§ The Parliamentary Under-Secretary of State for Work and Pensions (Mr. Chris Pond)
I beg to move amendment No. 120, in page 110, line 27, after 'not' insert'a prescribed scheme or a scheme'.
§ Mr. Pond
The amendments are technical, but important none the less. They amend clauses 165 and 172 to mirror the arrangements set out in clause 113, which is about eligible schemes. They enable certain schemes to be excluded from wider PPF coverage. Together, the clauses make it possible to exclude named—I emphasise, named—occupational schemes and general types of scheme from the pension protection fund and fraud compensation umbrellas. In other words, a more selective approach to exclusion will be possible. Although it is possible to exclude from compensation coverage schemes with fewer than two members, or ones that offer only death benefits, the clauses will now allow the exclusion of named schemes that are not considered to be suitable for PPF and fraud compensation coverage—typically, defined benefit schemes that will always be able to meet their liabilities to members due to credible guarantees provided by the employer. It would be wrong to include such schemes within the PPF and fraud compensation umbrellas, and unfair to require them to pay levies.
§ Kevin Brennan
Will my hon. Friend explain the difference between a prescribed scheme and a scheme of a prescribed description? The amendments appear to draw a distinction between the two.
§ Mr. Pond
That is one of the reasons why, although technical, the amendments are very important. I am not sure that the House wants me to delay our business by dealing with that specific point now—[HON. MEMBERS: "Oh, go on."] Perhaps if I meet my hon. Friend in the Tea Room after the debate, we can discuss the matter at some length, or I could set it out in writing, if that is acceptable to him. Perhaps he would prefer—[Interruption.] Oh, let us deal with it now, shall we?[Laughter.]
People will know that a prescribed scheme is, of course, a named scheme—I thought that that was obvious from what I said—whereas a scheme of a prescribed description could be a type of scheme. I hope that that clarifies the matter, but I shall happily go further in the Tea Room.
§ Mr. Webb
I shall not ask the Minister to go any further. However, to be serious, scheme members want 1140 their scheme to be protected against fraud. The Minister appears to be saying that a named scheme may be deemed not to be covered by fraud protection, because "credible guarantees" have been given by the sponsoring employer. However, credible assurances can be subject to fraud if someone reneges on them. Does that undermine the anti-fraud protection that the Bill is trying to provide?
§ Mr. Pond
No, I do not think that it does. I take these things particularly seriously because I am the Government's anti-fraud Minister. I am not, as some people have unkindly suggested, the Minister for fraud and error, both of which I am against. The measures are important, because they apply to schemes that are unlikely to require fraud compensation, as they have other forms of protection built into them. Later clauses deal with schemes with a partial Crown guarantee that are exempt from fraud and other levies as they have other back-up. For that reason, we do not expect there to be any circumstances in which the schemes would be vulnerable to fraud.
Schemes should have a collective responsibility to help to protect members from the loss of benefits resulting from fraud, which is why the Pensions Compensation Board currently imposes a levy on all schemes. It is reasonable, however, to spread the burden of the levy as widely as possible to minimise the impact. We expect the levy to be applied occasionally, as and when fraud compensation is needed.
§ Kali Mountford (Colne Valley) (Lab)
On the issue of fairness and compensation, is my hon. Friend satisfied that it is reasonable to demand that schemes that have already been subject to fraud should continue to pay the levy?
§ Mr. Pond
My hon. Friend makes a fair point, which we have considered carefully. We envisage that the levy will be applied only occasionally, and in the seven years since the Pensions Compensation Board was created only four cases of fraud have been discovered and less than £600,000 has been paid out in compensation. We need to make sure both that the levy is applied proportionately and that it provides appropriate protection against fraud. By exempting certain schemes we can build in that proportionality and protection.
