Grand Committee Report of 13 October 2004

Official Report of the Grand Committee on the Pensions Bill
(Tenth Day)
Wednesday, 13 October 2004.
The Committee met at half past three of the clock.
[The Deputy Chairman of Committees (Lord Geddes) in the Chair.]
The Deputy Chairman of Committees (Lord Geddes): I remind the Committee that in the case of a Division in the Chamber I will adjourn the Grand Committee for approximately 10 minutes. I also advise Members of the Grand Committee—I am sure that they know it already—that any interventions or speeches should be made standing.
Clause 252 [Increase in age at which short service benefit must be payable]:
On Question, Whether Clause 252 shall stand part of the Bill?
Lord Higgins: We resume our deliberations, beginning with Clause 252, following the four very hard-working and intensive sittings which interrupted the Recess, working under extremely difficult conditions. I feel bound to say that I hope that experiment will not be repeated. If there is only one lesson to be learnt, it is that the task of maintaining security in Parliament—and preventing the kind of the invasion of the Commons which we had—when the entire area is really a working building site is extremely dangerous. We were very fortunate that the outcome was no more serious than it was.
Since we last met there have been two important developments. The new Secretary of State appeared in his role following three previous Secretaries of State—none of whom were outstanding successes—and he began by making various statements and giving interviews and so on. For example, one report in the Sunday Times on 26 September stated, "No crisis yet says new pensions boss". The argument seemed to be that the crisis was 15 or 20 years ahead. That must have been rather heartbreaking to read for the people that we will be trying to help later on—for example, on the financial assistance scheme.
There is a crisis now—and it is growing. That has been spelt out in the Turner report which, no doubt, noble Lords have been studying very carefully over the past 24 hours or so. I think it is disgraceful that we did not have a Statement on that report. It was on the front page of every paper and on every television programme last night. It is an indication of the contempt in which the Prime Minister, in particular, and the Government generally tend to hold Parliament
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that we did not have a Statement on the report that was issued and which was described by the new Secretary of State only a few hours ago as perhaps the most important report we have had almost in living memory.
It is a very important report. It is extremely thorough and detailed. The crucial thing about it is that it brings to the public's attention what the problems are, although it tends only to deal with the long-term ones and not the ones with which we are primarily concerned in this particular piece of legislation. It creates a rather strange situation because I gather that the Government are proposing to do nothing about it until after the election. Apparently, they will go into the election with no policy to deal with these problems at all and say, "Vote for us. We will tell you what we are going to do afterwards".
But, be that as it may—
The Parliamentary Under-Secretary of State, Department for Work and Pensions (Baroness Hollis of Heigham): Now we get on to the more controversial issues.
Lord Higgins: We now get on to the more controversial issues. Indeed, the noble Baroness will be glad to know that I am going to go straight to deal with Clause 252 stand part. The Turner report states that the options are, effectively, to be poorer, to pay higher taxes, to get more savings and to retire later. That brings me to Clause 252, which is concerned with an increase in the age at which short service benefit must be payable.
The clause refers to Section 71 of the Pension Schemes Act 1993 on basic principle as to short service benefit, which I have here, and indicates that a change shall be made from the existing situation so that in future the short service benefits must—and I stress "must"—be payable as from an age no greater than the age of 65 or, if a member's normal pension age is greater than 65, the normal pension age.
In the context of the discussion by Turner about whether we should have a higher pensions age and so on, I am not clear exactly what is meant in Clause 252 by the "normal pension age". Perhaps the noble Baroness can tell us exactly what the import of this is and why it is necessary to change the Pension Schemes Act 1993 definition to the new definitions included in the clause.
On the face of it, if we are going to discuss whether pension ages should be raised and so on, it seems strange that this change is made. I have to confess that I am not even clear whether this raises the level or not compared with the 1993 Act proposals. But no doubt the noble Baroness can help us with that. It seems to be strangely triggered by the discussions in the press in the past few days.
Lord Hunt of Wirral: I intervene to support strongly the comments made by my noble friend Lord Higgins. Yesterday's preliminary report—that is how it is expressed—of the Pensions Commission revealed in some detail what we had all really feared, which is that

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this country faces a pensions crisis. Through their raid on private pension funds, the Government have served only to make matters worse.
There are certain provisions in the Bill, such as Clause 252, that are technically necessary and rather urgent, but we are faced with continuing our scrutiny of a Bill that serves only to be over-complicated yet ineffective at the same time. I cannot recall a Bill that has been so substantially amended by the same group of Ministers who introduced it in the first place. The homework was not done. I strongly agree with my noble friend Lord Higgins that Adair Turner's report should have been accompanied by a ministerial Statement and a proper and vigorous debate.
Pensions policy is not the particular province of any generation, nor is it the exclusive province of any political party. Surely, we should now redirect our efforts towards the production of a lasting cross-party consensus. That is essential. The continuous barrage of government amendments to which we have been subjected has stretched the spirit of co-operation and consensus on these Benches to breaking point. As it stands, I cannot see how the Bill will save a single firm or a single pension fund. Indeed, it has now become so complicated that it may achieve the opposite.
To summarise, I say to the Minister that her Bill has now become too complex, too oblique, and too vulnerable to interpretation and judicial activism. Speaking as a solicitor, I am filled with trepidation about the way in which the Bill will be interpreted. My only contribution is to ask Ministers to go back to the drawing board on a substantial part of the Bill and to start again. Fine, there are certain technical amendments, such as the clause that we are now debating, that need to go through, but there is a huge mass of provisions that need to be thought through once again. Cannot Ministers take the opportunity before it is too late to come back to Parliament with something more considered and relevant early in the new Session, which is, after all, only a matter of weeks away?
It was my privilege yesterday to listen to Jane Kennedy and Alan Johnson talking about the future and what the Government propose to do. The purport of what they said was that we needed to have a rethink of our policy on pensions. Certainly, the columns today and the editorials urge that on us. Why is the Minister ignoring the huge debate that is going on outside this place? Is it not about time that we tackled the real issues?
Lord Lea of Crondall: It is understandable that the noble Lord, Lord Higgins, should wish to make some reference at this stage to the important report of the Turner commission. I have known Adair Turner a long time, as other noble Lords have, from when he was director-general of the CBI. The report is an outstanding contribution to a debate that is quintessentially long-term if ever there were one. That does not mean that we should all start to debate it now, but a debate at a suitable stage on the report in the House would be very good.
The noble Lord, Lord Hunt, goes a further mile and—if I may say so—somewhat opportunistically says that the Bill achieves the opposite, so there are immediate ramifications for its relevance. That is going far too far. Nothing in what Adair Turner said removes the necessity of getting on with all the major reforms in the Bill. Indeed, until we have dealt with some of the immediate questions in a Bill such as this—notably, coming from a trade union background as I do, the whole question of the compensation fund and so on—we will not get people to address the issue. That issue will not be dealt with on a party political basis.
I very much take the point made by the noble Lord, Lord Hunt, that we need a consensus on the Turner report. The word "consensus" has been out of fashion for a long time in this country, but all the major parties—I include employers and trade unions, which is my background—need to find a way of thinking through the equation between retirement age, the problem that our savings ratio in this country has fallen to about 5 per cent instead of the 10 to 12 per cent that is the average in Europe, the financing of pensions and the question of compulsion on workers and employers. We need consensus on those questions.
Whether the immediate lump sum flashed around the newspapers from the report—£50 billion to £60 billion—is the right way into the debate or not, clearly a huge contribution is made by the Turner report. However, trying to be objective about it, I can see no way in which it does other than distinguish the immediate issues such as are in the Bill from those that must be debated as soon as is convenient in the Adair Turner report.
Lord Oakeshott of Seagrove Bay: I support what the noble Lord, Lord Lea, said. I do not propose to make any sort of Second Reading speech now, but want to put on record that we warmly welcome the analysis in the Turner report and the very clear conclusions to which anyone who has eyes can see that it points to. If I can out Adair, I should say that I served with him on the economic affairs committee of the SDP in the early 1980s. It is not surprising that he has therefore come up with just the sort of sensible and interesting report that one would expect.
A serious point is being made. The report should not delay proceedings on the Bill. It is a useful Bill so far as it goes. We should not talk about scrapping it and going back to the drawing board; we are here constructively to try to improve and amend it and get it to do what it can do. However, I ask the noble Baroness to assure us that there will be an opportunity at an early stage to have time to debate the Turner report, as has been suggested from both sides. It is, to a simple extent, separate from this Bill.
Baroness Turner of Camden: I wish to add a word to what was said by my noble friend Lord Lea. As we all know, one of the things that has come out of the Adair Turner report very strongly is that people are not saving enough. One reason why they do not do so is the lack of a feeling of security. One thing that the Bill attempts to do is to cope with that feeling of insecurity, by providing some kind of fund that gives people a

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basis for feeling that their occupational pension scheme, if they contribute to it, has some sort of security backing. All Members of the Committee support that concept.
Baroness Hollis of Heigham: I should have predicted, in a way in which I did not, that we would start with a query on this matter. Like others, I found the Adair Turner report fascinating, often because it made connections that I had not made before. A tiny one is that, as one moves from DB to DC schemes, so people are likely to work longer. That may pick up some of the points about people dropping out of the labour market at a relatively early age. It is a sideways move that I should have made and had not quite in that form, so I have found the report extremely rich and valuable.
The point is that it is a report. I may sound bureaucratic, but it is a report of a non-departmental body, which is not conventionally prefigured by a Statement in the House. There is nothing to stop the Opposition asking for a PNQ. I understand that it has not done so. The Opposition in the other House—in my view well timed—has opted for an opposition debate today on pensions. But if this House—bluntly—prefers to debate 800 foxes over 8 million pensioners, then so be it. Some of us do not.
3.45 p.m.
Obviously, we shall deal with the report and so on. I cannot give any undertakings—that is for the usual channels—whether or not there is any time allocated to a big pensions debate. After the Queen's Speech, we shall resume our Wednesday afternoon debates. There will be ample opportunity for any of the three parties to initiate a pensions debate when we have finished the Bill. I cannot really be more helpful than that. My understanding is that it would not necessarily be conventional, and certainly we have not had a request to take an unconventional response.
I hope that we do not come under too fierce an attack about what the Bill does. When I wrote books, I always used to get impatient when the reviewer criticised me for not having written a different book. I always got very cross with that. The noble Lord, Lord Hunt of Wirral, criticised us for not having a different Bill altogether. As my noble friend Lady Turner of Camden rightly said, the Bill is designed to do a couple of things. It is meant to inform people's awareness of what the future state of their pension provision will be. Part 4, in terms of informed choice, should go some way to doing that, along with some of the other subsequent announcements made by my Secretary of State about enrolment and so on.
It is clear that the publicity attached to the Adair Turner report probably has done more about that than anything we will do for the time being. None the less, we speak as one on this. First, the Bill is designed to make people realise that they need to save and what the shortfall is, given any assumptions they may have on what replacement earnings they would like in retirement and what they will actually get. We seek to do that in the
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Bill. I do not think we should underestimate it. We try to do it in a personalised way, whereas Adair Turner's report is about heightened awareness.
As my noble friends eloquently said, the second reason people why have been reluctant to save is the worry about security. The volatility of the stock market and so on has also encouraged fears in that direction. The third problem—if government is at fault, may I say that it is probably the actuarial profession which has failed to build the figures in properly—is growing longevity. That has also perhaps given us a false complacency—I include myself—about what is going to happen.
We should all take responsibility for this. As my Secretary of State said, there is no magic bullet that the Government can suddenly fire. We will all have to face up to the choices that Adair Turner has identified. We either work later, including working longer beyond the age of 55, or we have to save more or face increased taxes or to accept a reduced standard of living in retirement. As he rightly says, any forward solution is going to have to be a mix between those.
However, what the Bill seeks to do to a more limited extent is something important, and I hope as a result that we shall not get too sweeping a condemnation of that. Without informed choice and without the Pension Protection Fund, the state of defined benefit schemes would be even less attractive. They are certainly attractive to employees. They will be even less attractive to employers and employees in the future.
As for the changes in the build-up of the Bill that the noble Lord, Lord Hunt, criticised us for, he understands the situation perfectly well. The Bill came across as a framework, but most of the amendments that have arisen in this House have come in part because of some of the concerns expressed by noble Lords, including the opposition parties. For example, a major chunk of change has been moral hazard. That was run at the other end, quite rightly, all around the House, and it is because the pension Ministers took that on board that the Committee is being asked to scrutinise those clauses.
We have had, for example, the issue of pension liberation. That came up at the last moment, when we were dealing with those very nasty court cases in Oxford. Noble Lords thought it was right that we should do that. We are going on to do something on pension sharing, which again the Committee would want us to do. We have, for example, details of insolvency practitioners and how to get appeals right from their notices, subject to European law, which in no sense was an encumbrance on insolvency practitioners.
The noble Lord, Lord Hunt, pressed us in that area. We are responding. I am now being criticised by him in the nicest and most pleasant way for responding to the concerns he raised at Second Reading. It is unreasonable to criticise the Government for listening and then to criticise us for actually responding with amendments to that effect.
We have responded on member-nominated trustees, something which came from the TUC, on scheme wind-ups and the limited price indexation. The noble

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Lord at Second Reading made a very powerful point on LPI not just for DB schemes but for DC schemes. We are coming forward with responses to that. We are building it into the Bill. Now he tells me that that is not good enough; we have a Bill that we are actually constructing in the Lords. It is because the Committee is taking the Bill seriously and it is because I on behalf of the Government am taking the Committee's views seriously that we are adding the clauses.
I hope that I do not sound tetchy, but I think that it is slightly graceless of noble Lords opposite to criticise us for responding to the concerns raised by them, which we are taking seriously. I hope that on reflection the noble Lord, Lord Hunt of Wirral, will in future cast his criticisms of the Government in a more inclusive way. I have said enough on that.
There may be some misunderstanding about the clause. Certainly when I was first being briefed on it, I misunderstood the intentions. Perhaps I may say what it seeks to do, as that is not as obvious as it might be. The clause amends the legislation that applies to members who leave a scheme before pension age—early leavers. We are not talking about ill health, but early leavers; people who become deferred pensioners, in effect. Where a scheme's normal pension age is before 60, pensions for early leavers are payable no later than the age of 60. That applies to a limited number of schemes where normal pension age is lower than age 60 because of the nature of the work; for example, firefighters and the police.
We are not saying that police and firefighters do not get their pensions until the age of 60, but that someone who has perhaps been a police officer or a firefighter for three or five years 15 or 20 years before and has gone on to another job, and whose health is therefore not impaired, should draw his pension in the normal way—in other words, not necessarily in terms of the scheme rules for existing police or firefighters but for broader scheme rules that early leavers' pensions should be paid in the normal course of events.
We do not think that early leavers in that situation should need to be paid before the age of 60. In other words, we are making a distinction between when one would pay a serving police officer who had done his 30 years or whatever in the police force and was now entitled to draw his pension and someone who had perhaps served four or five years. We do not think that they should be able to draw their pension at the same time as the serving police officer who does need the particular consideration, given the onerous nature of his job.
In those cases, the pension is currently payable later than the normal pension age but no later than the age of 60. Clause 252 raises that age limit to 65, in line with general public policy of extending the working life and raising the public service pension age in respect of future service. I hope that with that explanation, the Committee will accept the clause.
Lord Higgins: I think we are grateful for that explanation. I shall pick up two points only on the
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earlier remarks. I have read most of the three volumes now, but not all of it. However, I notice that in the foreword the report says:
"We want to make clear the facts on which our analysis is based, enabling experts and interested parties to point out where we are wrong, or where we have missed key issues".
On the perhaps over-optimistic assumption that the writers of the report read our debates in the same way that we read their reports, let me say something. Certainly by implication the report criticises the Chancellor's obsession with moves towards means-testing and the effect that that has on savings, but I cannot for the moment find any reference to the £50 billion a year tax grab as a result of the change in ACT. If so, that seems to be a missed key issue, one that has been rather extraordinarily overlooked.
Lord Lea of Crondall: I think that that the noble Lord, Lord Higgins, meant to refer to the figure of £5 billion rather than £50 billion.
Lord Higgins: It depends on how many years you calculate. At any rate, it is £5 billion a year.
Baroness Hollis of Heigham: I am trying to find the page, but I am fairly sure that it states somewhere else that this is irrelevant in comparison with the £350 million that has been wiped out in pension schemes on the stock market. However, I do not have a decent index to the report, so I cannot locate where I read that point.
Lord Higgins: It would be astonishing if the report did not make any reference to the £5 billion, although it may be that I have not yet found it.
I make only one other party political point. The noble Baroness has said that it is extraordinary that the Opposition wanted to debate 800 foxes rather than 8 million pensioners. The Hunting Bill is not an opposition Bill, it is a government Bill. The Government want to debate hunting; we would be entirely happy to have no more discussion about hunting and for the Bill to disappear. The noble Baroness has that slightly wrong.
Turning to the clause, I understand that the "normal pension age" means the scheme's normal pension age, not a normal pension age in any other way. I make the point because I think that the general public would understand the expression "normal pension age" to be the age at which the state pension becomes payable. Perhaps the noble Baroness, who has rightly said that she is responding to points made by the Opposition, will consider whether the drafting could be marginally improved.
Baroness Hollis of Heigham: The noble Lord is absolutely right. We shall make sure that the drafting is as unambiguous as it should be.
Clause 252 agreed to.
Clause 253 [Early leavers: cash transfer sums and contribution refunds]:
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 312ZB and 312ZC:
Page 186, line 23, leave out from "as" to end of line 35 and insert "overridden by a relevant legislative provision,
(b) the relevant legislative provisions, to the extent that they have effect in relation to the scheme and are not reflected in the rules of the scheme, and"
Page 186, line 46, at end insert—
"(8) For the purposes of subsection (7)—

(a) "relevant legislative provision" means any provision contained in any of the following provisions—

(i) Schedule 5 to the Social Security Act 1989 (equal treatment for men and women);

(ii) this Chapter or Chapters 2, 3 or 4 of this Part of this Act or regulations made under this Chapter or any of those Chapters;

(iii) Part 4A of this Act or regulations made under that Part;

(iv) section 110(1) of this Act;

(v) Part 1 of the Pensions Act 1995 (occupational pensions) or subordinate legislation made or having effect as if made under that Part;

(vi) section 31 of the Welfare Reform and Pensions Act 1999 (pension debits: reduction of benefit);

(vii) any provision mentioned in section 292(2) of the Pensions Act 2004;

(b) a relevant legislative provision is to be taken to override any of the provisions of the scheme if, and only if, it does so by virtue of any of the following provisions—

(i) paragraph 3 of Schedule 5 to the Social Security Act 1989;

(ii) section 129(1) of this Act;

(iii) section 117(1) of the Pensions Act 1995;

(iv) section 31(4) of the Welfare Reform and Pensions Act 1999;

(v) section 292(1) of the Pensions Act 2004."

