Pensions Bill [H.L.]

HL Deb 13 March 1995 vol 562 cc559-626

3.4 p.m.

Report received.

Clause 1 [The new authority]:

Lord Ezra moved Amendment No. 1:

Page 1, line 9, at end insert: ("() It shall be the duty of the Authority to exercise general supervision over the operation of occupational pension schemes coming within the scope of this Act, with a view to ensuring that schemes are efficiently and satisfactorily administered and that the interests of beneficiaries as a whole are safeguarded and to this end the Authority shall be provided with adequate staff and resources to intervene where appropriate in schemes which do not appear to the Authority to meet the standards laid down in this Act.").

The noble Lord said: My Lords, this amendment deals with the general duties of the authority. This issue was debated on an amendment moved by the noble Baroness, Lady Turner, in Committee on 7th February. On that occasion the noble Lord, Lord Mackay, spoke against it, mainly on the grounds that it appeared to ask for the authority to monitor every one of the pension schemes. This amendment does not do that. It pays regard to that view and it talks in terms of general supervision.

Subsequent to the debate which we had in Committee I did a little personal research, and I found that the Government, in introducing all the measures which established bodies of this kind—regulatory bodies—since they came to power, have given in the Acts of Parliament concerned a statement of their general duties right at the start. That goes for the Telecommunications Act 1984, the Gas Act 1985, the Water Act 1989, the Electricity Act 1989, the Railways Act 1993 and the Coal Industry Act 1994. In every one of those cases the general duties of the regulatory body are set out at the start of the Act.

Furthermore, my researches took me back to 1946, when the reverse process was undertaken by the post-war Labour Government when these industries were put into nationalisation. In every one of those cases the duties of the new statutory bodies, which were then the boards, were also defined right at the beginning of the Act. Therefore, I feel that the precedent in the actions of the Government and of previous governments is overwhelming for this to be done. I shall not be able, therefore, to understand any further resistance that the Government might have to the wording as now proposed because it is in very general terms.

My surprise if the amendment were to be opposed would be even greater having regard to what the Government themselves have said about the functions of the new authority. I ask your Lordships to turn to Schedule I on page 98 of the Bill as now amended. Paragraph 2 states: The Authority may do anything (except borrow money) which is calculated to facilitate the discharge of their functions, or is incidental or conducive to their discharge".

It seems to me that if the authority were disposed, pour encourager les autres, to execute a few recalcitrant trustees and considered that that was in the interests of discharging its functions, or was incidental or conducive to the terms of the instrument appointing it, it would be entitled so to do. This is an extremely wide-ranging statement. I am surprised that the Government should have included it in the Bill. The proposed amendment is much more limited than that. It attempts in simple terms to set out what the authority should be doing. On those grounds, I hope that the amendment will command the support of the House. I beg to move.

Baroness Turner of Camden

My Lords, I rise to support the amendment moved by the noble Lord, Lord Ezra. I have put my name to it because I believe it to be essential to have the functions of OPRA clearly set out right at the very commencement of the Bill. The establishment of a regulatory authority was a key part of the recommendations of the Goode Committee. Indeed, the report went so far as to spell out what it thought the duties of the regulator should be. In Committee we on this side of the Chamber sought to persuade the Government to write into the Bill the recommended duties. The Minister was not prepared to accept that. Nor was he prepared to accept a much more modified form of wording which dealt with a monitoring role.

The form of wording suggested in this amendment is even more modified, as the noble Lord, Lord Ezra, said. It gives OPRA the duty of exercising general supervision. It seems to me that the role envisaged by the Government for OPRA is essentially a passive one. It seems to be to react to complainants and whistle-blowers. By that time, of course, irreparable damage can already have been done. Any powers such as those envisaged by Goode which involve the setting of standards, and the checking of trustees' or administrators' behaviour against such standards, have been excluded from the Bill and so has any general overview of the pensions field.

The Goode Committee said quite specifically, The new legal framework we have recommended depends for its effectiveness on proper supervisory and enforcement machinery. We therefore recommend that the Pensions Regulator should have wide ranging functions and powers". Furthermore, The tasks we have identified for the Regulator are substantial. If they are to be performed in the way we consider necessary for pension schemes to be properly safeguarded, it is important that the Regulator should be organised in an effective way and that the resources necessary should be made available". As I have said before in discussions on this Bill, for many years I was a member of the Occupational Pensions Board. One of our problems was that people thought that we had much greater powers than in fact we actually had. It seems to me that we are in danger of repeating exactly that with the establishment of OPRA. At least the Occupational Pensions Board was not, and never claimed to be, a regulatory authority for the whole of the pensions field. But here we have some new legislation, the objective of which is to provide security for occupational pensioners and scheme members generally with a regulatory authority. But, unfortunately, unless we can have the Bill amended, that regulatory authority seems to have no greater powers, at least on paper, than the Occupational Pensions Board—perhaps even less, because the OPB does require certificates from the scheme actuaries stating whether the scheme is solvent, a statement from the scheme auditors that the accounts have been audited and, as a matter of routine, a copy of the accounts where they have been qualified in any way.

The board also has a duty to make reports to the Secretary of State on general issues of importance in the pensions field. It has produced a number of excellent reports, not all of which have resulted in legislation, although some have. After the board has gone, it is not clear whether anyone or any institution will have that function.

The Government's opposition to giving OPRA the type of role envisaged by Goode seems to be based on the large number of schemes. But many of the smaller schemes are insured schemes. There is no reason why there should not be a simplified, streamlined procedure for dealing with insured schemes. It is not satisfactory that, with large numbers of people (perhaps 20 million) relying on occupational schemes for the bulk of their retirement income, there should be a regulatory authority that does not have its functions clearly set out at the very commencement of the Bill. It should be a regulatory authority which lives up to its name and to everyone's justifiable expectations. I support this amendment.

3.15 p.m.

