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The personal accounts scheme will be a public body operating with huge financial clout. The way that it operates could create market imperfections and we believe that it would be irresponsible of the Government to dispense with their ability to set limits. If it were ever determined that the personal accounts pension scheme should be allowed to set its own rules as to what moneys it would accept and on what terms, that would be tantamount to giving it licence to demolish the private sector pensions industry.
The Minister may well say that the Competition Commission and the Office of Fair Trading are well placed to handle such issues, but there really is no reason why the Government should create a body which might turn into an unconstrained near-monopoly. The Government have a duty to ensure that their quango does not act in that way; hence, they need to retain the full powers in Clause 61 and there should be no possibility of them not having those powers to exercise.
If the Government ever thought that it was appropriate for the personal accounts pension scheme to operate without limits—we find it very difficult to see how that position could ever be reached unless, by then, the personal accounts pension scheme had swallowed up all private sector savings—we do not believe that it would be right for this mechanism to be achieved by way of an affirmative instrument. Instead, it would be right to come back to Parliament by way of primary legislation at whatever opportunity presented itself so that at that point Parliament could consider on the normal basis whether it was right for the Government to give up their powers. I look forward to hearing from the Minister whether he has any good reason for including the power in subsection (5). I beg to move.
Lord Oakeshott of Seagrove Bay: Although the noble Baroness’s warnings about gobbling up all private sector saving in this country as we know it, or whatever the warnings were, do not curdle my blood and I think that they were a bit overdone, I agree with her that we do not need this extraordinary self-liquidating subsection at the end of the clause. I put it to the Minister that you can always set very high limits if you want. The Secretary of State can say that the limit is £1 million—you can have any limit you want. Therefore, I find it very odd to set out the contribution limits and then to say, “But we may just blow this whole thing up after all”. So, like the noble Baroness, I cannot see that this subsection is appropriate and I support the amendment.
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Lord McKenzie of Luton: As I said earlier, we have always made it clear that the personal accounts scheme should complement and not replace existing pension provision, and the annual contribution limit and transfer bands are just two of the measures designed to achieve that. We have made our position on these measures clear in various publications and statements, and the contribution limit has been extensively debated here today and in the other place.
As is said, our policy on the contribution limits has been widely discussed and there is broad consensus with our stakeholders about the £3,600 level for the annual contribution limit. As part of this consensus, it has been widely acknowledged that there is a need to review the policy at some point after implementation. That is why we are committed to having a review in 2017 of two of the features of the scheme: the contribution limit and the prohibition of transfers to and from the scheme. That has been agreed by the Secretary of State and announced in previous publications. The review will enable the Government to assess whether these measures have been successful in promoting market stability as intended without detriment to individuals within the scheme.
Following the review, and if the review evidence clearly indicates that the contribution limit should be abolished, the Secretary of State may decide to remove the requirement to have a contribution limit in the personal accounts scheme. Clause 61 allows the Secretary of State to do just that. Of course, if the review evidence indicates that the limits should remain, the Secretary of State is not required to use this power and the limits can remain and be adjusted as necessary.
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Amendment No. 112C would remove the Secretary of State’s ability to remove the requirement for personal accounts to have a contribution limit. In other words, should the 2017 review find conclusively that a contribution limit was not necessary—for example, if it found that the limit was hampering saving and was not needed to maintain market stability—it would be difficult to remove the requirement to have a limit. Personal accounts would then be required to operate a limit until a suitable opportunity to amend primary legislation arose.
I hope that the noble Baroness accepts my assurance that the Secretary of State will exercise this power only in such circumstances as I have described. I should add that Parliament will be able to debate fully the exercise of the power, which uses the affirmative procedure. I hope that that goes some way towards addressing the noble Baroness’s concerns and that she understands that the purpose of the power is to allow the Secretary of State to act on the findings of the 2017 review, should it be required. I hope that that is clear but I see that it may not be and that some questions may be coming my way.
Baroness Noakes: First, I thank the noble Lord, Lord Oakeshott, for his support for the amendment. I found the Minister’s response a little troubling. He said that a review would be held in 2017 and that it would review the limits, which is an issue for Clause 61, together with transfers, which, as he established earlier,
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My point is that, even if the Government carried out a review in 2017—an idea that we support—they could never realistically come to the conclusion that they should write their power out of the Act. I completely accept that they could use their power to set much higher limits if they were satisfied that no market imperfection was caused and that there was genuine consumer demand for it, but I think it is very unwise for the Secretary of State to say, “I’ll never ever need that power again”, because what the Government find in 2017 may not be what they find at some later date.
This will be a state-backed pension scheme and therefore we have to bear in mind that it will be a bit of a brute in financial importance terms, given the sheer volumes of money flowing through it. It is not responsible of the Government even to have a power to repeal the need to place limits, and therefore I hope that the Minister will look carefully at this again. It would be unsatisfactory to leave subsection (5) in the clause because it would be difficult to conceive of any situation where a Secretary of State could satisfy himself that for all time there should be no power to set the limits as described in this clause—that is, not only the annual limit but also the possibility of setting additional amounts under subsection (3). I do not know whether the Minister would like to add anything to what he has already said.
