Pension Funds (Hansard, 12 December 1991)

§ Mr. Kenneth Hind (Lancashire, West)
I am grateful to have the opportunity to discuss this subject tonight. This debate could be regarded as a continuation of the previous debate on crime.
I have two major concerns. The first is the long-term need to protect pension fund contributors, and the second, which has worked as a catalyst, is the appropriation from the Daily Mirror and Maxwell Communication Corporation pension fund, of between £300 and £500 million by the major shareholder, the recently deceased Mr. Robert Maxwell. That in itself points to the need for closer consideration of the matter and probably for reform.
Earlier today, in support of this debate, I introduced a Bill to provide a framework of protection for contributors to and beneficiaries of pension funds. In future, large occupational pension funds will be a major source of British wealth. It is not without significance that we have obliged the public to contribute to pension funds to provide for their old age. We must also provide a framework which will protect them and ensure that those funds are available to benefit them when the time comes.
As the population ages, pension funds will become more significant as support for large numbers of workers in their old age and will play an important part in investment in the economy. We need only look around the City and at company reports to see the importance of pension funds as a form of investment in our major companies and in the economy.
First, I want to address the problems of Mirror Group Newspapers and the Maxwell Communication Corporation. This debacle—that is the only word to describe it—must under no circumstances be allowed to happen again. That, as much as anything, is what this debate is about.

§ Mr. Roger King (Birmingham, Northfield)
I hope that my hon. Friend will not take it amiss if, as somone with an open mind on the matter, I ask him whether he has had any dealings with the Maxwell empire in any shape or form and is now seeking to cleanse his spirit and soul this evening. I make that point because it is abundantly clear from statements made by many people who seem to have spent years toadying the the great man that they are now seeking to cleanse their souls and spirits by saying that they never had anything to do with him. I am sure that my hon. Friend is not such a person, but he probably has had parties in Blackpool and may well have enjoyed the odd tincture with the great man so that he now feels that he is almost obligated to his conscience to present a case this evening which is probably not true to his natural form. I await his reassurance on that.

§ Mr. Hind
I have no need to cleanse my soul. Perhaps those who need to do so will recollect the words of Mark Antony at Julius Caesar's funeral: So are they all, all honourable men. Mr. Robert Maxwell, a former Labour Member of Parliament, was the subject of an inquiry in respect of his company, Pergamon Press. The inspector's report said of him: This man should never be allowed to control a public company. 1070 How right that inspector was. How foolish we were not to take due note of that incisive comment, by a man who read Mr. Maxwell's character extremely well.
In the past, Labour Members criticised supporters of this Government and right hon. and hon. Members for financial mismanagement, but that is not the exclusive preserve of Members of every party other than Labour. No one can point a finger at anyone in this debate in that regard. The guilty have an equal share in that respect.
Robert Maxwell helped himself to the Mirror pension fund. While professional journalists—rightly, in my view—investigated the financial misdeeds of others, Maxwell had his hand in their pocket and robbed them blind. That was not all. A more serious aspect is that, after Robert Maxwell's death, we are led to believe by the newspapers that a further £300 million went missing from the group's various pension funds, which suggests that such activities went deeper than just one man, and that others were involved. They too must be called to account, and we know that those matters are now being investigated by the Serious Fraud Office.
The existing law has failed us in respect of the proper control and management of pension funds. The law is clearly defined. It is based on the law of trust—and most pension funds are trusts. There was a major judgment on that subject in 1883. In the case of Speight, the judges held: Trustees also have a duty to act diligently and prudently…in selecting an investment the trustee must take as much care as a prudent man would take in making an investment for the benefit of persons for whom he felt morally obliged to provide. They were saying, in the language of the Victorian era, that a trustee should be as prudent in his selection of investments as he would be in dealing with his own.
More recently, in the case of Cowan v. Scargill in 1984, the same sentiment was repeated in modern-day language: Trustees are required to exercise their powers in the best interest of present and future beneficiaries; trustees must put on one side their own personal, social, or political views". Those are clear guidelines to the way in which pension funds should operate. The Maxwell affair has clearly shown that a coach and horses was driven through that law, so we must consider carefully the need to change it.

§ Mr. David Martin (Portsmouth, South)
My hon. Friend makes a significant point about the duties of trustees. Will he deal also with the trustees themselves, and say whether there should be better legal rights—to provide for a more significant number of ex-employees to serve as trustees, so that the interests of all members of a pension fund can be better protected?

§ Mr. Hind
My hon. Friend leads me to my next point. My Bill would not allow a director or shareholder to serve as a member of the pension fund trust of the employer company. Control of the pension fund should be at arm's length, by independent persons who are not involved in the management of the employer company.
Robert Maxwell proved the undesirability of having directors or chairmen who are in control of both the company, as majority shareholders, and the pension fund. He was a fund trustee, along with his two sons, so effectively he controlled both the company and the fund. That led to the problems that the fund faces today.
If one individual holds a dominant commercial position in respect of a pension fund, he or she will be able to direct those who operate the fund, in the same way that he or she manages the company—and will be able to select those 1071 persons who are to serve as trustees and manage the fund. That clearly happened in respect of the MGM and MCC pension funds.

§ Mr. Charles Wardle (Bexhill and Battle)
My hon. Friend's views will be shared by many pensioners. Does he agree that pension fund assets would be easier to identify if they were held in the fund's own name rather than in the names of nominee companies? Although nominee companies are perfectly legal, do they not present a determined manipulator such as Robert Maxwell with opportunities to cover his tracks as he goes along?

§ Mr. Hind
My hon. Friend makes a good point. My Bill advocates that there should be no nominee companies, and that a pension fund should be a recognised legal entity. The people who control a fund should be clearly defined, as should the rights of contributors. I will return to that aspect later.
If one person dominates the fund, directors are appointed by this majority shareholder, as well as the trustees. On 31 January, Lord Williams of Elvel, Labour's deputy leader in another place, and a director of Mirror Group Newspapers, addressed their Lordships on that very point—on corporate governance. He raised questions on comments made by my noble Friend the Under-Secretary of State for Industry and Technology,saying—

§ Madam Deputy Speaker (Miss Betty Boothroyd)
Order. The hon. Gentleman is, I think, aware that hon. Members are not allowed to quote directly what has been said by a Member of the Upper House unless that Member is a Minister. I should be obliged if the hon. Gentleman would paraphrase.

§ Mr. Hind
Lord Williams of Elvel was talking about chief executives, and about non-executive directors confirming what he described as the outrageous ambitions of a chairman or chief executive. Now, the outrageous ambitions of another chief executive, unfortunately deceased, have been revealed for all to see. Perhaps Lord Williams and one or two others should take their own advice.