§ Mr. Webb
There is still a slight loophole, and I should be grateful if the Minister could reassure me that it will be closed. In an intervention, I asked about the type of schemes that will be exempt from the fraud component of the PPF levy. As a quid pro quo, scheme members would be exempt from payouts for fraud. As I suggested, we do not want scheme members to become vulnerable if everything looks kosher if I might use that phrase—I probably cannot, so I shall say if everything looks fine—but a few years later, perhaps after a personnel change in which a dishonest person is appointed, there is fraud. The Minister mentioned Crown guarantees, and we would all accept that in such cases there is no reason why there should be a levy to cover a fraud levy because that eventuality is covered anyway. However, his phraseology made me think that that was a specific instance, not an exhaustive list. There are other cases in which, to use his phrase, the employer gives "credible guarantees", only for the scheme to be taken over by a less reliable employer.
1141 Once we say that schemes fall outside the scope of the anti-fraud measures we are at the top of a slippery slope. I should therefore be grateful for a little more reassurance. The amendments make provision, as we heard in the intervention of the hon. Member for Cardiff, West (Kevin Brennan), for prescribed or named schemes. Can the Minister tell us about the scope of the provision? Will the PPF prescribe the schemes, or will that be done by statutory instrument? Prescription is usually done through regulation, so I would be grateful for clarification. Will the PPF have a delegated power to prescribe schemes, or will that be done by Parliament? I would not be confident about prescribing schemes, but my key concern is that there may be a gaping hole. Is there a long list of schemes that do not get fraud protection? In future, will workers look at the seemingly technical amendments that were agreed in the House and say, "No, it should not have done so, because they drive a coach and horse through the fraud protection that everyone wants"? Or is it a matter of nit-picking, and it will be only the odd scheme that falls outside the scope of the pension fraud protection scheme? I should therefore be grateful for a little mote reassurance on the record about the scope of the measures, as I am worried that we are opening up a bigger void. I am sure that that is not the intention, but I would like to register my concern. That is not so that I can say "I told you so" in 10 years' time, but so that our constituents never experience those unfortunate circumstances.
§ Mr. Pond
The hon. Gentleman is right to express his concerns, so that reassurances can be given on the Floor of the House and are on the record. We have been careful not to allow the gaping holes that he mentioned to appear in the safety net or even tiny chinks of light. The schemes that we are debating are guaranteed, so scheme members cannot lose out. The hon. Gentleman asked for an example—the Chatsworth House settlement scheme is a unique scheme that provides a guarantee. We cannot legislate in general terms to exempt such schemes, but it would be unfair to include them in the levy. By definition, they already offer a guarantee to their members. We must therefore make provision for named schemes. When I was introducing the amendments, I emphasised the need for the schemes to be listed by name.
§ Mr. Webb
The Minister raised the distinction between named schemes and a prescribed category. Would it not be simpler to describe a category of schemes, such as those with Crown guarantee, so that we do not need separate prescriptions or regulations? Either the House would have to consider such regulations, or the PPF would have to proceed case by case. That echoes the points that I made yesterday about adopting a set of principles that apply to every case rather than having to predict in advance everything that might crop up and deal with it. Could there not have been a more general approach to the issue?
§ Mr. Pond
Later clauses, as I said, deal with schemes covered by partial Crown guarantee that, as a category, will be exempt. In that case, we can use a category, but in this case, we need to name individual schemes and 1142 adopt a much more targeted approach, to make sure that we do not allow unfairness to slip into the overall process.
§ Kevin Brennan
My hon. Friend named a particular scheme that was guaranteed. Is it a guarantee against fraud or a guarantee that pensions will be paid? Surely, every scheme is guaranteed against fraud, which is an illegal act.
§ Mr. Pond
As my hon. Friend the Member for Greenock and Inverclyde (David Cairns) said, the law should be a guarantee against fraud. The fraud compensation scheme was set up, because, although the effort to prevent fraud in the first place offers a guarantee, once fraud has been committed, resources are not necessarily available for cash compensation. Here we are talking about a guarantee also that the pension will be paid. That is built into the scheme, which I know is the sort of reassurance that my hon. Friend would want.In reply to the hon. Member for Northavon, I should say that it is the Government, not the PPF, who will prescribe which schemes are to be exempted in this way.
It being Three o'clock, MADAM DEPUTY SPEAKER proceeded to put forthwith the Questions necessary for the disposal of business to be concluded at that hour, pursuant to Order [18 May].
Amendment agreed to.