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Trustees of a pension scheme are under statutory obligations to provide members and beneficiaries of pension schemes and relevant trade unions with a written statement of material changes or alterations to the scheme. Depending on the nature of the change or alteration to the scheme, generally written notice has to be provided within two or three months after any such change has taken effect. In addition, trustees must prepare and make available an annual report, which must be provided free of charge to members and beneficiaries on request.
These reporting obligations, which I know will be familiar to the noble Viscount, would apply to the trustees of any pension scheme affected by a transfer order or instrument under Clause 71. Therefore, I do not think that it is necessary to accept the amendment. We have the existing statutory mechanisms for the provision of information. This legislation complies with that and does not change it in any way. I hope that the noble Viscount’s concerns are satisfied.
Viscount Eccles: I would be more comforted if I were certain that trustees would not think that the partial transfer procedure was likely to have overridden their power to act as efficiently as they would have liked to have acted on behalf of the members of the scheme. That is another reason why I sincerely hope that more thought will be given to Clause 71. Whereas much of the Bill could be shortened, there is a case for spelling out in more detail the provisions with regard to pension schemes. Meanwhile, I beg leave to withdraw the amendment.
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117: Clause 71, page 36, line 30, at end insert—
“(7) In subsection (6)(b) the reference to a group company of the bank is a reference to anything that is or was a group undertaking in relation to the bank within the meaning given by section 1161(5) of the Companies Act 2006.”
118: Clause 71, leave out Clause 71 and insert the following new Clause—
Whereas a bank once taken under control by the Treasury will thereby have its solvency restored, nothing in that subsequent restoration of solvency shall preclude the former pension scheme attached to that bank from applying for inclusion in the Pension Protection Fund on the grounds that its parent was insolvent prior to being taken under Treasury control.”
Lord James of Blackheath: The amendment derives from a fear on my part that the drafters of the Bill have overlooked an important condition introduced in the Insolvency Act 1986, which will interact very badly with the recently passed Pensions Act 2008. Under Section 1(3) of Part II of the 1986 Act, for the first time, in contrast with all previous insolvency legislation, the directors of a company which was challenged as to solvency were obliged not to accept insolvency until they had explored all possible avenues for its correction. Severe penalties would fall on them if they did not do so.
As matters stand, it would be a reasonable assumption that any bank getting into dialogue with the Government with a view to a rescue was following that path and taking reasonable steps to avoid insolvency. If those discussions prospered, and the insolvency was avoided by the bank being embraced by the Government’s rescue arrangements, that bank would not have gone into insolvency. If the pension scheme was afterwards set adrift and not continued in the direct protection and ownership of the company and the Government, it would not qualify for inclusion in the Government’s pension protection plan.
I am sure that that is an unintended consequence. All I am looking for in this probing amendment is an assurance from the Government that they will amend this clause to ensure that, whatever happens, a pension scheme that is bereft and set adrift as a result of being embraced by the Government’s nationalisation programme is itself either looked after or passed into the care of the pension protection plan. I beg to move.
Lord Davies of Oldham: I am conscious of the noble Lord’s expertise in this area and of my own limitations, so I shall reply to him in the following vein. What he has described is clearly the intention behind this legislation. We want to ensure that bank insolvency and administration—the procedures established in Parts 2 and 3 of the Bill—should be deemed to be a
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The Government are considering consequential amendments to make that effective. Such an amendment would be made either to Clause 253 or under the relevant provisions of the Pensions Act 2004. The noble Lord has made his case. We intend to respond. I hope that he feels that this is a constructive response.
Lord James of Blackheath: I thank the Minister for that assurance, which I am happy to accept. I ask only that the wording be abundantly clear and remove any uncertainty. There are some nasty little people called licensed insolvency practitioners prowling the world, who will look to make trouble if they find any opportunity. The clause needs to be watertight.
Clause 71, as amended, agreed.
Debate on whether Clause 72 should stand part of the Bill.
Baroness Noakes: I can be brief. I have signalled that I oppose Clauses 72 and 73 standing part of the Bill on a probing basis. They deal with enforcement and disputes respectively.
I suspect that these clauses are more symptoms of the Government not having worked out in advance how they will deal with the important areas of enforcement and disputes. However, I shall give them the benefit of the doubt and invite the Minister to set out for the record how the Government see both enforcement and dispute provisions working. I invite the Minister to say when those provisions will be revealed to the world in draft and what consultation they expect to undertake.
I also ask the Minister to address why the regulations are to be dealt with by the negative procedure only under Clause 72. I appreciate that the power does not extend to the creation of a criminal offence or the imposition of a penalty but, nevertheless, the rights of individuals may be seriously affected by the detailed regulations. In those circumstances, it is normally the case that Parliament should have a say in how those regulations are drawn.
