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I hope the other place will think again about this issue, otherwise my solution—having learnt the hard way about how the other place will deal with it—is that we write more specifically into such Bills an insistence that when we are talking about parliamentary scrutiny the other place cannot then redefine that as House of Commons scrutiny. I was very clear when this Bill went through this House that when we talked about parliamentary scrutiny we meant scrutiny by experts in both Houses.
Lord Moser: My Lords, I speak as a member of the Liaison Committee. I was very pleased that when the noble Lord, Lord Jenkin, first made the proposal it was approved by the Committee, as has been noted, and was then passed by the whole House some months ago. I also express my appreciation to the Leader for her efforts in getting this through.
I shall explain why I regard it as a serious setback for the Government’s intentions behind this legislation. From the beginning it was made clear that the new Statistics Authority—it was then called a “board”—would have Parliament as its ultimate master, rather than Ministers. That was the whole point that led the then
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Lord Lucas: My Lords, is the Chairman of Committees aware that the problem of the other place regarding scrutiny by it as being scrutiny by Parliament is replicated in a very major way in the Planning Bill, which is currently going through this House? Will he therefore bend some efforts towards trying to resolve this conundrum in favour of “Parliament” meaning “both Houses”?
Lord Sheldon: My Lords, it is now 30 years since my noble friend introduced the idea of having a Barnett formula. It was expected to last only one, two or maybe three years. The situation has changed but the formula has lasted 30 years, which was quite unexpected. We need to examine this properly, and I am glad to see that the committee has been set up.
Lord Forsyth of Drumlean: My Lords, I welcome the decision by the Liaison Committee to set up an ad hoc committee on the Barnett formula, particularly with the provisos that have been included to take some of the politics out of it. It is a sensitive subject.
I congratulate the noble Lord, Lord Barnett, on the persistence with which he has gone about this. I suspect that it is a bit like the Schleswig-Holstein question, but in this case the noble Lord is very much alive and understands it. Not many people, especially those who pontificate on it in the press and elsewhere, understand it, but it is vital. I have no idea how these things are done, but I suggest that the noble Lord should not be allowed to be a First World War general and say, “Over the top, lads! By God, I wish I was going with you”, but should be very much a part of the ad hoc committee, if for no other reason than that he understands it and its implications.
This is a sensible decision. The committee has important work to do in ensuring fairness and equity throughout the whole of the United Kingdom.
The Lord President of the Council (Baroness Ashton of Upholland): My Lords, I shall say something about the statistics committee, which I have thus far—I use the words advisedly—failed to achieve. The reason that the time lag was so long was that I consulted way beyond my opposite number in order to try to put the case. Indeed, I have said to the noble Lords, Lord Moser and Lord Jenkin, that the game is not over yet, if I can put it like that. We should continue to raise the points, specifically because it is true that, whenever we use the word “Parliament”, it is my view that we should be clear that it means both Houses of
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The Chairman of Committees: My Lords, I am grateful to all noble Lords who have spoken on this report. The noble Baroness the Leader of the House has dealt with the matter of the statistics committee. Unfortunately, as she has said, it is not possible to form a Joint Committee if the other half does not want to know about it.
With regard to the noble Lord, Lord Barnett, and his formula, I thank him for his kind words and I am grateful for the words of support for them from the noble Lords, Lord Sheldon and Lord Forsyth. Membership of the committee will be a matter for the Committee of Selection, but it will have heard what has been said in this debate.
The noble Lord, Lord Soley, is welcome to come back to the committee on a future occasion and we will look at the proposal on its merits. Regarding the fact that the report of the noble Lord’s committee was not available at the time of the deliberation of this Liaison Committee, I would just say that it always meets at this time of year to consider what is going to be done in the next Session.
However, the fact that the report was not available is a slightly two-edged sword. The Liaison Committee’s report deals with the matter on completely separate grounds to whatever the report might or might not have said. It is probably a good thing that the report was not available. Although I am sure it will be admirable, we would not want our decision to have been influenced by whether we thought the report was good or bad.
On Question, Motion agreed to.
Pensions Bill
3.55 pm
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved accordingly, and, on Question, Motion agreed to.
House again in Committee on Amendment No. 130EW.
[The CHAIRMAN OF COMMITTEES in the Chair.]