Lord Dean of Harptree

My Lords, this amendment appears to be contrary to the principles on which the regulatory authority is to be based. As I understood my noble friend the Minister at Second Reading and during the Committee stage, we were rightly told that it should be the job of the regulator, through the whistle-blowing procedure, to concentrate on those areas where he felt that there might be difficulties arising. Those seemed to me to be the right priorities to adopt.

If the regulator were to have the role of crawling over every single occupational pension scheme which is in existence, how many staff and how much in terms of resources would he require and who would meet the substantial cost involved? With great respect to the noble Lord, Lord Ezra, I do not believe that he gave the House any indication of what the cost would be. When my noble friend the Minister replies, if he is minded to accept this amendment—which I hope he will not—will he say what the cost will be either to the taxpayer or to members of occupational pension schemes?

Baroness Seear

My Lords, it was in order to meet the very point raised by the noble Lord, Lord Dean, that the terms of this amendment were changed from those introduced at Second Reading. That included the word "monitor", which could create the false impression that the regulator was intended, as the noble Lord said, to "crawl all over" all the 150,000 schemes. Nobody seriously imagines that any organisation can crawl all over 150,000 schemes. The provision is to give the regulator a responsibility for general supervision, which is a very different matter from saying that it has to supervise in detail 150,000 schemes.

Therefore, I hope that noble Lords will realise that what is proposed is not in the least what the noble Lord, Lord Dean, has said. It is a general supervisory function and, if the regulator has not got it, it is extremely difficult to see what function he will have. If that is not the function, why may we not be told in a clause which defines what the authority is supposed to do? It is most extraordinary to set up an authority and in the Bill which establishes it to say that an authority shall be set up and then give a list of the things it will do to carry out its duties without at any point telling us what the duties are. It is a matter of clarity and logic. In the tradition of legislation which we have passed on previous occasions, such an amendment should be included in the legislation before your Lordships' House.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)

My Lords, the amendment before us this afternoon seems to me to do two things. One is the rather innocent objective put forward at the beginning of this debate of trying to bring together in five or six lines for the layman, so to speak, what the regulator will do. As the debate has gone on, a second motive has come forward and has been rightly exposed by my noble friend Lord Dean of Harptree; namely, to extend the scope of OPRA's responsibilities much wider than those laid out in my speech in Second Reading, or indeed in my speeches at Committee stage, or than what is in the Bill itself.

It seems to me that the amendment may well achieve the widening to which the noble Baroness, Lady Turner, addressed herself, but I am not sure that it achieves the clarity which the noble Lord, Lord Ezra, set out to achieve. A quick and readily accessible guide to what the authority can do is already there at the beginning of the Bill. The part of the Bill containing the list of clauses shows a list of the authority's powers, which are provided in Clauses 3 to 13 and 87 to 92. It also gives a good indication of what those clauses are about. As the Bill goes through both Houses, further information about what those clauses do can be found in the Notes on Clauses published with the Bill.

It is a very risky business to put into a Bill clauses which are not supposed to do anything in their own right. It can cause problems when a particular clause is being interpreted in isolation in the courts. We do not want to compromise the provisions of Part I of the Bill. We do not want to risk widening or restricting the scope of the authority by introducing a general list of functions on the face of the Bill. The amendment could jeopardise our common interest, which is the protection of scheme members' interests.

The functions of the authority will be those conferred on it in the Bill. Its role is to investigate schemes; to ascertain whether regulatory provisions are being or have been complied with and to take action as the authority considers necessary to rectify any non-compliance discovered. Such actions could include the imposition of civil penalties, taking criminal proceedings and appointing, prohibiting or disqualifying trustees. Many of these are issues which we shall discuss during the course of the day.

In line with the Government's policy for enforcement agencies, the authority will be expected to publish information about the manner in which it will carry out its function and the standard it will be aiming to achieve. Thus the public will be able to find out about the authority, not by going to the Bill and trying to get it from five or six lines, but by getting it from information published by the authority itself.

We also intend to amend the disclosure regulations to introduce a requirement for schemes to disclose to their members the existence of the new authority. That should ensure that those in whose interest the authority is acting will be aware of and understand the authority's role. We believe that that will be an effective way of disseminating information in a readily digestible form. We do not want pension scheme members to have to go to a copy of an Act of Parliament simply to try to establish what the authority will do. If the aim is to try to inform the public and scheme members about what the authority will do, I must submit to the House that what I have suggested meets that bill.

The wording of the amendment that has been suggested by the noble Lord, Lord Ezra, would go considerably further than simply specifying the functions of the authority which are conferred upon it by the Bill. It seeks to widen those functions to include, general supervision over the operation of occupational pensions schemes". The noble Baroness, Lady Turner, said that she saw that as one of the advantages of the amendment. However, as I explained in Committee, we do not want the authority to be a general supervisory body for the reasons that my noble friend Lord Dean mentioned. There are 150,000 schemes and I thought that we were all agreed in Committee that we do not want the authority to ghost every pension fund in the country. We want OPRA to have a range of well-defined powers to enforce compliance, with the specified obligations that are set out in both this Bill and the Pension Schemes Act 1993. We want it to target its resources and expertise accordingly, carrying out investigations where there are suspicions or reports of things going wrong or spot-checking schemes where it has good reason to think that there is a risk of something going wrong.

The noble Lord, Lord Marsh, pointed out in Committee that it is the members themselves and those actively involved in the administration and management of the schemes who are best placed to alert the authority to problems. That is why we are introducing the requirement for auditors, actuaries and trustees to blow the whistle on schemes which do not conform to the provisions of the Bill. We believe that that will be a far more effective means of ensuring that schemes comply with the law than giving the authority general supervisory functions which would increase its costs without, we believe, providing any additional benefit.

The noble Lord, Lord Ezra, prayed in aid the regulators for, among others, the telecommunications, gas and electricity industries. We do not believe that any of the bodies which the noble Lord mentioned is sufficiently similar in nature to the authority that we are proposing to provide a relevant analogy. The significant difference is that this authority is not intended to have general duties. Instead, it is intended that it will have the specific duties that are spelt out in the Bill.