On Question, amendments agreed to.
On Question, Whether Clause 253, as amended, shall stand part of the Bill?
Lord Higgins: I shall speak briefly. Some six and a half pages of the Bill are given over to early leavers, cash transfers and so forth. I have no particular point to raise, but it is not clear why this is in the Bill since it does not seem to be related to the main purposes of the legislation. Perhaps the noble Baroness could tell us briefly what this clause seeks to do.
Baroness Hollis of Heigham: I am pleased that the noble Lord has raised this because it is a rather important change dealing essentially with vesting rights. Noble Lords will know that most schemes impose a period of service known as the vesting period. Where an employee member leaves a scheme before the end of the vesting period, he or she will not have vested rights retained in the scheme. Usually, all that happens is that people take the cash out and go. They do so because schemes do not want to take on the extra administrative burden.
Clause 253 makes provision for those members so that those who leave a scheme after three months' service, for example, will be able, not so much to have their rights vested, but to take their rights with them into a new scheme, including the employer's contribution. In terms of the financial benefit, let us take the case of someone who leaves a defined contribution scheme with an employee contribution of 3 per cent of pensionable earnings and an employer's contribution of 4.5 per cent of pensionable earnings. If they leave after one year with pensionable earnings of £15,000, they may take a cash refund—that is the case at the moment—which will be worth £360 after tax has been deducted. However, if they arrange for a cash transfer sum to go into the next scheme, taking with them the employer's contribution, they will be able to transfer £1,200. That is the virtue of it. It really aids job mobility and particularly helps women.
I could go on in greater detail, but that is the whole point. Basically, we are ensuring that people who leave a scheme after three months can take the value of the scheme as though it had been vested with them into the new scheme.
4 p.m.
Lord Higgins: I am most grateful for that explanation.
Clause 253, as amended, agreed to.
Clauses 254 and 255 agreed to.
Clause 256 [Voluntary contributions]:
On Question, Whether Clause 256 shall stand part of the Bill?
Lord Higgins: I am beginning to wonder whether the value of a clause is inversely related to its length. This is a brief clause, concerning voluntary contributions. As I understand it, it omits Section 111 of the Pension Schemes Act 1993, which relates to the requirement for schemes to provide facilities for members to pay additional voluntary contributions, generally known, I think, as AVCs.
I speak with some passion on the matter, having at one stage been chairman of a pension fund that had met the requirements of the Act and had introduced facilities for members of the scheme to take out additional voluntary contributions. Unfortunately, like so many others, acting on what was supposed to be good advice, we put the money into Equitable Life. It took many hours and an enormous amount of legal advice and expense to follow the traumas of Equitable Life, trying either to get some sense out of the company itself or to help members of the scheme who had invested in Equitable Life AVCs. It was a disaster area.
The real problem was that, as trustees—albeit an expert trustee board—we could not give any advice to our members about what to do because we were not registered financial advisers. On balance, I think that, although we all want to encourage people to take out further contributions and save more, the obligation on

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schemes to provide such facilities without the ability to give advice when something goes wrong creates a difficult situation.
Baroness Hollis of Heigham: I agree with the noble Lord. The reason for the change is that, in 1986, occupational schemes had to have a facility for members to make AVCs because tax laws did not generally allow members of an occupational pension scheme to make contributions to a personal pension in respect of the same period and source of employment. That is changing; from 2001, individuals can contribute to an OP scheme and a personal pension at the same time, if their earnings are below £30,000. The forthcoming tax changes in the Finance Bill will remove those restrictions altogether. The compulsion on employers to offer AVCs is no longer necessary, because there are alternative vehicles in which people can, if they wish, amplify their pension by running a personal pension alongside their OP.
The clause is part of that deregulation. It is no longer necessary to place a statutory requirement on every scheme to offer AVCs. We expect many employers to continue to offer that facility, but, given that individuals can now make their own choice to go into a parallel scheme to top up an otherwise reduced pension, the requirement is no longer necessary. We are freeing the system up.
Clause 256 agreed to.
Clause 257 [Payments made by employers to personal pension schemes]:
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 312A:
Page 191, line 12, after "must" insert "except in prescribed circumstances"
The noble Lord said: It might be convenient if, in moving the amendment, I refer also to Clause 258. The Explanatory Notes, incidentally, contain a misprint in the pre-penultimate line of paragraph 793. The paragraph says:
"where a contribution under the direct payment arrangements has not been paid by its due date, and the trustees or managers have reasonable cause to believe that the failure is likely to be of material significance to the Regulator in the exercise of any of its functions, then they must, within a reasonable period after the due date, give notice of the late or non-payment to the Regulator and the employee".
Should not that be "the employer"? That is my first question. In that case, which employee is it? It follows.
The Explanatory Notes go on to state, very helpfully:
"Under clause 84 the Regulator must issue codes of practice on the meaning of 'material significance' in relation to the exercise of its functions, and on the meaning of 'reasonable period'";.
Nowhere, however, can I find any description of where notice is not required, except of course in Clause 258. That clause refers not to personal pension schemes, but to occupational pension schemes. It has been put to us that employers' payments into personal pension schemes should be treated in exactly the same way in both clauses. I beg to move.
Baroness Hollis of Heigham: I am assured that "employee" is the right word—there is no misprint. The notes state that,
"they must, within a reasonable period … give notice of the late or non-payment to the Regulator and the employee",
because it is the employee's money. I presume that it means any employee so affected.
Lord Skelmersdale: With the greatest respect, I am afraid that that still does not make sense. The whole clause is headed:
"Payments made by employers to personal pension schemes".
While I was speaking, the noble Baroness gave me the impression that "employee" might be the right word and was intended, so my supplementary question at that point was, "Which employee?".
Baroness Hollis of Heigham: Any employee who is affected. The notes state that,
"where a contribution under the direct payment arrangements has not been paid by its due date, and the trustees or managers have reasonable cause to believe that the failure is likely to be of material significance … they must",
notify the "Regulator and the employee". In other words, we are dealing with where the employer may not only pay into a pension, but be the vehicle for the employee's payments into the pension. It is important that the regulator as well as the employee is notified of that.
Let me follow the matter up and write to the noble Lord, in case there is some issue about which he is concerned that I am missing. His substantive point is essentially on why we seem to have powers in Clause 258 that we do not have in Clause 257. We do not need them, because the regulator will have the flexibility to do exactly what he asks already. Is that enough, or does the noble Lord wish me to explain?
Lord Skelmersdale: Could the Minister explain?
Baroness Hollis of Heigham: OK. Clause 257 amends Section 111A of the Pension Schemes Act 1993, which deals with the monitoring of payments made by employers to personal pension schemes. It introduces greater flexibility, for reasons that we all understand.
We have discussed already that one of the problems for OPRA was that it was littered with a large number of late payments—136,000, of which fewer than 2 per cent warranted a preliminary investigation, and fewer than half of 1 per cent went on to have a detailed investigation. That was a waste of effort and activity. As we have said throughout, we seek for the regulator to identify and work with trustees and so on where there are areas of risk, rather than to have reports on everything that is two or three days late. Most of those reports were minor or trivial failures where payment was a day or two late. The more flexible approach introduced by the clause will enable the regulator to focus his efforts on those late payments where there is or may be a real risk to members' benefits.
Unlike the existing legislation, the provisions do not provide for a power to prescribe the circumstances when a late-payment report does not need to be sent to

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the regulator. That is because, under the new approach, the regulator will have the flexibility to do that for itself. The regulator will set out in its code of practice the circumstances in which a report should or should not be made. It is therefore not necessary to take a power as provided for by the amendment.
I am happy to continue down that path, but we have considered the issue raised. I am assured that the regulator already has powers and that any words such as those in the amendment would be superfluous, in terms of the working of the clause.
Lord Skelmersdale: I am grateful to the noble Baroness for that long, detailed explanation. I took in only about three quarters of it, so I shall have to read it most carefully.
I still think it somewhat odd that circumstances can be described under Clause 258 and not under Clause 257. It would be helpful to everyone to know from the very beginning where they stood, rather than waiting for the regulator to issue the code of practice. It goes without saying that a raft of regulations, statutory instruments, codes of practice and goodness knows what will flow from the Bill. I take the noble Baroness's point that she investigated the requirement for having prescribed circumstances in Clause 257 and has come to the conclusion that it is not necessary. If I come to the same conclusion, of course it will not be necessary to move an amendment on Report. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 257 agreed to.
Clause 258 agreed to.
Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 312B:
After Clause 258, insert the following new clause—
"WINDING UP
(1) For section 73 of the Pensions Act 1995 (c. 26) (preferential liabilities on winding up) substitute—

Official Report of the Grand Committee on the Pensions Bill

  73 PREFERENTIAL LIABILITIES ON WINDING UP
  (1) This section applies where an occupational pension scheme to which this section applies is being wound up to determine the order in which the assets of the scheme are to be applied towards satisfying the liabilities of the scheme in respect of pensions and other benefits.
  (2) This section applies to an occupational pension scheme other than a scheme which is—

  (a) a money purchase scheme, or

  (b) a prescribed scheme or a scheme of a prescribed description.

  (3) The assets of the scheme must be applied first towards satisfying the amounts of the liabilities mentioned in subsection (4) and, if the assets are insufficient to satisfy those amounts in full, then—

  (a) the assets must be applied first towards satisfying the amounts of the liabilities mentioned in earlier paragraphs of subsection (4) before the amounts of the liabilities mentioned in later paragraphs, and

  (b) where the amounts of the liabilities mentioned in one of those paragraphs cannot be satisfied in full, those amounts must be satisfied in the same proportions.

  (4) The liabilities referred to in subsection (3) are—

  (a) where—

  (i) the trustees or managers of the scheme are entitled to benefits under a relevant pre-1997 contract of insurance entered into in relation to the scheme, and

  (ii) either that contract may not he surrendered or the amount payable on surrender does not exceed the liability secured by the contract,

  the liability so secured;

  (b) any liability for pensions or other benefits to the extent that the amount of the liability does not exceed the corresponding PPF liability, other than a liability within paragraph (a);

  (c) any liability for pensions or other benefits which, in the opinion of the trustees or managers, are derived from the payment by any member of voluntary contributions, other than a liability within paragraph (a) or (b);

  (d) any other liability in respect of pensions or other benefits.

  (5) For the purposes of subsection (4)—
  "corresponding PPF liability" in relation to any liability for pensions or other benefits means—

  (a) where the liability is to a member of the scheme, the cost of securing benefits for or in respect of the member corresponding to the compensation which would be payable to or in respect of the member in accordance with the pension compensation provisions if the Board of the Pension Protection Fund assumed responsibility for the scheme in accordance with Chapter 3 of Part 2 of the Pensions Act 2004 (pension protection), and

  (b) where the liability is to another person in respect of a member of the scheme, the cost of securing benefits for that person corresponding to the compensation which would be payable to that person in respect of the member in accordance with the pension compensation provisions if the Board assumed responsibility for the scheme in accordance with that Chapter;

  "relevant pre-1997 contract of insurance" means a contract of insurance which was entered into before 6th April 1997 with a view to securing the whole or part of the scheme's liability for—

  (a) any pension or other benefit payable to or in respect of one particular person whose entitlement to payment of a pension or other benefit has arisen, and

  (b) any benefit which will be payable in respect of that person on his death.

  (6) For the purposes of this section, when determining the corresponding PPF liability in relation to any liability of a scheme to, or in respect of, a member for pensions or other benefits, the pension compensation provisions apply with such modifications as may be prescribed.
  (7) Regulations may modify subsection (4).
  (8) For the purposes of that subsection—

  (a) regulations may prescribe how it is to be determined whether a liability for pensions or other benefits which, in the opinion of the trustees or managers of the scheme, are derived from the payment by any member of voluntary contributions falls within paragraph (a) or (b) of that subsection;

  (b) no pension or other benefit which is attributable (directly or indirectly) to a pension credit is to be regarded for the purposes of paragraph (c) of that subsection as derived from the payment of voluntary contributions.

  (9) Where, on the commencement of the winding up period, a member becomes a person to whom Chapter 5 of Part 4 of the Pension Schemes Act 1993 (early leavers: cash transfer sums and contribution refunds) applies, that Chapter applies in relation to him with such modifications as may be prescribed.
  (10) For the purposes of this section—

  "assets" of a scheme to which this section applies do not include any assets representing the value of any rights in respect of money purchase benefits under the scheme rules;

  "liabilities" of such a scheme do not include any liabilities in respect of money purchase benefits under the scheme rules;

  "the pension compensation provisions" has the same meaning as in Part 2 of the Pensions Act 2004 (see section 153 of that Act);

  "scheme rules" has the same meaning as in the Pensions Act 2004 (see section 303 of that Act);

  "winding up period", in relation to an occupational pension scheme to which this section applies, means the period which—

  (a) begins with the day on which the time immediately after the beginning of the winding up of the scheme falls, and

  (b) ends when the winding up of the scheme is completed.

  73A OPERATION OF SCHEME DURING WINDING UP PERIOD
  (1) This section applies where an occupational pension scheme to which section 73 applies is being wound up.
  (2) During the winding up period, the trustees or managers of the scheme—

  (a) must secure that any pensions or other benefits (other than money purchase benefits) paid to or in respect of a member are reduced, so far as necessary, to reflect the liabilities of the scheme to or in respect of the member which will be satisfied in accordance with section 73, and

  (b) may, for the purposes of paragraph (a), take such steps as they consider appropriate (including steps adjusting future payments) to recover any overpayment or pay any shortfall.

  (3) During the winding up period—

  (a) no benefits may accrue under the scheme rules to, or in respect of, members of the scheme, and

  (b) no new members of any class may be admitted to the scheme.

  (4) Subsection (3) does not prevent any increase, in a benefit, which would otherwise accrue in accordance with the scheme or any enactment.
  (5) Subsection (3) does not prevent the accrual of money purchase benefits to the extent that they are derived from income or capital gains arising from the investment of payments which are made by, or in respect of, a member of the scheme.
  (6) Where a person is entitled to a pension credit derived from another person's shareable rights under the scheme, subsection (3) does not prevent the trustees or managers of the scheme discharging their liability in respect of the credit under Chapter 1 of Part 4 of the Welfare Reform and Pensions Act 1999 (sharing of rights under pension arrangements) by conferring appropriate rights under the scheme on that person.
  (7) Regulations may require the trustees or managers of the scheme, in prescribed circumstances—

  (a) to adjust the entitlement of a person to a pension or other benefit under the scheme rules where the entitlement arises as a result of a discretionary award which takes effect during the winding up period;

  (b) to adjust the entitlement of a person ("the survivor") to a pension or other benefit under the scheme rules where—

  (i) a member of the scheme, or a person who was (or might have become) entitled to a pension or other benefit in respect of a member, dies during the winding up period, and

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  (ii) the survivor's entitlement is to a pension or other benefit in respect of the member (whether arising on the date of that death or subsequently).

  (8) Regulations under subsection (7) may, in particular—

  (a) prescribe how the required adjustments to entitlement are to be determined and the manner in which they are to be made;

  (b) in a case where the commencement of the winding up of the scheme is backdated (whether in accordance with section 145 of the Pensions Act 2004 (requirement to wind up schemes with sufficient assets to meet protected liabilities) or otherwise), require any adjustment to a person's entitlement to be made with effect from the time the award takes effect;

  (c) without prejudice to sections 10(3) to (9), 73B(2) and 116, make provision about the consequences of breaching the requirements of the regulations.

  (9) If the scheme confers power on any person other than the trustees or managers of the scheme to apply the assets of the scheme in respect of pensions or other benefits (including increases in pensions or benefits), it cannot be exercised by that person but may, subject to the provisions made by or by virtue of this section and sections 73 and 73B, be exercised instead by the trustees or managers.
  (10) For the purposes of this section—

  "appropriate rights" has the same meaning as in paragraph 5 of Schedule 5 to the Welfare Reform and Pensions Act 1999 (pension credits: mode of discharge);

  "discretionary award" means an award of a prescribed description;

  "shareable rights" has the same meaning as in Chapter 1 of Part 4 of the Welfare Reform and Pensions Act 1999 (sharing of rights under pension arrangements);

  and subsection (10) of section 73 applies as it applies for the purposes of that section.

  73B SECTIONS 73 AND 73A: SUPPLEMENTARY
  (1) Any action taken in contravention of section 73A(3) is void.
  (2) If any provision made by or by virtue of the winding up provisions is not complied with in relation to a scheme to which section 73 applies, section 10 applies to any trustee or manager of the scheme who has failed to take all reasonable steps to secure compliance.
  (3) For the purposes of subsection (2), when determining whether section 73A(3) has been complied with subsection (1) of this section is to be disregarded.
  (4) Regulations may—

  (a) prescribe how, for the purposes of the winding up provisions—

  (i) the assets and liabilities of a scheme to which section 73 applies, and

  (ii) their value or amount,

  are to be determined, calculated and verified;

  (b) modify any of the winding up provisions as it applies—

  (i) to prescribed schemes or prescribed descriptions of schemes;

  (ii) in relation to a scheme where only part of the scheme is being wound up;

  (iii) in relation to a case where any liability of the scheme in respect of a member has been discharged by virtue of regulations under section 127(4) of the Pensions Act 2004 (power to make regulations permitting discharge of scheme's liabilities during an assessment period).

  (5) Without prejudice to the generality of subsection (4), regulations under paragraph (b)(i) of that subsection may, in particular, modify any of the winding up provisions as it applies in relation to a scheme in relation to which there is more than one employer.
  (6) The winding up provisions do not apply—

  (a) in relation to any liability for an amount by way of pensions or other benefits which a person became entitled to payment of, under the scheme rules, before commencement of the winding up period,

  (b) in prescribed circumstances, in relation to any liability in respect of rights of a prescribed description to which a member of the scheme became entitled under the scheme rules by reason of his pensionable service under the scheme terminating before the commencement of the winding up period,

  (c) in relation to any liability in respect of rights of prescribed descriptions to which a member of the scheme had become entitled under the scheme rules before the commencement of the winding up period, or

  (d) in relation to any liability the discharge of which is validated under section 128 of the Pensions Act 2004 (power to validate actions taken during an assessment period to discharge liabilities of a scheme).

  (7) But nothing in subsection (6) prevents the winding up provisions applying in relation to a liability under Chapter 4 of Part 4 of the Pension Schemes Act 1993 (transfer values) which—

  (a) arose before the commencement of the winding up of the scheme, and

  (b) was not discharged before the commencement of the winding up period.

  (8) Regulations may provide that, in prescribed circumstances, where—

  (a) an occupational pension scheme to which section 73 applies is being wound up,

  (b) a member of the scheme died before the winding up began, and

  (c) during the winding up period a person becomes entitled under the scheme rules to a benefit of a prescribed description in respect of the member,

  his entitlement to payment of all or part of the benefit is, for the purposes of subsection (6), to be treated as having arisen immediately before the commencement of the winding up period.
  (9) If, immediately before the winding up period in relation to an occupational pension scheme to which section 73 applies, a person is entitled to an amount but has postponed payment of it, he is not, for the purposes of subsection (6), to be regarded as having become entitled to payment of the amount before that period.
  (10) For the purposes of this section—

  (a) "winding up provisions" means this section and sections 73, 73A and 74, and

  (b) subsection (10) of section 73 applies as it applies for the purposes of that section."

  (2) In section 74 of the Pensions Act 1995 (c. 26) (discharge of liabilities by insurance, etc on winding up)—
  (a) for subsection (1) substitute—
  "(1) This section applies where an occupational pension scheme to which section 73 applies is being wound up.",
  (b) in subsection (2) omit "(including increases in pensions)",
  (c) in subsection (3), after paragraph (d) insert—
  "(e) by the payment of a cash sum in circumstances where prescribed requirements are met.",
  (d) in subsection (4)—

  (i) for "rules of the scheme" substitute "scheme rules", and

  (ii) omit "(including increases in pensions)",

  (e)omit subsection (5)(b) and the word "or" immediately preceding it, and
  (f) after subsection (5) insert—
  "(6) For the purposes of this section—

  (a) references to assets of the scheme do not include any assets representing the value of any rights in respect of money purchase benefits under the scheme rules, and

  (b) references to liabilities of the scheme do not include any liabilities in respect of money purchase benefits under the scheme rules;

  and "scheme rules" has the same meaning as in the Pensions Act 2004 (see section 303 of that Act).""
  On Question, amendment agreed to.
  Clause 259 [Debt due from the employer when assets insufficient]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 312C:
  Page 192, leave out lines 24 to 29 and insert—

  "(a) either—

  (i) no relevant event within subsection (6A)(a) or (b) occurred in relation to the employer during the period beginning with the appointed day and ending with the commencement of the winding up of the scheme, or

  (ii) during the period—

  (a) beginning with the occurrence of the last such relevant event which occurred during the period mentioned in sub-paragraph (i), and

  (b) ending with the commencement of the winding up of the scheme,

  a cessation notice was issued in relation to the scheme and became binding, and

  (b) no relevant event within subsection (6A)(c) has occurred in relation to the employer during the period mentioned in paragraph (a)(i)."

  The noble Baroness said: In moving this amendment, I shall speak also to Amendments Nos. 312D to 312N, which amend Clause 259. Clause 259 amends Section 75 of the Pensions Act 1995, which contains provisions for placing a debt on sponsoring employers if there is a deficiency in the assets of their salary-related occupational pension scheme. At present, a debt can become due from the sponsoring employer should their scheme wind up or should they become insolvent. Clause 259 amends Section 75 so that a debt can arise on the sponsoring employer if that employer experiences a "relevant event". A "relevant event" includes insolvency events, as defined in Clause 115, which we have already discussed. Clause 259 changes the definition of insolvency events used by Section 75 so that the employer debt provisions are aligned with provisions on the Pension Protection Fund (PPF).
  As well as the insolvency of a scheme's sponsoring employer, a relevant event can be an application or notification made to the board of the PPF by, or in respect of, a scheme. An application or notification would be made in circumstances where the future of the sponsoring employer as an ongoing concern was in doubt.
  The reason for the amendments to the clause, which in turn amends the Act, is that there is an event not included in the PPF definition of insolvency events, which is currently covered under the employer debt provisions, and which still needs to be covered for employer debt purposes: when the sponsoring company goes into a members' voluntary liquidation (MVL). The amendments alter Clause 259 so that the relevant events applicable for the employer debt provisions include when the sponsoring company goes into a MVL. An MVL is a solvent liquidation where the company's shareholders appoint a liquidator to realise the company's assets and settle all its debts in full within 12 months. Companies usually use MVLs when the company is solvent but is no longer required; for example, following a group restructuring.
  The involvement of the board of the PPF with a scheme is not triggered where the sponsoring employer has been through this type of insolvency event. That is because the sponsoring company is solvent and should, therefore, be responsible for maintaining the funding position of the scheme. However, to ensure that a debt can arise on the sponsoring employer when an MVL occurs, if the pension scheme is underfunded, provision is still needed in Section 75 to cover MVLs.
  4.15 p.m.
  The amendments also deal with notices issued by an insolvency practitioner that become binding. That reflects the changes—which the noble Lord, Lord Hunt of Wirral, encouraged—made in Part 2 of the Bill which we debated, starting with Clause 116, to recognise that insolvency practitioner notices must be binding to take effect. Clause 116 deals with the insolvency practitioner's duty to issue notices confirming the status of schemes.
  The change to Clause 259 is consequential to the amendments and is required so that the provisions on employer debt are consistent with those for the Pension Protection Fund. For the board of the PPF to be able to assume responsibility for eligible schemes, the sponsoring employer must have gone through a qualifying relevant event, which includes an insolvency event, and the insolvency practitioner dealing with that employer must have issued a notice stating what will happen to the scheme. The amendments set out that those notices must be binding to have effect.
  With that rather lengthy, technical description, I hope that the Committee will accept the amendments. I beg to move.
  Lord Hunt of Wirral: I thank the Minister for coming forward with these useful provisions. Further to my remarks at the outset, there was great anticipation before this Bill was produced that we would see a much wider, larger pensions Bill. No doubt, that will proceed at some stage. My point earlier was not to negate the importance of the technical provisions, which I excluded from my comments, but to say that in certain parts of the Bill we are straying into areas which would find a better home
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  in a much wider, larger Bill to simplify the whole system. I did not want in any way to detract from the Minister's willingness constantly to look at these very technical issues and to come forward with some positive proposals, for which I thank her.
  Lord Higgins: In the hope that we shall not need to debate the Question whether Clause 259 shall stand part, perhaps I might respond to the noble Baroness's remarks. I imagine that at present many defined benefit schemes are in deficit. So, as I understand it, all the provisions in the clause apply only to a scheme that is in wind-up. Therefore, there might be a case for making that clear in the heading.
  I was surprised to find reference at line 16 of page 192 to "liabilities". I thought that, due to the European directive and so on, one had to describe such things as technical provisions. There seems to be inconsistency in that regard. Both of those are drafting points, but I wish to raise three substantive points.
  First, does this change the priorities in wind-up? Secondly, I understand the point made about members' voluntary liquidations, which I normally regard with great suspicion, unless there is clearly no longer a need for the scheme. We have already discussed on several occasions the case of Nikko bank. I am not sure whether this clause will make it easier to deal with such problems as resulted from how Nikko bank appeared to operate its pension schemes. Finally, is this relevant at all to the cost regarding the financial assistance scheme? The financial assistance scheme, dealt with in Part 6, concerns schemes that have been wound up or that are in the course of winding up. I am not sure whether anything in this clause would enable the Government to reduce the extent to which they help out pensioners under the financial assistance scheme.
  Baroness Hollis of Heigham: First, I thank the noble Lord, Lord Hunt, for his courteous adjustment of the battering he gave the Government earlier. Following the further report from Adair Turner, there will certainly be a need for further reflection, and there may well be a need for further reconsideration of the structure of the pension schemes.
  Returning to the noble Lord's original point—I shall stop banging on about the wider pension schemes unless provoked by Members opposite—given that pensions are a 40-year project, he is absolutely right that unless we achieve consensus they will not have staying power. Each scheme will last about 10 years and be dumped and people will have an accretion of state-type rights—SERPS, S2P, this that and the other. In the same way as with deferred pensions, they will have an accretion of cash-value transfers from schemes in their employment.
  After looking at the press commentary—as we have all done—with regard to the Liberal Democrat proposals, the Conservative proposals and the Labour Party proposals, it would seem that although there is a fairly broad consensus as to what the issues are, there is not yet a clear consensus on issues such as compulsion. There are divergent views on compulsion. There is not a clear view

