EXCESSIVE PENSION CONTRIBUTIONS MADE BY PERSONS WHO HAVE BECOME INSOLVENT

HC Deb 17 May 1999 vol 331 cc701-26

'. For sections 342A to 342C of the Insolvency Act 1986 there shall be substituted—

"Recovery of excessive pension contributions

342A.—(1) Where an individual who is adjudged bankrupt—

1. (a) has rights under an approved pension arrangement, or
2. (b) has excluded rights under an unapproved pension arrangement,

the trustee of the bankrupt's estate may apply to the court for an order under this section.

(2) If the court is satisfied—

1. (a) that the rights under the arrangement are to any extent, and whether directly or indirectly, the fruits of relevant contributions, and
2. (b) that the making of any of the relevant contributions ("the excessive contributions") has unfairly prejudiced the individual's creditors,

the court may make such order as it thinks fit for restoring the position to what it would have been had the excessive contributions not been made.

(3) Subsection (4) applies where the court is satisfied that the value of the rights under the arrangement is, as a result of rights of the individual under the arrangement or any other pension arrangement having at any time become subject to a debit under section 23(1)(a) of the Welfare Reform and Pensions Act 1999 (debits giving effect to pension-sharing), less than it would otherwise have been.

(4) Where this subsection applies—

1. (a) any relevant contributions which were represented by the rights which became subject to the debit shall, for the purposes of subsection (2), be taken to be contributions of which the rights under the arrangement are the fruits, and
2. (b) where the relevant contributions represented by the rights under the arrangement (including those so represented by virtue of paragraph (a)) are not all excessive contributions, relevant contributions which are represented by the rights under the arrangement 702 otherwise than by virtue of paragraph (a) shall be treated as excessive contributions before any which are so represented by virtue of that paragraph.

(5) In subsections (2) to (4) "relevant contributions" means contributions to the arrangement or any other pension arrangement—

1. (a) which the individual has at any time made on his own behalf, or
2. (b) which have at any time been made on his behalf.

(6) The court shall, in determining whether it is satisfied under subsection (2)(b), consider in particular—

1. (a) whether any of the contributions were made for the purpose of putting assets beyond the reach of the individual's creditors or any of them, and
2. (b) whether the total amount of any contributions—
1. (i) made by or on behalf of the individual to pension arrangements, and
2. (ii) represented (whether directly or indirectly) by rights under approved pension arrangements or excluded rights under unapproved pension arrangements,

is an amount which is excessive in view of the individual's circumstances when those contributions were made.

(7) For the purposes of this section and sections 342B and 342C ("the recovery provisions"), rights of an individual under an unapproved pension arrangement are excluded rights if they are rights which are excluded from his estate by virtue of regulations under section 12 of the Welfare Reform and Pensions Act 1999.

(8) In the recovery provisions—

"approved pension arrangement" has the same meaning as in section 11 of the Welfare Reform and Pensions Act 1999;

"unapproved pension arrangement" has the same meaning as in section 12 of that Act.

Orders under section 342A

342B.—(1) Without prejudice to the generality of section 342A(2), an order under section 342A may include provision—

1. (a) requiring the person responsible for the arrangement to pay an amount to the individual's trustee in bankruptcy,
2. (b) adjusting the liabilities of the arrangement in respect of the individual,
3. (c) adjusting any liabilities of the arrangement in respect of any other person that derive, directly or indirectly, from rights of the individual under the arrangement,
4. (d) for the recovery by the person responsible for the arrangement (whether by deduction from any amount which that person is ordered to pay or otherwise) of costs incurred by that person in complying in the bankrupt's case with any requirement under section 342C(1) or in giving effect to the order.

(2) In subsection (1), references to adjusting the liabilities of the arrangement in respect of a person include (in particular) reducing the amount of any benefit or future benefit to which that person is entitled under the arrangement.

(3) In subsection (1)(c), the reference to liabilities of the arrangement does not include liabilities in respect of a person which result from giving effect to an order or provision falling within section 22(1) of the Welfare Reform and Pensions Act 1999 (pension sharing orders and agreements).

(4) The maximum amount which the person responsible for an arrangement may be required to pay by an order under section 342A is the lesser of—

1. (a) the amount of the excessive contributions, and
2. (b) the value of the individual's rights under the arrangement (if the arrangement is an approved pension arrangement) or of his excluded rights under the arrangement (if the arrangement is an unapproved pension arrangement).

(5) An order under section 342A which requires the person responsible for an arrangement to pay an amount ("the restoration amount") to the individual's trustee in bankruptcy must provide for the liabilities of the arrangement to be correspondingly reduced.

(6) For the purposes of subsection (5), liabilities are correspondingly reduced if the difference between—

1. (a) the amount of the liabilities immediately before the reduction, and
2. (b) the amount of the liabilities immediately after the reduction, is equal to the restoration amount.

(7) An order under section 342A in respect of an arrangement—

1. (a) shall be binding on the person responsible for the arrangement, and
2. (b) overrides provisions of the arrangement to the extent that they conflict with the provisions of the order.

Orders under section 342A: supplementary

342C.—(1) The person responsible for—

1. (a) an approved pension arrangement under which a bankrupt has rights,
2. (b) an unapproved pension arrangement under which a bankrupt has excluded rights, or
3. (c) a pension arrangement under which a bankrupt has at any time had rights,

shall, on the bankrupt's trustee in bankruptcy making a written request, provide the trustee with such information about the arrangement and rights as the trustee may reasonably require for, or in connection with, the making of applications under section 342A.

(2) Nothing in—

1. (a) any provision of section 159 of the Pension Schemes Act 1993 or section 91 of the Pensions Act 1995 (which prevent assignment and the making of orders which restrain a person from receiving anything which he is prevented from assigning),
2. (b) any provision of any enactment (whether passed or made before or after the passing of the Welfare Reform and Pensions Act 1999) corresponding to any of the provisions mentioned in paragraph (a), or
3. (c) any provision of the arrangement in question corresponding to any of those provisions,

applies to a court exercising its powers under section 342A.

(3) Where any sum is required by an order under section 342A to be paid to the trustee in bankruptcy, that sum shall be comprised in the bankrupt's estate.

(4) Regulations may, for the purposes of the recovery provisions, make provision about the calculation and verification of—

1. (a) any such value as is mentioned in section 342B(4)(b);
2. (b) any such amounts as are mentioned in section 342B(6)(a) and (b).

(5) The power conferred by subsection (4) includes power to provide for calculation or verification—

1. (a) in such manner as may, in the particular case, be approved by a prescribed person; or
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2. (b) in accordance with guidance—
1. (i) from time to time prepared by a prescribed person, and
2. (ii) approved by the Secretary of State.

(6) References in the recovery provisions to the person responsible for a pension arrangement are to—

1. (a) the trustees, managers or provider of the arrangement, or
2. (b) the person having functions in relation to the arrangement corresponding to those of a trustee, manager or provider.

(7) In this section and sections 342A and 342B—

• "prescribed" means prescribed by regulations;
• "the recovery provisions" means this section and sections 342A and 342B;
• "regulations" means regulations made by the Secretary of State.

(8) Regulations under the recovery provisions may—

1. (a) make different provision for different cases;
2. (b) contain such incidental, supplemental and transitional provisions as appear to the Secretary of State necessary or expedient.

(9) Regulations under the recovery provisions shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.".—[Mr. Timms.]

Brought up, and read the First time.

The Minister of State, Department of Social Security (Mr. Stephen Timms)

I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Mr. Michael Lord)

With this, it will be convenient to discuss the following: Government new clause 12—Excessive pension contributions made by persons who have become insolvent: Scotland.

Government amendments Nos. 29, 53 to 62 and 66 to 77.

Mr. Timms

One of the main themes of our programme for welfare reform is that people should be encouraged to save for retirement if they can. However, when a person is made bankrupt, any pension arrangements that he has may be jeopardised. In some cases, pension rights can be seized by a trustee in bankruptcy and all the pension savings lost.

The existing clause 11 will ensure that in future, if a person becomes bankrupt, any rights that he has in approved pension arrangements will be protected. The protection will apply to occupational pensions, personal pensions and in due course to stakeholder pensions. I acknowledge the support that Opposition Members gave to that principle in Committee. However, we cannot give absolute protection to pension savings. There needs to be some safeguard to prevent people who are falling into bankruptcy—[Interruption.]

Mr. Deputy Speaker

Order. Conversations are breaking out throughout the Chamber. The House ought to listen to the Minister who is addressing the House.

Mr. Timms

Thank you, Mr. Deputy Speaker.

