§ House again in Committee.
§ Schedule 2 [Information about and registration of occupational pension schemes]:
Lord Mottistone moved Amendment No. 34:
Page 47, leave out line 48.
The noble Lord said: In moving Amendment No. 34, I should like also to speak to Amendments Nos. 35 to 40 inclusive.
Amendment No 35: Page 48, line 43, leave out from beginning to end of line 18 on page 49 and insert ("of the current name and current address of the occupational pension scheme and the names of any predecessors of the current occupational pension scheme.").
Amendment No 36: Page 49, line 26, leave out from beginning to end of line 24 on page 52.
Amendment No. 37: Page 53, leave out lines 28 and 29.
Amendment No. 38: Page 54, line 19, leave out from ("section") to end of line 20.
Amendment No. 39: Page 55, line 21, leave out ("or 56E(1)(b) or (c)").
Amendment No. 40: Page 55, line 43, leave out ("or 56E(1)(b)").
The operative amendment is Amendment No. 35, and that is the one on which I shall concentrate. At the moment we find at the bottom of page 48 under new Section 56C(1) in paragraphs (a) to (e) a list of a substantial number of documents which the registrar will acquire and which have to be lodged with him. If we then turn to page 52, we see that new Section 56G(1)(b) on line 40 says that if a document:
is in the custody of the registrar, any person—
§ The subject which we are discussing we also discussed when I resisted initially the acceptance of Clause 3. I shall not go into all the detail that we then covered. But a great deal of a company's arrangements for its pension scheme can by the process that I have just described be available to any person to examine in considerable detail. That could be of harm to the company by disclosing to its competitors exactly how it is running its pension scheme. It seems to me that that goes much further than would be either reasonable or desirable.
§ It seemed to me from the earlier debate that we might escape the registrar but that we shall almost certainly have the register, even though, as I suggested, it might be run by the Occupational Pensions Board, if one likes, for an economy reason. But if we are to have the registrar, it seems to me that we really ought to remove—and this is the purpose of Amendment No. 35—paragraphs (a) to (e) from new Section 56C(1) and replace them with just the current name and address of the occupational pension scheme. That would be quite enough information for anybody who 722 wished to know what sort of pension scheme they were concerned with or might potentially be concerned with. They could then find out all the details that they needed. What is important is that the information would be within the control of the company or the insurance company or other body organising the pension scheme. They can make sure that the wrong kind of person does not obtain this information The wrong kind of person is not the bona fide employee of the company or potential employee of the company, but somebody wanting to do something clever with the information they may gain.
§ Thus, as we said earlier when we were talking about Clause 3, everybody agrees that it should be easy for people to find out what pension schemes affect them, but it is not reasonable for other people who may have other purposes. Somebody mentioned clever journalists. It is not entirely in the interests of a company to have clever journalists writing articles about the details of their pension scheme. Thus, I think if we are to have the register, it needs to be restrained in the way that Amendment No. 35 requires. All the other amendments, Amendment Nos. 34 to 40. are consequential on this one. I beg to move.
§ Baroness Trumpington
Before I answer my noble friend, I cannot resist a little tit for tat. Last Wednesday I endured the taunts from the noble Baroness about the absence of people from my Benches. I have to say that I outnumber her representation this evening. It may not be great, but it is a damned sight better than on her side‡
It has become apparent over the years, whenever the issue of a pension schemes register is discussed, that there are very different views about the information which such a register should contain and the functions which it might perform. On the one hand, there is considerable support for a deposit register which could contain the deeds, rules and annual reports of schemes and be open to the public inspection. On the other hand, the amendments proposed by my noble friend Lord Mottistone would provide for simply a tracing register containing only enough information to enable early leavers, for example, to contact schemes with which they may have lost touch. Others would advocate no register at all.
Serious concern has been expressed about the costs and administrative burden which a register might place upon schemes, and about the confidentiality of information which might be placed on public record. The Government have listened carefully to the arguments which have been put forward at various times. That is why we have said that we are still open-minded on the issue. An evaluation of the costs and feasibility of the different options for a register is being prepared and I am sure my noble friend will agree that it would be unwise to reach a final decision before we have had an opportunity to consider all the facts.