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  about the weight that could and should be carried by the tax and national insurance system. There is certainly a divergent view about whether we should raise the retirement age, as opposed to everyone's agreement that we should get more people between the ages of 55 and 65 into the labour market.
  Frankly, until we have addressed those major issues and found some consensus on the way forward, only then could any government of any complexion introduce a Bill that has a reasonable chance of meeting the pensions crisis. As Adair Turner said, although some people are in crisis now, this will affect a greater and much more significant tranche of people in 20 or 25 years' time. There is not a lack of political will, hard work or applied intelligence; there is a need for all of us to share a common direction.
  Over the past six months, we have seen agreement on what the issues are. I am not confident that on the bigger issues there is yet a consensus on which any of us could build. That consensus may emerge over the next 12 months—I suspect that Adair Turner's report will take us a long way towards it—but that is where we are at the moment. So it is not reasonable to criticise us for not introducing a more comprehensive Bill at this stage.
  Returning to the points made by the noble Lord, Lord Higgins, the provisions apply both to schemes that are in wind-up and to schemes where the input-sponsoring employer has had a relevant event. The intention of the clause is to amend current provisions that ensure that schemes are as well funded as possible when a scheme starts to wind up. They have not been introduced to support FAS. No decisions have yet been made as to what will be the status of schemes which have solvent employers but are underfunded in a situation where employees' benefits may be at risk.
  The term "technical provision" is taken from the European directive specifically for the purpose of certification by scheme actuaries. Elsewhere we believe "liabilities" should suffice. But if the noble Lord wishes to go back through all of this, no doubt we can have another go.
  I do not know whether the noble Lord wishes me to discuss the situation of Nikko European plc. I have some briefing help here but I am not sure that it is particularly relevant to the point that he was making. There is, indeed, an MVL liquidation.
  Lord Higgins: As I understand it, the problem with Nikko was that the subsidiary company went into a members' voluntary liquidation—I am rather inclined to put that in quotes—and consequently the kind of debt covered by the clause was not, in effect, recoverable. That may be the wrong way to put it. Perhaps on the Nikko matter the noble Baroness could let me have a note and we can, if need be, return to it later. I am not sure whether it will arise later on in the Bill.
  Baroness Hollis of Heigham: My difficulty is that we are dealing with what is, I suppose, regarded as commercially sensitive material. My understanding is that the independent trustees have asked Nikko to
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  address the shortfall. Nikko is waiting to see what the final deficit is before making a decision about whether there is a possibility of topping up the fund. I am happy to go beyond that for the noble Lord on Privy Council terms, but I have some embarrassment about doing so here, because of some of the information that we have. I am not sure what I am allowed publicly to reveal, but I am happy to brief the noble Lord on Privy Council terms, as I know that the matter is of particular concern to him.
  The public position is that, as and when it is aware of the final deficit, the company will consider whether it may top up the scheme. I am hesitant to go beyond that.
  Viscount Trenchard: I have a supplementary question for the Minister about Nikko. I have had several letters from members of the Nikko pension scheme.
  The noble Baroness just said that the members would find out what the deficit was and then decide. It is difficult for the members to decide if they do not know what alternatives they can choose between. It would be better for the members if Nikko were to decide earlier.
  Baroness Hollis of Heigham: I am sure that that point has been registered, but the noble Viscount will understand if I do not go down that line any further. His point is on the record.
  Baroness Turner of Camden: It may not be the right place to raise the issue, but I am sure that several of us will have had letters from pension scheme members who complain that their scheme has been wound up while the company is still solvent.
  We are discussing an amendment that deals with wind-up. I have had letters—I am sure that others have too—in which people have told me that their schemes have been wound up while the company was solvent and that, as far as they could see, the legislation did not cover their situation, particularly if the scheme went into wind-up prior to 11/6/03. They feel that they have been left in a sort of gap where there is no cover for them. A date has been set in respect of this kind of operation, and those people feel that they have no redress, as they are outside the timeframe. Has my noble friend any comment on that? Is this the right place to raise that matter, or is there another place later on? I gather that there is a Liberal Democrat amendment that deals with the issue to some extent.
  Baroness Hollis of Heigham: I am anticipating a debate when we get to FAS. All that I can say at this stage is that it is one of the issues under consideration.
  I also remind the Committee that there is an issue of moral hazard, if there is a belief or understanding that the Government will pick up a scheme, if it comes under FAS, when the employer is solvent. There is an issue there about government, taxpayers—people without DB schemes or even occupational pension schemes—picking up the bill for something that an

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  employer could, to a greater or lesser degree, remedy and was part of the initial pension promise. That is a difficulty.
  We have not yet seen how we can walk that tightrope. We are aware that it means that some employees will be left unprotected. However, the last thing that we want to do is send out a signal that companies can wind up and walk away and the Government will somehow pick up the tab. In anticipation of some of the amendments that we will discuss later, I ask my noble friend to recognise that it is a difficult problem without any obvious answers at this stage. We are still working on it.
  On Question, amendment agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 312D to 312L:
  Page 192, line 31, leave out "qualifying relevant event" and insert "relevant event ("the current event")"
  Page 192, line 34, leave out "and" and insert"—
  "( ) the current event—

  (i) occurred on or after the appointed day, and

  (ii) did not occur in prescribed circumstances,"

  Page 192, line 38, at end insert—
  "(c) if the current event is within subsection (6A)(a) or (b), either—

  (i) no relevant event within subsection (6A)(a) or (b) occurred in relation to the employer during the period beginning with the appointed day and ending immediately before the current event, or

  (ii) a cessation event has occurred in relation to the scheme in respect of a cessation notice issued during the period—

  (a) beginning with the occurrence of the last such relevant event which occurred during the period mentioned in sub-paragraph (i), and

  (b) ending immediately before the current event, and

  (d) no relevant event within subsection (6A)(c) has occurred in relation to the employer during the period mentioned in paragraph (c)(i),"
  Page 192, line 41, leave out "A" and insert "Where the current event is within subsection (6A)(a) or (b), the"
  Page 192, line 43, leave out "qualifying relevant" and insert "current"
  Page 192, line 43, at end insert—
  "(4AA) Subsection (4B) applies if, in a case within subsection (4)—

  (a) the current event is within subsection (6A)(a) or (b), and

  (b) the scheme was not being wound up immediately before that event."

  Page 192, line 44, leave out from beginning to first "the" in line 45 and insert "Where this subsection applies"
  Page 193, leave out lines 1 to 15 and insert—
  "(a) a scheme failure notice being issued in relation to the scheme after the current event and the following conditions being satisfied—

  (i) the scheme failure notice is binding,

  (ii) no relevant event within subsection (6A)(c) has occurred in relation to the employer before the scheme failure notice became binding, and

  (iii) a cessation event has not occurred in relation to the scheme in respect of a cessation notice issued during the period

  (a) beginning with the occurrence of the current event, and

  (b) ending immediately before the issuing of the scheme failure notice,

  and the occurrence of such a cessation event in respect of a cessation notice issued during that period is not a possibility, or

  (b) the commencement of the winding up of the scheme before—

  (i) any scheme failure notice or cessation notice issued in relation to the scheme becomes binding, or

  (ii) any relevant event within subsection (6A)(c) occurs in relation to the employer.""

  On Question, amendments agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 312M:
  Page 193, line 16, at end insert—
  "( ) In subsection (6)—

  (a) after "scheme" insert "rules", and

  (b) at the end insert—

  "In this subsection "scheme rules" has the same meaning as in the Pensions Act 2004 (see section 303 of that Act).""
  On Question, amendment agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 312N:
  Page 193, line 17, leave out subsection (4) and insert—
  "(4) After subsection (6) insert—
  "(6A) For the purposes of this section, a relevant event occurs in relation to the employer in relation to an occupational pension scheme if and when—

  (a) an insolvency event occurs in relation to the employer,

  (b) the trustees or managers of the scheme make an application under subsection (1) of section 121 of the Pensions Act 2004 ("the 2004 Act") or receive a notice from the Board of the Pension Protection Fund under subsection (5)(a) of that section, or

  (c) a resolution is passed for a voluntary winding up of the employer in a case where a declaration of solvency has been made under section 89 of the Insolvency Act 1986 (members' voluntary winding up).

  (6B) For the purposes of this section—

  (a) a "cessation notice", in the case of a relevant event within subsection (6A)(a), means—

  (i) a withdrawal notice issued under section 116(2)(b) of the 2004 Act (scheme rescue has occurred);

  (ii) a withdrawal notice issued under section (Withdrawal following issue of section 116(4) notice) of that Act (no insolvency event has occurred or is likely to occur);

  (iii) a notice issued under section 116(4) of that Act (inability to confirm status of scheme) in a case where the notice has become binding and section (Withdrawal following issue of section 116(4) notice) of that Act does not apply,

  (b) a "cessation notice" in the case of a relevant event within subsection (6A)(b), means a withdrawal notice issued under section 122(3) of the 2004 Act (scheme rescue has occurred),

  (c) a cessation event occurs in relation to a scheme when a cessation notice in relation to the scheme becomes binding,

  (d) the occurrence of a cessation event in relation to a scheme in respect of a cessation notice issued during a particular period ("the specified period") is a possibility until each of the following are no longer reviewable—

  (i) any cessation notice which has been issued in relation to the scheme during the specified period;

  (ii) any failure to issue such a cessation notice during the specified period;

  (iii) any notice which has been issued by the Board under Chapter 2 or 3 of Part 2 of the 2004 Act which is relevant to the issue of a cessation notice in relation to the scheme during the specified period or to such a cessation notice which has been issued during that period becoming binding;

  (iv) any failure to issue such a notice as is mentioned in sub-paragraph (iii),

  (e) the issue or failure to issue a notice is to be regarded as reviewable—

  (i) during the period within which it may be reviewed by virtue of Chapter 6 of Part 2 of the 2004 Act, and

  (ii) if the matter is so reviewed, until—

  (a) the review and any reconsideration,

  (b) any reference to the Ombudsman for the Board of the Pension Protection Fund in respect of the matter, and

  (c) any appeal against his determination or directions,

  has been finally disposed of, and

  (f) a "scheme failure notice" means a scheme failure notice issued under section 116(2)(a) or 122(2) of the 2004 Act (scheme rescue not possible).

  (6C) For the purposes of this section—

  (a) section 115 of the 2004 Act applies for the purposes of determining if and when an insolvency event has occurred in relation to the employer,

  (b) "appointed day" means the day appointed under section 118(2) of the 2004 Act (no pension protection under Chapter 3 of Part 2 of that Act if the scheme begins winding up before the day appointed by the Secretary of State),

  (c) references to a relevant event in relation to an employer do not include a relevant event which occurred in relation to him before he became the employer in relation to the scheme,

  (d) references to a cessation notice becoming binding are to the notice in question mentioned in subsection (6B)(a) or (b) and issued under Part 2 of the 2004 Act becoming binding within the meaning given in that Part of that Act, and

  (e) references to a scheme failure notice becoming binding are to the notice in question mentioned in subsection (6B)(f) and issued under Part 2 of the 2004 Act becoming binding within the meaning given in that Part of that Act.

  (6D) Where—

  (a) a resolution is passed for a voluntary winding up of the employer in a case where a declaration of solvency has been made under section 89 of the Insolvency Act 1986 (members' voluntary winding up), and

  (b) either—

  (i) the voluntary winding up of the employer is stayed other than in prescribed circumstances, or

  (ii) a meeting of creditors is held in relation to the employer under section 95 of that Act (creditors' meeting which has the effect of converting a members' voluntary winding up into a creditors' voluntary winding up),

  this section has effect as if that resolution had never been passed and any debt which arose under this section by virtue of the passing of that resolution shall be treated as if it had never arisen.""
  On Question, amendment agreed to.
  Clause 259, as amended, agreed to.
  4.30 p.m.
  Clause 260 [Debt due from employer in the case of multi-employer schemes]:
  Lord Skelmersdale Lord Skelmersdale moved Amendment No. 312P:
  Page 195, line 44, leave out from beginning to end of line 12 on page 196.
  The noble Lord said: We now move to the nightmare scenario of looking at multi-employer schemes and what happens when the employer becomes a "less multi-employer", for want of a better way of putting it. This clause would insert a new section after Section 75 of the Pensions Act 1995, which does not mention multi-employer schemes per se but treats them in a global fashion with every other scheme. At that point, it is fair enough.
  However, the amendment concerns proposed subsection (12), with which my noble friend and I had some problems. Subsection (12)(a) states that the regulations must,
  "provide for how the sum specified by the Authority in a contribution notice is to be determined",
  and,
  "the circumstances … in which a person to whom a contribution notice is issued is jointly and severally liable for the debt".
  They must also state what matters the notice must contain and provide for who may exercise the powers.
  The circumstances will be different in each case. I do not know whether the noble Baroness, Lady Hollis, has figures on how many multi-employer schemes we might be talking about. I suspect that the situation is rare compared to many of the other schemes that we have been talking about over the past few weeks. Each case will be different and the facts will pertain to that scheme. It worries us that, since the sum will vary each time, we might get a string of very specific and generally unnecessary orders. Alternatively, is it intended that there shall be one order, updated periodically as statutory instruments are, to cover global matters but allowing for schemes to be individually tailored?
  Much more seriously, proposed subsection (12)(b) allows for the modification of Sections 42 to 46 of the Act by statutory instrument. I do not approve of that in general. I will not make an issue of it now, but depending on the noble Baroness's answer to my next question, I might well do at the next stage. My question is simple: in what circumstance can she envisage that it would be necessary to exercise that power? At this point, we should have some idea of what may be going on. I beg to move.
  Baroness Hollis of Heigham: Clause 260 reforms the position in relation to the application of debt on withdrawal from associated multi-employer schemes. As the noble Lord will understand, employers do not want to be left as the last man standing, bearing all the pension debt.
  The current legislation on withdrawal from multi-employer schemes provides for circumstances where, provided that there are other companies left in such a scheme, a company can withdraw from the scheme and cease to be a sponsoring employer so that it will not be liable for any shortfall if the scheme winds up in the future. Employers can currently do that relatively cheaply, as the withdrawal debt is based on the minimum funding requirement (MFR). Of course the problem with that is that any shortfall then has to be met by the last employer remaining in the scheme, something that is not always possible. That is the dilemma. That would mean that the pension promise was not met, with consequent issues for the PPF. Clause 260 therefore allows for Section 75 of the Pensions Act 1995 to be modified to provide flexibility in calculating the Section 75 debt when a participating employer withdraws from a multi-employer scheme with associated employers.
  The detail of that provision will be set out in regulations; that mirrors the approach taken in legislation governing multi-employer schemes where provision is made in secondary legislation to reflect the diverse and complex nature of these schemes. In a sense, that answers the noble Lord's second question. The regulation-making powers contained in the clause will provide that a full buy-out debt will be triggered on withdrawal unless the withdrawing employer puts in place an appropriate financial support arrangement approved by the Pensions Regulator. Once appropriate arrangements are in place, the debt will be recalculated and a scheme-specific debt will be payable.
  The financial support arrangements put in place are likely to be similar to the arrangements that may be put in place under Clause 41. However, anyone named in an arrangement under this clause must agree to it. In other words, the residual employer must sign up. That is because in that situation members' benefits are protected by the full buy-out debt applying. The employer who wishes to withdraw and not pay that debt must put the arrangements in place.
  Financial arrangements may include joint and several liability for pension liabilities across the whole company group, so that the debt on the employer in the event that the scheme should wind up in the future could be claimed against any member of the group. Alternatively, the ultimate parent company in the group, whether participating in the scheme or not, could agree to meet the withdrawing employer's pension liabilities should the scheme wind up in the future. In addition, there will also be the option to transfer pension liabilities to an appropriate new scheme when the employer withdraws. That could also reduce in some cases the debt. That is how we envisage ourselves proceeding.
  Section 12, which the amendment seeks to remove, provides that where regulations provide for the issue of a contribution notice in the event that the arrangements break down or are not appropriate, they must provide for: how the sum specified in a contribution notice is to be determined; the circumstances in which a person to whom a contribution notice is issued is jointly and severally liable for the debt; the matters which the notice must contain; and who may exercise the powers to recover the debt due by virtue of the contribution notice.
  Those regulations are necessary, and their application will be tailored so that those involved in multi-employer schemes are clear about how the power will be exercised and how the sum due will be calculated. As I have said, because of the complexity of multi-employer schemes, it is important that those details are put in regulations rather than primary legislation.
  The purpose of subsection (12)(a)(iv) is that those named in the appropriate arrangements will know how the sum in the contribution is to be issued. Clause 42 may be modified using these powers; for example, a person may be asked to guarantee the debt. I think that that answers the noble Lord's queries. By virtue of the complexity of the scheme the provisions must be made in regulations rather than primary legislation. They will certainly be tailored to fit the individual circumstances of

  GC 85
  the scheme. The big issue that we need to address is to ensure that no employer may withdraw from the pension liabilities unless there is an acceptable alternative resource for that liability to be met.
  Lord Skelmersdale: I think that I am grateful to the noble Baroness, as far as she goes. She said that the regulations would be tailored. I suggested in my opening remarks that every scheme that withdrew would be in a different situation. My real question was whether the regulations would be of a global fashion but subsequently tailored to each scheme as they came out of the multi-employer schemes, or whether we would have a string of statutory instruments. I have not yet understood which of those two scenarios is the more likely.
  New Section 75A(12)(b) states that,
  "the regulations may apply with or without modifications some or all of the provisions of sections 42 to 46 of the Pensions Act 2004".
  I can understand that if you have a "tailored scheme", to use the words of the noble Baroness, it may be necessary to override some of these provisions in the Act. But, as I read paragraph (b), it is possible to totally redraft them. I asked in what circumstances the Minister thought that this power might need to be exercised.
  Baroness Hollis of Heigham: As always, the regulations are global, in the sense that they empower the regulator. How the regulator applies it will be for it to determine, which is where it gets tailored. I am sorry, I just thought that that was self-evident because we agree that every scheme is different, therefore, each one will not need to come to the House as a separate statutory instrument. That would be absolutely impossible. Which party, the amount of moneys, the proportions and all those sorts of things will be for the regulator. This provision empowers the regulator.
  Baroness Hollis of Heigham: As for the circumstances, the example I have been given is that A, B, C, D and E are in multi-employer schemes. A is issued a financial support direction which currently would have to be for the debt of all. The amendment would limit it to A's debt only. So the point about the regulation is that you would be stuck if you had joint and several liability. That is the reason you would need this regulatory power. Let me follow up the matter with a letter to ensure that there is no ambiguity before Report.
  Lord Skelmersdale: I would be extremely grateful for a letter. Although I understood the example the noble Baroness has just given, I do not think that it covers the point I was seeking to make. Perhaps if we both look at Hansard and have an exchange of correspondence we might get somewhere. I strongly believe that unless there is a good reason for it, statutory instruments should not change primary legislation. Therefore, when the power is asked for in a Bill of this sort, we ought to have at least some concrete examples of where it might be necessary, and to see whether the power is reasonable. Having said that, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 260 agreed to.
  Clause 261 [Resolution of disputes]:
  Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 313:
  Page 197, line 1, at end insert—
  "( ) The trustees or managers may provide for the informal resolution of questions, or for conciliation, in accordance with a code of practice issued by the Regulator pursuant to section 84(1) before a dispute is referred to the trustees or managers."
  The noble Baroness said: It is possible that while I was away some of this might have been dealt with already. As I understand it, the Bill simplifies the existing requirements for IDR procedures, principally by removing the requirement for a two-stage process. The change is driven by simplification and a view that the present process is too complex and time-consuming.
  The amendment, however, takes the view that a single formal stage will realise these advantages only if it is supported by informal procedures. It seeks to achieve that by requiring the regulator to produce a code of practice as provided for in Clause 84, commending this and by commending the use of informal procedures.
  I have been asked to put the amendment to the Committee by my union, based on its experience of representing members. It tells me that the nature of many complaints is that the member, while dissatisfied, may have very little conception as to the full facts and rules that are relevant to his case. In the era before IDRs were required companies often fobbed off complainants summarily.
  4.45 p.m.
  The key advantage of the two-stage procedure was that it allowed the complainant to make what might be called an uninformed complaint and guaranteed him or her a reasoned response; that is, an explanation, reference to the rules, and so on. He or she could then bring an informed complaint at a second stage if not satisfied. Often, the second stage was not so much an appeal as an elaboration of the original complaint, which might well include information not previously known.
  The purpose of commending informal procedures is to try to retain the essential advantages of a two-stage system while meeting the objectives of simplification. This is a very simple amendment based on the experience of people who have been involved in representing members and dealing with their complaints in occupational schemes. I therefore commend it to the Committee. I beg to move.
  Baroness Hollis of Heigham: I thank my noble friend for her amendment. I am not sure how much disagreement there is between us. Her amendment would provide that trustees may provide for informal procedures or conciliation in accordance with a code of practice to be issued by the regulator. Currently, all occupational pension schemes are required to have formal arrangements in place for dealing with complaints and disputes. Normally, that is a two-stage process. We have had representations made to us that,

