HL Deb 08 June 1992 vol 537 cc1116-29

3.45 p.m.

The Parliamentary Under-Secretary of State, Department of Social Security (Lord Henley)

My Lords, with the leave of the House, I shall now repeat a Statement being made in another place by my right honourable friend the Secretary of State for Social Security. The Statement is as follows:

"With permission, Madam Speaker, I would like to make a Statement about the framework of law and regulation of occupational pension schemes and about the plight of Maxwell pensioners.

"Rarely in the catalogue of crime has there been a fraud as callous and despicable as the pillaging of pension funds by Robert Maxwell.

"It raises two questions. First, how can we minimise the loss and anguish faced by the pensioners? Secondly, how can we ensure that such a crime never recurs?

"Madam Speaker, the whole House will share a deep concern for the distress Maxwell pensioners face as a result of this appalling crime. Unfortunately, it is still not possible to be certain of its full impact on pensioners.

"At present there is a gap of some £350 million between the assets which remain secure in the various Maxwell pension schemes and common fund, and their liabilities to present and future pensioners.

"The assets siphoned off through the Maxwell private companies seem to be largely beyond recovery. But over £200 million of assets were given to banks and others as security against loans. It is not yet clear how much of this will eventually be recoverable by the trustees.

"Mirror Group Newspapers has agreed to meet the liabilities to their 15,000 pensioners and employee members. Pensioners of the private companies now in administration have no such security. Most schemes are continuing to pay pensions from available assets. But the Headington Pension Plan has not yet been able to pay its 240 pensioners their pensions for May and June.

"Moreover, the Maxwell Communication Works Pension Scheme has said that from 1st July it will be able to pay some 4,000 of its pensioners only 30 per cent. of their entitlement.

"Over the longer term the priority must be to identify, locate and establish ownership of the stolen assets and to secure their return. The liquidators are actively pursuing all legal avenues for the recovery of stolen assets. This will no doubt include appropriate legal action against any members of the Maxwell family and others involved in transactions which may be found to be unlawful.

"However, this is not simply a legal issue. Over the years many financial institutions had dealings with Maxwell companies from which they profited handsomely. Such transactions were perfectly honourable. However, the institutions involved may well feel some moral obligation to assist the pensioners who have so cruelly lost at Maxwell's hands.

"Moreover, other financial institutions too may recognise the value to them of maintaining faith in the integrity of occupational pension funds. I want to make it possible for them to make some tangible contribution to helping the pensioners defrauded by Robert Maxwell.

"Expediting the return of assets and securing contributions from the private sector will be a complex and lengthy process. The Government may be able to give an impetus. I am therefore immediately setting up a special unit in my department to take this forward.

"The unit will work alongside the trustees and others seeking to secure the return of assets and their equitable distribution between schemes. The unit will do all it can to speed up the return of assets. The Bank of England supports the foundation of this unit.

"The unit will also help to set up a trust into which voluntary contributions from the private sector will be paid.

"These steps will help to minimise the shortfall in the long term. But there is a particularly acute problem in the short term.

"This is not just because the process of identifying, establishing ownership and securing return of assets is an immensely complex and lengthy one. But of the £230 million of secure assets some £100 million are locked in the Common Investment Fund since, unfortunately, it has not been settled how they should be allocated between the nine different Maxwell schemes. The trustees and liquidators have now agreed to accept the court ruling on the allocation of assets. But it will take some months before that ruling is given. Meanwhile those assets are frozen.

"No government could accept a duty to make good losses resulting from fraud or theft of savings. But I do think it right to help ease the unique short-term pressures pensioners face while frozen assets are being released and progress is made in restoring and obtaining other funds. I therefore propose to provide temporary, emergency funding to help Maxwell schemes which are unable to maintain pension payments over the next few months.

"The funding I am making available will amount to £2.5 million in the form of repayable grants. The intention is that the grants should be repaid eventually, provided the assets of the pension funds are sufficient to permit this without detriment to their members.

"There is one final measure which may be of marginal benefit to some Maxwell pension schemes; that is, to bring in regulations to implement the provision of the Social Security Act 1990 which will make any deficiency of pension funds that have to be wound up, a debt on the employer company. I shall do this at an early date. This will apply to pension funds of the Maxwell companies. I would not wish to raise the hopes of Maxwell scheme members that they will stand to gain greatly from any payout to ordinary creditors of their former Maxwell employer companies which are in administration. Nonetheless, we are committed to implement this provision and I feel it right to do so now.