§ Mr. John Butterfill (Bournemouth, West)
Is it not particularly extraordinary, in the case of Lord Williams—

§ Madam Deputy Speaker
Order. Perhaps I could give the hon. Gentleman and the House a little guidance. The Chair is not prepared to entertain criticism of Members of the Upper House unless there is a substantive motion before this House. There is no such motion this evening, and I therefore hope that the hon. Gentleman will observe the correct procedures.

§ Mr. Butterfill
I am grateful for that guidance. I did not intend to express a direct criticism; I merely wished to comment that it was extraordinary that someone with such a distinguished record, who had been a managing director of Barings and, I believe, chairman of Ansbacher, should associate himself with the gentleman whom we are discussing.

§ Madam Deputy Speaker
Order. I have given my guidance. Hon. Members are enjoying themselves: let us keep it at that level, provided that it is within our procedures. I know that they will follow the procedures of 1072 the House, and stay in line with the guidance that I have given—and that given by Mr. Speaker, which will have been heard by hon. Members who were present earlier.

§ Mr. Hind
An important aspect of the relationship between directors and trustees is illustrated by the closeness of the relationship between the Mirror Group Newspapers pension fund and the companies. The accounts for last year contain an interesting section headed "Investment Report". It states As part of this process, the following changes were made in the structure of the Scheme's investment. Due to uncertain stock market conditions and relatively high interest rates, the Trustees instructed its investment managers to sell stocks, and hold an average of 20 per cent. of their portfolios in the form of cash deposits". The trustees and directors must have been aware—as it was in the report—that they were converting stocks into cash, which the company could subsequently borrow and invest in other Maxwell companies. As we know, that is probably what happened. It almost seems as if preparations were made for what subsequently took place.
The report continues: a further £12,034,000 was invested in the Common Investment Fund…this fund is managed by Bishopsgate Investment Management (BIM) in conjunction with other pension funds managed by the Pergamon Group Pensions Departments. The Scheme's participation in the CIF remains crucial to the Trustee's overall strategy". The management of a pension fund must be independent of the employer company. BIM—a company that was charged with the management of a large proportion of the pension funds—was a private company wholly owned by the Maxwell family. Effectively, they were appointing the directors and staff, and, therefore, handling all the funds from the pension schemes.
We are not discussing an arm's-length transaction. If legislation is to be drawn up, as I advocate in my Bill, that is precisely the sort of abuse that we should set out to prevent.

§ Mr. Keith Mans (Wyre)
Is it not slightly ironic that various investigative journalists such as Paul Foot and Alastair Campbell, who spend considerable time investigating corruption in other parts of the business world, should find that their own pensions seem to have been pinched from their own company over their heads?

§ Mr. Hind
I made that point earlier. While those people were investigating other people's pockets, Robert Maxwell had his hand in their pockets and was robbing them blind. That is a fact of life. I feel deeply sorry for them, and hope that their experience will be a salutary lesson that will help the rest of the country to avoid repeating it.
We cannot avoid the fact that the people appointed to manage the funds must carry some responsibility. Sycophants and nominees of the dominant majority shareholder of the employer company must not be in a position to manage the company.
Lord Donoughue, a Labour peer, was one of the directors of Bishopsgate until fairly recently. Interestingly enough, Madam Deputy Speaker, he is reported to have said in another place—[Interruption.]—I mean, Mr. Speaker. I apologise—it was the wig that threw me.
In the other place, Lord Donoughue said that tame directors were often appointed—friends of the majority shareholder, who would not ask too many awkward questions.

§ Mr. Roger King
Flunkeys.

§ Mr. Hind
That is a good word, and I shall adopt it. We must ensure that no more flunkeys are appointed to pension funds. It is not in the interests of the general public.

§ Mr. Butterfill
It might have been better if the company had been called Billingsgate rather than Bishopsgate. Then everyone would have known that there was something fishy going on.

§ Mr. Hind
My hon. Friend makes his own point.
The fourth matter to which the House should give serious consideration is the proportion of any pension fund that can be invested in the employer company. I shall listen with interest to what my hon. Friend the Minister says about that. I know that the Government are giving serious consideration to restricting to 5 per cent. the proportion of a total fund that may be invested in the employer company. I would certainly advocate that as a sensible course. It would prevent a pension fund from collapsing should a company go into receivership.
A recent example from the north-west was provided by the Lewis's stores group, which has recently gone into receivership. It was the subject of a motion under Standing Order No. 20 on which, with your permission, Mr. Speaker, I spoke some months ago. The receivers found that in February 1990 the company had sold an empty building in Bolton to the pension fund for £2.4 million. That building has not returned any profit to the pension fund and since then, I am told, it has declined in value.
In April 1990, £250,000 worth of contributions to the pension fund were not paid by the company. The following summer, that company borrowed £1.25 million from the fund. That sum has not been repaid, and since then the group of companies has gone into receivership, been broken up and sold. The money is probably lost to the pension contributors and beneficiaries. Although the group owned several department stores, it was not a big company. We must act with care to guard against such things happening.

§ Mr. Patrick Nicholls (Teignbridge)
While he is talking about tracing assets, does my hon. Friend intend to say anything about the Labour party's failure so far to admit how much money it received from Maxwell over the years, and to offer to restore it, since the donations were clearly funded directly or indirectly by pillaging the pension funds of working people? Early-day motion 365 refers to the matter. Perhaps my hon. Friend, having introduced this debate, has heard from the Labour party about its intention to reveal how much money it has received.

§ Mr. Hind
My hon. Friend makes a good point and I have no doubt that the House will note the early-day motion to which he referred.
The fifth point to be included in a Bill is that there should be a declaration that the assets of the pension fund are the property of the contributors and not of the employer company. A case has been decided on those lines, but the principle has not yet gained widespread acceptance.
The first time when such a case came to my notice was in the mid-1980s when BTR—the Birmingham Tyre and Rubber company—tried to take over the Pilkington Group, which is one of the major employers in my constituency. On that occasion, it was made clear to me by the employees who worked and lived in my constituency 1074 that they had real anxiety that the balances that were oversubscribed in the pension fund would be taken by BTR as part of the takeover and would be used for the benefit of BTR because they would be regarded as part of the acquisition.
It is important that we make it clear that that should not be allowed to happen, and that all payments into the pension fund are the property of the contributors and of the beneficiaries. If that principle were established, even if there were oversubscriptions, the contributions would be carried forward in perpetuity for the benefit of future contributors and future recipients of pensions.
Mirror Group Newspapers is a similar case. To whom do overpayments into a pension fund belong? At Mirror Group Newspapers, there has been a recent holiday payment for the company of the 14 per cent. that should have been made into the pension fund. That means that the company is benefiting from what would normally pass into the company pension fund for the benefit of the employees. I should like such practices to end, and we should take a clear look at the problem. Oversubscriptions should be not for the benefit of the employer company, but for the benefit of the contributors and of those who will receive pensions from the fund.