  GC 87
  while that is obviously satisfactory for public-sector or large schemes, it is often unwieldy, cumbersome and inappropriate for small schemes.
  Clause 261 removes the detail. We hope that it provides an effective framework for the resolution of disputes while allowing trustees to adopt procedures best suited to their scheme. We do not think that we need to have regulations that set out what needs to happen. My noble friend's amendment would permit trustees or managers to enable questions to be dealt with informally before they are referred as disputes to the trustees. Very often, wisely, they will seek union advice.
  I am sure that that is what takes place in the normal course of events. It is only when informal inquiries cannot be settled that they become formal complaints and disputes. But I do not envisage any need for a code of practice to deal with normal day-to-day inquiries and questions that arise in pension schemes.
  Do we need a code of practice? There is nothing to stop specific schemes developing procedures that involve informal resolutions. It is right for them to do so within the context of their own schemes. In future, if it is felt that guidance in relation to any informal process is appropriate, the regulator may consider issuing practical advice. It is one of the situations where the regulator could certainly do so should the concerns that the noble Baroness has expressed become clear and need to be resolved in that way.
  Certainly, at the moment we feel that it is unnecessary to require the regulator to do that before we know that there is a problem he must address. But if my noble friend is right and the union's fears are reflected, I would expect the regulator to issue such a code of practice in due course.
  Baroness Turner of Camden: I thank my noble friend for that explanation. Of course, the union was a bit concerned without it; if it was not in a code of practice or written down somewhere, it simply would not happen. That is why the union suggested that we had it written into a code of practice. However, I note what my noble friend has said: that if it becomes necessary, it will be looked at again. On that basis, I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Clause 261 agreed to.
  Clause 262 [The Pensions Ombudsman and Deputy Pensions Ombudsmen]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 313A and 313AA:
  Page 200, line 8, at end insert—
  "(6) The persons to whom section 1 of the Superannuation Act 1972 (c. 11) (persons to or in respect of whom benefits may be provided by schemes under that section) applies are to include a deputy to the Pensions Ombudsman.
  (7) The Pensions Ombudsman must pay to the Minister for the Civil Service, at such times as he may direct, such sums as he may determine in respect of the increase attributable to subsection (6) in the sums payable out of money provided by Parliament under that Act."
  Page 200, line 8, at end insert—
  "( ) The Pensions Ombudsman must also pay to the Minister for the Civil Service, at such times as he may direct, such sums as he may determine in respect of the amount payable out of money provided by Parliament under that Act which is attributable to the following persons being persons to whom section 1 of that Act applies—

  (a) the Pensions Ombudsman;

  (b) the employees of the Pensions Ombudsman."

  On Question, amendments agreed to.
  On Question, Whether Clause 262, as amended, shall stand part of the Bill?
  Lord Higgins: In earlier discussions on the role of the pensions ombudsman and so forth I referred to a letter forwarded to me from a constituent of Mr Ian Taylor MP. First, I thank the noble Baroness for her reply to that letter. Am I right in thinking that, effectively, this clause does not change the role, scope or discretion of the ombudsman but merely increases "an ombudsman" to "an ombudsman and deputy pensions ombudsmen"? If that is the case, I have only the same question as previously: will he get a non-contributory, index-linked final salary pension?
  Baroness Hollis of Heigham: Yes and yes.
  Lord Higgins: The noble Baroness might be well advised to look at the press today with regard to those who are happy enough to be in that situation. But I note what the noble Baroness says and we may wish to return to the issue.
  Clause 262, as amended, agreed to.
  Clause 263 agreed to.
  Clause 264 [Investigations]:
  On Question, Whether Clause 264 shall stand part of the Bill?
  Lord Skelmersdale: Basically, this clause gets rid of bits of previous legislation originating in the Pension Schemes Act 1993, as revamped by the Child Support, Pensions and Social Security Act 2000. Clause 264(2) would "omit the following provisions". I shall not go through what they do because that is not the point of the problem.
  The Bill states that these are to be repealed only,
  "to the extent that those amendments made by section 54 of the 2000 Act have been brought into force for the purpose of making regulations and rules".
  But the Explanatory Notes state that none of them has been brought into effect. So, once again, I am confused and would be grateful for an answer.
  Baroness Hollis of Heigham: I thought that this was an interesting issue, but I was intrigued that the noble Lord did not raise it. Under the Act, we originally sought to establish a way of involving what I call, not exactly class actions, but third parties affected by a decision of the ombudsman. I think that some of your Lordships were involved. The ombudsman would have a relationship with an individual, but his decision might have ramifications for other people not affected by that individual. In the 2000 Act we were trying to encompass that situation.
  I do not think that anyone, including the Opposition, said it at the time, but, effectively, it has turned out to be unworkable: the ombudsman has not been able to establish reasonably what would consist of the constituency to which he should have access. Given therefore that we have never brought it into force, we are simply getting rid of redundant verbiage. It is nothing more than that: we cannot do what originally we were seeking to do, which made good human rights sense—with a small "h" and "r". The regulations under the 2000 Act did not come into effect either, which is why we are getting rid of them.
  Lord Skelmersdale: Although I take what the noble Baroness has told us about this, I was questioning the last two lines of the clause, which state:
  "to the extent that those amendments made by section 54 of the 2000 Act have been brought into force for the purpose of making regulations and rules".
  The noble Baroness has just said that they have not been. So what is it doing there?
  Baroness Hollis of Heigham: I am having difficulty in understanding the noble Lord's point. We are omitting or seeking to repeal those provisions of the Act. As neither the provisions nor the regulations associated with the amendment have been brought into force they are going too. I am sorry; I am being dense.
  Lord Skelmersdale: But they are only going to the extent that those amendments made by Section 54 and so forth,
  "have been brought into force for the purpose of making regulations and rules".
  In the noble Baroness's substantive answer to my question on this clause, she said that no regulations have been made. So if no regulations have been made, why do we need an exception for things that have not been made? I do not understand.
  Baroness Hollis of Heigham: I wish I had the Act with me: I should have brought it. We are repealing the whole provision. Powers to make regulations were commenced but the regulations were never made. The wording is just a legal convention. I was just checking to determine whether some part of that section was introduced and therefore we needed to do that. But that is not the case.
  The advice that I am given is that the only bits of the regulations that were introduced were those that gave us authority to introduce the regulations, the powers of commencement—therefore we need to do it. As a result, they, too, are redundant because nothing subsequently followed.
  We consulted on the regulations. As a result we were persuaded. I am only sorry that this happened after the event rather than before, but they were basically unworkable because we could not take third-party considerations into account. Some regulations were brought into force, which were the possibility of the commencement. In fact, the rest of the regulations were not commenced. Therefore, the whole thing needs to go.
  Clause 264 agreed to.
  Clause 265 agreed to.
  Clause 266 [Annual increase in rate of certain occupational pensions]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendment No. 313B:
  Page 201, line 30, leave out from "subsection (1)" to end of line 35 and insert "—

  (a) omit "and" at the end of sub-paragraph (i) of paragraph (a),

  (b) at the end of sub-paragraph (ii) of that paragraph insert—

  "(iii) in the case where the pension becomes a pension in payment on or after the commencement day, is not a money purchase scheme, and", and.
  (c) for paragraph (b) substitute—
  "(b) the whole, or any part of, the pension is attributable——

  (i) to pensionable service on or after the appointed day, or

  (ii) in the case of money purchase benefits where the pension is in payment before the commencement day, to payments in respect of employment carried on on or after the appointed day, and"

  The noble Baroness said: In speaking to Amendment No. 313B, I shall speak also to Amendments Nos. 313C to 313Q and Amendment Nos. 350ZC and 350C. This important group of amendments fulfils a commitment I made at Second Reading to further simplify pension legislation by removing the post-1997 limited price indexation requirements from defined contribution schemes.
  Amendments Nos. 313B to 313Q remove the LPI requirement for money purchase scheme benefits derived from rights accrued post-1997. I should perhaps clarify—otherwise the noble Lord, Lord Skelmersdale, will chase me on the precise wording—that "money purchase" is the term used in legislation. It does, of course, have the same meaning as "defined contribution". The change will only affect pensions coming into payment after the relevant clauses come into operation. We expect that to be in April 2005. Regulations can and will carry back the same removal of indexation to 1988. But that does not need, by virtue of regulations, to be in the Bill.
  Amendments Nos. 313B to 313G cover occupational pension schemes; Amendments Nos. 313H to 313L cover personal pension schemes; and Amendments Nos. 313M to 313Q cover pension credit benefits. That is not pension credit as in the state pension scheme, it is the slice that goes with a pension sharing order following divorce.
  The term LPI refers to the way that pension rights have accrued since 1997. Perhaps it is worth going over the arguments again. Our original proposal was to reduce the LPI cap from 5 per cent to 2.5 per cent for all pensions. As Members of the Committee will know, that was designed to ease the burden on providers of defined benefit schemes.
  But, on reflection, we were persuaded by the arguments. I listened carefully to what the noble Lord, Lord Hunt, said. Ultimately, there is a money

  GC 91
  purchase pot, which is spent by the individual on the annuity—75 per cent of them buy a level annuity. Unfortunately, very many of them do not also buy a survivor's annuity. But it seems unreasonable to start retaining bits of how that pot should be spent when individuals can make their own choices based on their own knowledge of what they believe their longevity and life expectancy will be, and so forth. We are simply freeing it up as money purchase schemes are disposed of by the individual, who I hope will be taking financial advice.
  I do not know whether I need to go beyond that except to say that this is carried back to 1997 and by regulations will be carried back to 1988, freeing individuals to deploy their money purchase pot in the way that best suits their own circumstances, and basically treating them as adults. I beg to move.
  5 p.m.
  Lord Hunt of Wirral: I thank the Minister for the careful consideration she and her colleagues have given to this whole area. I even went as far as to encourage her to be "courageous" when I introduced this subject. I noticed a kind of shiver run through her officials when I mentioned that word because all those of us who adhere to "Yes Minister" know that that can be the kiss of death to any Minister.
  But, lo and behold, the Minister has come forward with some interesting proposals. We are still considering the effect of them—it may be necessary to return to them on Report—but they are a further advance in the direction of simplification and relieving the administrative burden. I am grateful to her for the careful thought that she has given to this issue.
  Lord Higgins: The noble Baroness is right; this is an important series of amendments. In some ways, Clause 266 is related to Clause 267. I say that with some confidence as the heading of Clause 266 is,
  "Annual increase in rate of certain occupational pensions",
  and the heading of Clause 267 is,
  "Annual increase in rate of certain personal pensions".
  Fairly clearly, the two seem to be related.
  When the Government first announced their broad proposals enshrined in the Bill, they included a provision that LPI should be reduced, effectively, from the rate or inflation of 5 per cent, whichever is the lower, to the rate of inflation or 2.5 per cent, whichever is the lower. As I have said previously, I have mixed feelings about this. It was presented as some huge improvement as a result of a government initiative. It may indeed reduce the burden on final salary schemes but, on the other hand, it also reduces the benefits obtained by the members of final salary schemes.
  There have been strong representations on this by the ABI, which argues that if this does reduce the burden on final salary schemes it may—I should have added "at the margin"—result in some schemes not changing to defined contributions schemes as a result
  GC 92
  of the burden on them having been reduced. I do not find that terribly plausible. It will have a very marginal impact. One can think of many other ways.
  The whole impact of the Bill, alas, is to discourage people from having final salary schemes and encouraging them to have defined contribution schemes. I therefore still have some doubts. I cannot see the beneficiary of the scheme receiving the protection they have hitherto had—rather than say it is going to be "significant", "material" is perhaps the right way of putting it—as far as the attitude taken by the company whose scheme it is is concerned.
  But, at all events, the Government, in an excess of enthusiasm for this particular point have, as I understand it, extended it from final salary schemes to defined contributions schemes. The ABI has made some very strong points. It argues that the amendments we are now considering would mean that consumers would gain in three ways: they would have greater choice to focus on purchased annuities, linked annuities and so on; it would be simpler; and it would be better value. All of those arguments are valid and, therefore, to that extent, are to be welcomed.
  It even goes on to calculate that if we were forced to go ahead with the present proposals unamended, a 60 year-old man would have to live to 93–14 years longer than the average life expectancy—before the totalling up of income from the index-linked annuity overtook the income from a comparatively level annuity.
  On all these grounds, the amendments are to be welcomed. But, so far as concerns defined contribution schemes, I still have considerable doubts about the position of final salary schemes and may wish to return to the issue on Report. Other than that, the amendments are welcome. I think that covers all the main points which arise in the context of Clauses 266 and 267.
  Baroness Hollis of Heigham: I am not sure that I really need to reply on that. The moves on DC schemes have been broadly welcomed and I am sure that is right. At the moment, providers sometimes have to buy eight different parts of an annuity before they can act. It is crazy because that is not the way in which people would use their money themselves.
  Let me make two points on the LPI. I understand the noble Lord's reservations; they are probably shared by my noble friend. Although she has not today contributed to the debate, she has shared her concerns in the past. It is not that we necessarily expect inflation to be above 2.5 per cent—we have already accepted that there will be a 1.5 per cent or so fluctuation around that mean over a period—but trustees have to provide, on fairly conservative estimates, for inflation at 5 per cent or thereabouts. Reducing the maximum liability means that employers can make lower contributions to the scheme to meet the costs of pensions deriving from benefits. With the appropriate savings that should produce—£370 million, we estimate—that is where the funding will come in for the PPF. This is part of that package and has to be seen in that context.
  The noble Lord is right to say that the overall effect on an the pension of an individual will be relatively modest. We estimate that it will be about 2 per cent for a man and 2.2 per cent for a woman over time. Compared to the impact on their pension of factors such as at what point they started, how long they stay with a company, how often they change, at what age they draw their pension, at what age they take retirement—let alone, above all, what has happened to their own earning profile—then obviously that 2 per cent or 2.2 per cent is relatively modest. The noble Lord is right about that.
  I do not believe that he has put any particular points that he would wish me to take further at this stage. He has expressed a residual concern, which I understand and which he may wish to revisit in due course.
  Lord Oakeshott of Seagrove Bay: Perhaps I may speak briefly—I was waiting for the noble Baroness, Lady Turner, to intervene—to make our position clear. As far as concerns defined benefit schemes, we oppose the cut from 5 per cent to 2.5 per cent in the LPI. Over the years, that could be more significant than the 2 per cent effective cut to which the noble Baroness refers. We are not talking about a theoretical situation that might arise in the future. Today the retail prices index—although it is not widely publicised—is running at more than 3 per cent. So, if this were established today, people would have their pension payments cut in real terms. People need to know that.
  The problem with having such a low limit as 2.5 per cent is that you can never claw it hack. You lose perhaps 0.5 per cent—or 1 per cent even in the present climate—and you have lost that forever. It does not average out at 2.5 per cent over a period; the ratchet is always against you.
  We are talking about a real and immediate problem. Again, we may well want to take up the issue on Report.
  Lord Higgins: The view with regard to inflation—this is my personal opinion—is extremely optimistic. The Government are borrowing enormous sums of money. If that is not fully funded, which can be done only at significantly higher interest rates, then the money supply will be expanded—it is an unfashionable concept but it is coming back to haunt us, I fear—and the rate of inflation could go very much higher.
  That will of course take some time to work through to the system but, given the level of government borrowing, unless interest rates go up very strongly indeed over the next two or three years we could see a very significant increase in inflation. At that point, this clause becomes extremely important for individual pensioners.
  The noble Baroness says that this is really about reducing part of the costs of the scheme. That of course ties in with the levy. This is an aspect of it which will not be related at all to the risks of a particular scheme
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  and the issues that we have discussed on that. We shall need to consider this matter very carefully between now and Report.
  Baroness Hollis of Heigham: I may well follow up the technical point in correspondence, but I want to come back on the point made by the noble Lord, Lord Oakeshott. The loss of 2 per cent that I indicated—2.2 per cent for women—is a 2 per cent loss of total retirement income for an average pensioner. It represents the most that someone might lose and is based on a comparison between a whole working life under the old and new indexation arrangements. I am not sure whether the multiplier effect indicated by the noble Lord is valid, but I shall look at the technical papers to see whether he is right. However, the indications I have been given at the moment suggest that we might take issue with that assumption.
  Lord Oakeshott of Seagrove Bay: If the noble Baroness carries out some projections and simulations working back with the RPI running at 4 or 5 per cent over a period, I shall be very interested to see the result of those calculations. However, I think that it will add up to a lot more than 2 per cent in cumulative total.
  On Question, amendment agreed to.
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 313C to 313G:
  Page 201, line 42, at end insert—
  "( ) In subsection (2) after "money purchase benefits" insert "where the pension is in payment before the commencement day"."
  Page 202, line 13, leave out from "day" to end of line 15.
  Page 202, line 21, leave out from "day" to end of line 23.
  Page 202, line 28, leave out from "day" to "and" in line 30.
  Page 202, line 32, leave out from "day" to end of line 33.
  On Question, amendments agreed to.
  On Question, Whether Clause 266, as amended, shall stand part of the Bill?
  Baroness Turner of Camden: Much of what I want to say has already been said in connection with the previous amendment, but I want to put on the record my objection, as I am sure my noble friend will appreciate, to the attempt in this clause to reduce the amount by which pensions in payment can be increased.
  As we know, under the present law all benefits earned after April 1997 have to be increased by the rate of inflation, or 5 per cent each year, whichever is the lower figure. We have now heard that the Bill will reduce the 5 per cent floor to 2.5 per cent. I understand that this is justified as being a suitable response to lower inflation, offering savings to employers and as compensation for the costs arising from the PPF levy.
  Other noble Lords have pointed out that there is no guarantee that inflation will stay at its present level. Indeed, indications suggest that it will rise. Although no doubt all governments will maintain a policy of trying to keep inflation low, they may not be able to do so. In principle it is desirable that pensions retain their value during what could in any case now be a rather

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  difficult period for those in retirement, and long-lived pensioners will be the ones who will feel the greatest impact of this unless we can amend it. In fact, women will feel it most because they tend to live for five years longer than men.
  We have all had a copy of the ABI briefing on these clauses. It is in favour of the reduction in limited price indexation and thinks that it is an important reform. But I am totally and absolutely opposed to it. For those who feel the same, given that the amended clause has been more or less agreed, the only way forward is to raise this matter again on Report. It is quite unsatisfactory to ask older pensioners to bear the costs of the PPF, which is what this really means. We shall come have to back that to on Report and test the opinion of the House, because it is desperately unfair. I feel very strongly about it and I will pursue it at the later stage.
  Baroness Hollis of Heigham: I thought that we had debated this so I shall not go over all the arguments again. All I would repeat is that this is a permissive power. Many schemes, perhaps most of them, if they share the view of my noble friend, will not reduce their current level of protection against possible future inflation.
  However, I have to say that when looking at all the representations made to us by industry and so forth, this is one of the biggest problems faced by the purveyors of DB schemes. After all, DB schemes are voluntary, So far as I am aware, in the United States there is no inflation-proofing at all on such schemes.
  Most of the representations made to us by industry regarding the factors driving their move away from DB to DC schemes suggest that it is the requirement to lay off the risks—not only investment risks but also the risks of longevity as reflected by what has happened to the LPI and so forth—on to the individual. It is companies' concern about those risks that has driven them to DC schemes.
  5.15 p.m.
  I think that the more appropriate way forward may well be the development of the hybrid schemes that we are beginning to see. I was interested to note that the Turner commission report seems to endorse one or two versions, such as cash balance schemes and so forth. In that case, one party takes the investment risk and the other party takes the longevity risk. That may be sensible.
  However, my noble friend will have to indicate where she thinks the money for the PPF levy is to come from if it is not to be raised by this sort of trade-off with employers. I know that if my noble friend feels passionately about LPI, she feels even more passionately about the PPF. I do not want to see the balance of the package being upset. No free money is coming from the taxpayer. We would be asking low-paid women, not in OP schemes, to pay through their taxes for what we currently envisage employers will be paying through their levies, offset by this change.
  I toss the ball back. If you unpick this, other things may unravel. I am not saying that the PPF will go or anything remotely as draconian, but this is part of a package. The Government cannot easily seek to unpick certain elements of it because we like some parts but not others. I put that warning now to my noble friend. This was the way we secured reluctant consent to funding the PPF. I suspect that if industry had its way, there would not necessarily be a PPF. I ask my noble friend which is more important.
  I really believe that most people in DB schemes would buy protection through the PPF for a modest reduction in the potential of a cut in future inflation-proofing. My noble friend has made a distinction between pensioners in payment and those with deferred pensions. We discussed this when we looked at where the levy would fall. If it does not fall on them, it will fall elsewhere—on active members or on deferred members. That, too, is not reasonable. We have looked at this and we cannot make those distinctions.
  None of us can have all the parts of this Bill we like and dump all the parts we do not like. It is a package. If we jeopardise it, there will be serious issues in industry regarding its willingness—it has been a reluctant willingness—to accept the principle and funding of the PPF. As my noble friend put it so eloquently earlier today, the PPF is probably the single most important protection for members in the Bill, and we should not undermine in any way the reluctant consensus.
  Lord Higgins: The people who are paying or losing are not those who are gaining.
  Baroness Hollis of Heigham: That is not the case. If a scheme were to go into the PPF two years down the road, it would include risk to the benefits of existing pensioners as well as to active members and deferred pensioners. All will receive protection. We have made it clear that, under the PPF, existing pensioners will continue to receive their pensions at 100 per cent, but indexation would come well down the list.
  They would gain from the PPF in exactly the same way as active members, because otherwise pensioners in payment could find— in exactly the same way as members whose schemes are seriously underfunded—that their existing pensions were also seriously depleted.
  Lord Higgins: I may have misunderstood it, but I understand that those who are going to lose are those in defined benefit schemes. When faced with a rate of inflation of over 2.5 per cent, they will not get the extra increase or the partial preservation of the value of the pension to which the noble Baroness, Lady Turner, referred. The people to gain are those whose schemes go bust and who would otherwise be paying a levy which may or may not be related to risk—but in any event it looks like not for a considerable time. In reality, they are not the same people.
  I may have misunderstood the point, but I put it to the noble Baroness that those who lose are all those in schemes which will suffer if inflation goes over 2.5 per

