Official Report of the Grand Committee on the Pensions Bill (Hansard, 18 October 2004)

HL Deb 18 October 2004 vol 665 cc137-210GC 137GC

§ (Eleventh Day)

§ Monday, 18 October 2004.

§ The Committee met at half past three of the clock.

§ [The Deputy Chairman of Committees (Lord Brougham and Vaux) in the Chair.]

§ The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham)
If the Committee will indulge me briefly, I would like to record how much we will miss Earl Russell. I am sure that the Committee will support me on that. Had we been debating this Bill a few years back, Earl Russell would have been sitting here and, quite rightly, ensuring that every statement I offered was evidence-based and on the side of the individual against the state, on the grounds that all individuals are moral adults and know much better than the state what they should do.

§ I will miss very much his wonderful, humorous, elegant, witty way of ransacking the 17th century for instances of real rights and poor law overseers in which the state required people to do X, they refused, and of course the state was wrong on every count, which was clear evidence of why the state continues to be wrong on every count. I did not want the opportunity to go by without saying how much those of us who worked with him loved him and will miss him. I shall pause for a second in case anyone wishes to join me in paying tribute to Earl Russell.

§ Lord Higgins
I most certainly wish to do so. When I first entered this House, within a day or so I had to make my maiden speech from the Front Bench. My speech was followed by that of Earl Russell, who was extremely kind in the way in which he welcomed me. I learnt to expect from him the kind of performance—I think that would be a fair description—which was typical of him. He showed an immense grasp of subjects, about which the noble Baroness, I and others had been concerned, regarding what was then called social security and is now, regrettably, called work and pensions, invariably with good humour. He had a quite extraordinary wit and, at the same time, a breadth of technical knowledge. In recent times we had not seen much of him, and it was with great sadness that we learnt of his death.

§ Although it is a platitude to say it, he will be greatly missed. He was a unique personality—I suppose that we are all unique personalities but his was more unique than many. Therefore, it is with great sadness that we should find that he no longer takes part in proceedings 138GC on issues of the kind which we are debating today. I am pleased to join with the noble Baroness in paying tribute to a remarkable person who was a hereditary Peer in the best possible sense of the word. He devoted a huge amount of time to the place and worked incredibly hard for the good of the people of this country as a whole.

§ Baroness Barker
On behalf of noble Lords on these Benches I thank Members of the Committee for their comments about our colleague Earl Russell. Everything that they have said is right, but it is perhaps fitting that among all the tributes—there have been many, and they have all been deserved—those of us who had the privilege of working with him on the intricacies of these matters, and therefore perhaps saw him at his absolute best, have the chance to say something.

§ Being one of Conrad's colleagues was always interesting. My noble friend Lord Addington once said: "The great thing about sitting beside Conrad is that it is a bit like being next to the best bowler of his generation. You never know whether he will take the wickets out of the ground or whether he will get hit for six, but either way it will be spectacular"—and it was. Over the few years in which I had the immense privilege to work with Conrad, I learnt that two things above all else fired him: his passion for justice and liberty. The extent to which poverty compromised those two things, and inflicted indignity on those who suffered it, was the fire that made everything that was good about Conrad come alive.

§ Had he been so good and unremittingly good on all of that he would have been insufferable. But he was not. He was blessed with a wicked—I repeat, wicked—sense of humour, which was great to be a part of. Last week, I recalled the night when, I think, there were only the noble Baroness, Lady Hollis, the noble Lord, Lord Higgins, our respective Whips, a Bishop and myself in the Chamber. We were in the depths of the pension credit Bill. The noble Lord, Lord Higgins, had proposed an amendment to delete the word "etcetera" on the perfectly reasonable grounds that none of us on the opposition Benches had a clue what it meant. Conrad sidled in beside me and said, "Do you mind if I take this?". I said, "Feel free". He stood up, proceeded to talk about 17th century history and an ecclesiastical court case that had rendered the definition of "etcetera" as the Antichrist.

§ We all sat back: it was vintage Conrad and we had had enough of what we were doing. The noble Baroness, in customary fashion, stood up like an indulgent schoolmistress and firmly told him and us why we did not want to delete all that because it meant serried ranks of social security legislation that was terribly important.

§ People outside this place see it as a place of privilege, but they often mistake the privileges that it gives. The great privilege is to have worked with someone like Conrad Russell. I thank all noble Lords for their sympathies.

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§ Clause 275 [Occupational pension scheme receiving contributions from European employer]:

§ Baroness Hollis of Heigham moved Amendment No. 322:

§ Page 209, line 26, leave out from "have" to end of line 28 and insert "received information forwarded to them by the Regulator in accordance with section 278(1)."

§ The noble Baroness said: The amendments on cross-boundary schemes relating to Part 7 are probably one area of the Pensions Bill that has almost no mapping on of Conrad's particular interest. In moving Amendment No. 322, I shall speak also to the rest in the group. I could introduce each amendment separately, but there are rather a lot of them. I have a copy of the speech here, which indicates the purpose of each amendment. If Members of the Committee allow, I shall give each of them a copy of the speech. I shall just make some brief points and then respond to any queries.