There must be safeguards to prevent people who are falling into bankruptcy from deliberately seeking to put assets into their pension in order to avoid their legitimate obligations to creditors. We need to strike a balance between safeguarding pension savings and the rights of creditors. New clauses 11 and 12 provide that safeguard. Their purpose is to prevent people from using an approved pension arrangement deliberately to put money beyond the reach of creditors.

Under the provisions in the new clauses, if a trustee in bankruptcy believes that excessive contributions have been made to a pension, he will be able to apply to a court for an order to recover the amount of those excessive contributions.

Mr. Nick Hawkins (Surrey Heath)

Will the Minister explain why "excessive" is not defined?

Mr. Timms

What is or is not excessive will be for a court to determine. I shall set out in a moment the issues that the court will have to address.

If the application is successful, the pension scheme will be required to pay a sum to the trustee in bankruptcy. That sum will then form part of the bankrupt's estate so that it can be used for the benefit of creditors.

The question that the court will have to address in considering whether there have been any excessive contributions is whether the making of any of those contributions has unfairly prejudiced the creditors. In coming to a view on that question, the court will be directed by the clauses to consider two matters in particular: first, whether any of the contributions were made for the purpose of putting assets beyond the reach of creditors; and secondly, whether the total amount of contributions was excessive in view of the individual's circumstances when they were made.

As the House will know, we have consulted on these proposals. A number of the responses were concerned about how a court would decide on excessive contributions, and it might be useful if I deal with some of those points. One particular concern was whether ordinary, standard contributions to a pension required by the rules of the scheme could ever be regarded as excessive. In the vast majority of cases, we would not expect a court to rule that they were excessive.

I can assure the House that the measure is designed as a deterrent, and is aimed at that small group of people who might try to defeat their creditors. We would expect only a handful of cases each year to be taken to court.

In addition to the new clauses, there are various related amendments. The most important is amendment No. 68, which is a further amendment to the Insolvency Act 1986. As I said, new clauses 11 and 12 allow for excessive contributions to a pension to be recovered for the benefit of creditors. However, the legislation also needs to deal with the situation when the pension is shared, under other provisions contained in the Bill.

If a couple divorce, they will be able to share the pension as a result of the pension-sharing measures in the Bill. Following the pension share, the pension scheme member may become bankrupt. Under the new clauses, a court could find that the bankrupt's pension is to some extent made up of excessive contributions, moneys that properly ought to have been available for creditors. Normally the court would make an order to recover the full amount of the excessive contributions from the pension rights of the bankrupt, but that may not be possible because of the pension-sharing arrangement, and insufficient resources remain in the bankrupt's fund for that purpose.

Where a bankrupt's pension has been shared between the divorcing spouses, amendment No. 68 sets out how the provisions on the recovery of excessive contributions from the former spouse's pension share of the bankrupt's pension will apply.

Let me make a few general remarks. First, like the new clauses, the amendment is intended as a deterrent. Without it, some couples who are going through a divorce may be tempted to manipulate the system. Some link between the measures in the Bill on pension sharing and the protection of pensions on bankruptcy is therefore necessary. Secondly, however, we anticipate that the number of cases falling under the amendment will be pretty small.

Mr. Webb

The Minister has just described how the pension-sharing rules and the rules on pensions in bankruptcy will interact. I understand from the Secretary of State's private office that the notes on the new clauses are being prepared by the Department and will be available for their lordships' consideration, but not for this House. As someone who knows little of these matters, I think that it would have been helpful if those notes had been available before today's debate.

Mr. Timms

I entirely accept the hon. Gentleman's point. I hope the explanation that I am giving, which is fairly detailed, will be helpful to the House and will clarify the position.

Thirdly, current bankruptcy law contains a longstanding provision to allow a divorce settlement to be overturned when there is evidence that the settlement deprives creditors of assets to which they should be entitled. I understand that those matters are referred to in insolvency law as transactions at undervalue or preferences.

The amendment follows that approach by providing that excessive contributions can be recovered from the pension share of the former spouse, but only when there is evidence that the pension-sharing order or agreement was at undervalue or amounted to a preference, unfairly depriving creditors of assets. It builds on existing provisions in insolvency law allowing divorce settlements to be reviewed.

I shall set out how the amendment will work. Let us assume that a couple divorce and, as part of the settlement, share the pension. A year later, the pension scheme member becomes bankrupt. The trustee in bankruptcy will use the provisions in the new clauses to ask the court to examine the contributions made to the pension of the person who has become bankrupt.

The court will come to a view about any excessive contributions and, if appropriate, will issue an order for an amount of excessive contributions to be recovered, for the benefit of the creditors. However, as a result of the pension share, there might be insufficient rights in the bankrupt's pension to recover the full amount of the excessive contributions. At that point, the provisions in the amendment come into play.

Under the amendment, the trustee in bankruptcy will be able to apply to a court for an order to make a recovery of the balance of the excessive contributions from the former spouse's pension share. As a first step, the court will have to consider whether there is evidence that the divorce settlement generally has the effect of putting assets beyond the reach of creditors. If it finds that there is no evidence of that, the matter can go no further. First call for excessive contributions will always be on the bankrupt's share of the pension. Only if there is a balance of excessive contributions not covered by the bankrupt's share will any recovery be made from the share of the former spouse.

If a court finds that all the conditions are met and that it is appropriate that some excessive contributions should be recovered from the former spouse's pension share, it will be able to make an order under the amendment. It will make such an order as it thinks fit for restoring the position to what it would have been if the bankrupt had not transferred those excessive contributions to the former spouse's pension share. The likely outcome is that the court will order that a sum representing the excessive contributions should be paid by the former spouse's pension scheme to the trustee in bankruptcy.

Hon. Members may have noticed that the amendment extends only to England and Wales and that there is no equivalent for Scotland. The policy is that the provision should apply equally to Scotland, and we shall table an amendment to deal with that at a later date. The amendments I mentioned at the beginning of my remarks are minor changes, consequential on those I have described.

Sir Robert Smith (West Aberdeenshire and Kincardine)

Will the Minister clarify why the Government were unable to introduce the legislation for Scotland so that the House of Commons could have debated it?

Mr. Timms

It was simply a question of preparing the drafting and getting the work done in time, but we will shortly introduce the appropriate measures. I have no doubt that they will receive thorough scrutiny.

Mr. Clifford Forsythe (South Antrim)

I did not hear the Minister mention Northern Ireland. Will he tell the House the position in that regard?

Mr. Timms

I think that the provisions I have described refer to Northern Ireland as well, but I shall check and come back to the hon. Gentleman if I am not correct. He is absolutely right to raise that point with me.

The purpose of amendments Nos. 66, 73, 76 and 77 is to ensure that income payment orders can still be made, despite the provisions in clauses 11 and 12. I apologise for this being a little confusing, but I am referring to clauses 11 and 12, which are already part of the Bill. My earlier remarks were about new clauses 11 and 12. The numbering is coincidental.

The amendments make it clear that there is a distinction between pension rights and the income deriving from those rights. Although pension rights are to be protected, the income deriving from such rights may be subject to an income payment order, but only for the period of the bankruptcy, which is normally three years.

7.45 pm

The purpose of amendments Nos. 54 to 60 is to specify in more detail how unapproved pension rights would be protected from seizure by the trustee in bankruptcy. In other words, the bankrupt will need to make the application, and it will be for the courts to decide whether rights in an unapproved pension arrangement should be treated as if they were rights in an approved arrangement, and so protected. The amendments include provision for the trustee in bankruptcy and the bankrupt to reach an out-of-court agreement that unapproved rights should fall outside the bankrupt's estate—a practical measure, designed to reduce court costs.

Amendments Nos. 53, 61 and 62 deal with another aspect of pensions and bankruptcy—the position of pensions which have been shared following divorce. These technical amendments are necessary to ensure that the provisions we are making for pension sharing on divorce work in harmony with those for pensions on bankruptcy.

Miss Anne McIntosh (Vale of York)

Can the Minister explain at what stage of divorce proceedings a party should put in a bid for pension sharing under the new provisions?

Mr. Timms

These provisions concern what happens if bankruptcy occurs after a pension share; they do not concern the procedure for pension sharing itself. A number of new clauses and amendments, which we shall come to later, deal with the Bill's pension-sharing provisions. These matters concern bankruptcy subsequent to a pension share being arranged, when the question whether excessive contributions have been made—and what can be done if they have—arises.

The amendments make it clear that, in the period between the making of a pension-sharing order or agreement and the discharge of the resulting liability by the trustees of the pension scheme, the pension credits awarded to a former spouse are to be treated as if they were rights held by a former spouse.