§ Mr. David Martin
On the subject of holidays from contributions, does my hon. Friend consider that there should be a duty to make up pensions that have fallen behind in inflationary terms? That would restore them to their original value. Should that be an obligation over the years so that, as people get older, they do not find that their pension is falling in purchasing value?

§ Mr. Hind
My hon. Friend makes a good point. Surely that must be the responsibility of the trustees and of the contributors to the pension fund in the terms and conditions when a pension fund is set up. Within the framework of legislation, such an aim would be difficult to achieve. It might be regarded, especially in relation to some of the existing pension funds, as quite an onerous burden to take on. However, as an aspiration, it would seem a sensible approach.
The sixth point to be included in a Bill is that the trustees should make annual reports to each contributor. The directors of an employer company are required to produce accounts which are registered at Companies house and which are distributed to shareholders. They know exactly where the company stands. The company provides a balance sheet and consolidated accounts. Shareholders know how a company performs. That same luxury is not provided to the pension fund contributors. Under the legislation that I have in mind, the contributors would be able to deal with those matters. The trustees would then be appointed by the pension fund contributors. If there was any difficulty, the contributors could go, as in company legislation, to the High Court for directions.
The seventh and most essential point is that we must have regulations to make such a system work. There should be a registrar of pension funds who would be appointed to apply to all funds to register annual returns and to distribute them to their members. Such a registrar would have enforcement powers, so that he could deal with those who failed to register and to carry out the duties imposed under the legislation. I appreciate that my colleagues will say that that is another quango. Of course 1075 it is. However, it is an important move which must be taken when we are considering the large sums involved in pension investment and management.
Apart from a home, a pension is probably the largest single item that we purchase in our lifetime. It is also one of our most fundamental purchases, and it is the security for our retirement. Because of that, it is important that it is adequately protected. It should be free from the pilfering or appropriation of the likes of Robert Maxwell and people who want to follow in his footsteps. We should separate the company from the pension fund and protect the workers of this country, so ensuring that we can provide adequately for their futures.

§ Mr. David Shaw (Dover)
I congratulate my hon. Friend the Member for Lancashire, West (Mr. Hind) on securing a debate on one of the major live issues. That it has only just become so is incredible, because over the years pensions have been regarded as rather boring and not many people have been interested in them, although 11 million people have rights under occupational pension schemes.
The Select Committee on Social Security, of which I am a member, is currently investigating occupational pension funds in this country. Although it is early days, some things are clear. On the evidence that we have received, the vast majority of pension funds are operating satisfactorily.
The case that has highlighted one of the shortcomings of pension funds, the Maxwell affair as it has become known—or Mirrorgate and Labourgate as it is known in some circles—is the only known instance where a man who was once described in a Department of Trade and Industry report as unfit to be a director of a public company ended up running a pension fund. Maxwellgate is the only known instance where a man with a series of major family companies, both offshore and onshore, based in Liechtenstein and Gibraltar, ended up running a pension fund. That is why we are debating the affair today.
The present system for looking after pension funds and pensioners' money should have been more than adequate. Lawyers draw up constitutions of pension funds and normally operate them to a high standard. The actuaries attempt to assess liabilities while the auditors carry out audits. With the benefit of that professional work and advice, the trustees supervise and control.
One should be able to rely on the trustees. They should be the right kind of people with proper training, qualifications and expertise to carry out the job. I would differ from my hon Friend the Member for Lancashire, West over his reference to trustees. Directors are often the right and proper people to be trustees. The directors must determine what benefits the pension fund should provide. They also have a responsibility, as company directors, for earning the money to make up the deficiencies if a pension fund becomes short of money. That can occur when investment returns are not sufficient to meet the benefits that the directors want to pay.
It will always be necessary with occupational pension schemes to have a relationship between the directors of a company and the trustees. However, I agree with my hon. Friend the Member for Lancashire, West that there should be at least one or two directors and trustees, who are non-executive directors with wider experience than just 1076 being a director of the company and trustees, who are totally independent of the company. That clearly failed in Mirrorgate.
The Financial Services Act 1986, one of the tightest and most bureaucratic pieces of legislation that the House of Commons has ever passed, should have provided many significant controls to protect the Mirror pensioners. It appears to have failed, because the two fund management companies were allowed to come under the control of Mr. Maxwell, his family interests and the Liechtenstein and Gibraltar trusts.

§ Mr. Michael Irvine (Ipswich)
My hon. Friend has rightly referred to the Mirror Group pensioners. Is he aware that, according to my information, it was not just the Mirror Group pension fund that Maxwell was running? He had effective control of no fewer than seven pension funds. Many of my constituents have suffered from his pillaging in another pension fund, and there are other pension funds besides that on which he had his hands.

§ Mr. Shaw
I thank my hon. Friend for reminding me of that. I am aware that he has been involved in trying to defeat and thwart Mr. Maxwell in his own constituency. I hope that his constituents realise how hard he has fought Mr. Maxwell and his cronies on their behalf. I have every confidence that, at the next election, he will get a result that will show his constituents that he has taken a strong interest in looking after their affairs in this matter.
Besides the professionals and the Financial Services Act, the superannuation fund office of the Inland Revenue takes a strong interest in the affairs of pension funds. As my hon. Friend the Member for Lancashire, West pointed out, the superannuation fund office of the Inland Revenue is an internal organisation, and it is not responsible for publishing accounts. Indeed, today, in answer to a question, the Chancellor of the Exchequer refuses to tell me the latest dates for filing accounts of the Maxwell group of companies pension funds because he regards that as confidential taxpayer information.
Much tax relief is given by the authority of the Ho-use of Commons to people who have and run pension funds, yet, with large amounts of tax relief being given, we do not have, through the superannuation fund office, rights of access to very large pension fund accounts for the general public as well as, perhaps, for the people who are interested as beneficiaries. Some form of registration, very similar to that of the Registrar of Companies' operation, is necessary for major pension fund accounts. About £200 billion to £300 billion is now manged in pension fund form. Not only beneficiaries but the general public should have access to those accounts, as happens with private companies that must disclose their accounts to the Registrar of Companies.
We should focus on the main safeguard that Mirror Group pensioners and all other pensioners should have been relying upon—the role of the trustees. The trustees should have been the protection for the Mirror Group pensioners and the Maxwell Communication Corporation pensioners, and for all the other pensioners whom my hon. Friend the Member for Ipswich mentioned.
What has gone wrong, and what questions should we ask? I prefer to ask questions rather than give answers and suggestions, because the Social Security Select Committee is still investigating the matter, and other matters 1077 connected wth pension funds. How could one man who was unfit to be a director of a public company have so much power?
That is not the only thing that was said in the report. I read the Department of Trade and Industry report extensively in 1981, when I worked in a merchant bank and Mr. Maxwell came on the telephone to say that he wanted to be a client of that merchant bank. I rejected Mr. Maxwell as a client of that bank not only because of the statement that he was unfit to be a director of a public company but because the rest of the report shows that he did not take professional advice. He was not interested in legal or financial advice; he was interested only in the ends of whatever he wanted to achieve.
We must also ask how Mr. Maxwell, with his reputation, could end up running an investment management company that was controlled through Liechtenstein and Gibraltar.