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  cent. They are not the same people who will gain from the PPF if it does something to protect certain people in certain schemes that go bust.
  Perhaps I may also raise a point mentioned by the noble Baroness. She said that this is a discretionary or voluntary matter.
  Baroness Hollis of Heigham: I said that it is permissive.
  Lord Higgins: In what sense is it permissive?
  Baroness Hollis of Heigham: On the immediate question, the only requirement for companies in DB schemes will be to provide RPI protection at 2.5 per cent. They are fully entitled to provide protection against possible inflation beyond that figure if they so wish, but this will be the new floor which they must meet.
  Lord Oakeshott of Seagrove Bay: While it is a compulsory floor, the Minister cannot declare on the one hand that it is permissive, thereby implying that it might not happen, while on the other hand claiming all the savings and regulatory impact assessments. Either we assume that it will happen or we assume that it will not.
  The noble Baroness is right to say that overall, someone has to pay if some have more or fewer benefits, but I am very taken by the powerful point made by the noble Baroness, Lady Turner, which seems absolutely clear and must be right. It will be a disproportionate burden on those who live longest and have pensions in payment over the longest period—overwhelmingly women; noble Lords will be aware that in this party we are focusing state help for the over 75 year-olds—because inevitably they will be the group most likely to have experienced a burst of inflation running at over 2.5 per cent at some point over the 30-odd years since they have retired. The real value of their pensions will be cut.
  That is what we are talking about here: the real value of the pension will be cut when it runs up against the ceiling. Having seen the real value cut, those who live longest will have a few years of living on a lower pension. It seems to me that the point cannot be argued.
  Baroness Hollis of Heigham: I would argue with that point. Turning to the trade-off with the PPF, I do not dispute that where this will be experienced is in retirement. Those who go on to retire will have many more years in retirement to experience this cap than pensioners who have enjoyed a higher level of protection. So the obverse of my noble friend's point is probably correct.
  However, the point I wanted to make was a different one, concerning the PPF. The nature of the fund is that it is a compensation scheme operated by a levy which, if you like, will pool the risk. Any pensioner today could be in a scheme and no one is able to foresee whether five or 10 years down the line the company funding that current pensioner's scheme may wind up, become insolvent or otherwise be unable to meet its
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  liabilities. That scheme will then come into the PPF. Whether that existing pensioner, currently in payment, continues to enjoy her—my noble friend is right to mention that it is more likely to be "her"—pension will depend on whether there is some rescue capacity in the system. Otherwise the existing pensioner, as well as the worker—the deferred pensioner—will each lose some element of their pension.
  We have already changed the winding-up priorities so that that pensioner will probably lose indexation rights, but at least they will get a pension. In the present situation, as we know from some schemes, if they are sufficiently underfunded they could lose the lot. So in my view it is simply not true that existing pensioners uniquely will bear this burden. The people who will bear it have not even reached pension age yet. However, pensioners will enjoy broadly the same level of protection, with the enhanced benefits available to other members. Those pensioners will get 100 per cent, while the workers will get 90 per cent. The workers receiving 90 per cent will be working for longer and thus exposed to the lower level of indexation protection than the existing pensioners. I would argue, therefore, that my noble friend's point is exactly the opposite.
  Lord Higgins: Clearly we are in disagreement on the main issue and we shall need to consider it very carefully. However, I am still a little puzzled on one point. If it is "permissive", the word used by the noble Baroness, why do we need these clauses at all?
  Baroness Hollis of Heigham: If we did not have these clauses, many schemes would follow the American model and have no indexation at all.
  Lord Oakeshott of Seagrove Bay: It means that schemes can offer more, but not less than indexation at 2.5 per cent.
  Lord Higgins: I now understand what the noble Lord means by "permissive". I suspect that if one follows the argument which has been put to us about it affecting whether people change, if you really do not want to deter people from closing down their final salary schemes and going to DB schemes, you would not have this clause and they could then index whatever they thought fit. Perhaps one ought to think about that angle as well. Why 2.5 per cent rather than 0 per cent? The point is not made clear.
  Baroness Hollis of Heigham: We can go into the financial thinking here. The Treasury is working on assumptions which have not been gainsaid by Bank of England forecasts or other financial commentators that the rate of inflation is expected to be around 2.5 per cent, although everyone accepts that it could be 1.5 per cent above or below that level. However, the point is that I have been told by major financial players that trustees, and in particular actuaries and accountants, are being pressed by their professional advisers to make provisional or contingent arrangements on a Domesday scenario of much higher rates. That is why this represents a real reduction in their potential liabilities.
  In terms of the floor, companies can continue to provide their existing levels of protection if they so wish. What they may not do is drop below an RPI rate of 2.5 per cent.
  Lord Higgins: I think that we have gone as far as we can with the argument. However, we shall need to consider the issues carefully on the central point, and the deal on the subsidiary point is still unclear. We shall need to come back to it.
  Clause 266, as amended, agreed to.
  Clause 267 [Annual increase in rate of certain personal pensions]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 313H to 313L:
  Page 203, line 21, leave out "subsections (2) and (3)" and insert "subsection (2)"
  Page 203, line 23, at end insert—
  ""( ) the pension became a pension in payment before the commencement day,"
  Page 203, line 34, leave out subsections (3) and (4).
  Page 204, line 34, after "supplementary)" insert "—

  (a) in the definition of "appropriate percentage", for the words from "revaluation period" to the end substitute "latest revaluation period specified in the order under paragraph 2 of Schedule 3 to the Pension Schemes Act 1993 (revaluation of accrued pension benefits) which is in force at the time of the increase (expressions used in this definition having the same meaning as in that paragraph of that Schedule)", and

  (b)"

  On Question, amendments agreed to.
  Clause 267, as amended, agreed to.
  Clause 268 [Power to increase pensions giving effect to pension credits etc]:
  Baroness Hollis of Heigham Baroness Hollis of Heigham moved Amendments Nos. 313M to 313Q:
  Page 204, line 43, at end insert—
  "( ) In subsection (2), for "This" substitute "Subject to subsection (2A), this".".
  Page 204, line 45, after "(2A)" insert—
  "Subsection (2) does not apply to pensions which—

  (a) are money purchase benefits, and

  (b) become pensions in payment on or after the commencement day.

  (2B)"
  Page 205, line 12, at end insert—
  """money purchase benefit" has the meaning given by section 181(1) of the Pension Schemes Act 1993;""
  Page 205, line 15, leave out "relate." and insert "are (directly or indirectly) attributable;"
  On Question, amendments agreed to.
  On Question, Whether Clause 268, as amended, shall stand part of the Bill'?
  Lord Higgins: This clause will take power to,
  "increase pensions giving effect to pension credits".
  There is a massive group of government amendments related to all three clauses we have been considering. However, I am not clear how Clause 268 is now
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  different from the way it appears in the Bill in relation to the increase in pension credits. Perhaps the noble Baroness could explain it.
  5.30 p.m.
  Baroness Hollis of Heigham: Clause 268 extends our discussion about LPI to one particular situation, which is pension sharing on divorce. Section 40 of the Welfare Reform and Pensions Act 1999 made provision for pension credit benefit to be subject to indexation capped at 5 per cent—the share that went in. At present, pensions in payment derived from a pension share are subject to indexation up to a maximum of 5 per cent.
  Clause 268 will amend that section to mirror the changes being made elsewhere—to pensions not subject to pension sharing—so that the same indexation cap, which is being reduced from 5 per cent to 2.5 per cent, will apply to pension-sharing pension splits or fractions as that for occupational pensions not so shared.
  Lord Higgins: So people who are divorced and sharing their pensions under the 1999 Act will now, if inflation goes above 2.5 per cent, pay for the insurance of people whose defined benefit schemes go bust?
  Baroness Hollis of Heigham: That is one way of putting it, but not the way I would put it. As the noble Lord will know, when a couple divorce, as a result of the changes that the previous government and the current Government made, there are two or three different options for them to dispose of their pension. If they are over retirement age and there is a pension in payment, that pension will normally be split by consent through the courts according to what off-setting of other assets there may be. We are talking only about divorce, obviously. A spouse might receive 50 per cent of the pension in payment or 20 per cent of it and have other ISAs, PEPs and whatever in lieu.
  If those involved are younger and the pension is not in payment, they are much more likely to go not for ear-marking, which is a lean-on, further down the line, but for a split of the capital sum. When that sum matures, it becomes a pension in payment. We are saying that the same indexation rules on reduction about which we have been talking apply. It is no different from how we treat a whole pension. We simply say that the same rules apply to half a pension or a third of a pension, or whatever else may happen on pension sharing following divorce.
  Lord Higgins: I hope that the Government will arrange to tell people in that situation that they are helping to pay for the insurance schemes of company schemes that go bust.
  Baroness Hollis of Heigham: Except that that they are also, under the pension levy, enjoying the protection of the payments that follow.
  Lord Higgins: Not if they are already divorced.
  Clause 268, as amended, agreed to.
  Clause 269 [Exemption from statutory revaluation requirement]:
  On Question, Whether Clause 269 shall stand part of the Bill?
  Lord Hunt of Wirral: I hope that the Minister might allow me to press her on the question of internal controls. This is a very technical clause on recalculation of benefits, but it is broadly related to the question of internal controls. By that I mean the need to check that recalculations are correctly undertaken. We had an exchange on a previous occasion, and I know that the Minister has been considering the question. It would be very helpful if she could outline her progress.
  Lord Skelmersdale: As a sort of supplement to that, I seem to have spent the entire afternoon looking for possible weasel words in the Bill, and I am afraid that I have come across another one. Proposed new section 84(6)(b) of the 1993 Act, which is in Clause 269, is to do with the retail prices index. In a sense, that is part of the discussion that we have just had about uprating.
  Proposed new section 84(5)(b) of the Pensions Schemes Act 1993 for some reason omits a definition of the retail prices index—of inflation. The first definition is fine by me. It is on,
  "the general index of retail prices (for all items)"—
  those are the important words—
  "published by the Office for National Statistics".
  That includes housing costs, in other words, which are substantial at the moment. Many people dispute the two levels that seem to be used by the Government of the state of inflation. The noble Lord, Lord Oakeshott, just mentioned a figure of 3 per cent; I thought that it was more like 2.8 per cent, but I shall not argue over 0.2 per cent. If we exclude housing costs, however, the figure is considerably under 2 per cent, which is a very big difference.
  Proposed new section 84(6)(b) reads,
  "where that index is not published for a month"—
  the global index, the 3 per cent or 2.8 per cent index—
  "any substituted index or figures published by that Office".
  If the Government's preferred measure of inflation—very naturally, it is the lower amount—is to become the norm, the Office for National Statistics would presumably be told no longer to publish the other level of the retail prices index. That would be extremely misleading and could be very expensive for pensioners where their pensions were in payment.
  Lord Lea of Crondall: The noble Lord has got the wrong end of the stick on the matter. From my experience as a member of the retail prices index advisory committee, I remember that we had a vote some years ago to maintain the housing element in the RPI. That is when the Treasury decided to also publish RPI-minus X.
  However, any index is only a rate of change. The RPI could be higher than the RPI-minus X or RPIX, or lower. It is a non-point to say that housing is
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  somehow in the RPI—it clearly is—and that, somehow, someone could play games with this form of words. The substantial point made earlier by my noble friend was totally different. The idea that there is a question here about RPI and RPIX is a non-point so far as the Bill is concerned.
  Baroness Hollis of Heigham: I never knew that the noble Lord, Lord Skelmersdale, had such a cynical or jaundiced view as to think that the provision was a way to manipulate whether we went for the Rossi index or the non-Rossi version of the index. I think that was his point—whether we could play games with it. If I am wrong, I shall write to him, but my understanding is that we are simply reintroducing words that were inadvertently omitted. So far as I am aware, those are the original words that were part of the original 1993 Act of the government whom he supported. It was an inadvertent omission when the functions of the Occupational Pensions Board were brought to an end by the Pensions Act 1995.
  The clause therefore amends the revaluation requirements in Section 84 of the Pension Schemes Act 1993. It enables them to continue as they have in the past. When the Conservative government first introduced the words, no doubt it was with all the cynical interpretations and intentions that the noble Lord described so eloquently to us today.
  I am grateful that the noble Lord, Lord Hunt, raised internal controls, because I am glad to have the opportunity to tell the Committee where we have got to with our thinking. As this is one of the more technical issues, it is right that an equally technical question should hang on it. I gave an undertaking—I hope and expect—that we will bring forward a government amendment on Report to require schemes to have adequate internal control mechanisms to ensure compliance with Article 14(1) of the EU pensions directive. I remember that the noble Lord, and the noble Lords, Lord Oakeshott and Lord Lucas, were very impressive on insisting that we should take that forward.
  In the limited time available, we have not been able to reach an agreed provision acceptable to all the stakeholders in terms of the Bill. It is particularly important that the wording of the provision is compatible with that used by the accountancy profession in its own tried-and-tested material on internal controls. Basically, I have run out of time to do what I had hoped to do. I am glad to have the opportunity to undertake instead to make regulations under Section 2(2) of the European Communities Act 1972 to introduce that requirement. In taking that route we will have more time to take on board the views of the Institute of Chartered Accountants for England and Wales, which has been responsible for pressing the Government to introduce a provision on internal controls into domestic legislation.
  I am sorry that I am not able to do that in this Bill, but we will do it by another route. Clearly, we need more consultation and consent on the precise form in

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  which we do it than we have so far managed to achieve in the time available. I hope that Members of the Committee will find that assurance helpful.
  Lord Oakeshott of Seagrove Bay: For the record, the noble Lord asked about the latest figure for the retail prices index. It was 3.1 per cent for the 12 months to September. It was 1.9 per cent for all items excluding mortgage interest payments and 1.1 per cent on the CPI, the rate that the Government target.
  Lord Skelmersdale: I thank the Minister. I will discuss the situation with the institute. It may be helpful if at some stage the Minister could at least publish in draft the sort of wording that she and her colleagues have in mind, and on which they are consulting, to share with us the opportunity to have an input to the consultation. I am assured by her remarks that the discussions are ongoing. We look forward to their resolution as soon as possible. It is obviously an opportunity to utilise other legislation to ensure that they are brought into effect.
  Clause 269 agreed to.
  Clause 270 [Meaning of "working life" in Pension Schemes Act 1993]:
  On Question, Whether Clause 270 shall stand part of the Bill?
  Lord Higgins: How have we survived since 1993 without this clause?
  Baroness Hollis of Heigham: Clause 270 is needed to correct a cross-reference in the Pension Schemes Act 1993.
  Lord Higgins: Has it only just been discovered?
  Baroness Hollis of Heigham: When the legislation increasing women's state pension age was introduced, the decision was made not to apply that change to GMP. It was felt that it would be wrong retrospectively to reduce the value of a woman's private pension rights. Furthermore, since many occupational pension scheme rules are based around the existing GMP, to introduce changes could represent a significant complication for many schemes. In this clause we are ensuring that the original intention is achieved.
  I do not know why nobody has picked the matter up before, given the Pensions Act 1995. Presumably, it was because the provision only kicks in from the 2010 alignment of pension age. That may be why all previous governments have not had their eye on that particular ball.
  Lord Higgins: Does it affect anyone?
  Baroness Hollis of Heigham: No, it protects accrued rights. As women move to the new, later state pension age, they will have differing accrued rights for national insurance purposes. The GMP underpins DB contracted-out occupational pension arrangements in calculating the length of an individual's working life. We
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  seek to ensure that the increase in the state retirement age for women between 2010 and 2020 should not make any difference to the change to their GMPs.
  Lord Higgins: Does that mean that nobody has noticed it until now, that everything has been all right, and this amendment will ensure that everything is all right in the future?
  Baroness Hollis of Heigham: That is my belief.
  Clause 270 agreed to.
  Clauses 271 and 272 agreed to.
  5.45 p.m.
  Clause 273 [Meaning of "stakeholder pension scheme"]:
  Baroness Turner of Camden Baroness Turner of Camden moved Amendment No. 314:
  Page 207, line 9, leave out "(10)"" and insert "(11)""
  The noble Baroness said: In moving Amendment No. 314, standing in my name and that of my noble friend Lord Hoyle, I shall speak also to Amendments Nos. 315 and 316, with which it is grouped. We are now on to the difficult issue of compulsion, about which there has been so much discussion arising from the recent report on pensions by Adair Turner.
  At Second Reading I referred to the failure of stakeholder provision to encourage greater participation from workforces where there is currently no occupational pension scheme. I believe that the Government are disappointed, but participation has dramatically increased where the employer makes a contribution.
  Employers are now obliged to facilitate access by providers to their workforces, but they are not obliged to make a contribution themselves. Many of course decline to do so. Half of all employees receive no voluntary contribution to their pension from their employer. That leaves them with only the low level of contribution and benefits associated with the state second pension.
  For an employee on average earnings, the employer national insurance contribution towards their second-tier pension is around only 2.8 per cent of total earnings, to which the contribution of the employee is another 1.2 per cent. The combined contribution of around 4 per cent of earnings is inadequate to produce a decent standard of pension.
  A lifetime of work should be associated with a decent minimum income in retirement. That is what a higher level of compulsory contributions is intended to achieve.
  We need also to bring to an end a situation of unfair competition, whereby employers making decent levels of pension contribution on behalf of employees have to compete with employers not making any pension contribution to employees.
  A parallel argument can of course be made relating to employee contributions. Why should employees who choose not to save for pensions be able to claim means-tested benefits at the taxpayer's expense while those who have saved may not do so?
  It is appropriate to discuss compulsion in the context of this Bill because a key theme is the need to boost pension contributions and to restore confidence in pension provision. We have a raft of measures, including simplification, extending education and awareness about pensions and improving security. But the approach is still to be voluntary. Simpler, safer schemes with tax relief on employee contributions will all add to incentives, but are likely to have only a limited effect on employees. The most effective incentive to contribute is well known to be a decent employer contribution. The stakeholder experience demonstrates that. And of course there is a case for compulsory employee contributions as well.
  While many employees continue to be unwilling to commit themselves individually to joining pension schemes, there is mounting evidence that public opinion is increasingly supportive of compulsion. A recent survey conducted on behalf of my own union—Amicus—showed 72 per cent in favour of compulsion and only 17 per cent against, and surveys have indicated growing employer support for the idea. Indeed, whenever pension provision has been discussed in this House, the idea of compulsion is raised. Of course it is very much to the fore now as a result of the Adair Turner report. Everybody is now discussing compulsion. Of course, we have the Australian experience to guide us. It is quite appropriate that the issue of compulsion, which is very important in relation to pension security and the whole question of pension provision, should be raised in the context of this Bill. I beg to move.
  Baroness Dean of Thornton-le-Fylde: I want to speak very briefly in support of the amendment. I never thought I would be speaking in favour of compulsory pension contributions, although at one time that is how it used to be in a company. The company had a scheme and everybody had to join it. The current pensions crisis, certainly very much supported by the Turner report, which most of us have not yet had time to digest although we have read the sexy bits from it—
  Lord Oakeshott of Seagrove Bay: Oh!
  Baroness Dean of Thornton-le-Fylde: Well, you know him better than I do Now may well be the time to consider the issue. We are therefore obliged to the noble Baroness for raising it. She is right to say that it came up at Second Reading, from a source that I never thought that I would hear it—the noble Lord, Lord Fowler. He was very much in favour of compulsion. The facts have driven people like him to say that we need to consider compulsion, as we now have a time bomb for many people who will spend retirement in poverty if we do not get things right this time. I support the amendment.
  Lord Skelmersdale: Whatever one's views on compulsion, it is of course a fact that compulsion already exists in the system—the state pension scheme. I am sure that my noble friend Lord Fowler would think the matter a minor extension, although for many
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  of us it is quite a serious step that needs a lot of consideration. That is roughly what I said in answer to him at Second Reading.
  We ought to consider something else at this point. There are companies who still—pace the Chancellor—have good pension schemes for their employees. There are not as many as there were, but they certainly exist. One thing not allowed by law is for them to promote those schemes, because in promoting them they are giving one-sided investment advice. The companies are, of course, not licensed by the Financial Services Authority, like other financial providers, consultants and so on. Even a cursory view of the Turner report suggests that the idea should be supported. I would very much like to know the Government's view on allowing a bit more laxity in the area. I am sorry if, by asking for that, I have hijacked the arguments of the noble Baronesses, Lady Dean and Lady Turner.
  Lord Lea of Crondall: I want to add one point that has not been made. I am sympathetic to the amendment, but my remarks relate to Adair Turner. It is clear that if he says one thing on process, it is that in his final report—that report will deliberately be after the election; we know all the reasons for that—above all he wants consensus on this question. Chapter 7 of the Turner report already makes that clear. If the noble Lord, Lord Fowler, were in the Room, he might find that he was talking about compulsion on workers, not necessarily about compulsion on employers. I might mean compulsion on employers and not necessarily on workers, and so on.
  It is very important that we do not get into a football game at the moment, given the tremendous prize to be gained if Adair Turner and his final report can find a consensus. We must not have people kicking the issue around and saying that compulsion is another form of taxation, a stealth tax, and all the rest of it. We need to go forward on a united basis. The amendment is exactly the sort of thing that we will need. It is an open secret that Adair Turner would be very sympathetic about going in such a direction, but the consensus to which the Minister referred on an earlier amendment is absolutely vital. We have to tread carefully in going forward with the Turner process, in order to build up that consensus rather than destroy it prematurely. That is my central point.
  Lord Oakeshott of Seagrove Bay: That is a sensible approach. I want to ask the noble Baroness one question, as I probably have not read the amendment as carefully as I should. Does it propose compulsion on employers and workers, or just on employers?
  Baroness Turner of Camden: Both.
  Lord Oakeshott of Seagrove Bay: I certainly support that principle; it is very important if one moves towards compulsion. The Liberal Democrats thought long and hard about the issue when producing our policy on it over the past few months. On balance, we did not think it right to come out in favour of it at the moment, but it is certainly an option on the table for discussion. It is overwhelming in significance, and the