Where the trustees of a pension scheme have discharged a pension-sharing order, the pension credit will have become pension rights belonging to the former spouse. The amendments will ensure that, for the purposes of the bankruptcy provisions, a pension credit which the trustees have not yet discharged will be treated in the same way. The bankruptcy provisions refer to the protection of pension rights, and these amendments are necessary to make it clear that a pension credit, once awarded, is a right.

Finally on this large group of amendments, in Committee we agreed to look into a point that was raised by Conservative Members. My hon. Friend the Under-Secretary agreed to take it away for consideration, in response to the hon. Member for Grantham and Stamford (Mr. Davies), and amendment No. 29 arises out of that.

As currently drafted, clause 11(9) safeguards the trustees when they have taken decisions before the date of the Inland Revenue's decision on tax approval, but will not know what decision the Inland Revenue has made until they receive notification of it. As such, it is quite possible that the trustees may have made a decision about the bankrupt's pension in the interim. For example, they may have bought him an annuity. It was never our intention that trustees could be held liable for decisions made in good faith during that interim period. The amendment, therefore, will extend the protection afforded to trustees until the date on which they receive the notification from the Inland Revenue.

I return to the question that was asked about Northern Ireland, and I can give the hon. Member for South Antrim (Mr. Forsythe) an answer. Although there is separate legislation for Northern Ireland, it normally follows the legislation applying to Great Britain, but it will be for the Northern Ireland Assembly to decide what to do on this particular matter.

The protection and enhancement of pension savings is a key part of our policy. In cases of bankruptcy, though, we must also have regard to the rights of creditors. It would be wrong if people who become bankrupt could use pensions deliberately to put money beyond the reach of creditors. There must be some form of protection against that, which is what these measures seek to achieve. Necessarily, too, there needs to be some linkage with the new measures on pension sharing in the Bill.

I believe that the arrangements we are proposing are fair, building as they do on existing arrangements, and I commend them to the House.

Mr. Quentin Davies (Grantham and Stamford)

It would be churlish not to acknowledge that the Government have adopted an amendment that I put forward in Committee. They did not tell me that they would do so, but I am glad that they have. It is represented in amendment No. 29. We must be grateful for that—it is a rare event when the Government accept that anybody else may have a useful contribution to make to a piece of legislation. It is only fair to give them credit where it is due, however rare such occasions are.

However, if the Minister thought that that concession would spike my guns and that I would be terribly nice to him for the rest of the proceedings, I must disappoint him. Although the bulk of the amendments are of a routine, technical nature, three substantive issues arise out of the long list of new clauses and amendments. They arise in relation to amendment No. 68 and new clauses 11 and 12, and they reflect a sorry state of affairs.

All this is a pretty bad business. The Minister did not tell us that amendment No. 68 drives a coach and horses through a principle of which I thought the Government were proud. We might discuss that principle later this evening when we deal with pension sharing. It is that, once a pension share has been effected, it becomes the unconditional property of the beneficiary of that share—of the recipient of the pension credit, to use the terms in the Bill. Clearly, that provision has now been modified substantially by the amendment on insolvency. If it can be altered in this context, perhaps it can be altered in others, too, and it will be possible for courts subsequently to review pension sharing and make retrospective changes. That fundamentally alters the whole concept that has been sold to the House.

I find it thoroughly unsatisfactory that the Minister should bring forward this provision in relation to England, but not to Scotland. He simply says that the provision in relation to Scotland can be dealt with in another place. We know how these things work out. In practice, when the Bill comes back to this place the provision in relation to Scotland will not have been given proper scrutiny. It will not have gone through a Committee stage in this place. After all, the House of Commons is supposed to be the primary legislature in this country. The provision will be debated in detail only, if at all, in the other place—a Chamber which the Government say is thoroughly unsatisfactory and undemocratic. It is contemptuous to treat Scotland in that way. The people of Scotland are entitled to feel more than a little aggrieved at the frivolity with which they have been treated.

That stricture applies to the whole treatment of pension sharing and insolvency in relation to pensions, as they are dealt with in the Bill. It is absurd that the Government should sell the Scottish people the idea that they now have, for the first time since 1707, a legislature of their own. The Scots have always had a fine legal system. It is one of the oldest systems of Roman law in constant, steady existence, yet the Scottish Parliament will not be allowed to discuss those matters. Scots law is different from ours. Scotland has its own company and family law, yet it will be unable to take decisions on pension sharing and insolvency as they apply to pensions because, those matters will be dealt with in Westminster in the way that we have just discovered—they will not be brought before this House at the same time as the corresponding English legislation.

The reality that we now see emerging explodes the fact that, for their own slightly squalid reasons, the Labour party has decided to sell a pup to the Scottish people. Now that it is confident of having become the largest party in the Scottish Parliament, although it did not achieve the absolute majority that it wanted, we are seeing how genuine is the Government's commitment to the idea of Scottish legislative devolution, and how thin, superficial and bogus are the concerns expressed by the Government for the Scottish people' s right to have a greater and more direct say in their own legislation.

That brings me to the two new clauses, which are the substantive elements in this string of new clauses and amendments—new clauses 11 and 12. New clause 12 is the Scottish counterpart to new clause 11, and what I just said in relation to the Scottish Parliament's rights in this area applies very much to that. I shall say no more about that, but will focus on new clause 11, which is the heart of the matter. What is so unsatisfactory about this evening's proceedings is that there is a double insult to Parliament in how the Government have dealt with this issue.

As the Liberals pointed out, the new clause has been introduced with no explanatory notes. It is a significant new addition to the Bill and it has been introduced at the last minute with no explanations and minimum opportunity for anybody in the House to understand what the Government's contentions are, to consult outside bodies, to take legal advice, and to do the job that we are all sent here to do, which is to ensure that legislation is scrutinised properly. The Government obviously do not want us to do that and are trying to undercut Parliament's responsibility and diminish its role. It should be clearly recorded that that is the effect of the procedure that they have adopted this evening.

The second abuse is that the new clause is in no sense a technical strengthening of the Bill. It is in no sense incremental, building on what is already in the Bill. It is not explanatory, making it clear to citizens what the changes in the law are about. All such changes can be made after the Committee stage. This new clause is a

thoroughly new approach, negating the substance of clauses 11 and 12 as they stand in the existing Bill, which passed Second Reading and its Committee stage. The Government had neither the courtesy nor the straightforwardness to admit that. They are trying to smuggle through a substantial and substantive change in the Bill by introducing it the very last moment, with a minimum of fanfare, in the hope that the Opposition would not notice. They badly miscalculated there.

Mr. Webb

As I have already said, I regard myself as ignorant in these matters. I have been trying to weigh how to advise my colleagues to vote. My concern about the hon. Gentleman's opposition to the new clause is whether he has an alternative strategy for preventing people from putting money into pension funds to avoid their creditors. Is there another way of doing this?

Mr. Davies

The hon. Gentleman asks a reasonable question. Yes, we do have an alternative strategy. It is the one in the Bill, which has already been read and which we went through in Committee and with which we agreed. That is what happens if we do a deal with the Government. We debate a legislative proposal made by the Government in good faith and agree that it is a sensible proposal to recommend to Parliament. Then what happens? We find a few weeks later that a surreptitious attempt has been made at the last minute, in the hope that no one will notice, fundamentally to change the essence of the agreed Bill. I wonder what is the point of having a Committee stage at all. Bills are thoroughly debated, we come out with an agreed text and then, after the Committee stage, the Government make a fundamental change.

I shall explain to those who have had no chance to mug up on these matters exactly where the differences lie. Clauses 11 and 12 provide for a separate treatment of approved and unapproved pension schemes. That distinction is absolutely key, for a reason that I shall explain later. The former have been approved by the Inland Revenue in accordance with section 14 of the taxes legislation, which means that the amounts to be put into those pension schemes, whether they are occupational, personal, money purchase or final salary schemes, are limited by Revenue rules. However, any amount of money can be put into unapproved schemes, because the Revenue has not approved them so there are no constraints. There is much greater scope for putting in large amounts of money, so the issue of excess contributions may arise.

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The Bill as drafted, as debated in Committee, and as agreed between the Government and the Opposition, made a clear distinction, for the purposes of insolvency, between approved and unapproved pension schemes. The new clause abolishes that distinction and provides that both approved and unapproved schemes should be subject to the same regime. That is a fundamental difference.

Secondly, clause 11 of the Bill as originally drafted makes it clear that there is absolute protection for approved schemes in the event of bankruptcy, as there always has been for occupational schemes that are set up under trusts. In trust law, assets held in the trust to the benefit of the pensioner are not deemed to be the assets of the individual, so they have always been protected. That is an old canon of English law, which was continued for approved schemes in the Bill as it was passed in Committee. That is no longer the case, because approved schemes are now to be open to clawback from trustees in bankruptcy, and I presume that that includes occupational pension schemes which previously always had absolute protection.

