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Since PADA was established, spending in connection with the authority up to 31 March 2008 was around £12.5 million. Noble Lords will be aware that until 29 February 2008, the authority’s costs were met using DWP resources, but since 1 March has been grant-in-aid funded and is now responsible for accounting for its own expenditure. This year’s departmental estimates include an initial budget of £36.1 million for the 2008-09 financial year, and is intended to cover the authority’s continuing advisory role and anticipates the funding that PADA may require once the delivery role is extended to allow it to set up the personal accounts scheme. As we have made clear, our intention is that the costs associated with PADA’s role in setting up the personal accounts scheme will be recouped from members’ charges, and the scheme is intended to be self-financing in the long run. The authority will therefore account separately for scheme-related expenditure.
The noble Baroness referred to the number of consultants involved in this project. Given that PADA is going to have a finite life—until 2013 on the basis of amendments in her name, although I note her indication that she does not intend to move them—as she knows full well, it is often better to buy in a range of experience from consultants than to recruit people, particularly if their skills are needed for a relatively short time. There are of course some quite specialist skills involved in all this.
I should say that how personal accounts are funded is an important decision, and the delivery authority is evaluating various options to identify the most appropriate method of financing. But noble Lords must accept that it will not and cannot be known until PADA has completed the scheme’s detailed design and undertaken commercial negotiations to obtain the services that will underpin its delivery. That can begin only once the Bill reaches Royal Assent. At this stage, revealing information about the scheme’s costs or possible funding arrangements could, I believe, prejudice PADA’s ability to secure value for money during commercial negotiations. But I urge both the noble Baroness and the noble Lord, Lord Kirkwood, to take up the opportunity of a meeting with Tim Jones at PADA, who I am sure will be able to brief them as fully as he is able.
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The set-up of the compliance regime will be funded by the Government by way of a grant-in-aid funding stream, which will be kept completely separate from the regulator’s current expenditure funded via the general levy and subject to parliamentary scrutiny. In terms of ongoing compliance costs, as I touched on in our debates last week, we are exploring further how these will be funded.
Finally, on the question of whether a 0.3 per cent annual management charge is achievable, we expect that the charge level that will apply in the personal accounts scheme will be in line with Pensions Commission estimates in the long run. But I stress that the charge structure of personal accounts has yet to be decided. The delivery authority is responsible for advising on the charge structure for the scheme and will be consulting on the options. The final decision will be dependent on the end design of the scheme and the commercial procurement process. I am conscious that that will not satisfy the noble Baroness’s demands for ever more information and I understand that because we would be asking the same questions in her position, but I hope she recognises that a lot of work has to be undertaken to get this scheme designed and to organise the funding arrangements. Until that is done, it would be foolhardy to commit to precise figures. For those reasons, I hope that the noble Baroness will withdraw the amendment.
Baroness Noakes: Let me get it straight at the outset that I did not ask the Minister to commit to precise figures, so I have not asked him to be foolhardy. I asked the Minister one simple and straightforward question: when the December 2006 White Paper was put together, the Government clearly had a view on costs and how they would translate into charges. Are the estimates that were produced at the time borne out by later experience or are they more or less than anticipated?
Lord McKenzie of Luton: Until the detailed work on the design of the scheme and all that goes with it has been completed, it is impossible to answer that question. We need to do that work to determine what the final costs will be. I do not understand why that is a difficulty for the noble Baroness. It is absolutely plain that, until we have done the work and know the detail involved, how it is going to be put together and what the final and full design is, we cannot give final costings. That is not an unreasonable position.
Baroness Noakes: I have not asked for final costings. I have asked for up-to-date estimates.
Lord McKenzie of Luton: The up-to-date estimates can be given when we have done further work on the design of the scheme. If it is work in progress, we do not update estimates every single day as progress is made on the design of the scheme. No one would do that.
Lord Kirkwood of Kirkhope: This is all the other way round. I listened to Mr Jones make a compelling case, in which he used the phrase that he is going to design an Expedia, not a Thomas Cook. It will be internet-based and low cost; it will be all in the sky; there will be no mail and no face-to-face. He is doing
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I am pleased that the noble Baroness tabled the amendment because I am getting more sceptical as the debate goes on. If Mr Jones feels that he has more than 0.3 per cent—if he can nudge it up to 0.5 per cent—he will design a different scheme. So, unless he knows the envelope within which he is working, how can he possibly be expected to design a scheme? It is all the other way round.
Lord McKenzie of Luton: I do not agree with the noble Lord. The proposition is to design a low-cost scheme targeted on low to medium earners within the parameters that we are debating in the Bill. That is the wraparound of what has to be achieved and the broad remit of Tim Jones and his team in getting the funding strategy in place and the charging that will result from it. Again, this is within the constraint that it has to be self-financing in the long term. Those are the parameters within which he has to act and undertake his work and we should let him get on with it, rather than every single day trying to get an update on where he is on his costings. That seems an entirely reasonable position.