"Madam Speaker, the Maxwell fraud is shocking because it is so exceptional. Most private pension schemes have served their members well. They have expanded considerably over the last decade. This Government are committed to reinforce their role. They provide substantial additional benefits for those in retirement, and have contributed significantly to the growth in pensioners' incomes we have seen over the last decade. More than half of all employees are members of such schemes. We are determined to ensure that their standing is maintained and enhanced, and the security of their members protected.

"The Maxwell affair has focused attention on the whole framework of pension scheme law. It has raised questions about issues, many of which may have played no part in that crime, but which nonetheless need answering. I therefore agree with the Select Committee on Social Security that there should be a thorough review of this area.

"I propose accordingly to implement our manifesto pledge by establishing an independent committee with the following terms of reference:

'To review the framework of law and regulation within which occupational pension schemes operate, taking into account the rights and interests of scheme members, pensioners and employers; to consider in particular the status and ownership of occupational pension funds and the accountability and roles of trustees, fund managers, auditors, and pension scheme advisers; and to make recommendations'.

"I believe that will enable the committee to consider all the issues raised by the Select Committee's valuable report.

"I am pleased that Professor Roy Goode QC, Professor of English Law at Oxford University has agreed to chair the review. I shall announce the names of members of his committee shortly. The committee will invite evidence from all interested parties and hold a number of public hearings. I have asked Professor Goode to report within 12 months or earlier if possible. If the committee finds changes which should be initiated urgently, it will report them to me before it concludes its work.

"I should emphasise that the committee will not be asked to carry out an investigation of the Maxwell affair. That involves crime and fraud and is rightly being investigated by the Serious Fraud Office.

"In conclusion, Madam Speaker, I have initiated a wide-ranging, open and independent review of pension law; I have taken exceptional steps to ease the acute short-term pressures on some pension schemes and their pensioners; and I have established a unit to mobilise support for the pensioners from those in the City who recognise an interest or obligation towards them. I believe these measures are imaginative and responsible. I commend them to the House."

My Lords, that concludes the Statement.

3.54 p.m.

Baroness Hollis of Heigham

My Lords, we thank the Minister for repeating the Statement made in another place. On this side of the House, we welcome the Statement and its tone and join with the Government in calling to institutions which have profited from Maxwell industries in the past to recognise the moral responsibilities which go alongside that.

Also, we congratulate the Minister personally on moving from his inevitable somewhat stonewalling position taken up on Thursday on the Unstarred Question to the more helpful and elaborative Statement now. I am sure that the noble Lord, Lord Wigoder, would like to claim some credit for such a move.

We are especially glad that the Government have recognised the urgency of the situation and even to some degree their responsibility, if not culpability, as regards this matter. Why is that? It is worth recalling that so far the Government have refused to amend pension law despite the Labour Party White Paper calling for that in 1979, despite the Wilson Committee report in 1980, despite the Gower reports of 1982 and 1984 and despite the call by the Occupational Pensions Board in 1982.

The Government have also wilfully refused to enact the EC directive—EC 80/987—which should have taken effect in 1984. That would have protected the pay and pensions of employees in cases of company insolvency. We also criticise the Government for their failure so far to implement the safety net provisions of their Social Security Act 1990. We have had the welcome announcement that Section 58B is to be implemented shortly.

Finally, we criticise the Government for the failure of their regulatory apparatus, including the activity of IMRO —the body to which the Government, under the Financial Services Act 1986, subcontracted their regulatory role. IMRO's failure properly to scrutinise the Maxwell companies and its failure to respond to pensioners' anxieties in this area must surely raise questions about the Government's efficacy of regulation in such a subcontractual role.

Given the failure of the Government's regulatory agencies, their failure to implement the safety net provisions of their own legislation, their failure to implement the EC directive back in 1984 and their failure so far to reform that area of pension law, it is right that the Government should now accept some responsibility, some liability and even some culpability in this field.

The Government did so in the Barlow Clowes affair where £160 million was made available to those who had lost investments made for speculative profit. The Maxwell pensioners were saving for the security of their old age. They are entitled to nothing less, especially as before 1988 no pensioners had the choice as to whether or not they joined an occupational scheme if it was on offer. Therefore, the Maxwell situation is not just a tragedy for the pensioners themselves, many of whom did not even work for Maxwell, but it also undermines confidence in the entire pensions industry. Therefore, it is a matter of public policy.