§ Mr. Butterfill
Mr. Maxwell's track record did not relate only to Pergamon. Before that, a mail order company had collapsed in considerable disorder and disarray. There was therefore a long track record of such problems being associated with Mr. Maxwell.

§ Mr. Shaw
My hon. Friend is correct. Before Mr. Maxwell became a Labour Member of Parliament there was what one might call a "blemish" in his background, but it got worse over the years. What happened is, therefore, all the more strange given the Liechtenstein connection, which was obviously set up for tax avoidance or tax evasion purposes. Mr. Maxwell was a man who wanted to avoid doing what the rest of us in this country do—pay our taxes—by operating through Liechtenstein. According to a written answer that I received today, nine Department of Trade and Industry reports have been produced in recent years showing that Liechtenstein is a dubious place for any company in this country to have business connections with. However, Mr. Maxwell, who was fiddling his taxes, ended up owning investment management companies that were supposed to be properly regulated in the City of London.

§ Mr. Roger King
I have been listening to what my hon. Friend is saying and understand the message that he is successfully putting across, that change is required because we need to protect ordinary pensioners from having their pension funds looted by freebooting capitalists. Does my hon. Friend have any evidence of how widespread that practice is? Does it touch every single pension fund? One gets the impression that every pension fund is being plundered by out-of-control behemoths, like the hideous Maxwell. My hon. Friend should look carefully at this case, because Mr. Maxwell was an outrageous and extraordinary creature, who somehow controlled everyone around him, even honourable newspapers such as The Daily Mirror and the campaigning journalists who have been mentioned.
I wonder whether my hon. Friend, in seeking to avoid any repetition of what has happened, is going a little too far in seeking all the changes to which he has referred, bearing in mind the fact that vast numbers of perfectly honest and respectable trustees control pension funds. Let us hope and pray that it does not happen again. After all, Mr. Maxwell is buried on the Mount of Olives and we are 1078 told that, in the event of a second coming, he will rise up to haunt us all again. Let us hope that, if we get hold of a JCB, we can eliminate that possibility. But let us remember that we shall probably not see the like of him again.

§ Mr. Shaw
I began by saying that this is a particularly unusual case because Mr. Maxwell was named in a Department of Trade and Industry report and we do not know of any other example in which somebody who was named in a DTI report has ended up running a pension fund or pension fund companies. I think that my hon. Friend was intending to suggest that Mr. Maxwell was probably not a capitalist, but a socialist who liked living off other people's money.
I am sure that my hon. Friend would want us to ask other relevant questions, such as how all this came about. We must ask ourselves how Mr. Maxwell became so desperate for cash that he plundered the pensions of 16,000 people in the Mirror group and the Maxwell Communication Corporation and other pension funds. We are talking about something serious and about a serious amount of money.
We must also ask ourselves why no one stood up to Mr. Maxwell. Why did the trustees not stand up to him? We have heard earlier about trustees in the other House, whom we must not talk about for various reasons of propriety and the rules and regulations of the House. However, we must question how people with titles could turn out to be such a weak lot. Surely it is not simply because they are socialists or members of the Labour party. Surely there is more to it than that.
Why did directors resign from some of those companies in the past year without explanations being given? Why did not the remaining directors, some of whom are members of the upper House and have socialist and Labour party connections, stand up and inquire? These members of the upper House demand enough information of the Government. Why did not they demand the information of Mr. Maxwell and his cronies? One is led to the conclusion that in this case the trustees consisted of a lot of political cronies and that the real questions were not asked because of Mr. Maxwell's political power and connections.
I come to the last and significant question that I want to ask.

§ Mr. Allan Rogers (Rhondda)
On the nine o'clock news tonight, we learned that evidence has come out that the Department of Trade and Industry was told about possible irregularities over a year ago and took no action. The hon. Gentleman would do better to address the system and structure that control pensions, rather than make cheap political points. Everyone is worried about irregularities in the City. For a long time, the Opposition have searched for structures and asked the Government to implement them against their friends in the City.

§ Mr. Shaw
The so-called irregularities of which the hon. Gentleman speaks are being investigated by the Conservative Government and have been investigated for some time. They are being dealt with. I cannot go into the irregularities in detail, because they are not relevant to the debate. However, in all probability the irregularities were financed by pension fund money. The purpose was to create a false market in the shares.
Any decent director of a public company—in the case of Mirror Group Newspapers and Maxwell 1079 Communication Corporation, those directors were Labour party sympathisers and supporters—would take steps to check why the price of the shares in the market was above what it should have been. Clearly, the Labour party supporters who were on the boards of those two companies did not investigate to a sufficient extent their share prices, where the pension moneys were going and what the trustees were doing.
The key questions are: where has the money gone, and what lessons can we learn for the future? The money appears to have been diverted into 400 companies, to end up sometimes in the banks and sometimes in private family money accounts around the world.
But more significantly and importantly, there is a political aspect to the loss of the pension fund moneys. Moneys have gone into publications such as The European. The European unfortunately brings us close to the question whether the Leader of the Opposition and his family benefited from Maxwell or Mirror Group pension fund moneys. Two children of the Leader of the Opposition were employed at The European newspaper. That is very close to the Leader of the Opposition. It is sad, and normally I would not make much of it, but the Leader of the Opposition did not worry about unleashing the dogs of war on Mark Thatcher when my right hon. Friend the Member for Finchley (Mrs. Thatcher) was Prime Minister. In the end, Mark Thatcher went abroad to make his money legitimately and properly.
I am sure that the Leader of the Opposition will want to come to the House and make a statement about all moneys that his family may have received directly or indirectly from any Maxwell organisation, whether The European newspaper or any other. He should make a statement about the full amount of money and what he proposes to do. He should state whether he proposes to repay it to the Mirror Group pensioners and other pensioners who are suffering and may suffer as a result.
It would be helpful also if the Leader of the Opposition would answer some obvious questions. Has his office—has he—at any time benefited in any way, shape or form from Mr. Maxwell's and other contributions? We know that the Labour party has benefited from Mr. Maxwell. We know that pension fund money may have gone to the Labour party, even if indirectly. We know that £38,000 went to the Boundary Commission fighting fund and that £44,000 went to the Labour party direct. We know that other sums have been used to support advertising and publications of the Labour party.
The suggestion has been made that a Member of the upper House closely connected with the deputy Leader of the Opposition may also have facilitated that person receiving money to finance his office. We all know that politics is tough in this country and that there are not state moneys in that connection, but it is important when something like this happens that, if pensioners' money has ended up financing the offices of the Opposition, that money must be declared openly, and a statement should be made on the Floor of the House. I hope that personal statements will be made.