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  important thing is to have a really big increase and get away from means-testing on the basic state pension, and see what effect that has on incentives for private saving. We felt that that was the No. 1 priority.
  Very much in the spirit of the remarks of the noble Lord, Lord Lea, we will be happy to discuss the matter again as an emerging consensus develops. On that basis, we would probably not support the amendment at the moment.
  Baroness Hollis of Heigham: I agree with the previous two speakers. I suspect that, if pressed, so would the noble Lords, Lord Higgins and Lord Skelmersdale.
  The national insurance system currently represents a degree of compulsion on both employers and employees, which can be abated by contracting out. It may be in the discussions—I do not know whether they have any future—that there is some argument for ending contracting-out and bringing it back into a different system. No doubt that will also be part of the small print of the discussion.
  As my noble friend Lord Lea rightly said, there is an issue about whether saving is regarded as a tax. There is another issue—which the noble Baroness, Lady Barker, might have chosen to remind us of—with regard to the capacity of people, particularly of lower-paid women and part-time women workers, to save.
  Adair Turner is very clear that a broader based solution will need consensus. That consensus is currently not there on any of the three Front Benches of the political parties. He also says that, over and beyond those considerations—this has been put to me in other cases—it is not entirely clear what the macro-economic effect would be. The evidence from Australia is somewhat ambiguous; there has simply been a displacement of voluntary saving into compulsory saving. Indeed, if you add additional saving to your existing voluntary saving, it is not clear what the implications will be for the economy—the Keynesian effect; you will be taking that money out of consumption.
  Over and beyond the political issue of whether it is to be regarded as a tax, over and beyond the implications it would have for the national insurance scheme, which are considerable given that there is already a level of compulsion there, and given the macro-economic effect, everything must be done very slowly. In other words, there must be a top-sliced growth in national wealth as opposed to redistribution from the existing wealth in different directions. Only then can we go down that path.
  One of the great virtues of the report—there are many—is that it lays the issues open for us. Debate will continue. It also makes it clear that consultation will continue on some of its findings, which I do not doubt will take up a large part of the agenda for next year.
  I think my noble friend and the noble Lord, Lord Oakeshott, are right: there may turn out to be consensus on the issue of compulsion and that we should go for it. There may turn out instead to be a belief that something short of compulsion, such as auto-enrolment
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  and allowing employers to require that you be a member of the occupational pension scheme, is needed. There are many other schemes which may turn out to be a half-way house to getting most of us to where we would like to be—which is to ensure adequate coverage in retirement so that people do not experience poverty, penury or serious deprivation.
  Baroness Turner of Camden: I thank my noble friend for that response. I am glad that the issue is being seriously considered. I am sure that in doing so consideration will be given to the Australian experience which has been rather good—from the standpoint of the pensioners anyway—because a high proportion of the population not covered before by pension provision is now covered.
  I know that there are difficulties. The noble Baroness referred to some of them. There is the general effect on the economy if you take out purchasing power—which you will do, of course, if people have to take more money out of their salaries at the time that they are earning and so on. I understand all that. On the other hand, we now face a serious situation, which has been highlighted by the Adair Turner report. We have to do something to ensure that future generations of pensioners will not be left in extreme poverty. It seems to me that we have an opportunity in the wake of this report—perhaps after Adair Turner produces his second report—to move in the right direction.
  My union has supported it and believes that that is the right course; I think that the TUC does as well. It has sounded out the views of its members, who seem to be willing to make a compulsory payment to pension schemes. Therefore, the time is getting riper and riper for compulsion. I therefore hope that we shall move in that direction very swiftly—perhaps within the next 12 months.
  6 p.m.
  Baroness Hollis of Heigham: Before my noble friend sits down to decide what she will do—obviously, she will withdraw the amendment given the context of this Committee—I should say that the Turner report gives the figures very clearly. I have seen these figures before, but visually they are expressed much more effectively in this report than is normally the case.
  If one makes the assumption that the net replacement income that one could reasonably expect to enjoy is around 67 per cent—or two-thirds—for those with a £15,000 to £30,000 income as an average, it shows that the replacement income of those earning below £15,000, given the state system, is likely even to equal their in-work income. Certainly, the very low-paid will do adequately under the state system. That would not be in terms of absolute income, but as a replacement factor. Those under about £9,000 or £10,000 per year may see replacement incomes of nearly 100 per cent of what they were earning.
  He also accepts, although it is not particularly his concern, what happens to those at and above the UEL, which is around £29,000 or £30,000. He is absolutely right in saying that it is between those two groups of people—the second, the third and some of the fourth

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  quintile, I suspect—who will not, given current patterns, live to see the replacement income that they would like to enjoy.
  I am working through the statistics myself. Part of the current problem is that they were done on the basis of individuals. One needs then to reconstruct on assumptions about household formation and household income and not just individuals' replacement. There is a lot of work still to be done about what levels we can reasonably assume for women, particularly partnered and married women. For example, will they extend their hours in the labour market, get above the LEL, and add in, as a result, a household replacement income as opposed to an individual's replacement income, which is none the less acceptable between the two?
  Obviously I am very interested in this issue. There is a lot of work still to do. Until that work has been done, which will happen over the next year or so, none of us can be sure that compulsion is the right way to give people the choice that they want of having an acceptable retirement. Under our present structure, the very poorest will enjoy replacement incomes well above that of the middle range of people. Whether those incomes are adequate is, of course, another debate.
  Baroness Turner of Camden: I thank the noble Baroness for that response. It seems that it is appropriate to discuss it in the context of this Bill, which is about security. One cannot really say to trade union members, "We are going to support compulsory deductions from your salary" or "Well, it's right that your money should be taken from you to contribute to a scheme" if they are not convinced that their savings being taken in this way are reasonably secure. Therefore, security is the other half of the argument, which is why it is appropriate to raise it here. This is a Bill about security. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 315 and 316 not moved.]
  Clause 273 agreed to.
  Clause 274 [Financial assistance scheme for members of certain pension schemes]:
  Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 316ZA:
  Page 207, line 26, after "payments" insert "entirely from public funds, with no charges or levies to be imposed on private sector businesses"
  The noble Lord said: The proceedings so far have been relatively consensual or even permissive—to use words that have been bandied about. This issue is obviously rather more political. Now that we turn to the financial assistance scheme, we start to focus on this simple point. Amendment No. 316ZA, supported by my noble friend Lady Barker, would make it entirely clear that any payments to this financial assistance scheme should be met entirely from public funds with no charges or levies to be imposed on private sector businesses.
  There has been a certain amount of vague talk from the Government that they will determine what help the private sector can give. Various phrases have been flying around. Clearly, if anyone wants to offer assistance from the private sector, that is up to them. But I know of no pension funds which think that it would be appropriate for them to make any contribution. Indeed, I expect that they would be in breach of their trustees' rights if they did. It would not be right to lay any burdens on business in this way.
  I want it to be clearly on the record that if the Minister is prepared to give me a satisfactory undertaking, I shall withdraw the amendment. But we are putting it in that form to make it entirely clear that this should not in any way be a burden on private business or private pension funds. I beg to move.
  Lord Higgins: This amendment and my amendment on the same point are the beginning of a series of amendments related to the single clause concerning the financial assistance scheme. It is worthwhile spending a moment on the genesis of this. It is well known that enormous pressure built up in the House of Commons in relation to those schemes, solvent or insolvent, whose pension schemes had failed to produce for their members the benefits that they expected. A whole series of Early-Day Motions were tabled. Certainly, the Labour Motion was signed by a vast number of Labour Members, which was, I think, clearly sufficient for the Government to be defeated if nothing were done.
  As a result, in what might reasonably be described as something of a panic measure, the Government made an announcement on 14 May, and then tabled the amendment which is now embodied in the clause that we are considering, to give assistance for workers who have lost their pensions.
  But the clause is, of course, in the very clearest way, a mere skeleton. It is not the least bit clear how the scheme will operate or what the amounts involved are. The points made by the noble Lord, Lord Oakeshott, bear that out very clearly indeed. The problem is that, as the Government have made clear, they do not intend to clarify the situation on a number of absolutely essential issues until after the Bill has become law.
  That means that it will be impossible for us, or anyone in either House who wishes to amend what the Government propose, to do anything about it. It will all be in regulations. The regulations will not be amendable. They will be on a "take it or leave it" basis. There are many occasions when that is so, but it is so of the entire clause virtually. We have no idea what is really envisaged.
  Therefore, I have to say in the strongest terms that I do not think that that is an acceptable way of proceeding. If I were very cynical—perhaps, to some extent, this reflects my experience as a Treasury Minister—I would say that the danger is that the Treasury would double-cross those who did not revolt and defeat the Government in the Commons.
  Perhaps that is too extreme a way of putting it, but, at the very least, I think that it is likely that they will be short-changed. In the Government's response, they came out very strongly as saying "Smith announces £400 million government assistance for workers who have lost their pensions". In fact, it is not £400 million up-front; it is £400 million over the life of the pensioners. In present-value terms, estimates were being made of perhaps £250 million.
  At the moment, we have no idea whether that is the right amount. It is not the least bit clear whether that is a cap on the amount. Certainly, nothing in the clause states that there will be £250 million, whether there will be a cap, or how it is to be distributed. That is why the noble Lord, Lord Oakeshott, and I rightly feel that we ought to clarify at any rate who will pay. If the noble Baroness can at least tell us that today—whether it will be the Treasury rather than the private sector—it will do a little to clarify the situation so far as the overall scheme is concerned.
  A number of statements made by the former Secretary of State and others have suggested that the Government are looking for some contributions from industry. Is that the case? If not, we shall have to do all we can to clarify the situation on Report.
  Our problem is that we are clearly in favour of the clause but, without having any detail whatever, there is a danger that it will turn out to be completely unsatisfactory. On this occasion, the noble Lord, Lord Oakeshott, and I have tabled a number of amendments seeking to clarify the position. We may return to those as we go along.
  But, as far as possible, there are a number of issues on which we can be clear. In her usual helpful way the noble Baroness has circulated a note explaining where she appears to have got to at the moment. The short answer to that is that, while the note was helpful, the Government have not got very far. However, for a number of issues there is no reason why they should not be clear about the position. I mention, for example, the one covered by this amendment on schemes that have gone down and whether the company is solvent or insolvent; whether there will be a gap between this scheme and the PPF coming in; what the level of payment is likely to be; and, most particularly, to what extent the amount involved is adequate. Again, that reflects the amendment.
  The Government have apparently carried out new research. A press release was produced in June on insolvent pension wind-ups, detailing new research into the number affected. It suggested that some 65,000 people had lost significantly, by more than 20 per cent of their expected pension benefits. A survey covered some 250 final salary schemes where, presumably, the pensioners had lost out.
  I mentioned earlier the remark of the new Secretary of State to the effect that there is no crisis now, but will be later. However, all these people are in crisis, so far as their personal lives are concerned. They face enormous uncertainties about what is happening. They do not know how or to what extent this scheme
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  may or may not help them. It would be most helpful if, by whatever means are most convenient, the noble Baroness could indicate on which side of the dividing line the 250 schemes we know about from the survey fall, particularly with regard to the starting date. That in itself will affect profoundly the amount and determine who is going to pay.
  This is an extremely unsatisfactory situation. A number of decisions need not be delayed until after the Bill becomes law, and the Government's position could be made clear, either by way of amendment introduced on Report or by way of a statement from the Minister. But we cannot accept that this measure, introduced in the way I have described, is satisfactory if it merely remains in its present form in the Bill.
  Baroness Hollis of Heigham: I agree entirely with the comment of the noble Lord that this is not satisfactory. It certainly gives me no pleasure to bring before noble Lords these clauses, which I accept absolutely are framework provisions.
  However, I put it back to the noble Lord that the reason we have a problem is not because the Government failed the schemes; those schemes have collapsed. The Government are seeking, with consent, to see what they can best do to protect those schemes. It is therefore unreasonable to move the language across, as it were, so that the Government are somehow culpable when we are seeking to address the degree of culpability of other organisations.
  Before turning to the specific points raised in the amendment, I want to put one or two questions to Opposition Members of the Committee to encourage them to share, if not to own, the problems we face. I accept that these questions will be quasi-rhetorical, although they are not meant to be.
  Does the noble Lord agree that a financial assistance scheme is needed? I am sure that he does and I doubt whether there is any dispute about that in this Committee. Does he further agree that a financial assistance scheme should be funded by central government? Again, there is agreement that it should be.
  6.15 p.m.
  Lord Higgins: We are not inclined to accept the financial assistance scheme as it is.
  Baroness Hollis of Heigham: I agree that it is technically defective on about 14 counts, but I had not thought to use that as an argument. Instead I seek to address the broader points of contention raised by the noble Lord. I do so because I do not want Opposition Peers to ride the constitutional horse. Constitutionally they are entitled to do so, in saying that this is only a framework provision, but they should not do so without recognising the problems we face in addressing the situation. That is why I am putting the point in this way.
  The noble Lord therefore agrees that there should be a FAS scheme and he agrees that it should be funded by central government. Does he also agree that the problems with those particular schemes have emerged and that FAS itself came on to the table only five

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  months ago? After all, the PPF was trailed in the original Green Paper back in December 2002 and there has been ample time to consult stakeholders on its ultimate shape. Does the noble Lord agree that, when we discussed and debated at length those Green Papers, there was no suggestion that there might be a need for a financial assistance scheme? I certainly cannot recall any such suggestion. It has arisen only recently and came to the table in May.
  Does the noble Lord agree that the Government lack detailed information on those 65,000 members in the 250 schemes? He himself has identified that the Government do not routinely collect information from private sector occupational schemes regarding their trustees and actuaries. Indeed, when I had a meeting with trade union representatives about a particular scheme—it shall remain nameless—that was going under, I asked what proportion of their union members were deferred members. The trade union representatives could not tell me, even though they had come to discuss it, because they do not routinely collect those statistics.
  However, we know from our researches that half of all pensions in payment are worth less than £3,000 a year, while a quarter are worth under £1,400 a year. That suggests a high ratio of very small payments for which we do not even have the statistics. Does the noble Lord agree that we have to collect those statistics before we can produce a sensible way forward? Does he also agree that once we have that detailed information on pensioners—deferred pensioners, active members, the number of assets held and so forth, the costs of possibly acquiring additional annuities to top up those schemes—we then still have to make very difficult decisions about, for example, the extent to which a scheme should be included when the winding-up has not yet been completed, what we should do as regards targeting and meeting hardship, and whether we should make distinctions between those close to retirement age and those further away, who may be in a position to rectify the situation? These are extremely difficult issues which we will be able to address and consult on with interested parties only when we have the database that is still in the process of being collected, given that this scheme has been on the table for the past few months.
  However, we are seeking to go ahead because if we were to approach this in the normal Civil Service way—collect all the information, work on how the resources should best be divided, seek consent and then publish—that would delay the scheme for at least a year and thus well beyond the introduction of the PPF. In the process the very people whom the noble Lord wants to help—those in crisis now—will lose out on the possibility of the scheme coming into effect in April next year.
  That is the broad shape of the dilemma we face. We can wait to collect the information so that we can more thoroughly address the questions to which the noble Lord wants answers and so that Parliament knows what it would be signing up to before, possibly, the Bill has completed the Report and Third Reading stages. But, if we do that—and, constitutionally, he has an
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  absolute right to say that that should be the case—he has to accept that because this has come to the table in the last five months, the result would be to defer and delay any such scheme, with the accompanying personal price paid by members. That is the dilemma we face.
  It is a question of which is the lesser of two unsatisfactory options. The Government judge that it is better to proceed with the framework scheme that we have outlined. I can assure the noble Lord that as soon as I can I shall bring the detail to your Lordships. Whether it can be done by the Report stage or by Third Reading, whether it can be done at all. I do not yet know, but as soon as I can I shall place that information on the table so that all of your Lordships will have it. I give way to the noble Lord.
  Lord Higgins: Much of the uncertainty to which the noble Baroness refers determines the cost of the operation. The reason the Treasury is so anxious to obtain all this data is to work out whether or not it wants to pay it. Unless the noble Baroness can tell me on what basis it was calculated, we believe that the £400 million figure was plucked out of the air. Anyway, as I say, it is not £400 million; in present value terms it is £250 million.
  But there are a number of points on which the data are not required but a decision in principle is. For example, whether the scheme will cover companies or schemes that went down at a certain moment. That does not require data; it is a question of what is the scope of the scheme. There is no reason why we should not be told that. As to eligibility, obviously again it could be decided whether or not it will cover insolvent companies. Unless one has got the shadow of the Treasury behind one asking what it is going to cost, you can perfectly well make a decision on whether a particular scheme in time will or will not be eligible. There is no reason why, in principle, one should not say, as one of the subsequent amendments says, that we will make sure that this carries through into the PPF operation. One can also probably calculate what the equivalent of a PPF pay-out would be.
  None of these points require data, except, as I say, where the Government are concerned particularly about the cost. There are a number of points on which they can make a decision, in principle, by the Report stage. It is important that they should do so otherwise the scheme will be viewed with suspicion. It is said that this will increase confidence in company schemes. This clause will not increase anyone's confidence in anything.
  Baroness Hollis of Heigham: I accept that some decisions are more blue skies than others. I do not challenge that for one moment. However, we are still working on whether that £400 million is, as the noble Lord seems to think, going to be £250 million or what the pattern of payment is. That is still under work at the moment. Until we know that we have basic consent and that basic decisions have been made about the nature of the structure of the moneys, for example, we cannot come on to some of the questions of the noble Lord.
  I accept his point about solvent and insolvent, but that comes back to some of the previous discussions we had about moral hazard issues and so on. We shall come to some of the detailed amendments later. As to whether it could go into the PPF, that again depends on decisions made as to whether we are topping up annuities or pooling assets. That decision will depend on data that we have not yet received.
  I do not want to hang too much on the data, although it is one of the major drivers. I should say to the noble Lord that I do not recall during my years in opposition in the House—during Maxwell and all the rest of it—that the Government then, or indeed any government, thought to bring forward a scheme of such complexity, as inevitably the FAS scheme will be, from a cold-standing start—to use an athletic metaphor—in which there has been no warm-up period, and tried to get it delivered from start to finish in 11 months; in other words, it was ready to go in 11 months down the line.
  That comes with that package. The Government are acting in good faith and seeking to deliver an effective scheme. I cannot—I wish I could—give the noble Lord answers to the questions he has posed. I have tried to share with him the dilemmas the Government face and explain why I cannot at this moment in time give him the answers that he seeks.
  Perhaps I may now go on to the noble Lord's amendment, or does any noble Lord wish to contribute to the wider debate at this stage?
  Lord MacGregor of Pulham Market: I am simply going to say to the Minister that none of the arguments she has produced have any relevance to the amendment because none of them affect the position in relation to anyone other than the Government. She is talking about how the Government finally frames the scheme and what degree of financial assistance will be given and so on. I understand all of that. You have to have facts in order to be able to come forward with final conclusions.
  But none of that affects the issue of whether the private sector should be contributing to this at all. All the points made by the Minister make it even more important that she makes it clear that the private sector will not.
  Baroness Hollis of Heigham: But the whole point is that the noble Lord—I think the noble Lord was here when he said this, but he may not have been—used the opportunity to make an opening statement about the state of the FAS and said that the Government should behave differently and so on. He produced a series of questions and a series of reservations and a series of objections to the way in which the Government were handling it before we got back to the amendment. That is what I was seeking to address in the hope—perhaps forlorn—that it would enable us not to repeat the same arguments on the subsequent amendments. But that may not be the case. Perhaps I may now go on to the noble Lord's amendment.
  Lord Oakeshott of Seagrove Bay: I want to make some points which would have arisen in response to
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  the questions asked by the noble Baroness. I thought I would move my amendment specifically on that point and bring up some of the other issues later. This is a very simple and very clear question. It is to be hoped that we can lay it to rest.
  Baroness Hollis of Heigham: Yes. But, as I say, the noble Lord, Lord Higgins, perfectly properly, was using the first of a series of amendments on this clause to state his position, rather than doing so as part of a clause stand part debate. We have done so elsewhere in the Grand Committee and I think it is perfectly reasonable. That is why I responded in the way I did.
  As to the noble Lord's amendment, I can put on record that the Government will not use this Bill to impose a statutory levy or charge on private business to fund the financial assistance scheme. Neither does Clause 274 enable us to introduce a levy by secondary legislation even should we wish to—and I have made it clear that we will not.
  These amendments are defective and would have a more damaging effect; they would rule out the possibility—I am not saying other than that—of voluntary funds. I have given a very clear statement of the Government's position on this. I have made it clear that we will not be doing it under primary legislation; and we cannot do it—nor would we wish to—under regulations. I hope that as a result of that explanation the noble Lord will feel able to withdraw his amendment.
  Lord Higgins: There have been a number of statements by the Government which suggest that, in one way or another, they expect the private sector to contribute.
  Baroness Hollis of Heigham: No. We would welcome the private sector contributing. I was being pressed about whether there would be any powers for the Government to impose a levy—a compulsory contribution—on the industry. We are saying "no".
  Lord Oakeshott of Seagrove Bay: I welcome the noble Baroness's assurance. I am sure that she is also saying that any contributions would be entirely voluntary.
  Baroness Hollis of Heigham: That is exactly it.
  Lord Oakeshott of Seagrove Bay: On that basis, I am happy to accept the undertaking. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendment No. 316A not moved.]
  Lord Higgins Lord Higgins moved Amendment No. 317:
  Page 207, line 27, at end insert—
  "( ) Such payments must not be made to cover the cost of guaranteed minimum pensions."
  The noble Lord said: Amendment No. 317 deals with an interesting point. As I understand it, the payments which would be made here could possibly be argued to cover the GMP, which would anyway be financed. Therefore, to that extent, the cost of the