The noble Lord prayed in aid Schedule 1(2). I must advise the noble Lord that those provisions do not describe or widen the functions of the authority. That paragraph simply enables the authority to discharge powers and functions which derive from the provisions of the Bill. The authority does not have completely unfettered power to do what it chooses. It can do only what the Bill allows it to do. There will, of course, be checks and balances to ensure that it acts in a fair and reasonable manner and uses its resources wisely. It will be accountable to Parliament through the Secretary of State, and will come within the jurisdiction of the Parliamentary Commissioner for Administration. I hope that that answers the point about Schedule 1(2).

We have had this debate before and I do not believe that it is reasonable to try to encapsulate in about five lines what the Bill does. I believe that the information that will be required by those people who need to know—pension scheme members and the like—will be provided by the steps that the authority will take and those that we shall ensure that pension schemes take. I believe that that will provide people with much more detailed knowledge of how the authority works than would the provisions set out in the amendment—and perhaps less legalistically.

Finally, if the four or five lines of the amendment were just a piece of harmless fun, your Lordships might think that it would be rather churlish not to add them to the Bill, but I hope that I have shown the House that they are a bit more than that. They introduce some new ideas about the duties and responsibilities of the authority. With that explanation, I hope that the noble Lord will feel able to withdraw his amendment. If he does not, I ask my noble friends to support me in the Division Lobby.

Lord Ezra

My Lords, the Minister's remarks disturb me on two counts. First, I think that his arguments about not including in the Bill anything about the general duties (however they might be defined) of the new authority fly in the face of precedent. The regulatory bodies that have been set up for the other industries that I mentioned are similar in that they are regulatory bodies. They have certain powers. It might have been argued that their powers could have been found by reading the whole of the relevant Bill and that there was no reason to state their general duties at the beginning of that Bill, but that is what was done. My noble friend Lady Seear made that point strongly.

The other difficulty is that the Minister said that paragraph 2 of Schedule 1 states that the authority can do anything within its powers according to the Bill. In fact, that is not the wording. The provision states that the authority can do anything that is "conducive" to carrying out its duties. That goes very much further than anything that I have seen in any comparable Bill. I was trying to identify more precisely what the general duties of the authority should be in these circumstances and in this Bill.

I do not agree with the view that that involves monitoring every single scheme. The word "monitoring" was introduced in the previous amendment on this matter, which was moved by the noble Baroness, Lady Turner. That word has been removed. Indeed, if it is felt that the words "general supervision" are too strong, I am sure that other words could be used. The whole burden of the amendment is to indicate that the authority would intervene only where it was necessary to do so. I believe that that is common ground. The purpose of the legislation is to ensure that intervention takes place only where it is shown that schemes are not conforming with the provisions of the Bill as laid down in Parliament.

I feel that a strong case has not been made against the amendment. If the wording of the amendment is not correct, I should be delighted if the Government would introduce their own amendment at the next stage. Indeed, the Minister's penultimate remarks suggested the possible wording of such an amendment. As I have said, if the term "general supervision" is shown to go too far, I am sure that it would be possible to think of other wording.

This is an issue of principle. When statutory authorities are established in major legislation, I believe that the parliamentary draftsmen should introduce, and the Government should support, a general statement of their duties, however worded. It is quite wrong to leave people to trawl through the whole Bill to discover what the general thrust of those duties should be. Furthermore, I believe that people could be misled by the broad wording of the second paragraph of Schedule 1. In those circumstances, I commend the amendment to the House.

3.28 p.m.

On Question, Whether the said amendment (No. 1) shall be agreed to?

Their Lordships divided: Contents, 93; Not-Contents, 120.

Division No. 1
CONTENTS
Acton, L	Jenkins of Hillhead, L
Addington, L	Jenkins of Putney, L
Allen of Abbeydale, L.	Judd, L.
Allenby of Megiddo, V.	Kilbracken, L
Archer of Sandwell, L	Kinloss, Ly.
Ashley of Stoke, L	Kirkhill, L.
Bancroft, L	Lovell-Davis, L
Barnett, L	Mason of Barnsley, L
Blackstone, B.	Mayhew, L
Bruce of Donington, L	McIntosh of Haringey, L.
Carmichael of Kelvingrove, L	McNair, L
Cledwyn of Penrhos, L	Merlyn-Rees, L
Clinton-Davis, L	Monkswell, L
Cocks of Hartcliffe, L	Monson, L.
Craigavon, V.	Moms of Castle Moms, L
David B.	Nelson, E.
Dean of Berwick, L	Nicol, B.
Dean of Thornton-le-Fylde, B.	Ogmore, L
Desai, L	Phillips of Ellesmere, L.
Donaldson of Kingsbridge, L	Rea, L
Donoughue, L	Redesdale, L
Dormand of Easington, L	Russell, E.
Eatwell, L	Sainsbury, L
Elis-Thomas, L	Saltoun of Abernethy, Ly.
Ennals, L	Seear, B.
Ezra, L.	Sefton of Gaston, L
Falkender, B.	Serota, B.
Falkland, V.	Shannon, E.
Freyberg, L	Shaughnessy, L
Gallacher, L	Shepherd, L.
Gladwin of Clee, L (Teller.]	Simon of Glaisdale, L.
Gould of Potternewton, B.	Simon, V.
Graham of Edmonton, L	Stallard, L
Grey, E.	Stedman, B.
Halsbury, E.
Harris of Greenwich, L [Teller.]	Stoddart of Swindon, L.
Haskel, L	Strabolgi, L
Hayter, L	Taylor of Gryfe, L.
Headfort, M.	Tenby, V.
Henniker, L	Thomas of Walliswood, B.
Hilton of Eggardon, B.	Tope, L
Hollis of Heigham, B.	Tordoff, L
Howie of Troon, L	Turner of Camden, B.
Irvine of Lairg, L	Wallace of Coslany, L
Jay of Paddington, B.	Wharton, B.
Jeger, B.	White, B.
	Wigoder, L
	Williams of Elvel, L.