Baroness Noakes: It has been an interesting debate and I thank the noble Lord, Lord Kirkwood, and the noble Baroness, Lady Hollis, for their support. I emphasised that I was not seeking to put 0.3 per cent in the Bill; the important issue was to flush out the position on costs.
The Government are asking us to buy a pig in a poke. We are invited to give the powers and authorities that come with the Bill, but they have not worked out what it will cost. They are going to carry on working on it until some point in the future; there are no parameters within which we can expect outcomes to be achieved; and we are given no information about the emerging costs. Estimates were carried out in December 2006 but the Minister can give me no further information now. He said that it is a matter of commercial confidentiality and that he cannot give me final estimates, for which I have never asked. This is entirely unsatisfactory.
PADA is already spending large amounts of money. By the end of this financial year it will have gone through the best part of £50 million. However, we do not know what the money is being spent on, what we are getting for it and what the total cost is heading towards. When the Identity Cards Bill came through Parliament, to give a similar example, we were at least told that over the first 10 years £5.7 billion would be spent. We did not make much progress on what lay behind that figure, which is why Parliament, in its wisdom, required the Home Office to present cost reports on a six-monthly basis. That £5.7 billion over 10 years is ever such a lot more information than we are getting on this Bill. The Home Office had cost estimates that were examined by accountants and reported on with some bits taken out to ensure commercial confidentiality. We knew ever such a lot more in that case. In this case we know absolutely nothing.
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The Minister hides behind a series of abstract words about what is being delivered. Mr Myners and Mr Jones also do that in meetings. There is very little point in having a meeting with them if one has already seen the evidence given to Select Committees and heard the reports from other meetings, because no further information is forthcoming. We are told about internet-enabled things, but no specifics on the cost emerge. It is not reasonable to ask Parliament to proceed with such a Bill unless we have information on the cost and the subsequent effect on charges.
I hope the Minister will reflect on this before Report. It is an important part of the whole picture in deciding whether the design we are being asked to support can fly and whether it is within the scheme that we all agreed was a good one to go forward. We are not being given enough information to know whether we should still support what we signed up to. I hope the Minister will go back to his department and look again at what information can be made available, not at what information cannot be made available. To date, the Minister and PADA seem to have been involved in a process of asking, “How many ways can we say that we will not give you the information?”. We need to move beyond that.
5.30 pm
Lord McKenzie of Luton: Perhaps I may clarify one point. The noble Baroness suggested that about £50 million will be spent by the end of this year but we do not know what it will be spent on. PADA will produce an annual report and be required to lay its accounts before Parliament, so what is spent will be clear as we go along. I know that that is not the same as forward estimates for the scheme as a whole, but it is not right to say that what is spent will not be accounted for, if that was the implication.
Baroness Noakes: I never suggested that PADA would not account properly for the money that it has spent or that the DWP would not account properly for the first £13 million or so that was spent on its own budget. But information received some time next year, after the event, tells us nothing about the total cost of the scheme. I was merely using that to show how little we know about the emerging cost profile of this scheme.
We will not get any further today. I just want the Minister to know that his response has been profoundly unsatisfactory. We have to make more progress on this at Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 113H and 113HA not moved.]
Clause 71 [Directions and Guidance]:
Baroness Noakes moved Amendment No. 113J:
The noble Baroness said: I shall speak also to Amendments Nos. 113K, 113L and 113M. Clause 71 deals with directions and guidance, both of which may be given to PADA by the Secretary of State. My amendments pursue a theme of transparency.
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Amendment No. 113J amends Clause 71(4) so that guidance as well as directions must be in writing. Under Clause 71(2) PADA must have regard to guidance, so it seems impossibly informal and open to misunderstanding if that guidance is not reduced to writing. If there is no requirement for a formal record of guidance, the Bill will tolerate guidance given by a series of nods and winks or other communications that would lack clarity. There can be no excuse for not properly recording guidance.
Clause 71(5) requires directions to be published, and Amendment No. 113K requires guidance also to be published. Amendment No. 113L requires publication of either guidance or directions to be within one month of the direction or guidance being issued. At present there is no limit at all on publication, hence the issue of directions under the clause—or guidance, if my earlier amendment is accepted—could be in six months or a year, or put in the annual report perhaps 15 months later. Amendment No. 113N would require the directions and guidance to be included in PADA’s annual report.
These are not intended to be nitpicking amendments. What PADA does will have an impact on the world outside Whitehall, and it is vital that the basis on which it operates is, first, completely clear to PADA itself, so guidance should be clear and recorded in writing, and, in turn, clear and transparent to the outside world.
I expect that the Minister will say that directions and, particularly, guidance will cover a lot of detailed matters of no interest to the outside world. The Government should let that world say what interests it, rather than having the Government decide that for it. I hope he will not hide behind some notion that giving guidance to PADA is not the kind of thing that should be exposed because it will raise issues of confidentiality; that is the kind of thing that gives the process of government a bad name. I say: let sunlight into the relationship between the Government and PADA. I beg to move.