Any of us with a pension do not expect to have to monitor it personally and to act as our own personal trustees. We all believed until now that our pensions were safe within the framework of government legislation. None of us would have invested our pay in pensions had that not been the case. The Government required pensioners to join those schemes. They were responsible for the regulatory structure and because of the default of that structure, along with the banks and Maxwell himself, they are responsible for the loss those pensioners face. Therefore, we welcome the Statement but we have some questions to ask the Minister.

First, will the provisions help those already receiving pensions or those about to become pensioners? There should be no category of deserving or undeserving among the Maxwell pensioners and those about to retire. All are entitled to aid.

Secondly, there is the question of resource, because £2.5 million is a very modest sum against the £160 million made available for the Barlow Clowes speculative investors. It may be enough to drip feed while assets are sought, but will it be enough? How many pensioners will it aid and for how long will it aid them? Will their pensions be made up fully to the sums which are due to them?

If the efforts to recover the assets are not adequately successful, will the Government undertake to review the pensioners' plight again and continue to drip feed until this sorry saga has come to a more happy conclusion?

Thirdly, I turn to Section 58B of the Social Security Act which the Minister mentioned when repeating the Statement. That makes pensioners creditors of the company. How soon will that section come into effect? Why did the Government not enact that earlier as that would almost certainly have protected some 50 per cent. of the liabilities from the subsequent defaults experienced?

Finally, I turn to the pension law review. We obviously welcome the appointment of Professor Roy Goode. That is splendid news for Maxwell pensioners. We welcome the terms of reference and hope that Professor Goode will be able to make recommendations regarding chairmen being independent, 50 per cent. of trustees representing employees and pensioners and those trustees being properly trained. We welcome also the fact that it will encompass the role of professional advisers to avoid any potential conflict of interest. Will the Minister confirm that the review will take into account a proper review of regulatory functions, whether it be a revamped occupational pensions board, the role of IMRO or, as Sir David Walker, the departing chairman of SIB, mentioned some days ago, the need for an overarching and non-fragmented regulatory body?

At lunchtime today some of us were at the Maxwell pension lobby in Central Hall. The meeting was packed, deeply distressed and rightly extremely angry. As a first response to the distress we on this side welcome the Statement. However, we warn the Minister that if this help proves inadequate we shall pursue the matter until all Maxwell pensioners have their pensions rightfully and properly restored.

Lord Wigoder

My Lords, I join the noble Baroness in thanking the Minister for repeating the Statement, which, as she observed, is somewhat different in both tone and content from the response made by the noble Lord after the debate last Thursday. On behalf of my colleagues and myself perhaps I may say that we are delighted that the debate initiated from these Benches led to such a dramatic and beneficial turn-round in the Government's thinking.

The two issues dealt with in the Statement are totally separate. No reforms of pension law either now or in the future will be able to help the existing Maxwell pensioners. I therefore turn, first, to the proposals to help those pensioners. I give them at once a welcome, which for the time being is a limited one. It may become more enthusiastic when I have heard the reply of the noble Lord to one or two simple questions.

First, with regard to the existing pensioners, is it the intention that in the immediate and foreseeable future their pensions will be paid in full? Secondly, with regard to the 240 pensioners in the Headington company who have received no money at all since last April, is it the intention not only that they will be paid in full for the foreseeable future but also that the arrears will be made up? Thirdly, the Statement refers specifically to the liability of the banks and to a possible liability of the Maxwell estate. Does the noble Lord agree that it will be desirable to look at the same time into the possible liabilities of other directors of the various Maxwell boards involved, both executive and non-executive, and specifically to the position of the trustees of the various pension funds? In addition, the position of both the DTI and IMRO should be considered for reasons which were examined in some detail last Thursday.

In the debate last Thursday I raised the possibility that the National Association of Pension Funds, although quite clearly blameless in this matter, may feel disposed to make a contribution to the present deficit sustained by the Maxwell funds. The Statement refers to that when it states: other financial institutions too may recognise the value to them of maintaining faith in the integrity of occupational pension funds. I want to make it possible for them to make some tangible contribution to helping the pensioners defrauded by Robert Maxwell". When the matter was raised last Thursday the Minister, on advice, said that he thought it would not be legally possible for those financial institutions to make any voluntary contribution. Do I now infer from the Statement that a rather more constructive attitude is being taken in that regard?