In the new clause, the Government are surreptitiously, without having the straightforwardness to tell the House what they are doing, not only failing to give greater protection to pension schemes in the event of bankruptcy, which was their announced intention when they introduced the Bill, but are withdrawing an existing protection. They cannot do much more of a U-turn than that, and doing it surreptitiously does not make it more attractive.

Thirdly, under clause 12 as originally drafted and agreed in Committee, there was an assumption that there would be protection for unapproved schemes. The formula was that if there were any doubt, the court would take a view on what would be reasonably required to meet the needs of the pensioner and his family—I am quoting the Bill almost verbatim—and would balance that against what sums in the unapproved scheme would be available for seizure by the trustee in bankruptcy. There was a presumption that there was at least a hard core of protection for an unapproved scheme, but that protection has also gone.

The House deserves an explanation of this U-turn. It is unsatisfactory to go through the legislative process and to find that the Government are doing a somersault and changing substantially or reversing the whole thrust of the Bill—which has been debated in good faith and has gone through Committee stage—without telling us why they have changed their mind. The Minister, far from being straightforward and telling us why they have changed their mind, has pretended that the Government's actions have been on a continuum and there has not been a clear break with the Bill as originally drafted.

The Minister will have to concede that there has been a change, so perhaps he will tell us what pressure the Government were under to change their mind. What high-powered lobbying has taken place behind the scenes? Why have they changed their mind, or do they legislate with such frivolity that they do not know what is in their mind from one moment to the next? In March, by the simple turn of the kaleidoscope, they are likely to give us one answer to our question, and then in May, they will give us another. No doubt, in June or July, when the Bill goes to the other place, they will have a third answer. That is a hopeless way to legislate, and the Government's behaviour is a disgrace to the House of Commons.

The Government's behaviour places the Opposition in a quandary. What do we do about this? We thought that we had an agreement on these two clauses, but the Government, without consulting us and without having the honesty to tell us straightforwardly what they are doing, have run away from that agreement and have done something completely different. That is not the way in which the Conservative party behaves. We think through proposals carefully, and as the Opposition we make an effort to take our legislative tasks seriously. We try to ensure that we consider legislation with basic thoroughness, and that our statements have a modicum of consistency from one stage to the next. We would ill serve Parliament if we behaved in accordance with any other principles. I am sad that the Government do not share our principles. Our position is exactly as I set out in Committee a few weeks ago: we must address this anomaly.

At present, before any of these provisions have been enacted, occupational pension schemes are protected from bankruptcy because they are set up under trust law. Following the Landau case, there was considerable doubt whether other forms of pension arrangement—approved or unapproved—were so protected. We consider it a thoroughly unsatisfactory state of affairs for there to be legal discrimination between a particular category of pension—occupational pension schemes—and other types of pension scheme, including personal pensions, the Government's proposed stakeholder pensions, their new proposals for leases, or any other sensible scheme that may come up with. If they use their majority to introduce less than sensible schemes, no doubt such schemes would also be included.

We should not discriminate between different forms of pension scheme in the matter of their protection from bankruptcy. That anomaly needed to be removed, and we thought that we had agreed in Committee a method of removing it: that is, the original provision in the Bill. The Government are now running away from that without telling the country or the House. That is the salient point, and if I repeat it often enough, perhaps I shall shame the Minister into explaining why the Government have changed their mind, because they owe the House an explanation.

There is a logic for some degree of protection for pensions in the event of insolvency. It is in the interests of taxpayers, because if someone's total assets are taken away, including those on which his livelihood in retirement may depend, the taxpayer may become the bearer of the residual liability to keep him. That is not a desirable state of affairs. If pension contributions have been made in good faith, within the Revenue rules, out of past earnings that are not the cause of the bankruptcy, it is reasonable to protect them.

Our position is exactly the same as the one we took in Committee, and it will be exactly the same next week, next month and next year. We do not believe in somersaults: that is no way in which to legislate. It is particularly worrying when it is a reflection of such an arrogant Government who think that they can get away with anything and do not need to think through their legislative proposals properly.

The Government should go back to the original clauses 11 and 12. New clause 11 is entirely superfluous and extremely dangerous. It removes the important distinction between approved and unapproved schemes. As a result, it makes a nonsense of the new phrase that enters our legal vocabulary for the first time: the concept of "excessive contributions". That is absurd because, by definition, if a pension scheme is approved by the Revenue, contributions cannot be excessive. That is what approval means.

Mr. Bayley

indicated assent.

Mr. Davies

The Minister is nodding. If contributions to an approved scheme cannot, by definition, be excessive, they cannot be subject to clawback on the ground that they have been excessive. I therefore feel that clause 11 should remain, as should the distinction between approved and unapproved schemes.

If the Minister still wants to introduce the idea that there can be excessive contributions in the case of an approved scheme, as suggested in new clause 11, he must tell us why the Inland Revenue's rules allow excessive contributions to be made in the first place. As we know, over the years the Inland Revenue has examined with enormous care what constitutes reasonable pension provisions that people might make in relation to their salaries, or that employers might make on their behalf. There is a limit to the amount that an employer can contribute to a pension scheme—15 per cent.—and age-related limits to the amount that an individual can contribute to his personal pension. Indeed, the Government are considering further limits in the context of stakeholder pensions—a flat-rate allowance per annum.

Presumably, the new clauses and amendments were tabled because, by definition, they were reasonable and not excessive. When changes have needed to be made, they have been made. The last Conservative Government, for example, decided that it was a good idea to cap the amount that could be paid into a pension scheme at a certain level of earnings, so that the proportion of earnings that could be tax-sheltered, and subject to a tax credit when paid into a pension scheme, would come to an end—at, if I remember rightly, an income of around £90,000 a year at present. That amount is indexed, and will rise year by year.

Then there is the issue of carry-back. It is possible for people to catch up on years when they have made no contribution—no pension provision—and are unable to do so, up to a period of six years. Again, the Revenue has considered what is reasonable in such circumstances. It would certainly not be reasonable to say that there could be no such provision, and that all pension provision must be made in the current period. For one thing, that is not the way in which individuals work—especially the self-employed, whose earnings fluctuate from year to year. Furthermore, it would not be reasonable if the aim of new clause 11 is to protect creditors in bankruptcy.

The Minister may be about to use the carry-back rules as an example of the way in which so-called excess contributions can be accumulated in the case of an approved scheme. If so, I must tell him that that is one of the perversities and foolishnesses into which he has a habit of falling through not thinking the issues through enough. He should consider what would happen if the principle were applied, and trustees were able to claw back amounts that had been paid into a pension scheme relating to previous years under the carry-back provisions. In fact, it would be necessary to ensure that everyone made the maximum pension contributions in the current year—which would mean that they would have to take more cash out of their businesses at the point in the cycle when their earnings were relatively lower than they would be at the present time.

At present, the great advantage of the carry-back proposal is that it enables people to smooth the cashflow that they have in their businesses so that in difficult times, they need make no pension provision, knowing that they can make such provision subsequently. By smoothing their cashflow in that way, they reduce the likelihood of going broke in bad times. If the Minister creates a major deterrent for anyone wishing to use the carry-back

proposal by forcing all business men who want to make pension provisions to do so in the current year, he will create a perverse effect by depriving businesses of cashflow that they would otherwise have in difficult times. He will make them more vulnerable to failure.

A provision that is being sold on the basis that it will protect creditors in bankruptcy will, in fact, cause more bankruptcies. That is pretty stupid. It is not the stupidest thing that the Government are doing, or even the stupidest thing that they are doing in this Bill; but it is pretty far down the scale of stupidity.

8.15 pm

Mr. Webb

Surely we are dealing here with priorities. Who will have the prior claim on the assets of a firm that has gone bankrupt? The hon. Gentleman seems to be saying that firms that are about to go bankrupt should be able to salt away what little money is left in years of retrospective pension contributions, rather than the creditors, who may themselves be small businesses on the brink of bankruptcy, having a prior claim.

Mr. Davies

No; I am saying that if people are given an opportunity to make tax-sheltered contributions to a pension scheme, which we have always had in this country—or, at least, have had for so long that we cannot remember when we did not—they will do so as far as they can. Let us suppose that they are told that they need not do that every year on a regular basis: that they can still make full contributions up to the Revenue limits, and can smooth those contributions over time. If they find that at certain junctures they do not have the necessary cashflow to make the requisite contributions, they can do so later out of greater earnings.

Otherwise, self-employed people might be liable for a fixed charge on their cashflow. They would say to themselves every year, "If I want to receive the benefit, I must take the money out now and put it in my pension scheme. I cannot leave it in the company; if I do, I shall have lost the chance of tax relief for ever." People would bring forward their pension contributions, and businesses would be deprived of cashflow, at times when it would be more logical to defer such contributions, in the interests of the health of business and thus in the interests of creditors.