Lord Myners: The noble Baroness has called a debate on the purpose of Clauses 72 and 73. It may be helpful if I set out the purpose of these clauses as seen by the Government. They relate to share transfer orders and instruments and property transfer instruments; that is to say, the stabilisation powers. They enable
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The starting point is that such orders and instruments make changes or impose obligations by operation of law. For example, a share transfer order transfers ownership of shares by operation of law. That is to say, the effect of the order—without more—is to divest the original shareholder of ownership and confer ownership on the transferee. No enforcement mechanism is needed in such circumstances as the order itself has achieved this effect. A former shareholder might attempt to vote his original shares, but any such action would be devoid of consequence as he is no longer the valid owner of the shares. However, the debates on the Bill—and, indeed, the experience of previous resolutions—have shown that this is a highly complicated field where it may be necessary to address a series of complex rights and liabilities in order to make resolutions effective. Given the importance of legal certainty in this area—many noble Lords, including the noble Baroness, have emphasised this point—we consider it prudent to be able to make specific provision about enforcement and disputes.
Clause 72 concerns enforcement. As I have previously stated, it is essential for the achievement of the special resolution regime objectives that the provisions in the orders and instruments take effect with certainty. In certain circumstances, it may be necessary to impose obligations on persons in relation to transfers, which require specific actions to be taken. In such circumstances it may be desirable, and aid certainty, to spell out the specific means by which such obligations are to be enforced. An example of an area where it may be necessary to impose specific obligations can be given in the context of share transfer powers. As I have said before, a share transfer takes effect simply as a result of the order or instrument itself. But shares may be held in a variety of different ways. For example, normally a shareholder of a certificated share must be registered in the register of members of a company in order to exercise the powers of a shareholder, or bearer shares may be held, which enable ownership of the shares to be transferred by physical delivery. In each case the transfer of ownership of such shares by the exercise of share transfer powers would be effective without imposing further obligations. This is the effect of Clause 21. But it may be desirable to impose such obligations to promote legal certainty. So an obligation could be imposed on the registrar to enter the transferee on the register of members, or on the holders of bearer shares to surrender them. If such requirements were not enforceable and relevant persons, such as the registrar, were not to undertake these actions, this would lead to confusion and potentially a lack of confidence in any transfers and the effectiveness of the implementation of the stabilisation procedures.
These obligations therefore aim to ensure that the formal requirements which normally relate to the transfer of shares and which must necessarily be dispensed with to make the transfer immediately effective are updated as soon as is practicable. This clause enables provision to be made about how such obligations are to be enforced, so the procedure is clear. I should note that provision may not include the creation of a criminal
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On Clause 73, it is desirable to have a mechanism to have appeals or disputes mechanisms for each of the powers that the Treasury or the Bank of England has under the stabilisation powers. Clause 73 sets out that the share transfer orders, share transfer instruments and property transfer instruments can include provision for disputes to be determined. These provisions can confer jurisdiction on a court or tribunal or specified persons; for example, an appeal panel.
It should be noted that whenever an exercise of stabilisation powers involves a determination of civil rights and obligations—protected by Article 6 of the European Convention on Human Rights—disputes must be determined in a way that respects the protections of Article 6, which provides for procedural fairness. These provisions therefore put our compliance with Article 6 on the strongest footing, and I believe that they have been welcomed by the markets and by commentators.
The noble Baroness asked why there is only the negative procedure. I believe that the parliamentary procedure for these regulations is common. They have been considered by the Delegated Powers and Regulatory Reform Committee to be appropriate.
In summary, both these clauses are workmanlike provisions, and I believe that they are essential to the efficacy and fairness of the powers. I therefore ask the noble Baroness to allow these clauses to stand part of the Bill.
5.15 pm
Baroness Noakes: Is it expected that statutory instruments containing enforcement and dispute powers will be issued soon? Or do the Government intend to wait until the exercise of the special resolution regime? Will they be generic, to sit there, or will they be specific? I did ask when we might see drafts, and so on.
Lord Myners: It is my understanding that they will be specific.
Baroness Noakes: In moving Amendment 119, I shall also speak to Amendment 120. For the convenience of the Committee, I have grouped Clause 74 stand part with these two amendments.
The Delegated Powers and Regulatory Reform Committee pointed out that there is a Henry VIII power in Clause 74 (7). This power, because it involves taxation, involves parliamentary process in the other place only. The Bill provides in subsection (7) that it is
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I have tabled the amendments to get the views of the Treasury and the Government on this; I do not seek to interfere in the privilege of the other place by tabling the amendments. The Minister will be aware that the Delegated Powers Committee reported long after the Bill had completed Report stage in another place, and this is the only formal opportunity for us to seek the Government’s response.
I tabled the question on Clause 74 stand part to get a greater understanding of how the Government intend to use the powers in Clause 74. I hope that the Minister’s speaking note will not simply fall back on his old friend “flexibility”, because as usual the Explanatory Notes give no hint at all about how the powers might be used in practice. Of course, they are very extensive powers in relation to taxation, so it is reasonable to ask the Government to set out how they expect to use the powers, especially as the powers are not restricted to the transactions associated with the stabilisation power or the bank that is the object of the stabilisation power.