§ Mr. Butterfill
Has my hon. Friend had an opportunity to read an article in The Spectator which says that one of the directors of the Mirror Group was being seriously considered by the Leader of the Opposition as a future Governor of the Bank of England?

§ Mr. Shaw
My hon. Friend is right. I am aware of that article in The Spectator today, but I had imposed my own self-censorship because the article refers to a Member of the upper House closely connected with the Labour party, and I have taken great pains to remain in order throughout my speech. I accept—one can say this without criticism—that it would have been very dangerous had that person become Governor of the Bank of England.
It seems that the trustees have failed the pensioners and have much to answer for to the Select Committee on Social Security, which has asked them to attend next Tuesday's meeting. More legislation may be required on trustees. At present, case law operates for trustees, and that case law is not as clear as statute law. That is unfortunate, because, until this case arose, by and large we had few problems with pension funds. The vast majority of such funds in this country are run satisfactorily and properly.
It is equally clear that, particularly in the case of the Mirror group, the merchant banks and the profes-sionals—who carefully briefed the City of London to the effect that Maxwell had been separated from control and that Maxwell companies were separated from any influence over the public company and its pension funds—utterly failed the pensioners.
More than anything, the Labour party, its contacts and connections failed the 16,000 Mirror Group pensioners and other pensioners who obtained their pensions through Maxwell-connected companies. The Labour party has a lot to answer for in this case.

§ Mr. Michael Meacher (Oldham, West)
I congratulate the hon. Member for Lancashire, West (Mr. Hind) on obtaining a debate on what is undoubtedly an important subject. I have been seeking for some time to get the issue urgently on the parliamentary agenda, but the Secretary of State for Social Security, whom I have already dubbed the invisible man of the Government, has maintained, and is still maintaining, a deafening silence.
I do not know how he justifies his keep in the Cabinet, when an explosive issue of this kind arises, directly within his responsibility, and he says nothing, apart from suggesting that he may bring forward the regulation on self-investment on which he has already been sitting for over 18 months and which, as I shall show, is in any case irrelevant to the Maxwell saga.
Pension funds currently total £300 billion to £400 billion, the largest single block of funds in the City. The degree of regulation at present is the lightest imaginable. It is true—I did not know that it was Speight 1883, but I am sure that that is correct—that pension funds are run by trustees, who are under a legal obligation to manage the funds in the interest of their members, but in practice the discretion that they exercise is virtually unlimited. Moreover, the trustees are generally appointed by the employer and often—not just in the Maxwell case—the chairman of the company is also the chairman of the pension fund. That may well mean, as has already been said, that the funds are used in highly questionable ways.
There is nothing at present to stop trustees investing in the shares of the parent company. There is nothing at present to stop trustees appointing managers from their own group. There is nothing to stop new owners of a business after a takeover winding up the fund and 1081 transferring the pensioners to a new fund and then pocketing the surplus. That is exactly what Hanson tried to do in respect of Imperial Tobacco.
There is nothing to stop employers paying pensioners a miserly 3 per cent. a year increase in their pensions—far below the average rate of inflation of the Thatcher years, which was 9 per cent. a year—while draining off the surplus or taking a unilateral contributions holiday. There is nothing to stop an employer shifting pension fund moneys away from reliable blue chip stock investments into much more risky and speculative gambles. All these things have happened, and they are by no means confined to Maxwell.

§ Mr. Butterfill
Will the hon. Gentleman give way?

§ Mr. Meacher
I shall only give way a few times, because there is limited time.

§ Mr. Butterfill
I am most grateful to the hon. Gentleman.
While we are on the subject, would the hon. Gentleman agree that Mr. Maxwell clearly had difficulty in distinguishing between personal and corporate assets, and even greater difficulty, apparently, in distinguishing between personal and pension fund assets? Given that Mr. Maxwell was a major benefactor of the Labour party, both corporately and personally, and given that not just the Labour party but perhaps the private offices of some Labour party Front-Bench spokesmen may have benefited, and therefore, quite unwittingly perhaps, benefited from moneys which were tainted and not properly available to be given to them, can the hon. Gentleman give an undertaking tonight that the Labour party will forthwith undertake to repay all those moneys just in case they may have been tainted?

§ Mr. Meacher
I must say that I find it nauseating hypocrisy for Tory party Members who have for years received hundreds of thousands of pounds from people like Mr. Asil Nadir, the Hong Kong tycoon whose name I cannot remember, and Mr. Latsis, who had a close relationship with the Greek colonels, to seek to lambast the Labour party for receiving money from rich men. It is an utterly disreputable and contemptible attempt to divert a serious debate by those lurid charges.

§ Mr. Rogers
My hon. Friend is quite right to point out that the Tory party has been the recipient of moneys over the years from the City and has justified it as perfectly proper. As my hon. Friend has said, their hypocrisy is now evident. I do not know whether the bubbles and the heat are bringing up the sewer rats of the Tory party, but some of the statements that I have heard here tonight have been absolutely appalling.
Tory Members, as I am sure my hon. Friend will point out, have opposed the regulation of the City year after year; they have opposed any moves towards the declaration of political funds for political parties. They have dithered like this for all these years, and now, just like sewer rats, they bubble up to the surface.

§ Mr. Butterfill
On a point of order, Mr. Speaker. Is it in order for an Opposition Member to call Conservative Members who raise legitimate points of interest sewer rats? Is that parliamentary?

§ Mr. Speaker
That is probably going over the top. I ask the hon. Member for Rhondda (Mr. Rogers) to withdraw the phrase "sewer rats", which is not parliamentary.

§ Mr. Rogers
Under your direction, Mr. Speaker, I withdraw it.

