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Perhaps I may say to the noble Baroness, Lady Hollis, that proposed new subsection (2) of my amendment does not preclude the Secretary of State from putting anything else that he wants into the report, and it may well be that what the noble Baroness would like to see will be very appropriate and ripe for consideration at that time—namely, five years later.
I accept the Minister’s criticism that the amendment refers to the establishment of personal accounts rather than their operation. The question then is: what is
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Amendment, by leave, withdrawn.
Schedule 1 [The trustee corporation]:
Baroness Noakes moved Amendment No. 54:
54: Schedule 1, page 75, line 11, at end insert—
“( ) The Secretary of State shall consult the chair of the corporation before appointing any other members of the corporation under sub-paragraph (1)(a).”
The noble Baroness said: My Lords, Amendment No. 54 amends paragraph 1 of Schedule 1. Under paragraph 1, the Secretary of State will make the first appointments of members of the trustee corporation and, indeed, he will be able to continue to make appointments for an undefined “initial period”. My amendment would require the Secretary of State to consult the chair of the corporation before making these appointments. That means, of course, that the Secretary of State’s first appointment would need to be the member who is to be the chairman of the corporation.
We debated a similar amendment in Committee and I was so surprised at the Minister’s response that I tabled this amendment, which is slightly different, so that the Minister can have another go at explaining to the House the role of the chairman of the trustee corporation. He told us that the chairman of the trustee corporation would be no different from any other member. Perhaps I may quote the Minister from the Hansard for 2 July. He said that,
- “all members of the trustee corporation will have an equal voice and equal weight in decision-making ... The chair does not have a greater say than other members, a distinction from the role of chair that one would often see”.
“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”.—[Official Report, 2/7/08; cols. 305-06.]
I simply cannot see how an effective organisation can be forged on the basis of collectivism. Of course, every member will have an equal vote in decisions—if it is ever necessary to resort to voting—but in any organisation there has to be some strategic direction and leadership. The trustee corporation cannot be a vacuum from which leadership has been expelled; it simply will not work.
I am not approaching this from a private sector board perspective, although it is certainly true that in the private sector you will never find a chairman specified in the way that appears to be envisaged by the Government. I looked at the appointment pages of the Sunday newspapers that we had at home at the weekend, when there was the usual clutch of public
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Another feature of these advertisements for chairmen was the need to forge a special relationship with the chief executive—usually one of guiding and challenging. This is an important aspect of the role of the chairman in all organisations with which I have worked, in all sectors. I assume that the trustee corporation will have a chief executive. Who, in the Government’s view, is to take the lead responsibility for both supporting that individual and for appraising his or her performance? These things may need a collective view—for example, if a change has to be made—but they do not emerge spontaneously. They have to be led.
The point about the Secretary of State consulting the chairman about other appointments to the corporation is that the board has to be one that the chairman believes he can chair effectively. That is a judgment about people. The formation of the trustee corporation is critical to the success of personal accounts. The people who are assembled are crucial in their own right. However, above and beyond that is the ability of the chairman to bring those individuals together to cohere into a whole that is bigger than the parts. That is what I see as leadership and what I see as essential to the trustee corporation. The chairman is not there to keep the attendance records and to ensure that the agenda is processed in time for lunch.
Of course, I hope that the Minister will accept this modest amendment. If he does not feel able to do so, I hope that he will set the record straight on how the trustee corporation will work in language that anyone used to a boardroom in any sector will recognise. I hope that the Government will want to recruit a person of real substance and experience for this role. What the Minister says today may dictate whether or not that is achievable. I beg to move.
Lord Oakeshott of Seagrove Bay: My Lords, I support the amendment. I am grateful to the noble Baroness for reminding us of the nonsense to which we were treated by the Minister in Committee. I find this quite extraordinary. I am not just saying that as someone who has quite a lot of private sector experience; I also refer to how public sector bodies work. For example, at the Pension Protection Fund, we meet the people, the chairman, the chief executive. What is the difference? What is the problem? Even if we call it primus inter pares—the idea that the chair is no different in any way from the rest of the board members, even if they have a vote—it is just basic good manners that the Secretary of State should consult the chair before making the other appointments. I cannot understand why this is being resisted. It does not seem to apply even to other DWP-sponsored bodies that we deal with. I just hope that the Minister might say, “Actually, we have got it wrong, let’s just do it”.
Lord McKenzie of Luton: My Lords, don’t rub it in! I guess my response can be summed up as, “It’s a fair cop”. I stand chided for a less than complete description of what we see the chair of the organisation doing. A
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I am happy to agree with the spirit of the amendment. I have some small concerns about the drafting. The amendment would make it unclear whether a group of inaugural members could be appointed along with the inaugural chair or whether, instead, establishing the corporation would require two appointment rounds. Also, if the chair had resigned, the plain words of the amendment would be at odds with the fact that there would be no chair to consult. I believe that those are just narrow, technical doubts, but it is important that we have clarity. However, we shall add this to the list of Third Reading items and enshrine the fact that the chair should be consulted. I hope that that moves us on.