I do not know whether that will be one of the Government's excuses. I have racked my brains wondering how such a stupid proposal could be presented, and racked my brains again wondering why the Government are doing so in a way that I have already described as insulting to the House of Commons. It breaches what I would like to think of as elementary good faith between Government and Opposition in Committee. I like to think that, in Committee, the Government do not have in their back pocket, and will not subsequently produce, a proposal that negates everything implied in the clauses that are being dealt with.

Surely, if we are to create a sensible balance, we must first ensure that no distinctions are made between different sorts of pension schemes in relation to tax and insolvency rules. The same rules should operate for everyone. As we agreed in Committee, the original Bill removed the anomaly created by the Landau case. Secondly, we must make a clear distinction between approved and unapproved schemes. Where the Revenue has determined that a level of pension contribution is reasonable, by definition it must be reasonable; otherwise, Parliament made a mistake in authorising the rules in the first place.

Thirdly—this is in clause 12 of the Bill, as passed in Committee—we should exercise more scepticism in relation to unapproved schemes, which may well provide opportunities for excessive amounts to be salted away. In those instances, there should be a provision for clawback, where necessary. Fourthly, we should ensure that there is a clear formula for determining the extent to which the clawback can take place, or the criteria by which the excess can be defined. Clause 12 says, basically, that a man may keep what is necessary for his own upkeep and that of his family; beyond that, the court may look to any excess contributions. That criterion, however, is missing from the new clause, which is open-ended.

One of the many unfortunate consequences of accepting the new clause—which I hope the House will not do tonight—would be the creation of considerable uncertainty in an area in which I thought we were moving towards greater clarity.

Mr. Webb

As I have said, I did not have the privilege of serving on the Committee that considered the Bill, so I apologise in advance for not having followed the detailed discussion on clauses 11 and 12 in the original Bill. However, my understanding is that those clauses provided for pension funds to be more secure in the event of bankruptcy, which seems, obviously, a step in the right direction. What appears to be represented in new clauses 11 and 12 is a recognition that that provision could be abused by excessive sheltering within pension funds immediately in anticipation of bankruptcy.

It seems that a balance has to be struck between providing the protection that we would want for someone's pension assets when that person becomes bankrupt, and allowing that to become abused, so a lot hinges on the definition of "excess contributions". I may not have been paying full attention, but the Minister said that he was going to indicate what the criteria for excess contributions to be used by the courts were going to be. I did not emerge with a clear understanding of what those were.

The hon. Member for Grantham and Stamford (Mr. Davies) queried whether contributions up to Inland Revenue limits, for example, could ever be regarded as excessive, either for a given year, or retrospectively. I should be grateful if the Minister would deal with that specific point. Indeed, the hon. Member for Surrey Heath (Mr. Hawkins) asked precisely that question and, I believe, wants to develop that point.

I have some sympathy with the hon. Member for Grantham and Stamford with regard to the process by which we have arrived at new clauses 11 and 12. It is unacceptable that the Minister has been forced into a position of saying. "We did not have time to do the Scottish bits." That is not an acceptable way in which to put legislation before the Houses of Parliament. To be frank, it is worrying that we find ourselves in this situation in the first place.

The new clauses that we are about to discuss relate to another last-minute Government attempt to close a tax loophole. My concern with all measures introduced in haste is that they are not good legislation. Fast legislation is seldom good legislation, particularly in complex sectors such as pensions, taxation and insolvency.

Therefore, I seek some reassurance from the Minister. 1 should be interested to know the parentage of the new clauses. How long have they been thought about? Where did they come from, essentially? Did the Government publish clause 11 and 12, receive representations from the people whose job it is to get round such clauses that they could get round, and realise that they needed to plug the loophole? How do they manage to find people whose job it is to get round such clauses who are willing to tell them that they have found a loophole, so that the Government can close it?

I am intrigued to know the process by which we arrived at the new clauses. I hope that the Minister will be up-front with us, as he was in admitting that the Government had not got round to writing the Scottish bits. I hope that he will tell us how we came to have what is a sticking-plaster clause, which was put on so late in the process.

On balance, we are reassured by the Minister's comment that, each year, only a handful of cases would fall foul of the new clause. Again, it will be interesting to know the basis of his belief that it will be a minority sport. He asserted that that was his estimate, but did not provide us with any basis for believing that.

Mr. Quentin Davies

On experience, I think that the hon. Gentleman is wrong and is rash to rely on the assurances that he has just quoted. On the contrary, the open-endedness of new clause 11 could result in an enormous amount of litigation and avoidable gratuitous legal costs.

Mr. Webb

I am grateful to the hon. Gentleman. I seek robust assurances from the Minister, which he will be held to, no doubt, by the electorate, among others, that vast swathes of legislation and litigation will not arise from the new clause.

We understand the principle that the Minister clearly and simply expressed, but we have reservations about the definition of "excess", about whether contributions up to the limit would ever be regarded as excessive, and about whether the measure blows a hole in the protection that is being put around pension funds. In particular, Liberal Democrats are keen to know where the new clause comes from, and why the Government had not thought of it in advance; I presume that the matter was not raised in Committee.

Therefore, I hope that the Minister can assure the House that the measure is carefully thought through, not rushed, and does not blow a hole in the principle that my hon. Friends have already accepted.

Mr. Forsythe

I seek a little clarification from the Minister following what he said about including Northern Ireland in the Bill.

The Bill refers specifically to Northern Ireland in a number of places. In clause 78(4), paragraphs (a) to (j) refer to Northern Ireland. In clause 78(5), paragraphs (a) to (d) do so. At the end of the Bill, where we have items that are to be deleted, a part refers to it.

I do not wish to go out of order but, speaking on the general principle of the question and about whether the measure applied to Northern Ireland, the Minister gave a general answer, which I understood that he would take advice about, that the Assembly would deal with the matter.

I know that Scotland has not been included in the measure, and that has a devolved Administration in place. The same thing applies to Wales. Leaving aside the merits, or otherwise, of the discussion, as Northern Ireland does not yet have an Assembly in place to be able to bring laws in, I ask the Minister to think again. Perhaps he would take advice again about how the measure would apply to Northern Ireland, and why only some parts would apply.

Mr. Hawkins

I am glad to have the opportunity to raise some particular concerns about the new clauses and amendments. The hon. Member for Northavon (Mr. Webb) referred to my intervention on the Minister. As well as adopting the sensible concerns that were expressed by my hon. Friend the Member for Grantham and Stamford (Mr. Davies), the Front-Bench spokesman, I say that my concern about the new clauses is that they get away from certainty, particularly where a marriage breaks down. I hope that the Minister will take seriously the concern of those who have conducted ancillary relief cases in the courts, that anything that removes the opportunity for the court to bring certainty at the conclusion of the litigation arising from a marriage is a dangerous matter.

As well as having conducted family law cases in the courts for a number of years, I am deputy chairman of the all-party group on insurance and financial services. I am concerned at anything that waters down the distinction between approved and unapproved pension schemes, which is what my hon. Friend the Member for Grantham and Stamford suggested was happening. He posed the question how that came about: how it was that the Government should introduce and apparently agree in Committee the original clauses 11 and 12, and suddenly try to row back from them. The hon. Member for Northavon said that he wanted to know about the provenance of the new clause.

The Minister will tell us in his reply whether he knows the answer to that question. However, my guess is that a bureaucrat somewhere in the Inland Revenue, at a very late stage, woke up to the implications of the original, and agreed, clauses 11 and 12, and suddenly said, "This is an opportunity for us to water down the distinction between approved and unapproved pension schemes." I guess, and fear, that that is the provenance of the sudden and undiscussed new clauses, which are undermining the original agreement in Committee.

I think that it would be very unwise for the Government to pursue passage of new clauses 11 and 12 and their consequential amendments. If they do pursue them, they will be creating a time-bomb for courts dealing with ancillary relief cases when they have to deal with the sometimes very complex financial arrangements arising from a divorce.

The Minister tried very quickly to gloss over the fact that, in certain cases, the trustee in bankruptcy will be able to go back to the spouse who did not originally have the pension scheme—in most cases, the wife—and perhaps to claw back, even from the wife, pension contributions for the trustee in bankruptcy if it is deemed by an ex post facto judgment that those pre-divorce pension scheme contributions were in some way excessive.