§ Mr. Meacher
There is a yawning gap in pension fund law. That is agreed on both sides of the House.

§ Mr. Nicholls
rose—

§ Mr. Meacher
I am not giving way. I am sure the hon. Gentleman would only perpetuate the low quality of debate which he generally introduces.

§ Mr. Nicholls
On a point of order, Mr. Speaker.

§ Mr. Speaker
That is not unparliamentary.

§ Mr. Nicholls
That was not the point that I was about the make, Mr. Speaker. I had it in mind that it was a tradition of the House that, if a Front-Bench spokesman deliberately spoke critically of a Back-Bench Member, it was courtesy to give way.

§ Mr. Speaker
The convention of the House is that, if an hon. Member does not give way, other hon. Members sit down.

§ Mr. Meacher
As the hon. Member for Dover (Mr. Shaw) rightly said, the superannuation office of the Inland Revenue makes sure that it gets its tax. The occupational pension advisory service makes sure that minimum pension benefits are provided. After that, it is a black hole.
The Government's response has been mind-blowingly complacent. Faced with a national outcry over the Maxwell revelations, the Secretary of State, like the three monkeys, heard nothing, saw nothing and said nothing. Instead, at the end of last night's debate, the Minister of State was wheeled out to mumble a hastily prepared script which purports to be the Government's considered response to a week of angry, blazing headlines. He said: but we acknowledge that trustees have a clear duty to act at all times in the interests of the beneficiaries of the scheme. They are required by law to disclose certain facts to their pensioners, the trade unions and the members of their funds. The actuarial valuation of the funds is an important part of that. When we have considered the outcome of the Maxwell situation, we shall consider whether any further changes to the law are needed. I am not prejudging that issue when I say that, if somebody deliberately sets out to commit fraud on a massive scale, there is precious little that the law or regulatory agencies can do to prevent it entirely. That last sentence takes the biscuit. The Minister says that they cannot stop a deliberate fraudster breaking the law but the Government have not given the regulatory bodies any powers to prevent fraud in the first place. Hon. Members will note that he said: When we have considered the outcome of the Maxwell situation, we shall consider whether any further changes to the law are needed."—[Official Report, 11 December 1991; Vol. 200, c. 918.] The Mirror Group Newspapers case is not by a long way the first episode which should have put a shot across the Government's bows. Many well-known companies, including Vauxhall, Decca, Babcock and Wilcox, Imperial Group and Thomas Tilling, have all over the last few years revealed serious flaws in the structure of their occupational pension funds.
1083 Then, of course, there is Hanson. A week ago, I received out of the blue a letter from a person in Stockbridge, Hampshire, whom I have never met. He wrote: I should like to remind you of the raid on Courage Brewery pension fund during the short ownership by Lord Hanson prior to the sale to John Elliot of Elders. The business had been rationalised by the Hanson henchmen—staff sacked, businesses sold off, assets transferred, land thought to belong to the sports and social club sold for an industrial estate, then Courages put up for sale. A dispute occurred over a huge cash surplus, £100 million, I think, in the employees' pension fund. This money was to be transferred from the pension fund of Courage employees to a fund in Lord Hanson's control prior to the sale, of course quite legally. The new fund was not to be used for the Courage employees whose contributions made the surplus but lost to the Hanson empire. I hope Conservative Members will note that it is not by any means only in the case of Maxwell that wrongdoings occur.

§ Mr. Nicholls
rose—

§ Mr. Hind
rose—

§ Mr. Meacher
I will give way to the hon. Member for Lancashire, West (Mr. Hind), who made a much more balanced speech.

§ Mr. Hind
Clearly, there are problems in the industry generally. I use the Maxwell case as an example because it is horrendous. Would both sides of the House agree about introducing legislation on this matter? If it is felt that legislation should be introduced in the near future, will the hon. Gentleman pledge, on behalf of the Opposition, to support it so that it could be taken through the House quickly?

§ Mr. Meacher
Indeed. I am glad to give that assurance, and if the hon. Gentleman listens to the rest of my speech, he will see that I shall take that line strongly.
In the light of what I regard as cheap party political points made by several hon. Members, I make it clear that Maxwell's actions were inexcusable. But they are not new—such action has been going on for years. Everybody knows that—pensioners, company employees, the media and the public—and everybody wanted action to stop it, except, apparently, the Government.

§ Mr. Nicholls
Will the hon. Gentleman give way?