Of course we are aware of the fears expressed about the disclosure of certain financial information. This will be taken into account in considering the results of the evaluation now being carried out. In the meantime, I can assure my noble friend that we shall certainly have very full regard to the views which have been expressed. I would therefore ask my noble friend Lord Mottistone to withdraw his amendment.
§ Lord Mottistone
Two points from my noble friend's remarks strike me. One is that she said considerable support was given to many documents as listed currently in the Bill. Can she enlarge on that and say where the considerable support comes from and, if it is not immediately available to her, can she perhaps let me know in a letter? I ask this because it could be that the considerable support comes from the very sources against which protection ought to be provided. It is difficult to know. As my noble friend said, my amendment would enable an individual, who was personally concerned because of a pension or possible pensions if he went to work for a company, to go only to the people who were providing the pension scheme, which is exactly what I want to achieve. That would seem to me to be perfectly all right for my individual friend. I think perhaps the considerable support might come from people who would derive other benefits from being able to get at this information and would not help the person we want to help, who is the potential pensioner. That is the first point.
The other point is this. My noble friend said that she and her department were considering all the facts before they came to a conclusion. However, she did not really give an indication as to when all these facts might have been examined. Is she able to go as far as to say that that would happen so that she would have time to put down an amendment of her own on these lines at Report stage, or, at the worst, Third Reading? I should hate this Bill to leave this Chamber while the Government were still investigating the facts. Can my noble friend help me on that matter? Is the moment right for me to sit down and invite her to reply?
That is beautifully timed. On the first point I shall write to my noble friend. On the second point, the answer is: in the near future.
§ Lord Mottistone
Can my noble friend say that it will be before Report stage? I must press her on this because I think that that would be a matter of considerable importance. If at Report stage my noble friend comes up with an amendment which is perhaps on the lines of that which I have, that is fine and we can forget about it. However, if she does not come up with one, we have to do it at Third Reading and by the rules of the House it would not be proper for me to go into battle on Third Reading. Furthermore, if the outcome at Third Reading is that her amendment which she then puts down is not good enough, we will not have time to correct it because we are the Second Chamber taking this Bill. Thus, it is very important that a conclusion is reached before Report stage.
§ Baroness Trumpington
Yes, I totally take the points made by my noble friend. He must remember that the Bill has flexibility for requiring any kind of register. I cannot really say whether I shall be in a position to put down an amendment at Report stage. However, when I am writing to him on the first point, I shall include the information he has asked for, and if the noble Baroness wishes to see a copy of the letter, it will be in the Library, but I shall see that the noble Baroness and perhaps the noble Lord, Lord Banks, have copies of any such letter containing that information. We shall then have to take the matter from there.
§ Lord Mottistone
Yes, that is fine. There is just one final point. What I sought to convey to the Committee when I introduced this amendment was that we have many facts here which are open to "any person"—and I turn again to page 52, line 40. Perhaps when my noble friend is considering any amendment she may have she will bear in mind that that term is very wide indeed. One may think that the term "any person" will invite all kinds of trouble. Therefore perhaps my noble friend may care to think about that. Having made that point—
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 35 to 40 not moved.]
§ Schedule 2 agreed to.
§ Schedules 3 and 4 agreed to.
§ Schedule 5 [Minor and consequential amendments]:
Lord Mottistone moved Amendment No. 41:
Page 64, line 34, leave out from ("Act ") to ("at") in line 35 and insert (" (earnings limits) ").
The noble Lord said: this amendment is a paving amendment to Amendment No. 42, which is the operative amendment.
Amendment No. 42: Page 64, line 37, leave out from ("contribution") to end of line 39 and insert ("the contracted-out percentage of so much of those earnings as exceeds the current upper earnings limit.").
§ I talked at some length on this point at Second Reading. In another place the Government put down an amendment dealing with this part of the Bill which was not good enough to make the proper adjustments financially that would encourage companies to concentrate on employing the lower paid and not the higher paid.
§ I pointed out at that stage that because of the effect of this part of the Bill, if not amended, there was a risk that the large companies and more especially the small companies that perform what are called "high tech" tasks might say, "We have to have the high-paid people. We cannot afford to lose them. And so, because it will cost us so much to have them, with the Bill unamended, we shall have to make economies at the bottom end". I am sure that my noble friend Lord Young would find this especially distasteful. The whole point is that this should work the other way round. I invite my noble friend, therefore, to examine my remarks at cols. 546 and 547 on Second Reading, which give the main argument showing why this is important.