NOT-CONTENTS
Aberdare, L	Astor of Hever, L
Addison, V.	Astor, V.
Ailsa, M.	Belhaven and Stenton, L
Aldington, L	Belstead, L
Alexander of Tunis, E	Birdwood, L

Blaker, L	Johnston of Rockport, L
Blotch, B.	Knollys, V.
Blyth, L.	Lauderdale, E.
Boardman, L.	Lindsay, E.
Borthwick, L	Long, V.
Boyd-Carpenter, L	Lucas, L
Brabazon of Tara, L.	Mackay of Ardbrecknish, L
Braine of Wheatley, L	Mackay of Clashfern, L. [Lord Chancellor.]
Brougham and Vaux, L
Buckinghamshire, E.	Manton, L
Butterworth, L	Merrivale, L
Cadman, L	Mersey, V.
Campbell of Croy, L.	Miller of Hendon, B.
Carnegy of Lour, B.	Milverton, L
Carnock, L	Monteagle of Brandon, L
Cawley, L	Mowbray and Stanton, L
Chesham, L	Moyne, L
Clanwilliam, E.	Munster, E.
Clark of Kempston, L.	Murton of Lindisfarne, L
Colnbrook, L	Newall, L
Constantine of Stanmore, L	Norfolk, D.
Cox, B.	Norrie, L
Cranborne, V. (Lord Privy Seal]	Northesk, E
Cumberlege, B.	O'Cathain, B.
Davidson, V.	Orkney, E
De Freyne, L	Orr-Ewing, L.
Dean of Harptree, L	Park of Monmouth, B.
Denham, L	Peel, E.
Dixon-Smith, L	Pender, L
Elles, B.	Peyton of Yeovil, L
Elliott of Morpeth, L.	Platt of Writtle, B.
Elton, L.	Rankeillour, L.
Faithfull, B.	Rawlings, B.
Ferrers, E.	Renwick, L
Fraser of Kilmorack, L	Rodger of Earlsferry, L
Gainford, L	Roskill, L
Gardner of Parkes, B.
Geddes, L	Seccombe, B.
Goschen, V.	Selborne, E.
Gowrie, E.	Shaw of Northstead, L
Gridley, L	Skelmersdale, L
Hailsham of Saint Marylebone, L	Slim, V.
Harding of Petherton, L	St. Davids, V.
Hayhoe, L.	Strange, B.
Henley, L	Strathcarron, L
Hertford, M.	Strathclyde, L [Teller]
Hives, L	Sudeley, L.
Hogg, B.	Teviot, L.
Holderness, L.	Teynham, L
Hood, V.	Thomas of Gwydir, L
Hothfield, L	Trumpington, B.
Howe, E.	Vaux of Harrowden, L
Inglewood, L (Teller.)	Wedgwood, L
Ironside, L.	Wise, L.
Jellicoe, E	Wynford, L
Jenkin of Roding, L.	Young, B.

Resolved in the negative and amendment disagreed to accordingly.

3.36 p.m.

Baroness Hollis of Heigham moved Amendment No. 2:

Page 1, line 9, at end insert: ("() The Secretary of State shall, in consultation with the Authority, approve an annual budget for the work of the Authority, decide on reasonable levels of funding for the responsibilities of the Authority, arrange for such funds to be made available to the Authority and report annually thereon to Parliament.").

The noble Baroness said: My Lords, I shall speak also to Amendment No. 223. The amendment relates to the funding of the regulatory authority. We are seeking to persuade your Lordships that if the regulatory body is to be statutory, it must be independent, and if it is to be seen as independent, it must be funded not by the industry but by the public purse. Why? We are not talking about a large sum, we are talking about f 1 0 million to regulate a £500 billion industry. The sum is not especially onerous for the industry itself, nor for us, the taxpayer.

However, given that pensions, as the noble Lord, Lord Marsh, argued in Committee, are a voluntary and non-profit making activity by employers—something which I am sure which we all want to see continued—we do not want to add to the burden of employers' costs if that can be avoided. Some additional costs, such as the compensation levy or the solvency standard, may be essential, and, in that case, must be borne by the industry. This cost does not have to be, and in our view it ought not to be; which would help secure more willing compliance by the industry.

There are other reasons why we should like to see state-funding of OPRA. A publicly funded OPRA would also inspire greater public confidence in its independence. The Government will say, I am sure, that it is independent already; that government will appoint the chairman and the members, determine the budgets, determine the staff and, by regulation—having refused the last amendment—will determine its powers, duties, and competence. In that case, why is the state not willing to finance what it is so closely prescribing?

If the authority is to be independent in the sense that the state is regulating its activities, why not ensure that it is seen to be independent by funding it? After all, the regulator's job is often to impose on trustees behaviour which is extremely delicate: holding the balance between investment policy, solvency surpluses, and the like. In such difficult and delicate issues of trusteeship, integrity of decision making is ensured by impartiality—not beholden to either party. That is the meaning of "independence". Independent funding would help underpin that.

No one denies that self-regulation, or this, its step-sibling—that is, statutory self-funded regulation—has a bad name. Yet in contributing to pensions, employers and employees are showing huge confidence: confidence by the employer that he can deliver the pension promise; confidence by the employees that the right to invest considerable savings for 25 years or 40 years is building up their single most valuable financial asset.

The size of that asset, the long timescale over which it is built up and the need for its guardianship suggests that the state can provide the most effective guarantee. Companies may come and go, be sold, merged, taken over and go into insolvency. Does anyone doubt that the state, funding the regulator, acts as a stronger trustee of the pension promise than any self-financed body?

In Committee, the Minister advanced two arguments against such a similar amendment. His first argument was that other bodies levy the industry. He gave as an example insurance companies which pay for regulation by the DTI. But insurance companies are commercial, profit-seeking and profit-taking bodies. At this stage, I have no problem with them funding their own regulation. However, pension funds are not commercial, profit-seeking, profit-taking bodies: they are non-profit making trusts.