The Banking (Special Provisions) Act 2008 contains no equivalent section. Have any issues arisen in practice from the exercise of powers under that Act? The Minister might like to say in what respects taxation has caused a problem in practice so as to lead the Government—in the case of Northern Rock, Bradford & Bingley, or Kaupthing Singer & Friedlander—to seek the extensive powers set out in Clause 74. I beg to move.
Lord Myners: I thank the noble Baroness for the clarity of her explanation. I shall seek to avoid using the term “flexibility”, at least on this clause, although as a concept it has considerable merit when anticipating the extraordinary circumstances to which this legislation is relevant. However, I shall subserviate the term, should it appear in my speaking note on this clause, in favour of another one.
This clause makes provision for dealing with the tax consequences of a transfer made under the special resolution regime in Part 1. Similar provision is included in the Banking (Special Provisions) Act 2008. The tax affairs of an authorised institution are likely to be extremely complex, and the tax implications of the transfers of shares, property and liabilities of such an institution are no less. It is therefore necessary to have a broad power to deal with the various types of tax charges or losses that would otherwise arise as a consequence of a transfer.
I should stress that the purpose of the proposal is not to enable the Treasury to impose a new tax charge or to deprive a taxpayer of the use of any tax loss that might arise from having had their shares transferred away from them. That is a very important point. Rather, the intention is broadly to ensure that the tax advantages or disadvantages that are created because of the transfer can be neutralised and that continuity can be preserved, where appropriate.
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I turn to the amendments in the name of the noble Baroness, Lady Noakes, and the noble Lord, Lord Howard of Rising. I should stress that the purpose of subsection (7) is to ensure that we can, if necessary, update the list of taxes in subsection (2) by order. The amendments would give effect to a suggestion of the Delegated Powers and Regulatory Reform Committee that these orders should be made by the affirmative procedure rather than the negative one. Although the Government take the committee’s views very seriously, in this instance we feel that it is not necessary to adopt the draft affirmative procedure.
In determining the list of relevant taxes, we have sought to limit it to taxes for which it is likely that provisions may be needed. However, we recognise that circumstances may change over time, and the order-making power ensures that the Government will be able make the necessary changes so that all relevant taxes are covered.
I should point out to noble Lords that any regulations substantively amending provisions relating to any tax—regardless of whether it is one included in the provisions of the clause or one subsequently added by order—will be subject to the affirmative procedure. It is these regulations, dealing with amendments to tax provisions of any tax added to the list, that will clearly be of most substantive interest to Parliament and external stakeholders. Given that any substantive amendment to tax provisions will be subject to the affirmative procedure, we believe that it is appropriate to retain the negative resolution procedure for this order, relating to the addition of new taxes to the list of those covered by the clause. I therefore invite the noble Baroness to withdraw the amendment.
Lord Northbrook: In describing the point of the clause the Minister said that the tax effects should be neutralised. There would therefore not seem to be a case of financial privilege involved here. Could not the Delegated Powers Committee’s recommendation, that the clause be subject to the affirmative procedure, be accepted?
Lord Myners: I take account of the noble Lord’s observation, but it is our view that it would be inappropriate for the affirmative procedure to apply, for the reasons that I have given.
Viscount Eccles: I am a member of the Delegated Powers and Regulatory Reform Committee and I wish to ask the Minister a rather technical question. The committee’s report on the Banking Bill was published on 18 December. I think it would be normal for it to expect a written reply but, so far as I know, it has not done so. Is it the Government’s intention to send one?
Lord Myners: If there has been a failure of procedure, I apologise. If a letter is customary and was expected by the committee, I shall take whatever steps are necessary to ensure that it is sent. I am not sure how much longer I can use the excuse that I am new to the House. There is very rarely a day when I do not do something wrong—when I stand when I should be sitting or use a term that I should not use. On the other hand, I believe—and my noble friend Lord Barnett encourages me to believe—that there is a sign
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Baroness Noakes: Of course, procedure is extremely important and my noble friend was right to ask the Minister when the Delegated Powers Committee may expect a reply from the Government. However, I am much more concerned about the substance.
It is customary for the Government to take very seriously the recommendations of the Delegated Powers Committee and rare for the Government to reject them. They did so last June, during the passage of the Banking (Special Provisions) Bill, in relation to the nationalisation order, if I may use that shorthand, and whether the affirmative procedure should be used. Sound reasons were accepted at the time relating to timing, but this is of a different order.
This matter does not require urgency; it is something where the Treasury is just saying, “We don’t think we want to ask for power in advance and go through that affirmative procedure, which we find really rather boring. We’d like to just ram it through and hope that no one prays against it in the time available”. There was no substantive reason for the Government not to accept the recommendation of the Delegated Powers Committee, other than they did not want to do so. That is a very unfortunate position for them to take in Committee and we will have to think about it very carefully before Report. The House will not be pleased to find the Government again setting themselves against the findings of the Delegated Powers Committee, which generally commands the support of the whole House, as its members are very experienced in issues relating to delegated powers taken in Bills. I do not believe that the Government have advanced any substantive argument for not following the recommendation, other than preference. I do not think that that will wash with the Delegated Powers Committee and it will not wash with these Benches either.
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