Lord McKenzie of Luton: Perhaps I may make just a couple of points. The noble Baroness is taking an interesting position in that she is seeking to encourage the Secretary of State to stay involved and hang on to power. That is not what we usually hear from her. It may well be the case that the review in 2017 will say that there should be some relaxation to the limit, as that is what the evidence points to, but that there is no conclusive evidence that it needs to be abandoned for all time, in which case the Secretary of State does not need to operate under Clause 61(5). Quite how he would operate in those circumstances, given the vote that took place earlier, which abrogated our power to bring forward orders under these schemes, is another matter. Perhaps I should not press that point too far.
The noble Baroness makes a reasonable point. If at that juncture there is not sufficient evidence to say that there should never be contribution limits, it may not be a wise use of the power, but it might be clear at that point that that position is taken. Having a contribution limit at whatever level imposes a cost on the scheme and on members, because it has to be implemented, policed and compliant, even if we are at a fairly high level. I do not see why the noble Baroness should be too troubled, but it is important that there is the facility to lift those contribution limits if they are not impacting adversely on the market and if they are restricting the right of the people at whom the schemes are aimed to save more fully.
Baroness Noakes: The noble Lord has suggested that the Government could not raise the limits if that was found to be appropriate. I was trying to suggest that the Government should retain the power. I do not
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Lord McKenzie of Luton: I am happy to reflect on the noble Baroness’s comments on the provision. I do not think that we will shift our position, but we need to think it through and I hope that one way or another we will be able to convince the noble Baroness of the reasonableness of it and why it is important to have the provision available. I hope that she will support us when we bring back an amendment to reinstate the power that she so cruelly removed from us earlier on.
Baroness Noakes: I should have responded to that point. When we removed the power we recognised that it was open to the Minister to bring back a power to amend subsequently. The noble Lord, Lord Oakeshott, and I, as we happily tripped through the Division Lobby, said that a power to amend would be appropriate but not the initial requirement to set up the pension scheme. We remain open to such an amendment. I am glad that the Minister is going to take away the point and review it. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Schedule 1 [The trustee corporation]:
Baroness Noakes moved Amendment No. 112D:
“( ) Appointments of members other than the chair of the corporation made in accordance with sub-paragraph (1) shall be made after consultation with the chair of the corporation.”
The noble Baroness said: We now come to Schedule 1 and some of the detailed rules governing the trustee corporation. In moving the amendment I shall speak also to Amendments Nos. 112G, 112P and 112R. These concern the role of the Secretary of State in appointments to the trustee corporation, removals from it and pay while they are members of it.
The scheme of Schedule 1 is for the Secretary of State to appoint the members and chair of the trustee corporation when it is set up and for an initial period. We know that Secretaries of State like to leave their personal mark on bodies that they set up by appointing the initial members, whatever the involvement of the Office of the Commissioner for Public Appointments.
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We accept that there is no practical possibility of the trustee corporation appointing itself at the outset and that the initial appointments will be made by the Secretary of State. But we believe that it is wrong in principle that the Secretary of State should foist a large number of members of the corporation on a new chairman. Accordingly, Amendment No. 112D proposes that the Secretary of State must consult the chairman about appointments of other members. The chairman must be able to work with his members and it is dangerous if he has no say whatever in their selection. This is good practice and I hope that there would not be any other procedure that could conceivably be followed.
Amendment No. 112G restricts the initial period in which appointments will be made by the Secretary of State to 12 months. I can see in the build-up period of the trustees, that it would not be appropriate for a small number to appoint the rest but we must not let that unusual power last for too long. In fact, 12 months may be too generous an allowance for the task of building the board. But the point of my amendment is that the time should be finite and on the face of the Bill.
Amendment No. 112P amends paragraph 5 which allows the Secretary of State to remove members from office. I can see no need for this provision after the initial period. The circumstances listed in paragraph 5 are perfectly well handled by the corporation itself on an ongoing basis. I could see that the Secretary of State might have a reserve power if he came to the conclusion that the board overall was not fulfilling its remit, but there is no such targeted power in the Bill and the power in paragraph 5 is simply inappropriate on an ongoing basis to deal with the board’s composition.
Lastly, Amendment No. 112R amends paragraph 7(l), under which it is up to the Secretary of State to determine pay. My amendment says that it is the corporation, after consultation with the Secretary of State, which will set pay. I see that the Secretary of State should have a formal role in consenting, but there is no need for him to get involved in pay matters. His civil servants have no expertise in pay, especially in the specialised area of running a pension trustee corporation, and there is no point in filling up their days with such matters. The Minister will have to talk a good story to justify the Secretary of State’s paws remaining over the pension trustee corporation. I beg to move.