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  £400 million would be less than it would otherwise be. We were anxious to establish—and this has nothing to do with data or anything else—that the GMP payments and the funds available for them would be ring-fenced and totally outwith this scheme. Will the noble Baroness give an assurance to that effect? I beg to move.
  6.30 p.m.
  Baroness Hollis of Heigham: The amendment seeks to prevent any payment from the financial assistance scheme being used to cover any part of any guaranteed minimum pension that cannot be met by the scheme. I wonder whether we have a meeting of minds on how it currently operates.
  The guaranteed minimum pension is part of the system of contracting out. As the Committee will know, between 1978 and 1997, in order to take advantage of reduced national insurance contributions, an employer had to ensure the rules of his pension scheme would provide to each member a pension at least as good as a statutory minimum; i.e. the GMP. Many schemes actually provide a pension that is better than the minimum and the GMP then acts as an underpin; a floor below which pensions cannot fall.
  It was intended that at retirement the individual would receive a pension that was at least as good as the GMP and that GMP would be deducted from their entitlement to the state earnings related pension scheme—SERPS—to take account of the lower national insurance contributions.
  Of course, such a guarantee from the employer is predicated on the pension scheme remaining in existence. If a scheme winds up, whether the guarantee can be made good depends on the level of funds in the scheme.
  If the scheme cannot afford to secure the full GMP, it is permitted to secure a reduced amount. However—and this may be where the misunderstanding possibly occurs—the state does not step in and cover the balance of the GMP; nor does it, as a matter of course, restore state scheme rights. On the contrary, the full GMP is still deducted from the SERPS entitlement. That is because the individual, having paid a reduced level of NI, has not paid for his full SERPS.
  Therefore a person who has a GMP entitlement of £50 a week, although his scheme can only secure £10, will still have his SERPS reduced by the full £50. He keeps the £10 and therefore loses the £40. In this context, a provision such as that proposed by the noble Lord could actually add to the detriment of the individual. As it is generally lower-paid workers who have very little scheme benefits over and above the GMP, this amendment would effectively skew the proposed assistance towards the higher paid. If the noble Lord is saying that the financial assistance scheme should be used to compensate and make good the fall in the GMP, which has already been paid for once by the reduced NI contributions, that would disadvantage those who are better off. That is not what
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  we intend and I do not think the noble Lord would wish that. I hope that as a result of this he will withdraw his amendment.
  Lord Higgins: We need to consider very carefully the technical point the noble Baroness has just made. My reason for tabling the amendment was to some extent prompted by an article by Teresa Hunter in the Sunday Telegraph. It may be helpful if I quote exactly what it says. It states:
  "Members of occupational schemes that are contracted out of the second state pension (formerly known as Serps) qualify for a guaranteed minimum pension (GMP) from the state if the scheme fails to pay out.
  "Malcolm Wicks, the pensions minister, has admitted that victims of the 59 collapsed schemes that have so far requested payment have yet to receive a penny of their entitlement.
  "He was forced to admit to the delays in a written answer to a question tabled by David Willetts",
  and so on.
  Baroness Hollis of Heigham: I think that there is a misunderstanding.
  Lord Higgins: Fine. Just let me finish. I was anxious to establish that there was no question of that being met by payments out of the £400 million. But has there in fact been such a delay in the 59 schemes that have collapsed? If so, why have they not been paid?
  Baroness Hollis of Heigham: The Sunday Telegraph is not my usual reading and I have not read that article. I get the cuttings. I shall follow the matter up and write to the noble Lord about the particular article if he wishes. Certainly, I want to make clear that there is no second state contribution by virtue of topping up any shortfall in GMPs, which cannot be secured by the distribution of the employer's assets, because they have already been paid for once through reduced NI contributions in opting out of SERPS.
  Lord Higgins: It would certainly be helpful if the noble Baroness could write to me on what is obviously a technical point. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Higgins Lord Higgins moved Amendment No. 317ZA:
  Page 207, line 27, at end insert—
  "( ) Payments made under this section shall not be subject to any form of means test."
  The noble Lord said: Amendment No. 317ZA suggests that any payments from the fund should not be subject to a means test. The Government's decision on this issue does not require a survey or anything else. The Government can clearly make a decision in principle on payments under the FAS made to people whose pension schemes have collapsed—who are likely of course, very often in a company, to have a large range of incomes from really very low to perhaps quite high—whether those people should then be subjected to a means test.
  The idea and consequences of a means test, pursued so fanatically—I think it is the right word—by the Chancellor, have apparently now been rumbled not

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  only by the Turner report but also by the Prime Minister, so we are told. Be that as it may, I should have thought this was an issue on which the Government can give an absolutely clear-cut answer: no, payments under this arrangement will not be subject to a means test. Is that so or not? I beg to move.
  Baroness Hollis of Heigham: I am happy to seek to respond to the amendment. Going back to the previous amendment, I wonder whether there was some confusion between us. Was the noble Lord referring to deemed buy-back in terms of the Sunday Telegraph article?
  Lord Higgins: It had not crossed my mind.
  Baroness Hollis of Heigham: Fine. It was possible that the article could have been alluding to that. I will make sure, when writing to the noble Lord, that I include the issue about deemed buy-back. It is a different issue which may have some relevance to the broader debate.
  The amendment seeks to ensure that persons who may be given assistance under the financial assistance scheme will not he subject to any form of means test.
  Planning work on the FAS is proceeding on the assumption that we will not determine eligibility for assistance from the scheme through an assessment of any income or capital which an individual may have, other than the pension income which they have lost through a scheme winding up under-funded. However, we are still examining ill detail various options relating to how assistance from the FAS will be paid out.
  We may wish to consider further factors. I have mentioned them already in our previous exchange, such as age, length of service or proportion of accrued rights lost. The calculation of entitlement—I repeat—is complex. We do not want to rule out anything which could compromise our ability to design a coherent scheme which will make the best possible use of available funds and which will ensure that those who have lost the most will receive the most help.
  I am going to ask your Lordships to support us during this design stage, while we seek to gather the data we need. But on the noble Lord's point, in the common-sense understanding of means test, which is a test of income and capital, our planning work is proceeding on the assumption that we will not determine eligibility for assistance for the scheme through any assessment of income or capital which the individual may have.
  Lord Higgins: I listened extremely carefully to the noble Baroness and I will have to read exactly what she said. I was a little worried about the wording in her earlier statement, although she seemed to be clear enough on her effective reprise of the answer. If that is so, can the amendment simply not be agreed? If not, how can we devise an amendment to make the position clear?
  Baroness Hollis of Heigham: I do not wish to agree to the amendment. The means test that has been produced
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  is a test of capital or income. That is not what the amendment says. It says "a means test". That could be interpreted to read, for example, as being associated with how much has been lost, what the de minimis is, and so on. The Government will not accept the amendment.
  But I have made it clear that we are not proceeding on the assumption that there will be any test of capital or income, which is actually a more accurate way of addressing the issues concerned. The means test as it stands could be read to cover other assessments, including the need to target, which we may seek to embrace, and on which we might have widespread support. I cannot possibly accept the amendment as it stands.
  Lord Higgins: We agree on what we want to achieve, so it is important that that is made clear in the Bill. Will the noble Baroness undertake to come back on Report with an amendment that implements what she has just said? If not, one is bound to view it with suspicion. It should not be beyond the wit of the government draftsmen to make it clear. I hope that she will agree to do that.
  Baroness Hollis of Heigham: No. I suspect that, on each of the issues, Members of the Committee will try to chip away and get something extra. I do not blame them. As a result, by pressing their amendments or getting the Government to bring forward amendments in lieu, they seek to put in the Bill as primary legislation something that will pre-shape or determine a great deal of the framework of the financial assistance scheme before the Government have finally produced a scheme in the round.
  I do not take issue with Members of the Committee on the policy—we probably do not disagree on it at all on this point. However, I am not willing to be a party to trying to chip away on each issue. The next one could be age. I forget some of the other amendments to which we will come but, as and when I can, I want to be able to give noble Lords a description of the entire scheme. I would have thought that the words that I have already used would give the noble Lord the assurances that he seeks, in the same way as I sought to allay concerns on the previous amendment about not going for a statutory levy. The noble Lord did not press me to put anything into the Bill; he took that assurance. I hope that he will feel able to wait until we have decided on the final scheme and its shape, and then he will see how we have balanced the different pressures on us to accommodate people's needs given our resources.
  Lord Higgins: The provision ought to form part of the overall scheme, but it is very difficult to understand how implementing an amendment that embodies what the noble Baroness has said in any way makes it more difficult at a later stage—unless, at a later stage, the overall scheme will not cover the point as we would like. It is not acceptable to take such a skeleton course—to say, "Don't worry, we'll do this and that but we won't put it in writing". One has to restore confidence. If the people affected by the scheme, who are in desperate straits at the moment, do not know for

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  certain from the Bill what will happen to them, they will be worried. They will say, "I have a pension of £30,000 a year that may or may not be tied out by the scheme. We will have to go into the basis for the payments later on". They will need to know whether or not that amount will be means tested.
  The fact that there will be an overall scheme at the end of the day does not prevent us—the noble Baroness said "chipping away"—making explicit what the scheme will do in a number of important respects. That is what we seek to do. We accept that the scheme may not be able to be devised completely before the Bill gets Royal Assent, but there is no real reason why a number of its aspects should not be clarified, with other matters then subsequently dealt with by regulation.
  6.45 p.m.
  Baroness Hollis of Heigham: I am sorry but I cannot accept that position. I can see why the noble Lord would wish to argue it, and I do not for a moment challenge his right and integrity to argue that point. But I am not in a position to start giving assurances on some aspects of the scheme but not others. I do not yet know whether we will make proposals in which those closest to retirement age, for example, and with the least capacity to build up their scheme should be treated differently from those who are further from retirement. That may be right; I do not know. Ultimately, noble Lords will decide as they wish on Report; however, I am not willing to give assurances on solvent schemes that are still underfunded and so on until I have a sense of the complete structure of the scheme.
  The noble Lord's second point was that this affects people's confidence. People's confidence in these schemes is already at flat bottom as a result of actions taken by their employers and possibly their trustees in the past. We seek to rescue that. The outcome for any individual, given the average range of incomes within the schemes, will not depend much on means-testing because the amount of capital or other income that people arc likely to have will be within a very narrow range. It will depend far more pertinently on other issues that we have not yet been able to determine because we do not have the data.
  We do not know what percentage level of compensation or assistance we will be able to give compared to the PPF, for example. We do not yet know to what extent there should be a de minimis. Nor do we know to what extent, if people have lost only a small amount, one should meet it or operate on a percentage basis. Those three items, and whether you should weight provision to those closest to retirement, will affect the outcome for any individual far more than means-testing. I assure Members of the Committee that statistically that certainly will be the case, with the odd exceptions of those at the extremes of the array of income.
  I cannot accept this series of amendments in so far as they ask us to make a pre-commitment on some aspect of the FAS which I am not in a position to give.
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  I am perfectly happy to rehearse the arguments and to listen to the arguments about why we should take such a line rather than a different one: I want consent to that scheme as far as we can get it. But I cannot on any of these amendments give assurances or indications of what the final scheme may look like until we have got to that matter. I have assured the noble Lord that it is not part of our planning assumptions at the moment. I will not agree to amendments or put provisions on the face of the Bill at this stage, because that would be inappropriate until we know what the whole scheme may look like.
  Lord Higgins: Clearly, we are not in agreement on how the matter should be handled. Its genesis arose as a result of pressure in the House of Commons. I understand that some matters cannot yet be decided, but there are a number of amendments, such as this one, which can be decided now and can be included in the Bill. Probably it would be right to move such amendments on Report. If the noble Baroness is telling me that the House of Commons will reverse an amendment which says that schemes should not be means tested, let us see what happens. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 317A:
  Page 207, line 27, at end insert—
  "( ) The Secretary of State shall publish a report annually, setting out the basis on which assistance from the financial assistance scheme will be provided over the next year either confirming that it will provide total benefits to qualifying members equivalent to those they would have received had their scheme fallen within the scope of the Pension Protection Fund, or if assistance from the financial assistance scheme will be insufficient, specifying by what percentage those benefits will fall short of benefits received under the Pension Protection Fund."
  The noble Lord said: I hope that it will be convenient to the Committee if I speak to Amendments Nos. 317A to 317D together, as they hang together. It would enable me to respond to some of the points and challenges made earlier by the noble Baroness to Members on this side of the Committee.
  As I listened to the later stages of the noble Baroness's exchange with the noble Lord, Lord Higgins, I began to think that we had developed a very novel definition of parliamentary scrutiny whereby the Government ask the Opposition a series of straight questions, some of which I am happy to play the game on and give answers, but make it clear in advance that the Government's response to any questions from the Opposition will be, "Don't know" or "Won't say". I find that an odd way of behaving.
  Baroness Hollis of Heigham: We are in the process of constructing a scheme. I do not blame the noble Lord, Lord Oakeshott, but the noble Lord, Lord Higgins, knows better. This scheme started to come to the surface five months ago, in May. I am being asked what individual bits will look like before construction is complete. It is unreasonable to ask us to make declarations at this stage. I suspect that if any

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  Members opposite were sitting at this side of the Dispatch Box they would say exactly what I am saying now.
  Lord Oakeshott of Seagrove Bay: I have listened very closely to the noble Baroness making that point several times. It is our turn now to make some points in response.
  I have been asked a series of questions, to which I shall now try to respond, before asking further questions of my own and explaining why I believe my amendments are a useful aid to parliamentary scrutiny of this Bill and why I do not think that the Government would be binding their hands by accepting some of them. They have already accepted the principle of my first amendment.
  I have already made clear in the first amendment our belief that the Government should stand behind the scheme and that it should be entirely government-funded. As set out in Amendment No. 317C, we believe that, given the great urgency that the Minister has highlighted, the FAS should come into effect within six months at the latest of the Bill's enactment. I invite the noble Baroness to say why, if there is such urgency, she cannot accept that amendment.
  We also say that, where a qualifying pension scheme was closed while the sponsoring employer was solvent, it should be treated as a qualifying scheme for the purpose of this clause. That is a very clear proposal in our amendment. We wish to know whether it is a principle.
  Our position is clear. We need to look a little at the background. We keep being told that the scheme has been in contemplation only since May. We all know that that is complete nonsense. There has been pressure for some sort of financial scheme and long discussions for many months. The problem was that the Government could not make their mind up and agonised about it for many months. Finally, in May, on one of the few occasions when the Chancellor of the Exchequer and the Prime Minister were on speaking terms, they got together and cobbled this scheme up. If it is being done in a rush, it is very much because the Government took so long to decide to do it; so that is not a satisfactory excuse.
  This is not a "menu without prices"—those who have been in politics a long time may remember that phrase. The figure of £400 million has been plucked out of the air with no data, as the Minister has made clear. We do not think that it is unreasonable to say that it is wrong to invite Parliament to sign a blank cheque for £400 million of public money. Unless we can clarify some issues of principle about how the scheme will work, that is what we are being invited to do. We are not happy to do that.
  In Amendment No. 317A I seek, not to set down any particular rate of payment, but to say that once a year the Government should make clear what the benefits will be, when they have decided that that aspect can be discussed, so that people can see the ratio of the benefits payable under the PPF. That would provide a
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  clarification that in no way ties the Government's hands to us. Even since May we have had no specific indication of how this very important scheme will work. All that we are told is that the Government are thinking and looking at the data. That is not good enough; we will not accept it. The amendments are fairly modest, but they seek to clarify how the scheme will work, without tying the Government's hands. It is really not good enough to hide behind saying, "The scheme has been going only since May, so we do not know and cannot tell". We are not prepared to accept that blank cheque on Report, unless we have much greater clarification and, indeed, a proper answer on why the amendments are not acceptable, if they are not. I beg to move.
  Lord Lea of Crondall: Without playing with words, it is quite interesting that the noble Lord twice said that he would not agree to sign a blank cheque. It is a funny sort of blank cheque if it has £400 million written on it. There is an important point here—that one has to begin from somewhere and work backwards. Not only is some £400 million not a blank cheque, but much that then has to be put into place arises from it.
  Lord Higgins: I can take up the point that the Government are not writing a blank cheque. Nowhere have we been told that the figure will be set. In particular, the figure of £400 million was bandied around to placate those in a revolting state of mind in the other place—probably quite rightly. In fact, it is not £400 million. That is a headline figure and what the press statement says. In present-value terms, the figure is only £250 million.
  More particularly, we are not clear whether that is a limit. Is it? Given the number of schemes that we are considering—250 or so have been included in the survey—we can consider, once we know that, whether it is the least bit adequate to deal with the problem. If we find, by a fairly simple arithmetical process, that it clearly is not, we need to define in the Bill itself exactly how the administration will take place.
  There are real problems here, about some of which the noble Baroness is right—we will not know until we get more data. But some can be decided now without any great problem. In her usual helpful way, she sent round a note that said that one issue that we would need to consider was whether to have an initial cut-off date for support under the FAS. We are likely to need some cut-off point, to make it administratively feasible and to give some certainty about the funding arrangements. One option that we are considering is to use April 1997 as a starting point, as that is the date of the coming into force of the Pensions Act 1995. We should take into account the schemes that started to wind up shortly before April 1997 before reaching a conclusion.
  That is not a range of issues that need to be considered in the light of the data, unless the Treasury is concerned that, whatever else happens, the figure will not be more than the present £250 million. If that is the position, fine—we know where we stand. The noble Baroness will say, "It is an absolute limit.