My last specific question, to which the noble Baroness referred also, concerns Section 58B of Schedule 4 to the Social Security Act. Can the Minister give an undertaking that the regulation to bring that into effect will be made in the near future, certainly in time to take effect before the parliamentary recess? Can he say also that it will be considered from the point of view of seeing whether a limited retrospective effect—perhaps only a matter of one or two months—will be desirable in order to ensure that the MCC organisation in particular can be brought within its provisions? The Statement refers to it having only a marginal effect. My information and clearly that of the noble Baroness is that it may have a substantial effect in reducing the deficit in the funds.

With regard to the long-term issue, I should like to congratulate the Government on closing the stable door with such a resounding bang. I welcome the action being taken, although clearly it is now too late to help existing pensioners. The only matters I wish to raise in that regard are these. First, I take it that it will be within the power of the committee that is to inquire into the matter to look at the role of independent trustees in the future. The Minister will no doubt agree that whether or not trustees are independent will make little difference unless they are totally diligent, committed and honest in everything that they do. The present law relating to the duties of pension fund trustees is, I venture to think, reasonably clear and adequate. The noble Lord may agree that it would help pension fund trustees to comply with the present law with even greater determination than they do if it were seen that the trustees of the Maxwell funds and their actions were being scrutinised with great care in the course of the present inquiry.

Secondly, the committee will no doubt have power to look into the question of whether or not a pension fund should be entitled to invest at all in the assets of its parent company. The present limit of 5 per cent. appears on the face of it to be wrong in principle. It may be desirable that there should be no such investment allowed by pension fund trustees.

Thirdly, will the committee consider the possibility of applying the principle of the Policy Holders Protection Act 1975 under which insurance companies are obliged, if necessary, in the case of disaster to pay a small levy in order to rescue an insurance company that has got into trouble? It may be desirable in the case of pension funds to apply a similar principle.

Lord Henley

My Lords, I welcome the partial welcome from both the noble Baroness, Lady Hollis, and the noble Lord, Lord Wigoder. Obviously I am brin6ng a somewhat different message to the House than I brought last Thursday but events have moved on over the past three or four days. I am therefore grateful to be able to read the Statement made by my right honourable friend in another place.

I begin by saying that I do not accept the analysis of the Statement by the noble Baroness that the Government were admitting responsibility and culpability. There is no such admission by the Government whatever. The issue is much more complicated than the noble Baroness suggests.

I stress also that we are looking at one small part of the whole general success of occupational and personal pension fund policies. We have seen enormous growth over the past 13 years in the income that pensioners throughout the country receive from both occupational and personal pensions. I appreciate the awful problems many individual Maxwell pensioners may have to face. However, one must look at them in the context of the overall success of occupational and personal pensions and the development that has taken place over the past 13 years.

The noble Baroness, Lady Hollis, said that there had been many previous requests to change the pension law. She also mentioned the EC provisions which have come into effect. She said that the Occupational Pensions Board had recommended as early as 1982 that we should give up trust law as it was no longer the correct framework for pensions. The noble Baroness will know that in 1988 the Occupational Pensions Board came to a completely different conclusion. It decided that our trust law was the appropriate framework for pensions. I am neither going to say that it is the correct framework now nor the incorrect one. It is a subject for the review body which is being set up to look into such issues.

One cannot really dismiss trust law as being bad because it was originally created, as the noble Baroness said last week, for some different purpose in the Middle Ages. By chance it might be the appropriate mechanism for these matters. However, it must be for the review body to come forward and advise us on this matter. I stress to the noble Baroness that there are of the order of 140,000 different schemes which operate perfectly well within trust law. Obviously Maxwell has brought this into question and the review will look into it.

As regards EC Directive 80/987, that relates to measures to protect employees in the event of the insolvency of their employer. It covers quite a range of issues of which occupational pensions is only one part. We are satisfied that we have done all that was necessary to implement that directive. The noble Baroness also asked whether it would be only the pensioners who will benefit from the £2.5 million. The unit which has been set up within the Department of Social Security will be in discussion with the trustees to decide how best these funds, together with their existing assets, can be carefully distributed in the interests of the pensioners. We hope that full pensions will continue to be paid, but it will have to be a matter for the discussions which the unit holds with the trustees of the different funds as to how they will go about doing that.