§ It is a fact that under the Bill, as at present constituted, some big companies will be seriously affected. IBM estimates that in a full year it will lose £13 million as the Bill is now written; British Petroleum estimates £9 million; Shell £7 million, and ST and C £4.5 million; ICI £4 million, and so on. There are a whole range of smaller companies that would lose at least £400,000 to £500,000. There is really a need to pay regard to Amendment No. 42, which would ensure that the employers' contracted-out rebate should apply above as well as below the 725 £265 a week upper earnings limit. Correcting the anomaly, it has been estimated, would cost about £300 million in a full year and about £130 million in the current 1985–86 year. Those figures need to be set against the sorts of figures that the Treasury estimated would be the result of the Bill as it stood. But, as I explained on Second Reading, the figures that the Treasury produced to justify it took in all industry, public industry as well as private industry.
Public industries on the whole probably would gain because of the balance of their employees. It is private industry that will lose. As one company has said:
This additional burden"—
referring to the Bill unamended—
goes a long way to offset the benefit that we have derived from abolition of the national insurance surcharge".
§ As such a tremendous effort was made by the Government to abolish that surcharge—it took them some years to get around to doing it—it seems an awful pity to negate it by not making a compensating correction to what they are trying to achieve here.
§ My amendment is phrased carefully so that it does not strike at the root of what the Government are trying to do. It tries only to make an offsetting balance. It can, however, make a tremendous difference as to how companies behave as a result. I hope that, even if the Government cannot accept the amendment right now, my noble friend will say that they will have yet another look at this point in order to be quite certain that they are not trying to save a few hundred thousand pounds or perhaps even a few million pounds to satisfy the Treasury, which is all theoretical anyhow, before assessing on a proper balance how it will affect private industry which will be the sector to suffer and which earns the money to keep the rest of us going. I beg to move.
§ 8.45 p.m.
§ Lord Young of Graffham
As my noble friend has explained—I have read carefully cols. 546 and 547 on Second Reading—his intention in the amendment is to extend the contracting-out rebate to the employers' contributions which, by virtue of Clause 7(1) of the Bill, will become payable from 6th October on earnings above the upper earnings limit; that is, some £265 a week for weekly earnings or £13,780 a year. The director-general of the CBI wrote to my right honourable friend the Secretary of State making the same suggestion. My right honourable friend has replied explaining the technical objections to this proposal. I hope that it will assist your Lordships if I now repeat that explanation.
The contracting-out rebate that operates, as I have explained, over that part of the earnings in the range of £35.50 to £265 a week is actuarially related to the liability to provide graduated minimum pensions which contracted-out employers accept in their occupational pension schemes. This liability is, in turn, related to the earnings-related pension liability of which the state itself is being relieved to the extent that a rate above £265 a week would mean giving a new kind of rebate that was quite unrelated to the contracting-out provision. It would amount to a straightforward concession to contracted-out employers whereas others, not contracted-out but 726 equally affected by the abolition of the upper earnings limit for employers' contributions, simply would not benefit.
I accept that the entire structure of the earnings-related pensions and contracting-out are very substantially affected by my right honourable friend's recent Green Paper. Under these proposals this technical objection simply would not arise. But then neither does the contracting-out rebate. It would be wrong to tinker with the present system in a way that prejudices the introduction of important new changes such as my right honourable friend has proposed.
In its letter to my right honourable friend, the CBI costed this proposal—here, I agree with my noble friend—at £300 million in a full year. This is a significant objection. It would significantly reduce the £800 million to be raised from employers by abolishing the upper earnings limit in order to offset the £880 million that they receive by virtue of the reduced liability lower down the earnings scale. I am sure that my noble friend would agree that £880 million or £800 million is not mere tens or hundreds of thousands of pounds. We are dealing with substantial amounts of money, in the view of the Treasury or elsewhere.