Lord Oakeshott of Seagrove Bay: I support Amendment No. 112D. It is obviously sensible, although the ultimate power is with the Secretary of State, that he should consult the chair and the corporation. I am open-minded on the other issues and I await the Minister’s answer.
Lord McKenzie of Luton: Schedule 1 sets out the provisions in relation to the non-departmental public body, the trustee corporation, created under Clause 65 to run the personal accounts scheme. The amendments in the name of the noble Baroness, Lady Noakes, relate to the appointment, removal and remuneration of members of the trustee corporation as she has explained.
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First, I should explain that all the appointments in the initial period will be ministerial and so must be made in accordance with the guidance issued by the Office of the Commissioner for Public Appointments. This guidance ensures that appointments to public office follow a fair, open and transparent process. We want the trustee corporation to be given as much freedom as is reasonable for a public body, to get on with the job of running the scheme. So, from the end of the initial period, the trustee corporation will be responsible for recruiting its own members as and when vacancies arise.
Amendment No. 112D requires the Secretary of State and the corporation to consult the chair of the corporation when making appointments. During the initial period, the Secretary of State will consult any previously appointed members of the trustee corporation on new appointments. This membership would include the chair of the corporation. As a sole corporate trustee, all members of the trustee corporation will have an equal voice and equal weight in decision-making. Each member is a valued participant in the administration of the scheme. The chair does not have a greater say than other members—a distinction from the role of chair that one would often see.
When responsibility passes to the corporation, it is important that the corporation as a whole satisfies itself of the suitability of the potential appointee. This would, of course, automatically include the chair of the corporation.
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Amendment No. 112G relates to the length of the initial period. At this point we do not have all the detail for the preparation of the recruitment timetable. The delivery authority will advise us on this process in due course. We need to consider advice before making a final decision. There may be good operational reasons for it to be longer than 12 months, but equally it may be less. Our intention is that the initial period will not be any longer than is absolutely necessary, and in any event will end at the latest by the time the scheme opens for business in 2012.
Amendment No. 112P relates to the ability of the Secretary of State to remove a member of the trustee corporation from office. As the sponsor of a public body, the Secretary of State has a responsibility not only to the public, but to Parliament. The ultimate responsibility, to ensure that the provisions agreed by Parliament are carried out via the corporation, remains with the Secretary of State. Therefore, it is right that the Secretary of State must be able to assure himself and, if necessary, Parliament that the members of the trustee corporation remain suitable for their position of trust and responsibility. This is not a power to be used lightly. Although the power seems wide, it would be used only in exceptional circumstances. It is usual practice to include this power in legislation when establishing a non-departmental public body.
Amendment No. 112R would remove the Secretary of State’s ability to determine the level of remuneration of members of the trustee corporation. Although he would have to be consulted, no consent would be required. It is normal practice for the Secretary of
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This amendment would, in effect, leave the trustee corporation to determine its own levels of remuneration. That would be a highly unusual situation and one that could open the members of the trustee corporation to accusations of feathering their own nests. We of course doubt that this would happen but, in such an important matter, even the appearance of preferential treatment would be damaging. I hope that has been helpful to the noble Baroness. I have explained each of the points about which she had concerns and I hope she feels able to withdraw her amendment.
Baroness Noakes: I thank the Minister for that reply and I thank the noble Lord, Lord Oakeshott, for his support for Amendment No. 112D. I found the Minister's response to Amendment No. 112D a little perplexing—that the chairman would have no greater say than the other members, which is unlike a normal corporation. A chairman in any situation has responsibilities to bring the organisation together, to manage business, to ensure that the board is effective and so on. That is why the chairman should be the person who has a say in the appointment of members. That is normal commercial practice. I think it is the practice in the non-profit sector and it is the practice in the majority of the public sector. I am mystified by what the Minister has said. Perhaps he could explain that further.
Lord McKenzie of Luton: I can try to. I offer a distinction between someone whose job it is to chair the board, to ensure that meetings are conducted properly and so on, and a chairman of an organisation who might have some responsibility for the strategic direction of that organisation and a leadership role. That is not the role that we see for the chair of the trustee corporation; we believe they should act collectively—I can see the noble Baroness is not convinced by this. In any event, as a practical matter, the Secretary of State will consult those who are already appointed, and that would include the chair but there would be no special consultation with the chair.
Lord Oakeshott of Seagrove Bay: Perhaps I can offer the Minister a word of advice: when you are in a hole, stop digging.
Baroness Noakes: The noble Lord, Lord Oakeshott, gives good advice. I do not think the Minister has understood what the chairman of a trustee corporation does. Such positions exist already in the private sector and nowadays they are big jobs; they attract some quite heavyweight candidates. Such people are in a position of leadership because a huge number of issues need to be handled by the board. It is not a case of all members being in it together and someone drawing up an agenda and watching the clock during
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