Turning to Section 58B of the 1990 Act and the provision for employer debt, I do not accept that we delayed too long on this matter. The issues are certainly slightly more complicated than the noble Baroness gives us credit for. These matters will be brought forward as soon as possible. As I said last Thursday, I do not believe one should exaggerate the effect that those particular provisions will have in terms of assisting individual Maxwell pensions and, for that matter, individual pensioners. She also mounted some criticism of IMRO. It would be wrong of me to make any comment at the moment in advance of the discussions which IMRO is having with the SIB in the exercise of its regulatory responsibilities. When the report is made that will be the time to comment on those particular aspects.

I now turn to the various questions asked by the noble Lord, Lord Wigoder. He asked whether the Headington pensions would be paid in full and whether the pensioners would get their money back for May and June. As I said in answer to the noble Baroness, Lady Hollis, I cannot give that specific assurance. The unit will be in discussion to ensure that as many pensioners as possible and all those affected have their position protected as well as it may be. As regards the assets of various individuals to which the noble Lord referred, such as the various directors and members of the family, it would be appropriate that a particular body, such as the Serious Fraud Office or the trustees, should look at all appropriate assets of appropriate individuals. Obviously I cannot make any comment on the likely criminality, or lack of it, of any particular individual, with the obvious exception of the one who has possibly gone beyond our earthly jurisdiction. As regards the others that must be a matter for the Serious Fraud Office.

The noble Lord, Lord Wigoder, raised the role of the independent trustees. That again is something that has been looked at in the past. It is certainly a matter which the review body can look at again. Earlier I mentioned a figure of about 140,000 different schemes. There are in fact practical problems. That was one reason why in the past we decided not to follow the advice of the Occupational Pensions Board. The noble Lord referred to the advice which I gave the House last week as to whether the NAPF could persuade its individual members to make up the money from their funds. My advice at that time was that they would be unable to because of the terms of their original trust deed. However, we hope that it will be possible for the unit to work with the trustees to overcome those particular problems. Again, I can give no particular guarantee.

I now turn to the matter of self-investment. The noble Lord thought that possibly the 5 per cent. limit established when we brought in the self-investment rules last February was too high. Again one can be over-simplistic about that. If one had an absolutely rigid no self-investment rule one would very often be denying a particularly big firm which covered a very large share of the market the opportunity to invest in quite a considerable part of the market. Similarly one might be denying firms the chance to invest in their own success. I believe that 5 per cent. represents quite a sensible balance. A considerable number of people suggested a higher limit than 5 per cent. As regards Maxwell issues, I am not sure that necessarily it would have made much of a difference in this particular case.

The noble Lord also asked whether the Government agree that it is desirable to look at the liability of all the directors and trustees. That is something, together with the difficulties of all the schemes, which the unit will be discussing with anyone who may be in a position to help. I imagine that I have not dealt with all the questions which have been raised by the two noble Lords. If there are any specific points which they would like me to take up I shall write to them later.

Lord Boyd-Carpenter

My Lords, I am sure that your Lordships are grateful to my noble friend for the careful and interesting analysis which he has given of this highly unsatisfactory situation. Is he aware that, apart from the hardship to blameless individuals, one of the unhappiest aspects of it is that it tends to undermine confidence in occupational pension schemes which, over the years, many of us have tried to build up? Therefore, it is immensely depressing that a rogue like the late Mr. Maxwell can do all this enormous damage. Will my noble friend assure your Lordships that one of the major objects of the Government's policy and handling of this matter is to repair the damage which has been done to confidence in these schemes?

Will my noble friend also amplify what he said about the pursuit of the members of the Maxwell family who may well be thought to have received very considerable assets from his estate? Is it the Government's view that the obligation, which exists towards the pensioners, demands that efforts should be made by all legal means to extract from members of the Maxwell family any of the funds which they may have acquired?

Finally, is my noble friend aware that the giving of aid from public funds to people who have suffered from rogueries of this kind sets quite a dangerous precedent which the Government will need to be very careful indeed to see does not become established? I am sure that my noble friend will agree that it is quite wrong that, where a rogue does enormous damage to individuals, it should be assumed in future that it is the duty of the taxpayer to make it up to them. We should get it quite clear that a system for pensions will be set up which is proof against this kind of roguery or, if not, that at least it secures that those who have profited from it shall repay to the taxpayer and not have the taxpayer pay for the damage done.