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  Consequently, we will have to make some decisions on that basis". But there is no reason why the kind of issue that I have just mentioned cannot be decided now or put into the Bill. I say that because the people in these schemes are desperately worried about whether they will receive any help, any significant help, under the scheme. On the basis that we have just discussed, they could be told, "So sorry. Your scheme was on the wrong date and you will not get anything. Forget it". Alternatively, the Government could say, "Your scheme was on an eligible date. We have decided to take it from there and you will get something".
  Data have nothing to do with that. It is a question of making it clear to people who are extremely worried about their personal position what they will get or whether they will get anything. There is no reason why that decision should not be taken by Report.
  7 p.m.
  Baroness Hollis of Heigham: From the sound of it, I think that we are going to have a similar debate on each set of amendments, in which case I suspect that I shall be making broadly the same response each time, which is as follows. Where I can appropriately narrow down the area of uncertainty, as with the assurance I was able to give the noble Lord, Lord Oakeshott about not introducing a statutory levy—I think he thanked me, but that is fine—I shall be happy to do so. However, it would not be prudent of me to try to give undertakings or to accept wording to go in the Bill without knowing the scale of the commitments involved. That means knowing, for example, the data.
  For example, the noble Lord put it that if I could say that there will be no more and no less than £400 million as a lump sum for the 250 schemes, we could use a simple arithmetical process to see what they would get. I was so taken aback by the noble Lord's words that I wrote them down. However, that is absolutely not the case. How many of those are deferred pensioners? What level of assets is being brought into the scheme? What size of annuity would be required to top it up? How much would that cost us in the market? It is not at all simple. It will have to be done, but in the example cited by the noble Lord, simple it is not. That is why we need to do this as fully as we can.
  All I do is to repeat time and again the assurance I have given to noble Lords, who should know by now that I try my best to honour promises and assurances. Where I can share information with noble Lords, I shall do so; where I can write to noble Lords, I will do so. But where I cannot, it is no use repeating to me, "You should be able to do this. You should be able to do that". My response will always be the same. Until we know the scale of the commitments involved and the totality of what the scheme will look like, I am not in a position to make or give undertakings on any particular dimension. I can say that it is not going to be levied on the private sector. That is clear and the Government have never suggested that it would be a statutory levy. However, on the other issues I am being pushed on, we simply do not know, and I am not going to suggest to the noble Lord that I shall be able to answer him in a short while.
  Before we all become too tired through constant repetition, perhaps I may address the amendments before us. Amendment No. 317A would require the Government to publish a report every year on whether the payments from the financial assistance scheme are running at the same level as those from the PPF. Where it falls short it should say by how much. Amendment No. 317B is more direct by seeking to prescribe the level of benefit that the financial assistance scheme will pay to ensure that it runs at the same level as the PPF.
  The noble Lord introduced his amendments with the remark that they are quite modest. However, they absolutely are not. This is a central and difficult issue. Can we have a financial assistance scheme paying a certain level of benefit, and approximately how close might that level be to the PPF? I doubt very much that we could reach PPF levels, but I do not know how far we will fall short of those levels. Moreover, given the £400 million and the lack of information on the distribution of members' pension values, their ages, the value of their accrued rights and the level of assets a scheme might hold in order to meet them, and therefore the cost of any subsequent annuity, I could not begin to answer what the noble Lord has described as minor points. They are central to the whole debate.
  Lord Oakeshott of Seagrove Bay: I stand corrected on Amendment No. 317B. However, I would welcome a proper response to Amendment No. 317A, which is in effect a transparency amendment, as well as on Amendments Nos. 317C and 317D. However, I accept that Amendment No. 317B is more a point of principle.
  Baroness Hollis of Heigham: In that case I shall go straight to Amendment No. 317B, if the noble Lord accepts that I cannot do what he seeks in Amendment No. 317A.
  Lord Oakeshott of Seagrove Bay: No, I am asking for information in response to Amendment No. 317A. That amendment seeks information rather than any substantive commitment.
  Baroness Hollis of Heigham: I was going to say in response to that that a report would be difficult to produce and probably of little value. I am not sure about usefulness, but I think that it is right and proper that the FAS should be held publicly accountable. Once the organisational structure of the scheme has been settled, I accept that it should report on its activities, and we shall ensure that it does so. We shall certainly be undertaking a review of it.
  At this stage I do not want to say that we will start doing some of the simple arithmetic suggested by the noble Lord, Lord Higgins, showing the relationship. When that scheme is established, I hope that we will have some presumptions or assumptions about what levels of final pension people should be able to take away, putting together what they already have secured and what the FAS can top it up by. At that point, people will be able to do their own sums. I do not think that the noble Lord's precise wording is appropriate.
  We do not disagree that the activities of the FAS will be extremely complicated. It will be a far more complex job than setting up the PPF, which will not happen until two years down the road. The FAS is being thrown right into the middle now. As soon as we have the information, it will obviously be available for public scrutiny. The FAS will continue to report in the usual way. I do not doubt that the substance of what the noble Lord quite legitimately calls for will be given, but not in the form in which he is calling for it. I hope that he will accept that.
  As regards Amendment No. 317C, which I did not think would be moved, again, there is very little distance between us. We are all eager to see it. No one benefits from unreasonable delay. However, I do not think it right to force the scheme to make payments within a specified period. We seek to have the scheme established by spring 2005 and to make payments as soon as practicable after that. The six-month deadline sought by the noble Lord would require the FAS to open for business possibly in a badly under-prepared state, which I do not think is right.
  We share a common interest. We want to get the scheme up and running as quickly as possible. I do not yet know whether FAS will be able to do what the noble Lord wants; that is, to be making payments within six months. I simply do not know. It would be unreasonable for me to make those commitments. It may be, for example, that we can start giving assurances to those who are close to retirement, but we cannot yet. At a later stage, we will have to deal with those who are further away from retirement. That is a sort of two, three or 17-step process that the FAS may have to go through.
  While I fully share with the noble Lord that we want the FAS up and running as quickly as we can, I cannot give him an assurance that it will be done within six months—particularly if the price of that would be the FAS would not running effectively in the members' interests in terms of the funds it would be using and disposing of, and the information that it needs. I just do not think that we can do it, or make a commitment in the timetable for which the noble Lord is asking. If we could, I would be extremely happy to do so.
  Lord MacGregor of Pulham Market: I have listened to the debate with great interest and I have a certain sympathy with the Minister in her predicament. It is not really her fault. This debate has most clearly underlined what we all suspected had happened and what my noble friend Lord Higgins said; that is, the Government resisted the scheme until the last minute. Political pressure made it necessary for them to do something. They cobbled it together at the last minute. The Treasury says that we must put an overall limit around the cost and that we must go through all the details to ensure that it is not an open cheque. It is taking a lot of time to do because some of the data are not available. That is very obvious from the discussion that we have just had.
  But we had two commitments from the Minister. I want to make a point about one of them. On the commitment about any contribution to a statutory levy or anything of that sort, we have had a very clear statement. Indeed, it would have to be in the legislation if that was going to be done. So we can he satisfied with that. I do not think that there will be any voluntary contribution from the private sector because it raises all the moral hazard issues that we have discussed elsewhere.
  I am still puzzled about the point on the means test because we are talking about two types of means test here. That is probably the difficulty about the precise wording in that means test point. As I understand it, the Minister has given us another commitment tonight, which is that the means test, as we normally understand it, will not apply to this scheme. Perhaps I can develop that a little further. I can see that some sort of means test may be needed in the scheme itself; in other words, it could be decided that a different proportion of financial assistance is given to people with a smaller income than to those with a greater one. If that is described as a means test, I fully understand the Minister's point.
  The Minister talked about the fact that no account would be taken of potential beneficiaries' other income and capital outwith the financial assistance being given. That was a very clear commitment. I began to worry that the Minister would not even contemplate some form of amendment that would encapsulate that, making me concerned about whether it was a real commitment at all. If I have understood her right, it would be of at least some comfort to some people to know that their income and capital other than that which would come from within the scheme would not be taken into account in the final payments. I am not a drafter, but I would have thought that it was not beyond the wit of man to make that clear in the Bill.
  Baroness Hollis of Heigham: The noble Lord is absolutely right in distinguishing between the two forms of assessment. We often use the word "targeted" as an alternative to "means test". I suspect that we will target in this scheme, but not necessarily in that way.
  I will repeat my words, as I chose them very carefully. Planning work on the FAS is proceeding on the assumption that we will not determine eligibility for assistance from the scheme through an assessment of any income or capital which an individual may have, other than, as the noble Lord accepts, the pension income that they have lost through a scheme winding up underfunded.
  Lord MacGregor of Pulham Market: Is that an assumption or a guarantee?
  Baroness Hollis of Heigham: Planning work is proceeding on that assumption. That is how we are setting up FAS in the work in progress.
  Lord Higgins: My suspicions about what the noble Baroness originally said have just been confirmed. We will need to look carefully at her remarks. My noble friend is right to distinguish various forms of means

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  test. We are all clear what we are talking about. I need to look again at the exact wording that the noble Baroness has just used.
  I accept that some of the calculations may be complex, but, if that is so, one is bound to ask how the Government arrived at the figure of £400 million—or, in present value terms, £250 million. One cannot help suspecting that there was a general feeling, "There is going to be a revolt. How much can we buy them off for? We need a nice clear figure", and that the answer was £400 million. If the noble Baroness is right in saying that one cannot make those calculations, then there was no basis for giving any figure at all, unless she wishes to tell us how it was calculated, however complex or simple the formula.
  I return to an important point that we ought to be able to deal with. The issue of eligibility is crucially important for companies whose schemes have collapsed. At least on the timing aspects—the points in the noble Baroness's note which I quoted earlier—there is no reason why it should not be decided before the Report stage what the cut-off dates are at either end. The Government could put that in the Bill and everyone would know where they stood. To that extent at least, members in some companies would know whether they were outside the scheme and would get nothing, or whether they were in the scheme and might get something. There is no reason why that should not be decided before the Report stage.
  Similarly, on solvent and insolvent companies, there is no reason why the Government should not take a view and include it as an amendment to the Bill, deciding whether solvent schemes are in or out. That decision does not have to wait. Unless the real problem is Treasury-driven, why cannot those decisions be taken by the Report stage? The noble Baroness is always immensely helpful. I hope that she will go back to her department, in particular to the Chancellor, and say that these aspects should be clear before the Bill passes into law.
  7.15 p.m.
  Baroness Turner of Camden: I am grateful to the noble Lord, Lord Higgins, for raising again the issue of solvent and insolvent companies. I had mentioned it earlier and I intended to raise the matter if it arose on one of the amendments further on.
  It seems to me that it is most unfortunate for people whose companies wound up their schemes before 11 June 2003, which is the time frame so far as they are concerned. Many of them have paid for a long while into schemes but now find themselves with a severely diminished pension or very little at all. I have a long paper here which was prepared by an individual who was involved in one of these schemes. He points out that the number of companies involved is quite small and the number of individuals involved is really quite small in the general scheme of things. He states that there are total of 15 schemes, and that the total number of people involved is 3,732.
  These are cases where the companies wound up their schemes before they became insolvent. They became insolvent some time later, and then the individuals concerned found themselves with no recompense at all. The writer of this paper makes the point that it is all very well saying that the companies concerned have a moral obligation, but if they are hard up financially they will probably be unable to make up the shortfall. Without legislation, how can they possibly obtain any money from the sponsoring company, even if the sponsoring company has any?
  The people who raise these issues—and I gather they will be going to the Parliamentary Ombudsman about them—have serious problems. The Government should look carefully at this before Report.
  Baroness Hollis of Heigham: I take it that we are dealing with Amendment No. 317D? The noble Lord did not move it, but we are now dealing with it.
  Lord Oakeshott of Seagrove Bay: Yes.
  Baroness Hollis of Heigham: I tried to respond to the question about solvent and insolvent companies. Under FAS, taxpayers' money is used as assistance of last resort where employers are not in a position to fulfil their promises. I mentioned earlier that we have to ensure that employers cannot simply duck out of their responsibilities, leaving the taxpayer to pick up the pieces. We do not encourage or allow employers to evade responsibility for their schemes.
  There would be an issue of moral hazard involved if we suggested that the Government were willing to pick up, as a last resort, an underfunded scheme where the employer was solvent. We have to be very aware of what we might be appearing to do in that situation.
  It must be remembered that such employers will have received taxpayers' money already on the basis of their promise to provide a pension; they have had tax relief; if the scheme is contracted out they have had a reduction in NI contributions. I do not believe that we should allow employers to take advantage of those benefits and then renege on the agreement when they are solvent and dump their responsibilities into the Government's lap. In this respect, we come back to some of the moral hazard questions that were raised earlier in the discussion.
  In some situations—this is a fresh point, which I am sure the Committee will be glad to hear as opposed to the reiteration of previous points—the structure of these companies can be complex, and although it may appear that the principal employer of a particular scheme is unable to meet the full cost of scheme liabilities, there may be connected companies that can do so. And even though there may not be a legal requirement, they can sometimes voluntarily do so.
  The obvious case in point is the Seeland pension scheme. The Committee will remember that in November 2003 Maersk announced that it was proposing to fund the deficit in the Seeland pension scheme on a full buy-out basis, despite there being no legal obligation to do so. The company said that it made the decision in recognition of the spirit of the

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  new legislation announced by the Government in June 2003 and its commitment to being a good employer in the UK. This case, which is quite significant, showed that even though there may not be a legal obligation for a company to meet the full deficit of a scheme, it can none the less—and many of them will—act to make good its moral obligations, ensuring that pension scheme members do not suffer significant losses to their pension provision. Had there been a statement that the Government would step in, I very much doubt that Maersk would have made the statement that it did.
  When one talks about moral hazard, it is not abstract vocabulary. Here was a real case where, had the Government intervened, I do not think that Maersk would have responded in the way that it did. All credit to the company that it felt able to do so.
  I am sure that the Committee will agree that we should avoid the use of funds in such cases, particularly where companies or connected companies are willing and in a position to make good the deficit.
  I have said that we are still exploring exactly how "insolvency" is to be defined in the context of FAS and we are considering the position of schemes where companies may be able to provide some additional future contributions. We are also exploring the legal issues relating to the possible provision of assistance to members of schemes sponsored by solvent employers.
  In parallel, we are requesting further information on schemes winding up underfunded with solvent employers, and we are offering those affected by the wind up of such schemes the opportunity to voice relevant issues in consultation with FAS. This will give us a strong evidence base on which to go forward with the difficult decisions that have to be taken. It would be wrong to pre-empt the outcome of this consultation process. We have got to work with stakeholders, members of the pensions industry, those affected by pension losses, and with other bodies such as the PPF and the regulator, to ensure that we get the balance right.
  What I am really saying on the question of solvent and insolvent companies is that the Government have still not determined their view. We are acquiring relevant information to see what the liabilities and consequences might be; we are seeking views on this in consultation. When I can inform the Committee how the Government's mind has formed on this and what the outcome is, I shall be happy to do so.
  But this is not a closed issue. I can tell the Committee from the various briefings that I am involved with that this matter is being worked through at the moment. I cannot give the information or the assurances that the noble Lord seeks—not because we are trying to conceal anything but because we have not yet decided how best to take this issue forward.
  Lord Oakeshott of Seagrove Bay: I apologise to the Committee if I inadvertently caused confusion by moving the four amendments together. We have had a
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  good and wide-ranging discussion, during the course of which it became apparent that some matters can be clarified but that it may not be possible with others.
  As to the four amendments, I shall read what the Minister said in reply to Amendment No. 317A, but I feel that it was a constructive response. I shall withdraw all four amendments together at the end. I accept that Amendment No. 317B is rather flying a flag. I shall withdraw it. It is what we believe but we would not expect the Government to accept it.
  However, as regards Amendments Nos. 317C and 317D, the Minister and Ministers in the other place have said that this financial assistance package must be brought in soon—the Minister has spent a great deal of time saying how urgent the matter is—and I cannot believe that we are seriously being told that it could take more than 18 months. But, if my mathematics is right, that is how long it will take; from May, when it was introduced, until six months after the Act comes into effect next spring. Are we seriously saying that it is conceivable that it could be at least 18 months before payments are made? It is a pretty shocking position if the Government are not prepared to accept an amendment to that modest effect. We shall certainly press that issue.
  So far as concerns Amendment No. 317D in relation to solvent and insolvent employers, as the noble Baroness, Lady Turner, said, this may not affect many people but they are very hard cases. I think particularly of Bradstock and Dexion, about which people have been writing to me and, no doubt, to other noble Lords.
  It identifies very much the difference between this side of the House and the other because, frankly, it is an issue of principle. It is an issue of eligibility, as the noble Lord, Lord Higgins, said, and it is also an issue of principle. It is either right or it is wrong to include people in that position in the scheme. It is not a question of how much it costs; it is a question of whether they should be in or whether they should be out. If the votes are there on Report, it will be a reasonable thing to insist on. Those issues of principle, those issues of eligibility, and the issue of the date when people are or are not eligible, are very important.
  The question of the gap is particularly important in the Turner and Newall case. Is it conceivable that there could be people who were covered when funds go into wind up but who are now, or roundabout now, covered neither by the financial assistance scheme nor by the PPF? We take the view that it is absolutely inconceivable that that should be so. Again, it is a straightforward issue of principle and eligibility.
  So the questions of date and the solvency and insolvency of employers are, in our view, perfectly proper issues of principle that need to be decided independently of detailed work on collecting data. We shall certainly be returning to those issues on Report. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 317B to 317D not moved.]
  Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay moved Amendment No. 318:
  Page 208, line 16, leave out from second "the" to end of line 18 and insert "Board of the Pension Protection Fund ("the scheme manager")"
  The noble Lord said: I shall be very brief in view of the lateness of the hour. I hope that people will feel the relative simplicity of these four amendments, Amendments Nos. 318 to 321, which I shall move at the same time. They all basically try to give effect to one proposal. Although clearly the money—the £400 million or whatever comes out of the financial assistance scheme—must be ring-fenced and not mixed up with the Pension Protection Fund pot, it seems illogical effectively to set up a separate quango to administer it. It seems a practical and sensible suggestion that the Pension Protection Fund's board and administration should handle the money as well, although obviously in a parallel and separate way. That would be simpler; it would avoid duplication and ought to save on costs. I beg to move.
  The Deputy Chairman of Committees (The Countess of Mar): I point out very gently to the noble Lord that he moves the first amendment and speaks to the other three.
  Baroness Hollis of Heigham: I shall be very quick because, like everyone else, I am aware of the time. We have not ruled out the possibility that the board of the PPF may have some role in administering the scheme if, as the noble Lord said, that offers the greatest efficiency. Clause 274(3)(g) allows for regulations to do just that. However, such important details need to be worked out in consultation with those involved. Until we have completed that consultation, including with the PPF chairman, trustees and so on, it would not be sensible to require the board of the PPF to manage the affairs and to rule out all other options. What the noble Lord asks for may happen, but we are not there yet.
  Lord Oakeshott of Seagrove Bay: Given the need for speed, it would be a good idea to take that decision sooner rather than later—to rule it in and get on with using the existing structure. That would be better and quicker. I beg leave to withdraw the amendment.
  Amendment, by leave, withdrawn.
  [Amendments Nos. 319 to 321B not moved.]
  On Question, Whether Clause 274 shall stand part of the Bill?
  Lord Higgins: It has been a helpful, if somewhat frustrating discussion. The noble Baroness says that she can understand that. We have to consider how best to move forward. Given her reply on means-testing and subject to looking at the wording very carefully, I regret that she did not feel able to say that she would come back with an amendment on Report. That will mean that we will have to try to draft one, and
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  probably vote on it. I hope that it will go to another place and the Government can then decide how to deal with it.
  So far as the overall issues are concerned, something that really needs to be decided—it does not depend at all on the inquiries, data or anything else—is the question of eligibility, with regard both to the timing and the dates and to the solvency or insolvency point. There is no reason why the Government cannot take a decision on that. If they then table an amendment on Report, we can decide whether it is good or bad, but at least Parliament will have had some say in the matter. If the Bill goes through in this form, Parliament will have had no effective say about these matters whatever.
  My final point relates to what I have said, but it may help to clarify the situation. Are we to understand that the £400 million/£250 million is a limit or not? If we know where we are on that, some other parts of the jigsaw may fall into place.
  7.30 p.m.
  Baroness Hollis of Heigham: On the last point, the Government have decided that £400 million is the appropriate sum. Clearly, that does not rule out any government, including a government formed by the parties opposite, revisiting that issue should they be so minded. However, that is not the Government's position at the moment. Their position is that £400 million is the appropriate sum of money with which to finance the financial assistance scheme.
  On the second point about the means test, I cannot go further than I have already gone. The noble Lord can move his amendments. I have given him such assurances as I can. It would be foolish of me to try to give categorical undertakings of what may or may not happen five, 10 or 20 years down the line. If I can clarify things further as decisions become clearer and we collect more information, I shall be delighted to do so. But it is no use trying to push me into saying things that I am not in a position to say. I cannot go further than I have gone today.
  Finally, on the broader constitutional points that the noble Lord raised, I accept that the result is not a satisfactory solution. It has come up in the sense that Members of the Committee do not have the detail which I understand that they could reasonably expect to have. But if we were to follow the path that noble Lords seek—to have either a complete structure in place and be able to bring it to them or to start chipping away at contours or dimensions of the scheme—the risk would be either to ensure that other bits of the scheme that we think are appropriate cannot be resourced or funded as we think appropriate or meritorious, or that we would delay the implementation of the scheme as of April 2005.
  All of us, not just the Government, are, in that sense, to some degree in a corner. I perfectly accept that the scheme has come up at a fairly late stage as a result of the situation of the scheme members of ASW and so on being drawn very forcibly and properly to the Government's attention. As a result, we have not had the usual lead-in that goes behind such structures. In

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  my experience, it is often a couple of years before such a scheme would get off the ground. We are trying to do it infinitely more rapidly and we are trying to do trading on it.
  I cannot go beyond that. I am grateful to noble Lords, as I think that the Committee could have been harsher in some ways on the Government. Noble Lords have shown to some extent an understanding of the situation which the Government face. I am grateful for that understanding. All I want noble Lords to understand is that it is not through lack of application, work or industry, let alone cynicism or malevolence, that I cannot give the Committee the assurances that it would like today. I cannot do it. When I can, I shall be happy to do so.
  It may be that by Report the Government have got far enough in their thinking and information to be able to make some of their positions clear. I do not know. But to push government against what they feel they can do is not sensible, because ultimately the scheme must be able to deliver within its finite resources compensation or assistance. We must be able to do that as decently and as expeditiously as we can. I cannot give the Committee the assurances it seeks. I shall give the noble Lords the assurance that they seek when I can. Until that point, to try to push me to say, "One wall will be here, but we do not know where the other three walls will be. There will be a roof and we think that it will have these dimensions" is not a sensible way to ask the Government to proceed.
  I thank noble Lords for the relative courtesy that they have extended on these issues and their understanding of where we come from. I hope also that the Members opposite do not think that there are some easy issues that somehow the Government are ducking
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  out of by not answering today. Believe me; it cannot be done in the way that your Lordships would wish at this point.
  Lord Oakeshott of Seagrove Bay: I should just like to make a couple of points in response to that. We are not in any way seeking to chip away anything. There is nothing there to chip away. We seek to help lay one or two clear foundations. That is how I would put it.
  We fully understand that the Minister is not in a position to give assurances on some points today, but we hope that our arguments and the strength with which we have made them—courteously, I hope—will enable her to go back, consult and be in a position to give some commitments on Report, given parliamentary timing and the nature of the Bill.
  Lord Higgins: I am not going to ask the Minister to reply again; I merely make the plea that there is no reason why the Government could not table an amendment on eligibility on Report. The only reason they will not do so is because they have failed to take the relevant decisions. There is no lack of data or anything else. We are not asking the Government for a completely tied-up scheme in every respect. But to the extent that it can be clarified by the Government taking decisions, there is no reason why it should not be done.
  I very much hope that the noble Baroness will go back to the department and say that this is something where Parliament believes a clear decision by the Government should be made and not left to an arbitrary decision by regulation some time after the Bill is passed.
  Clause 274 agreed to.
  The Deputy Chairman of Committees: The Committee stands adjourned until Monday 18 October at 3.30 p.m.
  The Committee adjourned at twenty three minutes before eight o'clock.