The second argument that the Minister advanced was that occupational pensions benefit only a proportion of the population—about half—and that therefore the rest should not be expected to contribute. That is a new rule in public finance: unless benefit is enjoyed by everyone there is no public policy interest in funding its policemen. Are we now saying, for example, that only car drivers should pay for traffic wardens; that only restaurant owners and users should pay for the inspection of restaurants and their kitchens; that only the noisy tenants and their neighbours seeking peace from the hi-fi should pay for noise pollution officers; or that only people with children should pay the 50 per cent. of the local authority council tax bill that is spent on schools? No, we never use that argument in public policy. We make a distinction, and rightly so, between the activities of a local authority or any other body which give private gain and private enrichment—for instance, planning fees for enlarging one's house or car parking charges for parking one's car—and the regulatory and policing functions—for instance, drawing up local plans and employing traffic wardens—which indirectly or directly benefit us all. Those are publicly funded.

We all need to have those policing powers and regulatory controls in place, even if at any snapshot in time only a minority are users of the service. In other words, no one is saying that the state should pay for occupational pensions; that is a private matter for personal savings and enrichment. However, we are saying that the state should pay for the regulation of the system because it is in the public interest and we all stand to benefit from it. Why is that? As taxpayers, we are either helping to finance SERPS if individuals do not opt out into occupational pensions or, if they do, we are helping to finance the tax privileges from the Inland Revenue which make pensions such a special form of savings. It is a special form of savings precisely because we as taxpayers recognise that we all have a public policy interest in encouraging as far as possible the policy of provision for oneself in old age.

We believe that the state—that is, we, the taxpayers—should fund OPRA in order to ensure, first, that it not only is but is perceived to be truly independent and, secondly, because the regulating and policing of pensions is of such vital interest to us all directly as pension holders or indirectly as taxpayers and therefore it is a matter of public policy. I beg to move.

3.45 p.m.

Baroness Seear

My Lords, I support the amendment that was so fully and adequately moved by the noble Baroness, Lady Hollis. It is in the interests of us all that there should be good occupational pension schemes. If that had been the case 50 years ago the burden on social security would be much less. It is an insurance by the taxpayers that in the years to come we will not have to bail out people who in old age have inadequate incomes because they did not have proper occupational pensions. That is what we are now suffering from and we wish to avoid that for the future.

The Minister has always said—and I know that he will repeat it many times today, tomorrow and on Third Reading—that we must not discourage employers from setting up occupational pension schemes. If he wants to encourage them to do so, surely he is interested in reducing the charges that are laid on employers. One such charge that he can most easily remove is the cost of running the authority. It is obvious that an authority financed by the state will be seen to be more independent. Whether in fact that is the case is another matter but such a perception is of great importance. The authority will be seen to be independent, which is a strong reason for supporting the suggestion that the payments should come from the taxpayers and not from the industry.

Lord Dean of Harptree

My Lords, the noble Baroness, Lady Hollis, mentioned car drivers. All noble Lords know that in recent years car insurance has risen by leaps and bounds. That has been due partly to the fact that there are more cars on the road and that car thieves have greater opportunities to steal cars. Furthermore, many of us are careless about car security. However, I do not believe that as a consequence anyone has suggested that the taxpayers, some of whom are unable to own cars, should assist with the payment of car insurance.

The analogy relating to the provision is precisely the same. Those of us who are lucky enough to be members of an occupational pension scheme and who are drawing occupational pensions should help to pay the costs of effective regulation. Why should the taxpayers, some of whom have had no opportunity to join occupational pension schemes, bear the costs in this regard?

I do not believe that the analogy drawn with the Occupational Pensions Board holds water. It was the job of that board to administer as an agency of the Government the question of whether schemes fell within the rules laid down by statute. In this case, the regulator has an entirely different job. It is his job to seek out fraud where it exists. No one has a stronger vested interest in avoiding fraud than members of occupational pension schemes. Therefore, it is right that the costs of the authority should be met by those of us who are fortunate enough to belong to occupational pension schemes and not by the general body of taxpayers.

Lord Clark of Kempston

My Lords, I hope that my noble friend resists the amendment because it will provide a precedent. The Securities and Investments Board is funded by the industry. The cost of the Personal Investment Authority is borne by the people who are regulated. It has always been the principle that the industry or the service must pay for self-regulation. If the Government told the taxpayers that they must take on the funding of this new organisation that would be a retrograde step. It should be funded by those who participate and not by the general taxpayers.

Lord Mackay of Ardbrecknish

My Lords, as has been made clear in this short debate, the purpose of the amendment is to prevent the cost of a new regulatory authority being met by and levied on pension schemes and instead to require the Secretary of State to make available appropriate funds from the taxpayer.

I recall from our debates in Committee that both the noble Baroness, Lady Hollis, and the noble Lord, Lord Ezra, acknowledged that even without the amendments which we are now discussing the Secretary of State would determine the authority's budget. We believe—and I do not think there is any quarrel between us—that that is quite right. Indeed, paragraph 8 of Schedule 1 already provides for that.

But the point at issue is whether the authority is paid for by a levy on pension schemes or by taxation. The fact that the Secretary of State has budgetary control has been put forward as an argument for state funding. I do not accept that there is any logical connection between ensuring financial accountability and the source of the funding.

We are committed to keeping the costs of the authority to a minimum compatible with effective regulation. We shall be able to apply checks and balances on its expenditure. The authority's financial affairs will be monitored and scrutinised closely. It will be required to draw up annual statements of accounts which will be examined and certified by the Comptroller and Auditor General. Copies of all statements of accounts and reports by the Comptroller and Auditor General will be laid before both Houses of Parliament and published. They will be available for purchase by the general public.