Lord McKenzie of Luton: I wonder whether I might be permitted, before we move on to the amendments, to make a brief statement following on from where we left Monday’s proceedings. Following the debate in this House on Monday evening, my ministerial colleagues and I reflected on the thoughtful contributions made by the noble Lords, Lord Lucas and Lord Oakeshott, and the noble Baroness, Lady Noakes. I was in particular struck by the constructive approach taken by the noble Lord, Lord Oakeshott. He has acknowledged
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In our consultation, we requested responses on our proposed legislative approach. In that document, we suggested taking a broad amending power in primary legislation to follow with the specific detail of the changes in regulations. We did this for a number of reasons. First, we wish to give this House sufficient notice of our intent, which an introduction at Report stage would not do. There was insufficient time following consultation for an alternative legislative approach at Committee. Secondly, we wished to be thorough in consultation, and, having consulted widely on our policy intentions, to follow with a second consultation on the details in secondary legislation. This would help to mitigate the undesirable consequences of regulation, to which the noble Lord, Lord Lucas, and the noble Baroness, Lady Noakes, referred this week. Thirdly, we believe that, as the DWP does not have a pensions Bill every year—thankfully—the need to react to future unforeseen issues in pensions avoidance might be best served in this way.
As we have consistently demonstrated, our intention is to work with our stakeholders closely, both on the draft legislation and on the regulatory guidance that would detail the specific requirements on schemes and their sponsors. However it is clear from this week’s discussions that noble Lords would prefer a greater amount of this legislation in the Bill, to ensure that the regulator’s powers are constrained by primary legislation.
The noble Lord, Lord Oakeshott, felt that we were asking for a blank cheque to be given to secondary legislation. While this has never been our intent, this view has been reflected in some feedback received from key stakeholders. We agree with the principle. The slippage of our anticipated date of Royal Assent from July to later this year, gives us the opportunity to put more detail in the Bill. I am confident that we will find an appropriate way forward which addresses those concerns.
I am happy to assure noble Lords that our intention remains to work closely with them and stakeholders over the summer and to return in the autumn with more of the proposed detail included in this amendment. We have discussed the potential for setting up a working group in this area with the CBI. It is supportive of the need to extend the regulator’s powers to deal with new market developments, but shares the noble Lords’ concern that more detail should be place in primary legislation. Alongside this we will work with the Pensions Regulator as it develops guidance to ensure that that guidance is clear and gives appropriate reassurance to business.
It is therefore right that we work through the amendments tabled by the noble Lord, Lord Lucas, and the noble Baroness, Lady Noakes, some of which we can agree with in principle, so that I can be as clear as possible on the Government's position on the points raised. However, I should be clear that nothing in this
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I am grateful for the opportunity to clarify where we left matters the other evening; I think it might help our discussions on the amendments that have been tabled.
4 pm
Baroness Noakes moved, as an amendment to Amendment No. 130EW, Amendment No. 130EY:
The noble Baroness said: I am sure that all noble Lords will have an opportunity at some stage to respond to what the Minister has just said. We are grateful to him for putting that on the record. However, it does not change the fact that the Government are choosing to press ahead with the amendment notwithstanding the fact that it has not been properly consulted on. They did not expose Amendment No. 130EW to consultation. They received a large number of responses to their different consultation, many of which disagreed with the drift of what the Government were trying to do, but within days of the consultation ending they published their draft amendment, indicating that they had no intention of taking account of the consultation itself. We believe that it would be right for further discussion to take place on the basis of the Government having an open mind. But the Government have chosen not to have an open mind. We will therefore progress with our amendments on the Marshalled List, because it is important that the arguments put to us are properly recorded in Hansard alongside any consideration of the Government's own amendment.
In our last Committee day, the Minister said:
that is, this broad power in Amendment No. 130EW—
- “... if it created serious new risks. I should like to reassure noble Lords that it is not our intention that by introducing provisions we materially increase such risks”.—[Official Report, 14/7/08; col. 1086.]
Those are very fine sentiments, but that is not what the new clause in Amendment No. 130EW proposes. That new clause focuses on producing regulations as if there are material risks either to the benefits of members of pension schemes or of compensation being payable to the PPF. We believe that it is quite possible that the regulations will increase both those risks and, therefore, that they should be properly considered in those terms before regulations are produced.
Let us consider the risk to benefits of members of pension schemes. The CBI, for example, has pointed out to us that if further clearance applications are a result—and many believe that that will be the case if Amendment No. 130EW is in the legislation—there will be a considerably increased cost imposed on business to deal with them. The CBI estimates that each clearance costs between £50,000 and £100,000 as a result of the many advisers and valuation fees involved in putting together those applications. That will inevitably lead
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We have also had comments from people who are aware of how turnaround situations work. They say that these new powers potentially make turnarounds more difficult and will possibly hasten businesses being placed into insolvency. That obviously poses a risk to the benefits of members because the PPF levels of compensation fall well short of those within a defined benefit scheme. As I stated previously in Committee, while it is often said that the PPF gives 90 per cent cover, that is often down as far as 60 per cent and it is around 80 per cent on average.
There is also the question of whether this power will help the retention of DB schemes, because the regulations might be used to impose additional liabilities on those who are able to lend financial support to employers struggling with DB schemes, merely through being connected with those employers. Employers with an attached DB scheme will find themselves unsaleable and unattractive investment targets. If that is the case, they will find it more difficult to find investment partners and, inevitably, the employer covenant reduces.