§ Members of the Committee will have also had the background briefing paper that we circulated some time ago, which I hope will have set out the intentions of this section. But, briefly, we are seeking to comply with the European directive, especially Articles 19 and 20, by September 2005. In the briefing and the directive, the proposed structure is, first, to organise itself on a distinction between the home country where the pension scheme is registered and the host country, which is normally where the employer would be. It is a bilateral assumption. Of course, part of the difficulty is that the employees may not always be where the employer is. Sometimes the employer may be where the scheme or corporation is. We may therefore have to seek to produce triangular relationships within a home/host framework. That needs to be worked on.

§ Secondly, behind the amendments is the fact that the home state where the scheme is incorporated will do the bulk of the regulation, but the host state—that is, where the employer and usually the employees are—will be responsible for ensuring that it is responsive to and subordinate to the social and labour law relevant to occupational pensions within that host country.

§ My third broad blue-sky statement is that these schemes have higher levels of stringency in their funding requirements and in their need to make good any funding deficits than we are proposing for our schemes, and to give assurances too that the PPF would come into play only where a levy had been raised, which would normally be on a scheme registered in the home country.

§ We do not expect there to be rapid movement on this; we think that it will be slow for various reasons. The first reason is a very practical one. Most of the details have not yet been worked out. Although three countries—Britain, the Netherlands and Ireland—have well developed occupational schemes and Germany has some schemes, other countries like France and Greece have very little in the way of occupational regimes. This means that the regulatory regimes of all EC countries will get together and work through the working group on harmonising structures 140GC and developing the detail. The DWP is to play an active part in that and will be represented at meetings from late October onwards.

§ However, this will go slowly. For example, what is to happen with a scheme where there are employees in several different quasi host countries? The structure required has to be both rational and sensitive.

§ Secondly, this will progress slowly because multinationals are only going to go for cross-national, pan-European schemes where they are comfortable about doing that, where they have a substantial number of employees, and where the trustees in either the home or the host country are comfortable. It is also worth saying that most trans-national schemes are quite likely to be defined contribution schemes and therefore only to some degree will come within this regulatory regime. But we want to encourage this development, in part because we think that as a result multinational companies may be able to offer more effective management of their schemes and administration on their assets, thus producing better value for their employees. Moreover, we believe that British pension companies will be able to offer services to a market which is open for development and which may very well play to Britain's financial market strengths. We certainly want to encourage that.

§ Finally, in the speediest of terms, I shall set out what the amendments will do. Government Amendments Nos. 322, 326 and 327 will ensure that we comply with Article 20 of the directive. Government Amendment No. 323 modifies the existing definition of "European employer" because it is problematic where the employer is not the same as the host state, and it is necessary for the regulator to have the power to enshrine the discussion as it proceeds.

§ Government Amendments Nos. 324 and 325 clarify the two-step process of authorisation and approval. Government Amendment No. 328 permits the regulator to ring-fence assets. However, again the forthcoming meetings of the EC working group will refine this further. Government Amendment No. 329 describes the situation of a non-UK cross-border scheme. Government Amendment No. 330 returns to a degree to the ring-fencing issue by referring back to and implementing the provisions of Article 19 and the protection of assets. Finally, government Amendments Nos. 329A and 330A are minor and technical.

§ So, I have gone through this group of amendments briefly, having also circulated a speech and a briefing paper and I hope, with those, that the Committee will find our approach—which is to work together with our colleagues in other countries to develop a coherent response to Articles 19 and 20—is the right way forward. I beg to move.

§ Lord Higgins
It may be helpful if I first make some general remarks about the way in which the Government propose to take action with regard to the European pensions directive, covered by Clauses 275 to 281. As the noble Baroness has pointed out, we start with a series of government amendments.

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§ At the very beginning of our discussions in this House, the noble Baroness kindly provided a comprehensive statement about the problems associated with this area, and has again provided us with more extended speaking notes than she used today. That being so, I do not propose to go into it in enormous detail at this moment, but to ask whether arrangements could be made for those particularly involved with these matters, either those with multinational schemes or companies providing such services across European borders, could be issued with something approximating to the extremely helpful notes distributed to us, and perhaps also drawing on the remarks made by the noble Baroness today.

§ Back in the 1970s, I well remember that those in the pension and insurance industries would remark on what a fantastic opportunity the EC was because we were so competitive. Alas, I am afraid that it was noted in the information that the noble Baroness provided to us that the measure is really the first step in going ahead in this direction, so far as occupational schemes are concerned. In the mean time, the UK insurance industry has shrunk very considerably. At all events, we must certainly do everything that we can to take the opportunities presented to us. As I understand it, that is effectively what the clauses seek to do.

§ 3.45 p.m.

§ It is also clear, however, that agreement has still not been reached with regard to a number of definitional problems. Consequently, the Government have to resort to leaving scope to agree to whatever definitions are eventually agreed by statutory instrument. It is very sad that, in the course of the lengthy negotiations, so many issues are not covered. Even the definition of what is meant by a European employer is outstanding. One would have thought by now at least that that could have been agreed. It is very important that we get universal definitions so far as possible if confusion and perhaps subsequent litigation are not to take place.