Lord McKenzie of Luton: The authority has been established as an independent expert body to advise on, and take forward, implementation of the personal accounts scheme. However, it is a non-departmental public body, so accountability to Parliament for the authority’s performance in action rests ultimately with the Secretary of State. Clause 71 sets out provisions allowing the Secretary of State to issue directions and guidance. Such provisions are a common feature of relationships between an executive NDPB and its sponsoring department. These measures provide reassurance to the Government and, importantly, to Parliament that appropriate procedures are in place to ensure that the NDPB works within its scope, does its job properly and manages itself to the standards we expect from a public body.
I shall take this opportunity to outline the clear distinction between guidance and directions. Directions must be complied with. As a rule, they are issued only in exceptional circumstances and are of such significance that it is only right that they should be published, so the Bill will require that. An example of a possible direction would be if the authority clearly disregarded
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Directions should be published promptly. Indeed, during debate in the other place, my honourable friend the Member for Warwick and Leamington said that,
- “we intend that the directions would be published as soon as they were made, subject to the necessary practical arrangements”.—[Official Report, Commons, Pensions Bill Committee, 5/2/08; col. 419.]
I will arrange for those to be available in the House Library.
Guidance, as the noble Baroness acknowledged, can be much more routine and a standard part of how departments work with their NDPBs. The provision allows the sponsoring department to clarify its expectations of the work being carried out by the NDPB and give policy steers about the work being led by the NDPB. As a rule, the NDPB must have regard to such guidance but does not have to comply with it, as is the case here. Existing legislation for different NDPBs sets a variety of requirements as to whether directions and guidance should be written and published. That is dependent on the nature of the NDPB and the role it is undertaking.
The noble Baroness’s amendments seek to ensure that, as with directions, all guidance issued to the authority must be in writing and must be published. I sympathise with the intent of these amendments; transparency in the work of NDPBs and their dealings with Government is of great importance. However, requiring all guidance to be put in writing, or indeed published, is not the most effective way of working—in fact, we think it could get in the way. Guidance will not be an exceptional occurrence; rather, it will be part of the continuing dialogue with my department as the authority carries out its functions in delivering the personal accounts scheme, which is, of course, part of a broad pension reform programme.
Guidance covers the full range of activity carried out by both organisations, from the mundane administrative tasks to serious matters of policy formation. As an example of the first, the authority has recently relocated its London office and, while the decision on the suitable location was made by the authority, the department, in its role of steward, provided a great deal of guidance on how such public sector processes are managed. It would obviously be entirely disproportionate to require that sort of guidance to be written down and published.
At the other end of the scale, the department and PADA are working together on the secondary legislation to establish the scheme. While many of its aspects are now in the public domain, such as the contribution limit, the further work on scheme development will throw up detailed questions that will need to be resolved by discussion between the authority and the department and, quite possibly, through guidance of one sort or another—some written, some not. It would plainly not be appropriate for all these discussions to be made public. Information will remain available under the Freedom of Information Act in the usual way, but it is
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Of course, once proposals have been agreed, they will be set out in a draft order and rules and will be issued for wide consultation. Given the commitment to consultation that has been demonstrated across this programme, I hope that Members of the Committee will accept the need for periods of policy formation to take place, protected from public exposure. This is particularly important for a time-limited body such as the authority, involved closely with other organisations in a broad programme of reform, working to a demanding timetable.
Much of this guidance will, as a matter of good working practice, be made in writing. However, introducing a requirement for all guidance to be put in writing and, further, to be published would impose unnecessary and inappropriate demands on the programme. Of course, the authority and the department will fully adhere to Cabinet Office guidance and to the Freedom of Information Act. I believe that this treatment of directions and guidance strikes the right balance between transparency, effective collaborative working—given the authority’s role in the wider programme—and the need to respect confidentiality in an appropriate manner in a highly commercial context. I hope that that has addressed the noble Baroness’s concerns.
Baroness Noakes: I am rather unconvinced by the point that guidance should not be put in writing. Perhaps the Minister can help me. The authority has to have regard to guidance. The authority will be the board—the directors who are appointed to PADA. How are they to know what guidance they have been given?
Lord McKenzie of Luton: It depends on the circumstances in which that guidance is offered. During my time on the child maintenance programme, there was a raft of meetings with officials from the redesign team, who would discuss various options, and various steers were given. Those options were then worked up, documented and put into the system. It also depends on the level of issue that is being dealt with. Often the guidance is not put in writing at the point of delivery; invariably it is in documentation and specific proposals, and sometimes in specific regulations, as I have just outlined. That is the normal process of government.
I hope that the noble Baroness will respect the fact that issues surrounding policy formation are confidential within government and are protected under the Freedom of Information Act. What is important, once guidance has been issued—whether it is ignored or taken on board—is that the resulting policy is properly documented and implemented and that Parliament has the opportunity to see the results.
5.45 pm
Baroness Noakes: I shall not take up much of the Committee’s time, but perhaps I may say that the Minister’s response was really a bit silly. Trouble has been taken to write guidance into the legislation—not
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