Baroness Noakes: My Lords, I repeat what my noble friend Lord Skelmersdale said in relation to the previous amendment: it gives me great delight to beg leave to withdraw the amendment. I am delighted by what the Minister has said.
Amendment, by leave, withdrawn.
9 pm
Lord Tunnicliffe moved Amendment No. 55:
The noble Lord said: My Lords, I shall speak also to Amendment No. 57. I am sure that noble Lords will remember our debates in Committee about the trustee corporation. In particular, we had an interesting debate on the period for which a person can be appointed to be a member of the trustee corporation. We agreed to take away the valid points made by the noble Baroness, Lady Noakes, and the noble Lord, Lord Oakeshott, about the value of experience and continuity in such positions. After consideration, we believe that it is sensible to increase the maximum period of tenure to two terms of five years, rather than two terms of four.
Amendment No. 55 means that, although we are extending the maximum limit, it will remain in line with the principles in the code of practice of the Office of the Commissioner for Public Appointments, which suggests that it is in the public interest to limit the length of appointments made by Ministers to be no longer than a total of 10 years.
On Amendment No. 57, while the corporation will comprise the nine to 15 individuals who make up the sole corporate trustee, the corporation will, of course, need to employ staff to carry out the day-to-day running of the scheme. At this stage, it is simply not possible to know how the trustee corporation will want to staff itself and who the best candidates for the various roles will be. It is possible, especially in the early years, that industry experts may be interested in joining the corporation to assist in its set-up but that they would want to do this on a short-term secondment basis, rather than as formal employees. We want to ensure that the trustee corporation has the flexibility to appoint the best possible people for the job. Amendment No. 57 enables the trustee corporation to delegate functions to all members of staff, not just employees. Many, if not all, senior positions are likely to include delegated functions.
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Finally, I reiterate that the trustee corporation is required to act in the best interests of members. This means that, regardless of whether an employee or secondee, the trustee will still have to consider the appropriateness of any delegation and ensure that proper controls are put in place. This amendment will not dilute that responsibility in any way.
I thank noble Lords again for their compelling contributions in Committee and I hope that these amendments address the concerns that they raised then. I beg to move.
Baroness Noakes: My Lords, more delight is recorded from these Benches.
Lord Oakeshott of Seagrove Bay: My Lords, hallelujah!
On Question, amendment agreed to.
Baroness Noakes moved Amendment No. 56:
56: Schedule 1, page 78, line 8, at end insert—
“( ) The trustee corporation must establish a committee in order to keep under review the question whether the corporation’s internal financial controls secure the proper conduct of its financial affairs.”
The noble Baroness said: My Lords, Amendment No. 56 amends paragraph 9 of Schedule 1 so that the trustee has to form a committee to oversee the corporation’s internal financial controls. In ordinary parlance, this is an audit committee.
The Bill deals with two quangos. The Personal Accounts Delivery Authority, to which we will be coming soon, is required to set up a committee of non-executives to oversee PADA’s internal financial controls. That is in Clause 82. The trustee corporation, which will also be a quango, has no such requirement.
At one level, I have no problem with not specifying audit committees in legislation. It is only in Bills introduced in the past 10 years that the Government have specified committees like that for PADA. There is an EU directive which now mandates audit committees for certain types of company and the Government have wisely decided not to legislate for that but to leave it to the infinitely more flexible mechanism of the FSA’s rule book. But I believe that organisations which handle large amounts of money and valuable assets—that is certainly what the trustee corporation will be doing in bucket loads, I should think—will have effective oversight of their financial controls and management.
I tabled this amendment for our Committee stage and I had expected the Minister to tell the Committee that it was the Government’s policy that there should be an audit committee and that they would require one somehow. But the Minister did not do that. He told the Committee that it was premature to determine whether there should be an audit committee and that the Government would prefer not to tie this down specifically. The Minister did not want to tie the hands of the board of the trustee corporation. We do not believe that there could be any possible justification for not forming an audit committee, and the board really should not be given any option.
The Minister said that he would go away and consider the point, but as he has not tabled an amendment, I have retabled my amendment in order to see whether
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Lord Oakeshott of Seagrove Bay: My Lords, this seems a pretty basic requirement for good corporate governance in an organisation such as this.
Lord McKenzie of Luton: My Lords, noble Lords may recall that in Committee we discussed the arrangements for the trustee corporation that will manage the day-to-day running of the personal accounts scheme. In particular, we debated whether there will be a committee with responsibility for reviewing the corporation’s internal financial controls.
It may help if I remind the House that the corporation will be established as a non-departmental public body and its sole function will be to run the scheme in the best interests of its members, within the order and rules. As part of its work in designing and establishing the personal accounts scheme, the Personal Accounts Delivery Authority will assist with and advise on the practicalities of establishing the trustee corporation. Once the trustee exists, the delivery authority will help the corporation set itself up and facilitate the handover process.