§ Generally, the clauses distinguish between the regulator giving authorisation in a general sense and approval of a particular arrangement. However, Clause 276, I think, suggests that in between that there will be a process of accreditation. I am not clear how that takes place. Perhaps we could be told something more about that, at whatever the noble Baroness regards as the appropriate moment.

§ I mentioned earlier that the provisions are concerned with multinational companies and those providing services across borders. As a Unilever pensioner, I suppose that I ought to declare an interest—although not in a very large pension, I regret to say. None the less, it is one that is of some relevance to me. I imagine that there have been great consultations with all the major multinational companies on the matters.

§ There also seems to be some confusion about the definition of a home member state and a host member state. Although the clauses seek to give definitions of them, the actual terms seem wholly interchangeable. That is not very satisfactory but, given that 142GC negotiations have been going on, I imagine that they have at least been agreed as terms of art, so will provide a reasonable basis for discussing the matter.

§ Overall, we welcome the clauses. We hope that rapid progress can be made and that, as a result, as the noble Baroness said, there will be opportunities for those in this country who operate in the particular markets. It is not quite true to say that there is a European market; we are talking about something rather different from that, with individual companies or sponsors dealing with particular cases. None the less, the clauses are helpful and we do not have any particular points on them, given the extremely helpful notes and explanations that the noble Baroness has given us, to pursue. However, we will look carefully at the more elaborate notes that she has given us and, if necessary, return to matters on Report. My initial impression is that, so far as things go—they have still not gone as far as one would like—the arrangement is reasonable.

§ Lord Oakeshott of Seagrove Bay
We also have no argument with the broad thrust of the amendments and the clauses, which seem sensible. Will the noble Baroness simply reassure us that the Government have consulted widely the relevant organisations and pension funds in the area and share with us concerns that have been raised, if there are any? We are happy to work on the principle of reading the speaking notes. However, having flicked through them quickly, I am disappointed that we have not had the opportunity to hear her telling us, from page 27, about the "cantonnement" and what my excellent German research assistant, Oliver Hartwich, who although having two degrees has never heard the word, assures me should be called ein separater Abrechnungsverband. Apart from that, we have no comments.

§ Baroness Hollis of Heigham
Perhaps I should say to Hansard, "Good luck".

§ I am grateful to the Committee for its welcome for these clauses. I am grateful also that it understands why we cannot yet go into any further detail. We are dependent on bringing other countries into a common understanding and a common vocabulary in regard to what we are doing.

§ I shall be very happy, again, to ensure that these notes are circulated to all companies and organisations which have an interest. Our officials are working with them all the time. That is why we are getting the steer that we are. If any noble Lords have any concerns that any company or possible player is being overlooked, please let me know and I shall ensure that they are included. But certainly all the major companies of which I am aware—both companies which may have schemes, such as the oil companies, and possible players in the market place who are pension providers—have been actively involved, and we are grateful for that.

§ Finally, the noble Lord, Lord Higgins, asked what "accreditation" might mean. This is one of our words rather than a European word. It simply refers to the total process within which there are two steps: 143GC authorisation and approval. Accreditation simply encompasses the whole regime. With that, I hope very much that the Committee will accept the amendment.

§ On Question, amendment agreed to.

§ Baroness Hollis of Heigham moved Amendment No. 323:

§ Page 209, line 33, leave out from "employer"" to end of line 36 and insert "has the prescribed meaning;"

§ On Question, amendment agreed to.

§ Clause 275, as amended, agreed to.

§ Clause 276 [General authorisation to accept contributions from European employers]:

§ Baroness Hollis of Heigham moved Amendments Nos. 324 and 325:

§ Page 210, line 4, at end insert— (1A) On receipt of the application, the Regulator must—

(a) where the Regulator is satisfied that the applicant meets prescribed conditions, grant the authorisation, and
(b) in any other case, refuse the authorisation."

§ Page 210, line 8, leave out "grant or"

§ On Question, amendments agreed to.

§ Clause 276, as amended, agreed to.

§ Clause 277 agreed to.

§ Clause 278 [Notification of legal requirements of host member State outside United Kingdom]:

§ Baroness Hollis of Heigham moved Amendments Nos. 326 and 327:

§ Page 211, line 3, at end insert "and as to the other matters referred to in Article 20(5)"

§ Page 211, line 5, at end insert— ( ) Where—

(a) the trustees or managers of an occupational pension scheme are approved under section 277 in relation to a European employer, and
(b) in pursuance of Article 20(8) of the Directive the Regulator receives information ("the new information") from the competent authority of the host member State as to changes affecting any information previously forwarded under subsection (1),

the Regulator must as soon as reasonably practicable forward the new information to the trustees or managers.

§ On Question, amendments agreed to.

§ Clause 278, as amended, agreed to.

§ Clause 279 agreed to.

§ Baroness Hollis of Heigham moved Amendment No. 328:

§ After Clause 279, insert the following new clause—

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