8.30 pm

Unless the Minister is prepared to give the courts some guidance on how excessive contributions are to be defined, how are courts to decide the matter? The decision will not be at all easy for the courts, who are always anxious to protect the rights of both spouses after a divorce. Perhaps not many other hon. Members have dealt with very complex ancillary relief cases, as I did for a number of years. I am well aware that anything to do with the unscrambling of pension relief in ancillary relief cases arising from a divorce is already an exceptionally complex task for courts to perform.

The one thing that courts always attempt to do is to provide certainty. As Hon. Members on both sides of the House will know, and as we have always said, when there is a divorce, the objective should be to achieve a clean break. The Government are now opening the scope for the trustee in bankruptcy, after all the pension contributions have been assessed, to come back and say, "I want to claw back some contributions that I think are excessive." The trustee may even be able, on divorce, to claw back some of the pension contributions made—in the typical case—by the husband from the wife's share of the estate. That may serve the objectives of some minor pettifogging official in the Revenue, but it is not the type of thing that courts want to be wrestling with. The Government, exceptionally unwisely, are opening a whole new can of worms.

As my hon. Friend the Member for Grantham and Stamford said, the Government should have left intact the clear, understood and long-established distinction between approved and unapproved schemes, not try to water down the distinction or row back from what was agreed in Committee, simply to satisfy the desire of some official in the Revenue.

Mr. Timms

I am pleased to assure the House that there has been no U-turn or somersault. Consequently, some of the strictures that we have heard have been inappropriate.

I should like first to answer the question of the hon. Member for Northavon (Mr. Webb) on how the new clauses arose. As we have heard, the Pensions Act 1995 contained a statutory protection for occupational pensions in the event of bankruptcy. However, as a safeguard against abuse, section 95 of that Act provided that a court could order that contributions should be recovered from the pension fund if it could be shown that they were excessive. Therefore, that approach was a feature of the 1995 Act. However, the section was never commenced because it was technically defective.

Subsequently, along came the Landau judgment—which we have heard about—highlighting the disparity between occupational and personal pensions. In its judgment, the High Court found that, in bankruptcy, pension rights in a retirement annuity contract vested in the trustee, thereby calling into question the security of rights in personal pensions. It is, indeed, the case that very many personal pensions are being seized in bankruptcy—hence the need for the original clauses 11 and 12, which were welcomed by Opposition Members.

Therefore, since 1995, the intention has been that there should be such protection from abuse.

The hon. Member for Grantham and Stamford (Mr. Davies) sometimes demonstrated a rather loose grasp on some of the Green Paper's detail. Nevertheless, I do not think that it would be unkind to draw his attention to paragraph 49, on page 74 of the Green Paper, which states:

At the same time we need to prevent people from using a pension scheme to put money deliberately beyond the reach of their creditors. There will therefore be a mechanism to allow a court to order that excessive contributions paid into the scheme can be recovered from the pension fund". The Government have, therefore, always intended that there should be such a provision. The Green Paper made it clear that we would attempt to make such provision, and our intention was restated in the consultation document "Strengthening the Pensions Framework", which was published the day after publication of the Green Paper.

Mr. Quentin Davies

Does the hon. Gentleman remember paragraph 48, on page 74—which he has just quoted—of the Green Paper, which states: We therefore propose that all tax-approved private pension rights"— which, of course, means approved schemes— should be exempt from the bankruptcy process, thus falling outside the jurisdiction of the trustee in bankruptcy"? That intention was duly enshrined in clause 11—which is now being reversed by new clause 11. The Minister can hardly deny that that is a somersault or a U-turn; he may choose whichever term he likes.

Mr. Timms

It is neither. The following paragraph says that there needs to be a safeguard, as there was in the 1995 Act.

The consultation period began on 16 December and concluded on 12 February. We have taken account of the results of that consultation in the new clauses and amendments. I assure the hon. Member for Northavon that we have pursued the issue carefully. Our intention has been clear since the publication of the Green Paper. We have consulted carefully and taken account of what was said to us. The new clauses and amendments are the result of that careful process.

Mr. Davies

The hon. Gentleman talks about representations. Were the decisive representations—no doubt powerful, clever, effective lobbying—from lawyers and accountants specialising in insolvency? Insolvency practitioners are the only category of humanity to be greatly advantaged by the Government's U-turn this evening. Without the new clauses and amendments, the Bill would give complete security to members of approved schemes. There would be no ambiguity about their protection. Now all pensions—approved and unapproved—are up for grabs. The Government seem to have fallen for the representations—no doubt the biggest ones—from those with a direct commercial interest in such confusion in the legal system.

Mr. Timms

The hon. Gentleman still has not grasped the point that I am urging on him. The 1995 Act contained a provision to safeguard against the same problem. We all agree that pensions should be protected from bankruptcy, but there has always been a requirement to guard against the possibility of people abusing that protection by making unduly large contributions to keep the money out of reach of their creditors. That would be a clear abuse. The previous Government introduced legislation to deal with that, although sadly it was technically defective. We have followed along the same lines, but we are doing it properly.

Mr. Rendel

I am getting a bit confused about the timing. We have heard time and again of the Government producing legislation before the end of the consultation period. In this case, the Government announced what they were going to do in a Green Paper and went through a consultation process that finished as early as February, yet in May we still do not have the legislation for Scotland before us even on Report. What on earth has gone wrong?

Mr. Timms

This is a technically complex matter and it has taken us some time to finalise the details. However, I assure the hon. Gentleman that our proposals fully reflect our very careful consultation.

The hon. Member for Northavon asked for some assurances about the number of cases likely to arise. The experience of the Insolvency Service in dealing with bankruptcies shows that, in the stages before bankruptcy, most people do not have the money available to put into pension funds. Cases in which bankrupts seek to defeat their creditors in the period leading up to bankruptcy are the exception. There is clear evidence that the measures will not be needed in a large number of cases, but there will be some, so we need safeguards. The purpose of the measures is to deter.

The hon. Members for Northavon and for Grantham and Stamford asked whether contributions could be regarded by a court as excessive if they were within the Inland Revenue rules. The answer is yes, that is possible. Clearly, someone making pension contributions must have regard to other debts and duties to creditors. It is possible—although not very likely—that a court could take the view that contributions were excessive if bankruptcy was approaching. I hope that that has clarified the point.

The hon. Member for Grantham and Stamford asked for further clarification of the circumstances in which a court would regard contributions as excessive. As I have said, a court would need to take a view, first, on whether any contributions were made for the purpose of putting assets beyond the reach of creditors, and, secondly, on whether the total amount of contributions was excessive in view of the individual's circumstances when they were made. Again, the court would need to take a view on that. We are happy to leave the matter to the courts.

The hon. Member for South Antrim (Mr. Forsythe) asked about the scope of the legislation in Northern Ireland. As he said, there are a number of references to Northern Ireland in the Bill. The majority of measures apply throughout Great Britain because they mainly deal with social security and pensions matters. Northern Ireland has a separate body of social security legislation and, in future, will be able to legislate separately on most social security and pensions matters.

It will be for the new Assembly to decide whether to replicate the measures in the Bill to achieve parity in Northern Ireland. Our expectation is that the measures will be mirrored in Northern Ireland, but that will be a matter for the Assembly to decide. Some matters covered in the Bill are not dealt with separately in Northern Ireland because they do not come under the heading of social security legislation, and the hon. Member for South Antrim referred to some. However, it will be within the ability of the Assembly to amend those that do.

My right hon. Friend the Secretary of State for Northern Ireland was here when the hon. Gentleman raised that matter. I was pleased that she came in at that moment, and she will have heard his points.

The amendments make the distinction between approved and unapproved schemes, and we are not blurring those distinctions. Given that we all agree that pensions savings should be protected in the event of bankruptcy—no one, either today or in Committee, has challenged that view—the question is whether there should be protection, and safeguards against the abuse of that protection. If people make large contributions into their pension scheme specifically to avoid and defeat their creditors when they know that bankruptcy is coming, should the legislation provide safeguards against such abuse? The previous Government took the view in the Pensions Act 1995 that it should—we take that view also. I would have thought that there would be consensus on that matter. On that basis, I commend the new clauses to the House.

Mr. Duncan Smith

I do not intend to detain the House, and I shall make a couple of brief points. I have never heard such a lot of nonsense from a Minister since coming to this House. We have a ridiculous position, with the Government including this measure late in the Bill. It was not proposed in Committee, but suddenly they have said that they must put it in as a matter of urgency. We have heard that the consultation was over by February, and now the Minister has admitted to the hon. Member for Newbury (Mr. Rendel) that excessive contributions might have been made under the Inland Revenue rules.

There is confusion, and the Minister has hardly resolved anything. He admits that the Government have not had time to produce provisions for Scotland. I do not know what they have been doing all this time. It is an absolute outrage that the Bill is in a mess on Report and the Government cannot answer the questions, when the measures could have been included and properly discussed in Committee. That failure by the Government is an outrage.