§ Mr. Meacher
No, I shall not give way.
I was interested to read a few days ago an article by Christopher Fildes of the Daily Telegraph, who wrote on 9 December: The Minister responsible—Tony Newton, caught with his mouth open, and surely not long for high office—cannot say he was not warned. More than two years ago, I told him here that pensions would blow up in his face". He then quotes a previous article of his entitled "Bomb in Tony Newton's in-tray", of 31 July 1989.
Why has the Secretary of State failed to act in the past two and a half years? Does he realise that, by sitting on his hands and doing nothing about the matter for the past several years, he bears some responsibility for the losses suffered and for the fact that Mirror Group Newspapers pensioners have been cheated of their pensions? He bears some responsibility for the losses suffered by other pensioners and employees in a string of recent notorious cases because of the lack of a law which would have prevented those dubious and questionable practices from 1084 taking place. By his complacency and by dithering over his response—or rather non-response—to the Maxwell scandal, he is still causing anxiety and apprehension to millions of pensioners who are genuinely very worried about whether their pension fund is secure.
I mean no disrespect to the Under-Secretary of State, the hon. Member for Maidstone, but if the Secretary of State does not come out of hiding soon and come to the Dispatch Box with considered proposals to stop the rape of pension funds, he will have forfeited his right to retain his office and, in my view, he should resign. If he has any doubts about what he should do, I shall tell him.
First, the Secretary of State should enshrine in law the clear principle—I was glad to hear the hon. Member for Lancashire, West make the same point—that the pension fund moneys belong to their members, not to the employers. That is not just the long-held view of the Labour party but was the decision last year of the European Court in the Barber judgment, which declared that men and women should have equal pay. That meant that there should be equal pensions, because pensions are deferred pay.
Secondly, the right hon. Gentleman should legislate—again, I am wholly in agreement with the hon. Member for Lancashire, West—to provide for an independent chairman who is not to be the chairman of the parent company, or a member of the parent company board. He should require—we may differ a little on this, but I insist on it—that there be a 50 per cent. Employee representation, consisting of at least one pensioner representative, on the trust board. Those employee representatives must be independently elected, not chosen by the managers or owners of the parent company.
That is exactly the framework that we proposed during the Committee stage of the Social Security Act 1990, but it received the same negligent and complacent response from the Government then, on 6 March 1990, as it does now. The then junior Minister for Social Security said in response to our proposal: We feel that it would be an unnecessary intrusion into he way that pension schemes are run and set up, to give the state the power to require schemes to have member trustees".— [Official Report, Standing Committee G, 6 March 1990; c. 348.] It was that folly, due to political dogma—the Government's refusal to require the appointment of 50 per cent. employee representatives to keep a close eye on an errant employer—that led directly to Maxwell's autocratic control of the MGN pension funds and their subsequent misuse.
Thirdly, the Secretary of State should require full and up-to-date disclosure of all relevant information covering the financial state of the pension fund. Every member of that board should be an equal recipient of that information.
Fourthly, the Secretary of State should regulate extremely tightly both self-investment and stock lending—I am surprised that stock lending has not been mentioned more tonight. The 5 per cent. self-investment regulation, which the Secretary of State has already been sitting on for 18 months and has still not introduced, is flawed because it exempts permanently any self-investment in the company's properties, as opposed to shares which exist when the law is finally changed.
More importantly, reference to that much-delayed regulation was the only response made by the Secretary of 1085 State to the Maxwell revelations, and it was irrelevant because Maxwell did not self-invest in the parent company, but drained off the funds to an entirely separate set of private interests. Therefore, even if the Secretary of State's regulation had been in place five years ago, it would still not have stopped Maxwell doing what he did by one iota. We await any Government response that is relevant to preventing what has happened, which we all agree involved misdeeds.
Fifthly, the right hon. Gentleman should make statutory provision for the redress of complaints. He should offer recourse to an independent tribunal with enforcement powers—possibly within the industrial tribunal framework—so that the complaints and grievances of pension fund members can be properly addressed.
Sixthly, and most importantly, we need a statutory trust deed to provide a model for the operation and administrative procedures of pension funds. At present, employers can, idiosyncratically, write their own trust deeds. They do not have to conform to a trust framework that guarantees the protection of the proper rights and interests of employees and pensioners. That standard trust deed should regulate the nature and frequency of trustee meetings, establish minimum standards for disclosure, standardise rules for the actuarial calculation of surpluses, which are gravely lacking at present, and regulate investment procedures.
I hope that the Under-Secretary will note that I think that we should look at European procedures and practice. In particular, we should consider the rules in the Benelux countries, whereby about two thirds of pension fund assets must be invested in cash or fixed-interest stock. We should also look at the provision in Germany of a degree of compulsory insolvency insurance so that pensioners are protected against losses suffered from speculation outside blue chip stock investment. I think that the Select Committee is to do so, which I strongly support.
There must be new rules to regulate the allocation of surpluses. It is simply wrong for employers to siphon off surpluses or take unilateral contributions holidays, which amounts to much the same thing, when pensioners are being fobbed off with a mere average 3 per cent. annual increase in pension to protect them against inflation—especially when the average inflation rate in the Thatcher years was 9 per cent. The first duty of the pension fund must be to provide best quality pensions for its members, including adequate inflation protection, which is currently gravely lacking.
I draw attention to the secret protocol to the economic and monetary union treaty which, it was announced today, was signed at Maastricht. In effect, the Prime Minister has signed away equal pension rights between British men and women for the next 40 years, secretly, without warning or consultation, and with dubious constitutional validity because it flies in the face of the Barber judgment of May last year. This is, in effect, the third opt-out from the treaty on economic and monetary union by this outsider Prime Minister.
When that is fully understood, it will cause intense anger among the millions of pensioners and employees who will find that their hopes and expectations of pension 1086 equality in retirement have been abruptly and unceremoniously dashed by the Prime Minister and the Secretary of State. However, it raises two important issues.
First, six months ago the Secretary of State suspended the 5 per cent. limited price indexing regulation on the grounds that it could not be afforded with the overhang of costs from the Barber judgment. If that has now been removed by this protocol—I want an answer from the Under-Secretary of State for Social Security, the hon. Member for Maidstone (Miss Widdecombe)—will he urgently reinstate the limited price indexing regulation? [Interruption.] If the Under-Secretary is worried about time, perhaps she should have had a word with two of her hon. Friends, one of whom spoke for half an hour and one for 25 minutes.
If the LPI regulation is introduced, occupational pensions will be slightly better but still inadequately protected against the ravages of inflation. Will the Secretary of State reintroduce that regulation? Secondly, will he use the latest protocol to ditch the hopes and expectations of equal retirement age and equal pension rights in the state scheme? On that alone, he owes it to millions of people to make clear the Government's position.
If there is one good thing about the Maxwell saga, it is the way in which it has highlighted the flaws and gaps in the control of pension funds so that even this Government can no longer drag their feet and ignore them. Procrastination and delay must stop. We must have a new, effective and comprehensive law on the statute book before the election if it is in six months' time. As I have been asked, I give an assurance that, if the framework of protection that I have spelt out is speedily adopted by the Secretary of State, we shall give such a Bill a fair wind in Parliament. If not, it will be on his head and on that of the Government when millions of pensioners and employees give their verdict on the issue in the forthcoming election.

§ The Parliamentary Under-Secretary of State for Social Security (Miss Ann Widdecombe)
Well, well, well. On the night when we were discussing matters of supreme importance to millions of pensioners, where were the Opposition? On the night when we were discussing the fears and anxieties of employees—past and present—who worked for years for a major Labour newspaper, where were the Opposition?
It is worth recording that, for the first three quarters of an hour of this one-and-a-half-hour debate there was no one on the Opposition Back Benches, whereas, on the Conservative Back Benches, interest has been shown not only by my hon. Friend the Member for Lancashire, West (Mr. Hind), whom I congratulate on obtaining the debate and on the eloquent and reasonable way in which he opened it, but by my hon. Friends the Members for Eltham (Mr. Bottomley), for Teignbridge (Mr. Nicholls), for Dover (Mr. Shaw), for Wyre (Mr. Mans), for Birmingham, Northfield (Mr. King), for Bexhill and Battle (Mr. Wardle), for Portsmouth, South (Mr. Martin), for Bournemouth, West (Mr. Butterfill), for Ipswich, (Mr. Irvine) and for Nuneaton (Mr. Stevens). But where was the Labour party?
I find it rather nauseating—I think that that was the phrase used by the hon. Member for Oldham, West (Mr. Meacher) that he should criticise my right hon. Friend the 1087 Secretary of State for inaction when we have taken consistent action, not just in response to some very large headlines but since the passing of the Social Security Act 1990.
That is only the most recent measure. I could also mention the Financial Services Act 1986 and its importance for this matter, but it is worth recording that the Social Security Act 1990 provided powers enabling restrictions to be based on the extent to which the resources of occupational pension schemes may be invested in the sponsoring employer and—this will interest the hon. Member for Oldham, West—in an associate employer or connected employer. The hon. Member for Oldham, West has rushed in with his mouth open to say that the Act had severe limitations, when in fact we should examine carefully the extent of the Act and make careful judgments on the basis of that.