4.15 p.m.

Lord Henley

My Lords, I certainly agree with the analysis that my noble friend gave that the damage that the activities of Mr. Robert Maxwell and possibly others has caused to the confidence that most individuals place in their occupational pension funds is very great indeed. We certainly intend to do all that we can to repair the damage done to that confidence. We in the Government believe in occupational pensions, in personal pensions and in the success that they have achieved in the past few years in terms of the dramatic growth in the real income of most individual pensioners.

My noble friend also asked me to expand on, as he put it, the pursuit of the individual members of the family, and on their possible guilt. Obviously, my noble friend will understand that I cannot comment on whether they are or are not culpable themselves. It would be quite wrong for me at the Dispatch Box, despite the protection that one enjoys from a legal point of view, to comment on them at the moment.

Lord Boyd-Carpenter

My Lords, I did not ask my noble friend to pronounce on their culpability. I asked him to indicate what the Government were doing to recover from them the funds that they have acquired out of the collapse.

Lord Henley

My Lords, I was going to go on to that, but I wanted to make it quite clear that I must not in any way give any indication that I believe either that they are guilty—or whatever. What I was trying to say was that we should like to see any money that belongs to the funds recovered for the funds. We hope that the Serious Fraud Office will pursue these matters as best it can. We certainly hope that the trustees and the unit that we are setting up in the department will pursue all the moneys that legally belong to the individual funds. I also hope that any individual members of the family or others who have control over the money might also recognise that there is a moral obligation to pay back to the funds money that has been taken from them.

My noble friend rightly said that we must not be put in a position of automatically paying out taxpayers' money to people who are the victims of any individual fraud or crime. I must stress that what we are offering with the £2.5 million is not compensation. The payments will be made by means of repayable grants intended to assist the trustees to maintain pension payments for a limited period to enable clarification of the position on asset recovery for the Maxwell pension funds to be made. We do not believe that that creates a precedent; but, as I stressed earlier, we do believe that we must repair the damage that has been done to confidence in the schemes. If possible, a set up must be created that will allow people to have total confidence in the schemes with the hope that this sort of crime will never happen again. However, I am unable to give the assurance that a 100 per cent. watertight framework for pensions could ever be set up. To some extent, one must say that people can always rob banks, but we should like to get as close to that 100 per cent. as possible.

Lord Desai

My Lords, I am sure that you must all agree with my noble friend Lady Hollis and with the noble Lord, Lord Wigoder, that although we welcome the Statement, it cannot be regarded as adequate because the pensioners who are distressed will be neither fully reassured by it nor have all their anxieties removed.

My first point is that we must think of the pensioners as creditors. They gave money to the company and the company has defrauded them. Therefore, while I welcome the Minister's Statement that although in future the pension fund liability will be taken as the first claim on a company's assets, I wish that that could be made part of the law in the future. After all, the pensioners are loaning money to the company—somewhat involuntarily, I should add, because it is normal practice to join a company pension fund—and given that they are loaning money, the pensioners should be regarded as creditors in just the same way as anybody else who loans money to the company, and not regarded only as pitiable cases who are to be viewed as supplicants.

Secondly, surely we must now conclude that self-regulation has failed. I put it no stronger than that. Indeed, many self-regulation schemes across many different parts of the City have failed. It is time that the Government took a firm grip of the situation and restored faith in this country's financial institutions. If London is to be the capital of Europe's financial centres, we must take much greater care to ensure that such things do not recur in the future.

Lord Henley

My Lords, I accept that reassurance is very important for the individual pensioners, and that is why we have this Statement today. As from last May, 240 pensioners in the Headington Pension Plan lost all their pension, and as from July, members in the Maxwell Communications Works Pension Scheme were possibly going to lose something of the order of 70 per cent. of their pension. By offering funds by way of a loan, we are trying to guarantee their situation for several more months so that the position can become considerably clearer. We hope that further assets can be recovered. This will ensure the long-term safety of those pensions.