Most occupational pension schemes are tax exempt approved and members of those schemes enjoy the benefits resulting from a number of special tax reliefs. Members' and employers' contributions are tax deductible. Income and gains from investments are exempt from income and capital gains tax and lump sum retirement benefits are free of tax. Other taxpayers who are not able to join such schemes are not so privileged. As both my noble friends have said, it would be wrong to expect the general taxpayer to foot the bill for the regulation of pension schemes. In effect, they would be paying twice: once for the tax reliefs enjoyed by pension schemes and again for the privilege of having those schemes policed.

We consider that it is right that the costs of the authority should fall on those who establish and run pension schemes because they are responsible for ensuring that their schemes are run properly. It is in their interests to promote members' confidence in them. Employers are able to set up pension schemes within a beneficial tax regime. Each year employers pay well over £18 billion of tax deductible contributions to occupational pension schemes. The current estimated total running cost of the authority is about £10 million per year. We do not consider that to be too great a burden.

While pension schemes are not established to make profits for their sponsoring employers (as the noble Baroness, Lady Hollis, pointed out) that is not to say that employers do not benefit from setting them up. Employers principally establish pension schemes as a means to recruit and retain staff. They are a vital element in the remuneration package, enabling employers to maintain a competitive edge in recruiting the most able candidates. Clearly a company has a direct interest in the calibre of its staff and the contribution that they make to its profitability. Therefore, employers have a direct interest in any measure which increases the confidence of their employees in occupational pensions. Recovering the costs of the authority through the levy would merely be an extension of the existing principles of the pension ombudsman, the Pension Registry and the grant to the Occupational Pensions Advisory Service.

The levy will cover the full running costs and the start-up costs of the new authority. I wholly reject the argument that it will compromise the authority's independence. The authority's board will be appointed by the Secretary of State and, through him, will be fully accountable to Parliament. Its functions and its obligations are set out in the legislation before us today. As now, the rate of levy will be set by the Secretary of State and will be prescribed in regulations. That will allow the levy structure to be amended in the light of experience and to allow rates to take account of changes in costs over time.

The principle that the cost of the authority should be met by those who establish and run pension schemes is important. I very much hope that after listening to the arguments, the noble Baroness will withdraw the amendment. But if she feels that she cannot do that and wishes to continue to impose another £10 million of expenditure on the ordinary taxpayer, I hope that my noble friends will join with me in rejecting the amendment.

Baroness Hollis of Heigham

My Lords, I was disappointed by the Minister's reply because we have not progressed since Committee stage. Two basic arguments have been put forward. The noble Lords, Lord Dean and Lord Clark, have said that other analogous industries pay for their own regulation. I had hoped that I had addressed that point by indicating that, for example, the PIA regulates a profit-making industry. I have no problem with those bodies that are seeking to make a profit having to pay for their own regulation. It is precisely because the provision of pensions is not a profit-making activity but a non-profit making trust that it seems unreasonable, first, to burden the industry with additional costs and, secondly, to treat it in the same way as though it is seeking to make a profit.

The substantive issue that has emerged from all the remarks made is whether there is a wider interest in the regulation of pensions sufficient that the cost of it should be borne not only by those who hold the pensions but by all of us. That is the issue.

That depends on what one believes that job of regulation to be. The Minister said in a very revealing comment that he did not think that it was reasonable to ask the general taxpayer "to pay twice over"; namely, once for the tax privileges afforded by the Inland Revenue and secondly for the policing function. The reason that we are moving the amendment is precisely so that the general taxpayers' investment in the first of those—that is, the Inland Revenue privileges—is protected and policed properly, which requires the second expenditure. In other words, if I, as a taxpayer, invest and if I, as a taxpayer, wish to ensure that my investment is safeguarded properly, I expect to pay for that policing as a taxpayer, not as a private investor.

Therefore, in my judgment the very argument which the Minister used—that because the taxpayer is paying for the Inland Revenue privileges he should not therefore pay for the policing—should be turned on its head. If one invests as a taxpayer, one has a need, a right, a duty and a responsibility to ensure that that investment is protected. That means that one must pay also for the policing.

One either accepts the argument or one does not but I believe that it applies to every other area of public life of which I am aware. For example, both central government and local authorities make grants for repairs and maintenance of listed buildings from taxpayers' money. Inspectors from both English Heritage, on the one hand, and from the local authority's conservation department, on the other, then check that the money has been spent properly. That checking is not done and paid for by the recipient of the grant. It is paid for by the taxpayer. Why is that? It is because, in the first place, taxpayers' money has been used to maintain historic buildings as it is public policy that that should be done. We then pay to ensure that our money has been well spent. That applies in this case, but even more so to the field of pensions. If we have a public policy interest in the security and independence of our pensions, we must all expect to pay for that. I wish to seek the opinion of the House.

3.59 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 95; Not-Contents, 135.

Division No. 2
CONTENTS
Acton, L.	Falkland, V.
Addington, L	Freyberg, L
Allen of Abbeydale, L	Gallacher, L
Allenby of Megiddo, V.	Gladwin of Clee, L
Archer of Sandwell, L	Gladwyn, L
Ashley of Stoke, L.	Gould of Potternewton, B.[Teller]
Avebury, L
Bancroft, L	Graham of Edmonton, L[Teller]
Barnett, L
Beaumont of Whitley, L	Gregson, L
Birk, B.	Grey, E.
Blackstone, B.	Halsbury, E.
Bruce of Donington, L	Hamwee, B.
Carmichael of Kelvingrove, L	Harris of Greenwich, L
Cledwyn of Penrhos, L	Haskel, L
Clinton-Davis, L	Henniker, L.
Cocks of Hartcliffe, L.	Hilton of Eggardon, B.
David, B.	Hollis of Heigham, B.
Dean of Beswick, L	Hooson, L.
Dean of Thornton-le-Fylde, B.	Irvine of Lairg, L
Desai, L	Jay of Paddington, B.
Donaldson of Kingsbridge, L.	Jeger, B.
Dormand of Essington, L.	Jenkins of Hillhead, L.
Eatwell, L	Jenkins of Putney, L.
Elis-Thomas, L	Judd, L.
Ennals, L.	Kilbracken, L.
Ezra, L	Kirkhill, L.
Falkender, B.	Lovell-Davis, L.

