§ Mr. Webb
I beg to move amendment No. 219, in page 90, leave out lines 14 to 16 and insert—(b) audited accounts covering the period from the date of the latest statutory annual accounts of the scheme to a date no later than three months prior to the day the application is made.'.
You will have noticed, Madam Deputy Speaker, that relatively few of the amendments tabled on Report—I do not mean the Government amendments—are signed by both Liberal Democrat and Conservative Members. This is one of those rare examples. We were simultaneously inspired by the need to change the audit and accounting arrangements in cases where trustees make an approach to the pension protection fund. We both received the same letter from the Institute of Chartered Accountants in England and Wales. It wrote to the hon. Member for Eastbourne (Mr. Waterson), who did not reply, so it asked me to table the amendments. The Conservatives then got round to it and may have been rather shocked to find their names on our amendment—but we will move on. In Committee, the hon. Member for Eastbourne generally got to speak first and read out the brief before I did; on this occasion—I am enjoying the moment—I can read it to him first.
The substance of the point is that, under clause 134, arrangements need to be made for trustees to approach the PPF to ask it to take over the assets of the scheme. There are two issues. First, the clause refers toan auditor's valuation of the scheme as at a date ("the reconsideration date") within the prescribed period ending with the day on which the application is madeThat is straightforward. The first question asked by the Institute of Chartered Accountants is about the concept of an auditor's valuation. Usually, there is a set of accounts and the role of the auditor is not to value the assets of the scheme, but to audit those accounts. It is the accountant who produces the account and the auditor who then certifies whether it has been done properly. The Institute of Chartered Accountants believes that it is not the job of the auditor to provide the valuation. Should the PPF be supplied with audited accounts, and is the auditor the right person to do the valuation? That is the first question.
That is why our amendment refers to "audited accounts" and not to an "auditor's valuation", as the Bill does.
The second point has to do with timing. The concept of an auditor's valuation is difficult. We are talking about audited accounts, which have to be signed by trustees. However, the Bill provides that trustees 1126 relinquish responsibility when a scheme's assets are transferred to the PPF, in which case there would be no trustees to sign the audited accounts. If the Minister accepts that we need audited accounts and not an auditor's valuation, there needs to be a provision in the Bill to ensure that trustees are in place to sign the accounts. That implies that the date of valuation or of the audit of the accounts must come before the assets are handed over to the PPF, as otherwise there would be no trustees to sign the audited accounts.
The amendment provides that the period should extend from the final annual accounts to three months before the date when the application is made. The reasoning is that it will take three months to produce accounts, have them audited and passed to the PPF. The ICAEW reckons that three months will be just enough time for that. The trustees—who would remain until the assets were handed over—would be able to sign the accounts off, and the PPF board and its staff would be able to look at what happened to the assets in the three months after the audited accounts were signed off.
I freely admit that I am not an authority on the distinction between the roles of auditors and accountants, but not surprisingly, it is important to the ICAEW. The institute considers that the Bill is unclear when it refers to aprescribed period ending with the day on which the application is made.It also believes that the clause confuses the role of the auditor with that of the accountant, as the latter prepares accounts to be audited. It is also concerned that audited accounts could not be signed off by trustees if the assets had already been handed over to the PPF, for the reason that I have given already.
I hope that I have done justice to the concerns that have been raised. I am delighted that the hon. Member for Eastbourne backs the amendment. I look forward to his contribution and to the Minister's response.
§ Mr. Waterson
There seems to have been a photo-finish at the Table Office when the amendment was submitted. All credit must go to the ICAEW for getting in just under the wire and ensuring, on the final possible date, that the amendment could be debated in the House. I hope that it will add some credibility to the amendment if I make it clear that it is backed by the official Opposition. I do not want it to be undermined by the fact that the names of Liberal Democrat Members appear at the top of the list of sponsors.
The hon. Member for Glasgow, Anniesland (John Robertson) has popped out of the Chamber for a moment. I am delighted about that, as the mere mention of any professional body incenses him and provokes him into an attack. Yesterday it was lawyers, and today it might have been the turn of accountants. I had better sit down before he reappears, so I will only say that we support the amendment and hope that the Government will accept it.
§ Malcolm Wicks
The support of Her Majesty's loyal Opposition of course adds enormously to the credibility of the amendment. It therefore pains me to suggest that it is unnecessary and might be withdrawn.
Clause 134 details the process by which the trustees or managers of a scheme may make an application to the board to reconsider a decision not to admit the scheme 1127 into the PPF. Amendment No. 219 would require this application to be accompanied by audited accounts that cover the period between the date of the latest set of annual accounts and a date that must be no later than three months prior to the date of application.
Clause 134(4)(b) already requires an application to be accompanied by an auditor's valuation of the scheme. Because an auditor's valuation would have to take, as a starting point, the final set of statutory accounts, there is no substantive difference between an auditor's valuation and a set of audited accounts as described in the amendment.
The amendment would require the accounts to cover a specific period of time—the period between the latest set of annual accounts and a date that must be no later than three months prior to the date that the application is made. It is absolutely essential that the application for reconsideration be accompanied by an up-to-date set of accounts, as that will provide the basis for the board's decision. The amendment would effectively allow the accounts to be three months out of date, which is unlikely to be acceptable in all cases.
We will be consulting further with the pensions industry, wind-up specialists and trustees to ensure that the period prescribed is the right one. We will also consult all those who have made useful contributions to the debate.
§ Mr. Webb
The audit could take place 11 months after the accounts for the previous year have been completed. I do not understand how the auditor is supposed to do an evaluation when the available accounts are 11 months old. The amendment would mean that, at worst, the accounts would be only three months old. The ICAEW has said that the auditor's role is different from the accountant's, so how can the auditor provide an up-to-date valuation when the accounts are 11 months old? Is that not what accountants do, rather than auditors? Is not what the accountants produce validated by the auditors?
§ Malcolm Wicks
This is very detailed territory, and none of us is an expert. However, we are talking about an auditor's valuation, and that will clearly involve the auditor making a judgment about a scheme's finances. The final set of statutory accounts will be one of the building blocks in that, but I promise that my officials will reconsider the matter. I have said that we will consult on it in any case. We are not against the spirit of the amendment, but we do not think it necessary.
Given the reassurances that we will consult, I hope that the hon. Member for Northavon will withdraw the amendment.
§ Mr. Webb
I am grateful to the Minister for his constructive response to the amendment. My assumption is that auditors check what other people have done. Although it may be rather crude, that is the distinction that I am trying to draw. I do not want to demean large swathes of the profession, but it seems to me that auditors check someone else's sums and do not do the sums themselves. Accountants and auditors have different qualifications and expertise, which I do not want to understate.
1128 The Minister has listened to the argument, however, and reflected on it, and he has promised to talk to people who can advise him on these matters. I therefore beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment made: No. 106, in page 91, line 4, leave out from 'as' to 'overrides' in line 6 and insert '—
- (i) paragraph 3 of Schedule 5 to the Social Security Act 1989 (c. 24),
- (ii) section 129 of the Pension Schemes Act 1993 (c. 48),
- (iii) section 117 of the Pensions Act 1995 (c. 26),
- (iv) section 31(4) of the Welfare Reform and Pensions Act 1999 (c. 30) (pension debits: reduction of benefit), or
- (v) section 264 of this Act,'.—[Derek Twigg.]