Perhaps I may correct the noble Lord on one small item relating to Section 58B. That gives the power to make the debt an ordinary debt, not a preferential debt. Therefore, it would not do what I suspect that the noble Lord was encouraging us to do. Making this a preferential debt would have much wider implications over a whole range of insolvency matters which those of your Lordships who are lawyers will no doubt understand far better than me. Primary legislation would be required to further amend both those provisions and various insolvency acts.

I note what the noble Lord said about self-regulation having failed. He will not be surprised if I say that I do not agree with him but, as I said earlier, we must await the report from SIB and IMRO.

Lord Monson

My Lords, following the last question of the noble Lord, Lord Boyd-Carpenter, and the Minister's reply to it, can the Minister first assure the House that other pensioners who may find themselves in the same unfortunate position as the Maxwell pensioners will not be treated any less favourably by the Government merely because they are likely to be less numerous and to have a lower public profile? It would be quite wrong for the Maxwell pensioners to be treated any better by the Government than other people who might find themselves in the same unfortunate position. Secondly, is there any evidence that any of the moneys in the Maxwell pension funds were illicitly used for political purposes either in this country or elsewhere?

Lord Henley

My Lords, as regards the second question, I am afraid that I cannot give the noble Lord an answer. I have no evidence about what happened as regards the political use of any money whatsoever. Regarding the first question, the noble Lord cannot expect me to comment on a future hypothetical situation. The Government will react as and when such a situation should arise, but I very much hope that such a situation will never arise again.

Baroness Oppenheim-Barnes

My Lords, the Government are to be congratulated on the setting up of the review committee and on its terms of reference. However, perhaps I may ask my noble friend whether those terms of reference can be extended to allow the committee to look at the role and responsibility of the fund managers as well as of the trustees and the directors. I ask this especially as the fund managers are often responsible for the advice that is given to trustees and directors in smaller companies who may not have access to other advice. That advice could be of a disastrous nature. Smaller companies could end up being in the same position as those in the Maxwell case.

Lord Henley

My Lords, my noble friend makes an interesting point. In fact, we have mentioned fund managers in the second part of the terms of reference of the independent committee. Their role and position will certainly be looked at by the committee.

Lord Harris of Greenwich

My Lords, the noble Lord referred in his Statement to the investigations being carried out by the Serious Fraud Office. Would he be good enough to indicate to his right honourable and learned friend the Attorney-General the concern of many of us about the length of time taken in some of these fraud inquiries? In particular, we should like to be reassured that there is no question of these investigations being hampered because of a lack of resources in the Serious Fraud Office.

Lord Henley

My Lords, all I can say is that I note the noble Lord's concern in the case of this inquiry —and no doubt serious fraud inquiries generally. I shall certainly pass that on to my right honourable and learned friend.

Lord Marlesford

My Lords, will my noble friend assure us that the Government intend to learn the widest lessons from this shameful and very damaging episode in Britain's financial history? Does he agree that it is a prime responsibility of any government, and particularly a Conservative government, who on the whole believe that goods and services should not be provided by the state, to ensure that consumers, employees, investors or pensioners are protected from abuse, fraud, exploitation and ill treatment? Will he ensure that those who have broken a fiduciary trust, either malevolently or through, as I suspect may be the position in this case, weakness in the face of a very unattractively strong man, are debarred, if necessary for life, from ever exercising such roles again? Finally, following on from what the noble Lord, Lord Desai, said, does my noble friend at least hope that the committee will consider in what other areas of financial activity in the City of London self-regulation may have failed or may be failing?

Lord Henley

My Lords, I should stress to my noble friend that in the main the existing procedures and the existing trust law work perfectly reasonably and perfectly well for most trust funds. As I have said, there are 140,000 individual schemes throughout the country. Most of them are providing a satisfactory service for the individual pensioners or deferred pensioners who will eventually benefit from them. As my noble friend has said, there has been a failure here —we accept that—as a result of massive fraud. That is why we are offering a general review of this area—to examine why there was a failure and what may be done to prevent such failures in the future.

My noble friend suggested that those individual members of trusts who are in breach of their fiduciary trustees' duties should debarred from ever serving as trustees again. I am sure that the committee that will review these matters will take note of the suggestion and will try to examine that point. My noble friend also alleged that the self-regulating bodies such as IMRO had failed in their duties in the City. As I said earlier in response to the noble Lord, Lord Desai, I do not accept that, and it would be premature of me to comment before we have the report from SIB and IMRO.