Mason of Barnsley, L	Seear, B.
Mayhew, L	Sefton of Garston, L.
McGregor of Durris, L.	Serota, B.
McIntosh of Haringey, L.	Shaughnessy, L
McNair, L.	Shepherd, L
Merlyn-Rees, L.	Simon, V.
Meston, L.	Stallard, L
Molloy, L	Stedman, B.
Monkswell, L	Stoddart of Swindon, L.
Morris of Castle Morris, L	Strabolgi, L
Mulley, L.
Nelson, E.	Taylor of Gryfe, L
Nicol, B.	Tenby, V.
Ogmore, L.	Thomas of Walliswood, B.
Peston, L.	Tope, L
Phillips of Ellesmere, L.	Tordoff, L
Porter of Luddenham, L.	Turner of Camden, B.
Rodgers of Quarry Bank, L.	Wallace of Coslany, L
Russell, E.	White, B.
Sainsbury, L	Wigoder, L
	Williams of Elvel, L
	Williams of Mostyn, L.

NON-CONTENTS
Aberdare, L.	Hailsham of Saint Marylebone, L.
Addison, V.	Harding of Petherton, L.
Ailsa, M.	Harmar-Nicholls, L
Aldington, L.	Hayhoe, L.
Alexander of Tunis, E.	Hemphill, L
Ashbourne, L.	Henley, L.
Astor of Hever, L	Hertford, M.
Astor, V.	Hives, L.
Belstead, L.	Hogg, B.
Birdwood, L.	Holderness, L.
Blake, L.	Hood, V.
Blatch, B.	Hothfield, L.
Blyth, L.	Howe, E.
Boardman, L.	Inglewood, L [Teller.]
Borthwick, L.	Jenkin of Boding, L
Boyd-Carpenter, L	Johnston of Rockport, L.
Brabazon of Tara, L.	Kimball, L
Braine of Wheatley, L.	Knollys, V.
Brougham and Vaux, L.	Lauderdale, E.
Buckinghamshire, E.	Lindsay, E
Butterworth, L.	Lindsey and Abingdon, E
Cadman, L.	Long, V.
Caithness, E.	Lucas, L.
Campbell of Croy, L	Lyell, L.
Carnegy of Lour, B.	McConnell, L
Cawley, L.	Mackay of Ardbrecknish, L.
Carnock, L	Mackay of Clashfern, [Lord Chancellor.]
Chesham, L.
Clanwilliam,	Manton, L.
Clark of Kempston, L.	Merrivale, L.
Colnbrook, L.	Mersey, V.
Constantine of Stanmore, L.	Miller of Hendon, B.
Cox, B.	Milne, L.
Craigavon, V.	Milverton, L
Cranborne, V. [Lord Privy Seal.]	Monson, L
Crathorne, L.	Monteagle of Brandon, L.
	Mountevans, L.
Cumberlege, B.	Mowbray and Stourton, L.
Davidson, V.	Moyne, L
De Freyne, L	Munster, E.
Dean of Harptree, L	Munster, E.
Denham, L.	Murton of Lindisfarne, L.
Dixon-Smith, L.	Newall, L.
Elles, B.	Norfolk, D.
Elton, L.	Northesk, E.
Faithfull, B.	O'Cathain, B.
Ferrers, E.	Oppenheim-Barnes, B.
Fraser of Kilmorack, L.	Orr-Ewing, L.
Gainford, L.	Park of Monmouth, B.
Gardner of Parkes, B.	Pender, L.
Geddes, L.	Peyton of Yeovil, L.
Goschen, V.
Gowrie, E.	Pike, B.
Gray of Contin, L.	Plan of Writtle, B.
Gridley, L.	Prior, L.
	Rankeillour, L.

Rawlings, B.	Strathcona and Mount Royal, L.
Renwick, L.	Sudeley, L.
Rodger of Earlsferry, L.	Swansea, L.
Saltoun of Abernethy, Ly.	Swinfen, L.
Seccombe, B.	Teviot, L.
Selborne, E.	Teynham, L.
Shaw of Northstead, L	Thomas of Gwydir, L.
Simon of Glaisdale, L.	Trumpington, B.
Skelmersdale, L.	Vaux of Harrowden, L.
Slim, V.	Wade of Chorlton, L.
St. Davids, V.	Whitelaw, V.
Strange, B.	Wise, L.
Strathcarron, L.	Wynford, L.
Strathclyde, L. [Teller.]	Young, B.

Resolved in the negative and amendment disagreed to accordingly.

4.6 p.m.

Clause 3 [Removal or suspension of trustees]:

Lord Lucas moved Amendment No. 3:

Page 2, line 18, leave out from ("order") to ("in") in line 19 and insert ("prohibit a person from being a trustee of a particular trust scheme in any of the following circumstances.

(2) The circumstances are—

(a) that the Authority are satisfied that while being a trustee of the scheme the person has been").

The noble Lord said: My Lords, in moving the amendment I shall speak also to Amendments Nos. 4, 6 to 14, 24, 25, 50, 51, 53, 60, 62, 76, 78, 82, 85, 92, 95, 100, 115, 125, 128, 134, 164, 166, 168, 172 and 173.

Lord Hailsham of Saint Marylebone

Well done!

Baroness Hollis of Heigham

Speech!

Lord Lucas

My Lords, we are dealing with a highly technical and, in its consequences, potentially wide-ranging Bill. We have maintained, and continue to maintain, an open mind on many of its aspects. Since its publication, we have continued to consult with interested organisations. We have listened carefully to what has been said in this House, and we have continued to conduct our own reviews of its provisions. The amendments are the first fruits of those reviews—a few additional improvements to the Bill.

