements with Parliament? I hope the Minister is not going to get out his usual fig leaf of commercial confidentiality to hide behind.
I could go on with my questions but the Minister knows what is needed to inform those outside his department who need to know what will be delivered by PADA. He does not need to hide behind formulae devised by his officials—he just needs to tell us how it is.
My amendment first requires that the scheme is capable of operation by 1 April 2012. I accept that “capable of operation” can have a multitude of meanings but the Minister knows what I mean by this and it is not a mere launch. The second subsection says that, if the Secretary of State thinks that he will be unable to comply with that date, he should lay a report before Parliament setting out the reasons for the delay and the date that he expects the scheme to be established and operating. It is important that employers and others have some certainty about what timescales they are intended to be operational within. The proposed new subsection also requires the Secretary of State to say what he intends to do to promote pension savings prior to the introduction of personal accounts. This is important because for every year that pension savings are deferred, especially for younger workers, there is a big impact on the amount realised at the end of the period or going into decumulation. There are options open to the Secretary of State to explore here.
The introduction of personal accounts is a major project carrying significant implementation risks which need to be managed. We have considerable doubts about the Government’s ability to deliver major projects, and that applies to the Government’s quangos as much as to the Government themselves.
We regret the lack of openness and transparency about the development of personal accounts to date; indeed, we regret the lack of a wholehearted commitment so far to a substantive delivery date in 2012. This is the Minister’s opportunity to reverse the policy of “Tell them as little as possible” and to replace it with a policy based on honesty and openness. I beg to move.
2 July 2008 : Column 267
Lord Oakeshott of Seagrove Bay: I am sympathetic to proposed new subsection (1B), which says that if there is to be a delay, the Secretary of State should effectively come forward, come clean and explain what is happening. However, I am a little concerned about proposed new subsection (1A), although I may have misread it. There are slight echoes of the amendment on which we have just voted. If we say that a scheme,
which we all want, what happens if, for understandable reasons, we miss that date? Are we then in the position, if we agree to the amendment, that the whole thing falls away? Perhaps I misunderstand it but that is my worry. I support proposed new subsection (1B) but I am concerned about proposed new subsection (1A) because if there is a delay we do not want to lose the whole scheme.
Lord McKenzie of Luton: Before I deal with the amendment, I say to the noble Baroness that comments like, “Honesty is not what he is paid for” ill becomes her and our debates in this Chamber, particularly when someone is referred to who is not here and who is not able to respond. Also, challenging the Government’s honesty in this is entirely unfair.
This amendment would place in the Bill a deadline for implementation of 1 April 2012 for what could be the largest occupational pension scheme in the UK. After Tim Jones was appointed, he took the sensible approach of carrying out a review of the plans that he inherited to satisfy himself that they were deliverable. The review was completed at the end of March and Tim Jones has made it clear that he has a credible set of plans that are consistent with delivery of the scheme from 2012. Following the review, a copy of A Report on the Personal Accounts Delivery Authority’s Plan for Delivery was placed in the Library of the House. Notwithstanding the noble Baroness’s comments, that was an attempt to take stock of where we are and the timeframe for delivery.
Our intention has always been to introduce the reforms from 2012 and that is still the case. However, we are still four years away from the go-live date of a complex programme delivering groundbreaking reforms. So clearly we cannot say that there are no uncertainties, risks or events around the corner that may change how we see things. A fixed implementation date, particularly one that is so precise—to the day—for this scheme would allow no flexibility should unforeseen events lead us to reassess our approach to implementation. While we firmly believe that there is no reason why we will change our approach, we do not think that a fixed date would be prudent.
This amendment also places a requirement for a report to be laid before Parliament in the event that the implementation date appears to be unachievable. The requirement does not seem to negate the requirement in the amendment to establish the scheme—the noble Lord, Lord Oakeshott, focused on that point. We do not believe that this is necessary, as progress towards implementation will be subject to scrutiny on an ongoing basis and there will be numerous opportunities for stakeholders, including Parliament, to input and review progress. For example, the delivery authority will produce
2 July 2008 : Column 268
I was going to say that I would hope that the noble Baroness is reassured by that response, but from what has happened to date, I doubt whether she is. I say to both the noble Baroness and the noble Lord, Lord Oakeshott, that Tim Jones and Paul Myners have invited opposition Members to discuss the details of their plans. I do not know whether noble Lords have taken that opportunity yet, but I would certainly urge them to do so. Indeed, Paul Myners turned up at a meeting of noble Lords but I think that only the noble Lord, Lord Skelmersdale, was there. It is not helpful to place fine details of the project on the record at this time when procurement has not yet commenced. We must appreciate that there are commercial sensitivities around this.