At this early stage, we do not know exactly what the assurance and internal control arrangements for the trustee corporation will be. In Committee, I said that it was probable that the trustee corporation will have an audit committee. If that was interpreted as equivocation, let me be clearer. I can reassure the noble Baroness that the authority has advised me that the intention is that the trustee corporation will establish an internal controls committee reflecting best practice in corporate governance. The Bill allows for such a committee through the provisions in paragraph 9 of Schedule 1.
I hope that the noble Baroness will accept my assurances that there will be a committee with responsibility for reviewing the corporation’s internal financial controls and that her amendment is unnecessary. If I need to be clearer, I will endeavour to be so at a second attempt.
Baroness Noakes: My Lords, I thank the noble Lord, Lord Oakeshott, for his support on this and on other recent amendments. I thank the Minister for being so clear on this occasion about what he intended to say the last time but did not quite manage to get out. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McKenzie of Luton moved Amendment No. 57:
On Question, amendment agreed to.
Baroness Noakes moved Amendment No. 58:
58: Schedule 1, page 80, line 42, leave out “and” and insert—
“( ) any information the Secretary of State directs relating to the financial position of any pension scheme established under section 66 for which the trustee corporation acts as trustee, and”
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The noble Baroness said: My Lords, I shall speak also to Amendment No. 61. These amendments concern financial reporting of the personal accounts pension scheme. In Committee we debated the financial relationship between the trustee corporation and the personal accounts pension scheme and whether there would be a clear dividing line between the two. Since then the Minister has helpfully shared with me the emerging thinking on how the two bodies will operate. As I understand it, the current view is that the pension scheme will receive contributions and invest the proceeds and will pay charges to the trustee corporation. All of the other financial transactions—largely costs—will be captured in the trustee corporation.
I should say that this arrangement is unlike what I understand to be private sector pension practice where there is a corporate pension trustee that is a largely dormant body with all the transactions going through the pension scheme, but I do not express a view on the arrangements that the Government are setting up. I can see that with the possible front-loading of costs, it has optical advantages if they are kept separate from the pension scheme. On the other hand, the costs properly belong to the personal accounts pension scheme, and it would be undesirable if at some later date, for example, the trustee corporation were wound up without all of its costs having been passed on to the pension scheme.
However, the concern that I am focusing on with these amendments is the more basic one of transparency. Since the contributions and investments will be shown in one set of accounts, those of the pension scheme, and the costs will be captured elsewhere, in the trustee corporation, it will not be possible to form a view on what is happening to the personal accounts scheme overall unless those two sets of accounts and any reports are brought together.
Amendment No. 58 amends paragraph 17 of Schedule 1, which deals with the annual report of the trustee corporation. Paragraph 17(2)(b) requires the annual report to contain information about the financial position of the trustee corporation. My amendment repeats that for any personal account pension scheme.
Amendment No. 61 amends paragraph 20 of Schedule 1. Sub-paragraph (6) requires the Secretary of State to lay the audited accounts of the trustee corporation before Parliament. There is no similar requirement for the accounts of the personal accounts pension scheme, so Amendment No. 61 requires them to be laid at the same time. The effect of the two amendments is that financial information about the pension corporation will always be accompanied by financial information about the personal accounts pension scheme as a whole, so that a proper picture of the whole can be seen.
In Committee, when we were debating the issue of audit committees, the Minister said:
“Although the two sets of accounts are separate, they are so closely linked that it is inconceivable that one can be looked at without an examination of the other”.
That is my point. He continued:
“I can say that the scheme members and Members of Parliament will see both sets of accounts”. —[Official Report, 2/7/08; col. 332.].
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That sounds fine, but it is not what the Bill says. The Bill has specific provisions about the accounts of the trustee corporation but nothing whatever about those of the pension scheme, which is why I have tabled the amendments to see whether we can make some progress on achieving that transparency. I beg to move.
Lord McKenzie of Luton: My Lords, I am grateful for the amendment because it gives us the chance to try to produce some clarity on the issue. Before I turn to the specific amendment, I remind the House that the sole function of the trustee corporation is to be the trustee of the personal accounts pension scheme and to run the scheme in the best interest of members, subject to the order and rules. As we have discussed, the trustee corporation is to be set up as an NDPB.
Before I go further, perhaps I might revert to the discussion we had about the draft pro forma accounts and stress, as I did at our meeting, that they were illustrative to give an indication of how the flows could be shown in accounting terms. Clearly, the delivery authority is responsible for designing the scheme and no final decision has been taken, so quite where the flows and costs will end up is still an open question. The purpose was to try to start a discussion on that.
Baroness Noakes: My Lords, I understood that it was work in progress but that the general drift was that there would be some in one and some in another; but you cannot see the totality unless you put the two together.
Lord McKenzie of Luton: My Lords, I certainly agree with the second point. As an NDPB, the trustee corporation will be required to publish an annual report and its accounts, setting out what it has spent on running the scheme. Those will have to be independently audited by the National Audit Office and laid before Parliament. As an occupational pension scheme, the scheme is required to produce an annual report and scheme accounts.
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