As your Lordships will see, therefore, employers are already net gainers from our proposals to the tune of £80 million. I suggest that the understandable concern about the abolition of the upper earnings limit, when applied to particular employers' needs, has to be seen in the wider context. My noble friend was right to remind us that last year we were able finally to abolish the national insurance surcharge which will save employers almost £900 million in a full year. This year, as the Chancellor made clear in his Budget speech, there was less room for manoeuvre. It was not possible to make further substantial reductions in employers' costs. Nevertheless, no one would dispute the need to encourage employment; hence the measures now before your Lordships. As I halve said, employers will gain £80 million overall from these measures despite the abolition of the upper earnings limit on their contributions.
About 1.75 million employees earn more than the upper earnings limit. In most cases the extra employers' contributions will amount, at most, to only about 2 to 3 per cent. of gross salary. There is evidence that earnings for such employees have been rising at about 2 to 3 per cent. in real terms for the last two or three years, suggesting that costs of that order can be absorbed without evidently too much difficulty.
I appreciate that there will be some cases where the costs are harder to absorb. But it is worth keeping in mind that paying 10.45 per cent. on all earnings, as employers will have to do for their higher-paid employees, is no more than the employers of the lower paid have done for some time. Indeed, before we started to phase out the national insurance surcharge such employers paid a total rate of 13.5 per cent. In contrast, under the present system, employers' contributions are just 6 per cent. of gross salary for someone on £25,000 a year and 4 per cent. only at £35,000 a year.
In my view the overwhelming point is that it will now be cheaper for any employer to take on new, lower paid employees. Removing the ceiling on 727 employers' contributions may have increased costs in respect of some 1.75 million employees, but it has reduced costs for 8.5 million—almost five times as many. It encourages employers to provide jobs, and potential employees to take them, in that one part of the labour market where the problem of unemployment is most acute.
My noble friend's amendment would significantly weaken the Government's ability to provide the encouragement to employment where it counts most. Seen in this wider economic context, I hope that my noble friend will see fit to withdraw his amendment.
§ Lord Mottistone
It is difficult to agree with a fair amount of what my noble friend has said. As regards the point about my amendment significantly reducing the Government's opportunities to encourage employment in the lower level, I fear—and I said this also on Second Reading—that without my amendment that could be the outcome in many of the companies which matter; namely, the companies which are earning the money for us. That is something of which the Government really must take account instead of producing arguments against it.
My noble friend said on two occasions—and I also mentioned this in my Second Reading speech—that the net advantage or the forecast advantage was £80 million across the board. The difficulty is that companies are all different. The £80 million will be shared out in different ways. However, the companies which particularly need to benefit from it—private industry—will not be nearly so well off as the heavy old creatures which have been around our necks for years. Therefore, the Government should not look at global situations quite so much; they should try to identify where the bite is going to be felt. I quoted several companies which will be individually over £1 million—indeed, over £3 million—worse off because of this. They are all important companies and companies upon which we depend.
I shall not of course make a fuss about this amendment now. However, I should be very grateful if my noble friend would not rely too much upon what the Chancellor wrote to the Director General of the CBI as though that were the end of the story. I hope that he will take this message away and try to persuade the Treasury, I suppose, to have a serious look at the matter or else one may feel that the Treasury are not really interested in the country prospering in the long run. Indeed, that is what we are talking about; we are talking about the companies which earn the money for us. That is much more important than making minor adjustments to balance some part of their books. We must look at what matters to the companies which are earning our living overseas. That is where they should concentrate their efforts. I hope that my noble friend will be able to convey that message to his noble friends and his right honourable friends so that they will have another look at the matter. In the meantime, I shall have another look and I shall almost certainly come back on Report with something. However, if my noble friend comes back with something else which is acceptable, then that will be better still. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.728
§ [Amendment No. 42 not moved.]
§ Schedule 5 agreed to.
§ Schedule 6 [Repeals]:
Baroness Trumpington moved Amendment No. 43:
Page 69, line 26, column 3, at end insert—
("In section 125(1), the words "in the month of June".
In section 126A(1), the words "in the month of June".").
§ The noble Baroness said: I beg to move Amendment No. 43, which is consequential upon the new clause which follows Clause 14.
§ On Question, amendment agreed to.
§ Schedule 6, as amended, agreed to to.
§ In the Title:
§ The Earl of Caithness moved Amendment No. 44:
§ [Printed earlier: col. 701.]
§ On Question, amendment agreed to.
§ Title, as amended, agreed to.
§ House resumed: Bill reported with amendments.
§ House adjourned at four minutes before nine o'clock.