The noble Baroness asked some specific questions about whether we have committed to 1 April as a start date. The answer to that is, no, we have not. As Mike O’Brien said in another place, that may well be the right date to start, but the commitment is in 2012. In any event, from provisions that we have previously discussed, we would see a phased introduction of the auto-enrolment duty which would potentially impact on personal accounts as well. It may well be the right date; it may be the date that it does happen; but we have not committed to it in any way. The noble Baroness asked whether there are project plans. I am sure there are project plans. There will be business plans and the framework agreement between PADA and the DWP will require targets, a plan to be set down and an annual report.
This is a major project to change fundamentally the pensions landscape. The enabling savings retirement programme covers the implementation of personal accounts, the introduction of automatic enrolment, the mandatory employer contribution and the communications to support these reforms. Tim Jones’s report sets outs the key stats which PADA needs to undertake before the reforms can be introduced. The first step is going through government approval processes before the procurement process can begin. Part of that is the passing of this legislation. Before these approvals can be obtained the funding strategy needs to be developed. The secondary legislation also needs to be developed and passed. We intend to consult on a draft order, as I said earlier, in the spring of 2009. Subject to approvals, PADA is intending to issue an OJEU advertisement in January 2009 for the main procurement exercise. Estimates of the time suppliers will need to put in place the necessary capabilities to deliver such a scheme are subject to negotiation during the procurement exercise. The suppliers will then need to design, build and test systems before they can be implemented.
2 July 2008 : Column 269
These are major reforms and it is important that we get them right. However, as we have said repeatedly, it is our intention to introduce the reforms from 2012 and this is still the case. I understand the desire of noble Lords to have as much detailed information as possible but they must understand precisely where we are on this exercise. I would urge them to talk to Paul Myners and Tim Jones and get this directly from those who have the responsibility.
Baroness Noakes: I was looking for information and commitment from the Government. Their agent is PADA; if it does not do the job properly then they can sack the people who work there. It is not for opposition Members to inquire of the staff of quangos—that really is not how life is supposed to work. The Minister said that he thought that there were detailed project plans, which I found extremely unspecific. I asked whether there were detailed project plans and I did not get a specific answer. I was hoping to follow up my query by asking to see them. Is there any reason why detailed project plans cannot be made available to Parliament?
Lord McKenzie of Luton: An outline of the approach is set down in the Library and the noble Baroness has referred to that. The noble Baroness may not want to talk to these individuals directly, but that is her choice. PADA is an NDPB. It will have a framework agreement which needs to be revised once the new powers of PADA come into being after the Bill is passed. That will require a business plan, annual reporting and a report on PADA’s progress under the responsibilities imposed on it. That will be in the public domain and will be available on an annual basis. All that is quite normal; it is how these processes work. The noble Baroness keeps asking to go along and look at the books and at every plan that is being developed, but I am not sure that that is necessarily the role of politicians, the Government or the Opposition. Again, I urge the noble Baroness to talk to PADA. I am sure that it will explain in some detail where it has got to.
5.15 pm
Lord Oakeshott of Seagrove Bay: I welcome the fact that I have had an invitation to meet Tim Jones and Paul Myners, and I look forward to doing so. I do not think that that is in any way inappropriate; I shall find it helpful and useful.
Baroness Noakes: The Minister has again referred to the little diagram in the document placed in the House of Commons Library—not, I should add, the House of Lords Library—but it is not a project plan. It is a million miles from a project plan but we are invited to believe that it will all be all right in 2012.
The Minister referred to phased auto-enrolment, but that cannot even begin unless the personal accounts scheme is up and running because there is no sensible way of phasing other than having the whole scheme operational. It seems to me that the Minister is hoping that PADA will deliver. He refers to annual reports and accounts being available to Parliament but those will not say anything about delivery; we know that. All the documents that have been produced so far are so unspecific as to be barely worth the paper that they are written on.
2 July 2008 : Column 270
We will have some time during the Summer Recess to progress this issue and I hope that the Minister will be able to procure some more detailed information. This does not require the breaching of commercial confidentiality but it does require information to be in the public domain. It is not enough for private meetings to take place, because many people are interested in the detailed outworking of this policy. I said at the outset that my amendment was probing. I have probed and found the Government wanting but, for today, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakes moved Amendment No. 110BA:
“( ) A scheme established under this section shall not be subject to the requirements to obtain audited accounts and an auditor’s statement about contributions under regulations made pursuant to section 41 of the Pensions Act 1995 (c. 26).”
The noble Baroness said: I shall speak also to Amendment No. 110DA. These amendments concern the audit arrangements for the new personal accounts pension scheme. They have been suggested by the Institute of Chartered Accountants in England and Wales, an organisation with which the Minister and I are both familiar.
The problem that the amendments seek to address is that the legislation relevant to trust-based occupational pension schemes has an audit requirement by virtue of Section 41 of the Pensions Act 1995 which is impractical to operate without amendment for personal accounts. The current audit rules require a pension scheme auditor to state whether in his opinion contributions have been paid in all material respects with the payment schedule. This encompasses both accuracy of payment and timeliness but is very difficult, not to say impossible, to achieve and is certainly costly in terms of audit fees for complex pension schemes with many employers involved, as this will be.