8.45 pm

Question put, That the clause be read a Second time:—

The House divided: Ayes 415, Noes 138.

Division No. 179]	[8.45 pm
AYES
Abbott, Ms Diane	Battle, John
Adams, Mrs Irene (Paisley N)	Bayley, Hugh
Ainger, Nick	Beard, Nigel
Ainsworth, Robert (Covtry NE)	Beckett, Rt Hon Mrs Margaret
Alexander, Douglas	Begg, Miss Anne
Allan, Richard	Beith, Rt Hon A J
Allen, Graham	Bell, Martin (Tatton)
Anderson, Donald (Swansea E)	Bell, Stuart (Middlesbrough)
Anderson, Janet (Rossendale)	Benn, Rt Hon Tony
Armstrong, Rt Hon Ms Hilary	Bennett, Andrew F
Ashdown, Rt Hon Paddy	Benton, Joe
Ashton, Joe	Bermingham, Gerald
Atherton, Ms Candy	Berry, Roger
Atkins, Charlotte	Best, Harold
Austin, John	Betts, Clive
Ballard, Jackie	Blears, Ms Hazel
Banks, Tony	Blizzard, Bob
Barnes, Harry	Blunkett, Rt Hon David
Barron, Kevin	Boateng, Paul

Borrow, David	Dobbin, Jim
Bradley, Keith (Withington)	Donohoe, Brian H
Bradley, Peter (The Wrekin)	Doran, Frank
Bradshaw, Ben	Dowd, Jim
Brake, Tom	Drew, David
Breed, Colin	Drown, Ms Julia
Brinton, Mrs Helen	Dunwoody, Mrs Gwyneth
Brown, Rt Hon Gordon	Eagle, Angela (Wallasey)
(Dunfermline E)	Eagle, Maria (L'pool Garston)
Brown, Russell (Dumfries)	Edwards, Huw
Browne, Desmond	Efford, Clive
Buck, Ms Karen	Ellman, Mrs Louise
Burden, Richard	Ennis, Jeff
Burgon, Colin	Ewing, Mrs Margaret
Burnett, John	Field, Rt Hon Frank
Burstow, Paul	Fisher, Mark
Butler, Mrs Christine	Fitzpatrick, Jim
Byers, Rt Hon Stephen	Fitzsimons, Lorna
Cable, Dr Vincent	Flynn, Paul
Campbell, Alan (Tynemouth)	Follett, Barbara
Campbell, Mrs Anne (C'bridge)	Foster, Don (Bath)
Campbell, Rt Hon Menzies	Foster, Michael Jabez (Hastings)
(NE Fife)	Foster, Michael J (Worcester)
Campbell, Ronnie (Blyth V)	Foulkes, George
Campbell-Savours, Dale	Fyfe, Maria
Canavan, Dennis	Gapes, Mike
Cann, Jamie	Gardiner, Barry
Caplin, Ivor	George, Andrew (St Ives)
Casale, Roger	George, Bruce (Walsall S)
Caton, Martin	Gerrard, Neil
Cawsey, Ian	Gibson, Dr Ian
Chapman, Ben (Wirral S)	Godman, Dr Norman A
Chaytor, David	Godsiff, Roger
Clapham, Michael	Goggins, Paul
Clark, Rt Hon Dr David (S Shields)	Gordon, Mrs Eileen
Clark, Paul (Gillingham)	Gorrie, Donald
Clarke, Charles (Norwich S)	Griffiths, Jane (Reading E)
Clarke, Eric (Midlothian)	Griffiths, Win (Bridgend)
Clarke, Rt Hon Tom (Coatbridge)	Grocott, Bruce
Clarke, Tony (Northampton S)	Grogan, John
Clelland, David	Gunnell, John
Clwyd, Ann	Hain, Peter
Coaker, Vernon	Hall, Mike (Weaver Vale)
Coffey, Ms Ann	Hall, Patrick (Bedford)
Cohen, Harry	Hamilton, Fabian (Leeds NE)
Coleman, Iain	Hancock, Mike
Colman, Tony	Hanson, David
Connarty, Michael	Harman, Rt Hon Ms Harriet
Corbett, Robin	Harvey, Nick
Corbyn, Jeremy	Heal, Mrs Sylvia
Corston, Ms Jean	Healey, John
Cotter, Brian	Heath, David (Somerton & Frome)
Cousins, Jim	Henderson, Doug (Newcastle N)
Cox, Tom	Henderson, Ivan (Harwich)
Cranston, Ross	Hepburn, Stephen
Crausby, David	Heppell, John
Cryer, John (Hornchurch)	Hesford, Stephen
Cummings, John	Hewitt, Ms Patricia
Cunningham, Rt Hon Dr Jack	Hill, Keith
(Copeland)	Hinchliffe, David
Cunningham, Jim (Cov'try S)	Hodge, Ms Margaret
Cunningham, Ms Roseanna	Hoey, Kate
(Perth)	Home Robertson, John
Curtis-Thomas, Mrs Claire	Hood, Jimmy
Dafis, Cynog	Hoon, Geoffrey
Dalyell, Tam	Hope, Phil
Darling, Rt Hon Alistair	Hopkins, Kelvin
Darvill, Keith	Howarth, Alan (Newport E)
Davey, Valerie (Bristol W)	Howarth, George (Knowsley N)
Davidson, Ian	Howells, Dr Kim
Davies, Rt Hon Denzil (Llanelli)	Hoyle, Lindsay
Davies, Geraint (Croydon C)	Hughes, Ms Beverley (Stretford)
Dawson, Hilton	Hughes, Kevin (Doncaster N)
Dean, Mrs Janet	Humble, Mrs Joan
Denham, John	Hurst, Alan
Dismore, Andrew	Hutton, John

Iddon, Dr Brian	Marshall-Andrews, Robert
Illsley, Eric	Martlew, Eric
Ingram, Rt Hon Adam	Maxton, John
Jackson, Ms Glenda (Hampstead)	Meacher, Rt Hon Michael
Jackson, Helen (Hillsborough)	Meale, Alan
Jenkins, Brian	Merron, Gillian
Johnson, Alan (Hull W & Hessle)	Michael, Rt Hon Alun
Johnson, Miss Melanie	Michie, Bill (Shefld Heeley)
(Welwyn Hatfield)	Michie, Mrs Ray (Argyll & Bute)
Jones, Barry (Alyn & Deeside)	Milburn, Rt Hon Alan
Jones, Mrs Fiona (Newark)	Miller, Andrew
Jones, Helen (Warrington N)	Mitchell, Austin
Jones, leuan Wyn (Ynys Môn)	Moffatt, Laura
Jones, Ms Jenny	Moonie, Dr Lewis
(Wolverh'ton SW)
	Moore, Michael
Jones, Jon Owen (Cardiff C)	Moran, Ms Margaret
Jones, Dr Lynne (Selly Oak)	Morgan, Alasdair (Galloway)
Jones, Marlyn (Clwyd S)
	Morgan, Ms Julie (Cardiff N)
Jones, Nigel (Cheltenham)	Morley, Elliot
Jowell, Rt Hon Ms Tessa	Morris, Ms Estelle (B'ham Yardley)
Kaufman, Rt Hon Gerald	Morris, Rt Hon John (Aberavon)
Keeble, Ms Sally	Mountford, Kali
Keen, Alan (Feltham & Heston)	Mowlam, Rt Hon Marjorie
Keen, Ann (Brentford & Isleworth)	Mudie, George
Keetch, Paul	Mullin, Chris
Kelly, Ms Ruth	Murphy, Denis (Wansbeck)
Kemp, Fraser	Murphy, Jim (Eastwood)
Khabra, Piara S	Naysmith, Dr Doug
Kidney, David	Norris, Dan
Kilfoyle, Peter	Oaten, Mark
King, Andy (Rugby & Kenilworth)	O'Brien, Bill (Normanton)
King, Ms Oona (Bethnal Green)	O'Hara, Eddie
Kingham, Ms Tess	Olner, Bill
Kirkwood, Archy	O'Neill, Martin
Kumar, Dr Ashok	Öpik, Lembit
Ladyman, Dr Stephen	Organ, Mrs Diana
Lawrence, Ms Jackie	Osborne, Ms Sandra
Laxton, Bob	Pearson, Ian
Lepper, David	Pendry, Tom
Leslie, Christopher	Perham, Ms Linda
Levitt, Tom	Pickthall, Colin
Lewis, Ivan (Bury S)	Pike, Peter L
Lewis, Terry (Worsley)	Plaskitt, James
Liddell, Rt Hon Mrs Helen	Pollard, Kerry
Linton, Martin	Pond, Chris
Livsey, Richard	Pope, Greg
Lloyd, Tony (Manchester C)	Pound, Stephen
Llwyd, Elfyn	Powell, Sir Raymond
Lock, David	Prentice, Ms Bridget (Lewisham E)
Love, Andrew	Prentice, Gordon (Pendle)
McAllion, John	Primarolo, Dawn
McAvoy, Thomas	Prosser, Gwyn
McCabe, Steve	Purchase, Ken
McCafferty, Ms Chris	Quinn, Lawrie
McCartney, Rt Hon Ian	Radice, Giles
(Makerfield)	Rammell, Bill
McDonagh, Siobhain	Rapson, Syd
Macdonald, Calum	Raynsford, Nick
McDonnell, John	Reid, Rt Hon Dr John (Hamilton N)
McFall, John	Rendel, David
McGuire, Mrs Anne	Robertson, Rt Hon George
McIsaac, Shona	(Hamilton S)
McKenna, Mrs Rosemary	Robinson, Geoffrey (Cov'try NW)
Mackinlay, Andrew	Roche, Mrs Barbara
Maclennan, Rt Hon Robert	Rooker, Jeff
McNamara, Kevin
McNulty, Tony
MacShane, Denis
Mactaggart, Fiona
McWalter, Tony
Mahon, Mrs Alice
Mallaber, Judy
Mandelson, Rt Hon Peter
Marsden, Gordon (Blackpool S)
Marsden, Paul (Shrewsbury)
Marshall, David (Shettleston)