§ Mr. Rogers
Will the Minister give way?

§ Miss Widdecombe
In due course. I apologise, but the hon. Member for Oldham, West did not leave me much time.
Shortly after the passage of this Act the Government commissioned independent consultants—they did not just pass the Act and have done with it—Ernst and Young to report on the extent of such investment and on any problems that could arise in restricting it. We wanted to be sure when we brought in the regulations to follow the Act that they would be sensible and would stand up. That is not inaction: it is sensible action.
Following the report, draft regulations to achieve such restrictions were then referred to the Occupational Pensions Board. That is not inaction either. After consultation with interested bodies, the board reported on the draft towards the end of July. So my right hon. Friend the Secretary of State has not been sitting on this for 18 months; there was solid action right up to the time when Parliament rose for its summer recess.
Having considered these representations, together with others received subsequently about the need for appropriate provisions to avoid causing unnecessary difficulty to companies and pension funds in respect of existing self-investment, we intend to lay the regulations shortly.

§ Mr. Rogers
I agree that the Government have, under considerable pressure, introduced legislation. If the legislation, however, is as good as the hon. Lady suggests, why did it not stop Maxwell criminally diverting funds from pension funds?
The hon. Lady invoked the Financial Services Act. I remember Opposition Members frequently suggesting that we should set up a structure to control the City and its financial dealings. Tory Members said that the City can regulate itself. That is the problem—without control of the City of London there will always be these scandals.

§ Miss Widdecombe
It is extraordinary that the hon. Gentleman asks why these measures did not stop Mr. Maxwell when, as we have just said, they are about to come into force. They are not retrospective and they would not have bitten on the Maxwell problem.
The protection of pension funds is of importance to the vast majority of people, and the Government have worked consistently to strengthen safeguards for pension funds and to protect scheme members. The bulk of what has 1088 been said tonight notwithstanding, I feel that I cannot comment on problems to do with the Maxwell group of companies' pension funds——

§ Mr. Rogers
Why not?

§ Miss Widdecombe
Because at best that would be speculative and at worst it could be seen as prejudicing the outcome of the Serious Fraud Office investigation.
In general, we should first consider the legal basis for the vast majority of pension schemes—in the main, it is trust law. This ensures that a scheme's assets are held separately from the employer's assets. This is a requirement for approval of the scheme for tax purposes. Under trust law, the trustees of the scheme, including those appointed by the employer, have a duty to act at all times in the best interests of all the beneficiaries under the trust, in accordance with the trust deed and the scheme rules.
As we have discussed the independence of trustees tonight, it is worth rehearsing their main duties. They must act in accordance with the trust deed and rules of the scheme within the framework of law. They must act prudently, conscientiously and honestly and with the utmost good faith. They must act in the best interests of beneficiaries and strike a fair balance between the interests of different classes of beneficiaries. They must take advice on technical matters and any other matters which they do not understand and they must invest the funds.
The duties of trustees in relation to investment have most concerned the House tonight. Under the Financial Services Act 1986, it is a criminal offence for an unauthorised person to carry on investment business, and that includes the day-to-day management of pension scheme investments. It is most unusual, therefore, for trustees to seek authorisation under the Act. Instead, trustees mainly delegate the work of detailed investment management to an authorised investment manager. However, they must retain control over broad strategic decisions such as the proportion of the total funds to be invested in particular categories of investment.

§ Mr. Butterfill
Does my hon. Friend agree that, in the Maxwell case, that work was delegated to Bishopsgate, which is an authorised investment manager—regulated by the Financial Services Act and a member of the Investment Management Regulatory Organisation, and that there may be a claim against IMRO as a result?

§ Miss Widdecombe
As I have said, I shall not comment on the details of the Maxwell case, pending the outcome of the specific investigation. It would be prejudicial for me to do so, but I shall take on board my hon. Friend's point.
In stating what the Government have already done, there is no suggestion that we are not interested in other representations. Not least among those representations must surely be the outcome of the Select Committee's deliberations. It would be wrong for us to rush in and take precipitate action without making judgments based on the important representations of the Select Committee and others which we shall receive.
If a trustee carries out some act in relation to the trust which is not authorised by the terms of the trust or a statutory obligation, or fails to do something that he should have done, there is a breach of trust. If that causes a loss to the fund, the trustee is personally liable unless the scheme rules exempt the trustee from liability—for instance, where there is some entirely unintentional error, 1089 which could be something as minor as paying a pension to someone who, upon examination, is not strictly entitled to it. Most pension schemes contain a provision binding the employer to indemnify the trustees against any liability or costs resulting from the proper exercise of their functions, but that would not apply to fraudulent transactions.
The trustee body sets out the procedure for the appointment of trustees and who is eligible. It may include people who are members of the board or senior executives of the company. It may include members of the scheme or the pensioners. The trustee body may be a company with individuals as directors of the compnay and it may include one or more persons with no direct interest in the scheme.
It is interesting that there are about 160,000 such schemes, of varying size and complexity and with different memberships. One of the difficulties in taking the sort of action being recommended by Opposition Members and one or two of my hon. Friends is that we have to devise schemes that will not have an adverse impact on genuine operations by smaller companies. It was precisely that sort of consideration which led us into such detailed consultation on the self-investment regulations and which would lead us again, however worthy a proposal might seem at first sight, to investigate the effects thoroughly.
We do not want to lay regulations only to find that we then have a string of amending regulations because, owing to the varying types of schemes, exceptions keep coming to the fore. Membership of those schemes now totals 20 million. It is a serious business. With all due respect to Opposition Members and to my hon. Friends, it is not something into which we can rush without full and proper consultation.
To improve understanding of the role and responsibilities of trustees, the Occupational Pensions Board, in its report to my right hon. Friend the Secretary of State on protecting pensions, expressed the view that a brief statement of the principles of trusteeship should be prepared and that the disclosure requirements, which have not featured much in tonight's debate but which are important, should be extended to include information on whether each trustee has received a copy of the statement.
My right hon. Friend accepted the board's recommendation—again, action not inaction—invited it to prepare a booklet and undertook to extend the disclosure requirements as soon as it was published, to include information as to whether trustees had access to that booklet. My right hon. Friend will then be in a position to extend the disclosure requirements accordingly.
Trustees are governed not just by trust law in that respect but must comply with legislation enacted by——