This is not a new problem; it arose in connection with stakeholder accounts. Eventually, some sort of compromise was reached so that the audit report was replaced by a report by reporting accountants—which, as the Minister will be aware, is not the same thing as an audit—on the trustees’ statement in relation to controls. The amendments are designed to get to the same point for personal accounts. Amendment No. 1l0BA removes the need for an auditor’s statement about contributions under Section 41 of the 1995 Act. Amendment No. 110DA specifies what will be in its place; namely, a trustee’s statement about systems and controls and then a reporting accountant’s report on the design and operation of those systems.
This was debated in another place and the Minister there made some sympathetic noises but these did not go so far as to accept the concerns expressed by the Institute of Chartered Accountants in England and Wales. Hence; we have been asked to table these amendments again in your Lordships’ House. In another place the Minister appeared to accept that auditors will find it difficult to give a clean audit opinion on contributions where the contributions are paid by a myriad of employers, many of them very small. But the Minister clearly did not grasp that in seeking what
2 July 2008 : Column 271
I hope that the Minister’s own background and experience will allow him to see that a conventional audit report as envisaged for single employer schemes simply does not translate into something like the personal accounts scheme. “Audit” is the wrong concept or, alternatively, it is one which is both over-engineered and destined to end in mechanical failure.
I would not regard it as right to leave this issue to regulations. It took a long time for the accounting profession to sort out the issue in connection with stakeholder pensions and it would not be right for us to let personal accounts go ahead without proper reporting arrangements in place. There is a manifest problem in trying to retrofit the personal accounts concept into the existing law for trust-based schemes. We should recognise that now and on the face of the Bill. I beg to move.
Lord McKenzie of Luton: I thank the noble Baroness for bringing forward the amendments, which relate to the auditing requirements on the scheme. As the noble Baroness said, the Institute of Chartered Accountants in England and Wales—a fine body, if I may say so—raised the issue with officials. I am grateful to the institute for its help in ensuring that we get the shape of our legislation right. The amendments relate to the application of regulations under Section 41 of the Pensions Act 1995 to the personal accounts scheme. In short, current regulations under that section require an auditor to state that he or she is satisfied to a high level of detail about contributions made by each employer into the scheme. The requirement from the auditor’s statement about all contributions to the personal accounts scheme will be costly and difficult to compile due to the sheer number of employers and workers participating in the scheme. An auditor may be unable to satisfy himself that contributions had been paid properly and may have to qualify the accounts and the audit will be of relatively little benefit to members.
The principle of proper accounting is paramount, but it is true that this scheme will be of a different scale and type from other schemes, for which the provisions in the Pensions Act 1995 were primarily designed. We have been considering the matter with the delivery authority and have concluded that the approach that the ICAEW suggests is the right one. I am pleased to give an assurance that the scheme will not need to apply the provisions made under Section 41 of the 1995 Act.
I can also confirm that no amendment to the Bill is necessary as we already possess the legal powers to achieve the objective of the amendment, either by regulations under Section 41 of the Pensions Act 1995, under Clause 116 of the Bill, or within the scheme order. In agreeing that the scheme should not need to apply the auditing requirements, we also agree that we need alternative assurance arrangements based on the principles of openness, accountability and probity.
2 July 2008 : Column 272
Fortunately there is no need for primary legislation to stipulate the assurance arrangements as the Bill’s current drafting allows the scheme order to set out the arrangements. The scheme order and the rules will be the subject of full consultation next spring. I hope that my assurances on the scheme audit and the robustness of the financial controls are sufficient for the noble Baroness to withdraw the amendment.
Baroness Noakes: I am very grateful for what the noble Lord said. He has certainly gone further than the Minister went in another place when these or similar amendments were considered. On behalf of the Institute of Chartered Accountants I express thanks to the noble Lord for taking it this far. I am sure that the institute will want to read Hansard and, if necessary, return to his officials to clarify the position. From what I can tell, the outcome he proposed is entirely satisfactory. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Noakes moved Amendment No. 110C:
The noble Baroness said: I shall speak also to Amendment No. 110D. Both amendments concern the rules of the personal accounts pension scheme. Clause 58(12) contains various matters which the rules of the pension scheme must not contain; namely, its object and purpose, trustee appointments or removals, meetings, committees and exclusion of liability. I can see why this Bill, with the order creating the pension corporation, will set up the current view of how those things should work, but over time we will find that the Bill is deficient in some respects and that some things specified for good reasons at the outset will no longer have any relevance or, worse, actually create problems. However, I can see no reason for the Bill to face permanent restrictions on the ability of the pension scheme to evolve over time through rules. Surely it should not be necessary for the Secretary of State to be involved in every new order on things such as the appointment of trustees or committees. Amendment No. 110C, therefore, deletes subsection (12) in the interests of the long-term efficiency of the operation of the scheme.
| Next Section | Back to Table of Contents | Lords Hansard Home Page |