Rooney, Terry	Taylor, Rt Hon Mrs Ann
Ross, Ernie (Dundee W)	(Dewsbury)
Rowlands, Ted	Taylor, Ms Dari (Stockton S)
Roy, Frank	Taylor, Matthew (Truro)
Ruane, Chris	Temple-Morris, Peter
Ruddock, Joan	Thomas, Gareth (Clwyd W)
Russell, Bob (Colchester)	Thomas, Gareth R (Harrow W)
Russell, Ms Christine (Chester)	Timms, Stephen
Ryan, Ms Joan	Tipping, Paddy
Salter, Martin	Todd, Mark
Sanders, Adrian	Touhig, Don
Sarwar, Mohammad	Trickett, Jon
Savidge, Malcolm	Truswell, Paul
Sawford, Phil	Turner, Dennis (Wolverh'ton SE)
Sedgemore, Brian	Turner, Dr Desmond (Kemptown)
Shaw, Jonathan	Turner, Dr George (NW Norfolk)
Sheldon, Rt Hon Robert	Twigg, Derek (Halton)
Short, Rt Hon Clare	Twigg, Stephen (Enfield)
Simpson, Alan (Nottingham S)	Tyler, Paul
Singh, Marsha	Vaz, Keith
Skinner, Dennis	Vis, Dr Rudi
Smith, Rt Hon Andrew (Oxford E)	Walley, Ms Joan
Smith, Angela (Basildon)	Ward, Ms Claire
Smith, Rt Hon Chris (Islington S)	Wareing, Robert N
Smith, Miss Geraldine	Watts, David
(Morecambe & Lunesdale)	Webb, Steve
Smith, Jacqui (Redditch)	White, Brian
Smith, John (Glamorgan)	Whitehead, Dr Alan
Smith, Llew (Blaenau Gwent)	Wicks, Malcolm
Smith, Sir Robert (W Abdns)	Wigley, Rt Hon Dafydd
Snape, Peter	Williams, Rt Hon Alan
Soley, Clive	(Swansea W)
Southworth, Ms Helen	Williams, Alan W (E Carmarthen)
Spellar, John	Williams, Mrs Betty (Conwy)
Squire, Ms Rachel	Willis, Phil
Starkey, Dr Phyllis	Wills, Michael
Steinberg, Gerry	Wilson, Brian
Stevenson, George	Winnick, David
Stewart, David (Inverness E)	Winterton, Ms Rosie (Doncaster C)
Stinchcombe, Paul	Wise, Audrey
Stoate, Dr Howard	Wood, Mike
Stott, Roger	Woolas, Phil
Strang, Rt Hon Dr Gavin	Worthington, Tony
Straw, Rt Hon Jack	Wright, Anthony D (Gt Yarmouth)
Stringer, Graham	Wright, Dr Tony (Cannock)
Stuart, Ms Gisela	Wyatt, Derek
Stunell, Andrew	Tellers for the Ayes:
Sutcliffe, Gerry	Mr. David Jamieson and
Swinney, John	Jane Kennedy.

NOES
Amess, David	Clark, Rt Hon Alan (Kensington)
Ancram, Rt Hon Michael	Clark, Dr Michael (Rayleigh)
Arbuthnot, Rt Hon James	Clifton-Brown, Geoffrey
Atkinson, Peter (Hexham)	Colvin, Michael
Beggs, Roy	Cormack, Sir Patrick
Bercow, John	Cran, James
Beresford, Sir Paul	Curry, Rt Hon David
Blunt, Crispin	Davies, Quentin (Grantham)
Body, Sir Richard	Davis, Rt Hon David (Haltemprice
Boswell, Tim	& Howden)
Bottomley, Peter (Worthing W)	Day, Stephen
Bottomley, Rt Hon Mrs Virginia	Donaldson, Jeffrey
Brady, Graham	Duncan, Alan
Brazier, Julian	Duncan Smith, lain
Brooke, Rt Hon Peter	Evans, Nigel
Browning, Mrs Angela	Faber, David
Burns, Simon	Fabricant, Michael
Butterfill, John	Fallon, Michael
Cash, William	Forsythe, Clifford
Chapman, Sir Sydney	Forth, Rt Hon Eric
(Chipping Barnet)	Fox, Dr Liam
Chope, Christopher	Fraser, Christopher
Clappison, James	Gale, Roger
	Gibb, Nick

Gill, Christopher	Paice, James
Gillan, Mrs Cheryl	Paterson, Owen
Goodlad, Rt Hon Sir Alastair	Pickles, Eric
Gorman, Mrs Teresa	Prior, David
Gray, James	Randall, John
Green, Damian	Redwood, Rt Hon John
Greenway, John	Robathan, Andrew
Grieve, Dominic	Robertson, Laurence (Tewk'b'ry)
Gummer, Rt Hon John	Roe, Mrs Marion (Broxbourne)
Hague, Rt Hon William	Rowe, Andrew (Faversham)
Hamilton, Rt Hon Sir Archie	Ruffley, David
Hammond, Philip	St Aubyn, Nick
Hawkins, Nick	Sayeed, Jonathan
Hayes, John	Shephard, Rt Hon Mrs Gillian
Heald, Oliver	Simpson, Keith (Mid-Norfolk)
Heathcoat-Amory, Rt Hon David	Smyth, Rev Martin (Belfast S)
Hogg, Rt Hon Douglas	Soames, Nicholas
Horam, John	Spicer, Sir Michael
Howarth, Gerald (Aldershot)	Spring, Richard
Hunter, Andrew	Stanley, Rt Hon Sir John
Jack, Rt Hon Michael	Streeter, Gary
Jenkin, Bernard	Swayne, Desmond
Key, Robert	Syms, Robert
King, Rt Hon Tom (Bridgwater)	Tapsell, Sir Peter
Laing, Mrs Eleanor	Taylor, Ian (Esher & Walton)
Lait, Mrs Jacqui	Taylor, Rt Hon John D (Strangford)
Lansley, Andrew	Taylor, Sir Teddy
Leigh, Edward	Thompson, William
Letwin, Oliver	Townend, John
Lewis, Dr Julian (New Forest E)	Tredinnick, David
Lidington, David	Trend, Michael
Loughton, Tim	Trimble, Rt Hon David
Lloyd, Rt Hon Sir Peter (Fareham)	Tyrie, Andrew
Luff, Peter	Viggers, Peter
Lyell, Rt Hon Sir Nicholas	Walter, Robert
MacGregor, Rt Hon John	Wardle, Charles
McIntosh, Miss Anne	Waterson, Nigel
MacKay, Rt Hon Andrew	Wells, Bowen
McLoughlin, Patrick	Whitney, Sir Raymond
Madel, Sir David	Whittingdale, John
Major, Rt Hon John	Willetts, David
Maples, John	Wilshire, David
Mates, Michael	Woodward, Shaun
Mawhinney, Rt Hon	Sir Brian
May, Mrs Theresa	Yeo, Tim
Moss, Malcolm	Young, Rt Hon Sir George
Nicholls, Patrick	Tellers for the Noes:
Page, Richard	Mr. Tim Collins and
	Mr. John M. Taylor.

Question accordingly agreed to.

Clause read a Second time, and added to the Bill.