As to the risk to the benefits of members of pension schemes, there is also a risk to the compensation being payable from the PPF. Again, those involved in turnarounds say that turnarounds and recovery will be more difficult because it will become more difficult to obtain new investment or to sell assets to pay off secure debt without being at risk under what are potentially the new rules. Clearance is not an answer in the turnaround situation because of time criticality. For example, you need to obtain refinancing in order to meet payroll obligations. We do not have an insolvency or turnaround regime which allows a lot of time for decisions to be made. If clearances are not pursued, further financing is just as likely not to be available and likely to accelerate the move of the employers into insolvency which, of course, will thereby increase the risk to the PPF of compensation becoming payable.
The point I am trying to make is that it is entirely foreseeable that the new rules that have been postulated by the Government will increase the risks—both to members of pension schemes and of compensation becoming payable to the PPF. The only point of Amendment No. 130EW is that the Secretary of State should take into account those risks before issuing any regulations. That is what our amendment seeks to do. I beg to move.
Lord Oakeshott of Seagrove Bay: It is entirely appropriate that the noble Baroness, Lady Noakes, is now going through these amendments in detail since the Government—unfortunately, and rather to my surprise, following what I thought was a constructive response from the noble Lord, Lord McKenzie of Luton, on Monday night—have decided to press ahead with this amendment. Given that we all accept that a lot more works needs to be done and a lot more detail needs to be in the Bill, I would have thought that it
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I thank the noble Lord, Lord McKenzie, for the kind words and considerable amount of re-playing of my speech in the statement. I could say to him that flattery will get you almost anywhere. But it would have been a lot more helpful if his boss, the Minister for pension reform, had taken the trouble to read my speech. Perhaps he might have spent a little more time reading it and a little less time making increasingly frenzied phone calls to my colleagues in the Commons yesterday. I think he made three calls to our present spokesman and one to our former spokesman. But he did not favour me with a call, so I spent most of my time hearing the things that he was saying about what I had said which indicated clearly that he had not read my speech. I thought—and I thank the Minister for this—that my speech was reasonably balanced and constructive; I certainly did not recognise any of it in the calls that “Macho Mike” was making on Tuesday.
I am pleased to say that the tone has suddenly changed overnight. I have in my pocket four messages asking me to ring Mike O’Brien, so I am glad that we are suddenly all friends again. Seriously, however, this is not the way to go about things at this early stage of scrutiny on a Bill and wastes quite a lot of time. The noble Baroness, Lady Hollis, will remember that, as I have said, we had a similar situation in 2004; but we have probably had six, seven or eight Ministers in Mr O’Brien’s position since then, all called different things. Just a little checking of what happened, or even taking some notice of his noble friend Lord McKenzie, would have been sensible. We should learn a lesson from this. It was not a constructive way to go about things, and I am glad that people have now, I hope, read my speech. I put a lot of thought into it, and we have been here before.
This is not a party political issue. As we did in 2004, we are all of us trying to get the right Bill that will work for an important and serious issue. I welcome a more constructive approach. I do not think that a meeting, although Mr O’Brien has now kindly offered one, would be appropriate at the moment. The right way to do it would be for the Government to consult properly over the summer, not just with the CBI, the BVCA, the TUC and anyone with a legitimate and substantial interest in these matters. When the Government have completed those consultations and worked out what they want to do, and have some draft amendments, I would very much welcome the opportunity to meet Mr O’Brien and the noble Lord, Lord McKenzie; I hope that that will be taken up. Indeed, if the noble Baroness, Lady Noakes, came as well, it would be wonderful to get government amendments to which we could all put our names.
However, Mr O’Brien must remember that we on these Benches are legislators, not stakeholders. We will ultimately need to decide, but I suggest that that is the right way to go about it. Again, I put on the record my serious concern over the dangers for British pension funds from what is going on in the buy-out industry. We are in uncharted waters. The covenant of some of these companies that are offering buy-outs is not
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I am totally with the Government on what they are trying to achieve. I support what the Pensions Regulator is trying to do. However, there is a right way to go about these things, properly taking into account the views expressed by people with a legitimate interest. I hope that that process will happen over the summer.
Baroness Hollis of Heigham: Listening to the debates on Monday evening and today—I am losing track of the Committee days now—I confess to a slight sense of déjà vu, to coin a phrase, to which noble Lords have referred. Back in 2004, I was rightly persuaded by the noble Lord, Lord Hunt, that there was a real issue of moral hazard in that Bill; and that, in establishing the TPR to avoid Maxwell-type rip-offs, we might tip over into preventing mergers, acquisitions and restructuring of companies. Those things would be highly desirable, both for the employees whose jobs might otherwise be at risk and for the health of British industry. The question then, as now, was how we assessed the balance between those risks and ensured that restructurings in good faith were not subsequently undermined by any rigid appliance of compliance rules by the TPR.
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