The amendments relate to the authority's power to take action against trustees of occupational pension schemes. The integrity and diligence of the trustee is crucial to the security of pension rights. If it is established that, while acting as a trustee of a scheme, such a person puts that security at risk by failing to comply with his statutory duties, then the authority must have the power to prevent him from acting as a trustee of that scheme either now or in the future.

Amendment No. 3 replaces the authority's power to remove trustees with a power to prohibit them, thus enabling it to take action against those who are no longer serving as a trustee as well as those who are. That removes the loophole in the clause as currently drafted which would have allowed trustees to circumvent action being taken against them by the authority by removing themselves first. As a consequence of the amendment, it is necessary to delete references to the authority's power to remove trustees and replace them with references to the authority's power to prohibit trustees. Amendments Nos. 7, 8, 9, 11, 12, 13, 14, 24, 25, 50, 51, 53, 60, 62, 76, 78, 82, 85, 92, 95, 100, 115, 125, 128, 134, 164, 166, 168, 172 and 173 do just that.

Lord Hailsham of Saint Marylebone

Well said!

Baroness Hollis of Heigham

My Lords, it is getting better.

Lord Lucas

Yes, my Lords.

Amendment No. 4 adds to the list of circumstances in which the authority may prohibit a person from being a trustee of a particular occupational pension scheme. It allows the authority to prohibit a company or Scottish partnership from being a trustee of a particular scheme where any director of the company, or partner of the partnership, is himself prohibited from being a trustee of the scheme. This is necessary to prevent an individual's prohibition being circumvented by his establishing a company or Scottish partnership.

It also allows the authority to prohibit a person from being a trustee of a particular scheme where that person is a director of a company which is itself prohibited from acting as a trustee by the authority. The authority may only do this where it is satisfied that the company was prohibited because of the consent, connivance or neglect of the particular director. This ensures that a director whose actions contributed to his company being prohibited can himself be prohibited from acting as a trustee. Without this provision, such directors could continue to hide behind the corporate veil and could simply set up a new trustee company and continue to act as before.

The amendment allows a list of circumstances in which the authority may prohibit a trustee to be extended through regulations. Rather than give the authority a wide power to prohibit individuals from being scheme trustees, on the face of the Bill we have sought to specify all the situations where we believe this power should be exercised. The flexibility to add to the list through regulation is needed in case, in the light of experience, other situations arise where it would be desirable for the authority to be able to prohibit an individual from being a scheme trustee.

s The remainder of Amendment No. 4 is concerned with the authority's power to suspend trustees, clarifying and adding to the provisions that are already contained in the Bill in Clause 3. It extends the suspension provisions to allow the authority to suspend trustees who are facing legal action that could lead to them being automatically disqualified in Clause 24. It also allows such a suspension to remain in effect until the proceedings in question are concluded. This is necessary because court action—for example, in respect of a criminal breach—may take longer than the two year limit on the length of suspension that would otherwise apply.

The new subsection (3B) sets down the effects that a suspension order may have, and new subsection (3C) provides that a suspension order may be made in respect of proceedings, petitions or applications made before or after the coming into force of subsection (3). Subsection (4) provides that the authority may, on the application of a person who has been suspended, revoke the suspension order either generally or in relation to a particular scheme or class of schemes. This addresses anxieties raised at the Committee stage by the noble Baroness, Lady Hollis, the noble Lord, Lord Monkswell, and my noble friend Lord Buckinghamshire, about the need to enable a person who has been suspended by the authority to apply for his suspension to be annulled and for him to be exonerated. It brings the process in line with that for trustees who have been prohibited or disqualified.

Amendment No. 6 is consequential on Amendments Nos. 3 and 4. It splits the amended Clause 3 into two, creating a first clause dealing with prohibition orders and a second dealing with suspension orders. The final amendment in this group, Amendment No. 10, further clarifies the procedure the authority must follow when suspending a trustee. It requires the authority to give immediate notice to the person it is suspending. It also requires the authority to give notice of the fact to the other trustees of any scheme affected by the suspension, except where a trustee cannot be found or has no known address in the United Kingdom. The authority's powers to suspend and prohibit trustees are essential elements of the new regulatory framework. They will allow the authority to protect the interests of scheme members by ensuring that trustees who fail in their statutory responsibilities are prevented from acting as scheme trustees. I beg to move.

4.15 p.m.

Baroness Hollis of Heigham

My Lords, this array of amendments—Amendment No. 3 and all the others, whichever they are—invents two new animals: a prohibition order and a suspension order, in place of the original powers to remove or suspend. I do not think we have any particular objection to that at all. However, if I may trouble your Lordships, I wish to raise a general point. We are now at Report stage. We have 171 amendments down for discussion today, 80 of which—almost half—have come from the Government at Report stage.

Noble Lords

Oh!

Baroness Hollis of Heigham

My Lords, I defer to the noble Lord if he thinks the figure is 79. I shall not press the point. But, more substantially, what is actually going on? What is not in this Bill covered by regulation, which is a power unspecified in the future, is being covered by redrafting as we go on. It looks as if this Bill is being redrafted on the hoof as it goes through. Every time it is circulated to a department, new comments appear to emerge and the Bill is amended.

Why was not all of this done before this Bill was brought to your Lordships' House? Why are we having Bills that are so sloppily drafted that whatever is not covered by regulation has to be amended in the course of the passage of the Bill? I believe that is unbelievably sloppy; I think it is improper; and I think it takes up the time of your Lordships which should be more properly spent on the Bill. In the Government's haste to get the Bill on the Floor of the House they have brought to us something which is so poorly drafted that we shall have to spend half of the hours of this evening trying to take through technical amendments which we should not need to be discussing because they should have been cleared before they arrived in the House. I have to say I think this is not an appropriate way for the department to behave.

Lord Monkswell

My Lords, when I first looked through the amendments that we have for discussion today, I must admit that I had to pause at this amendment and the subsequent amendments that seem to be allied to it. I say "seem to be allied" because it was not too difficult to determine that some amendments were allied to this one but until we had the Marshalled List which is only printed on the day of the deliberations ordinary Members of the House had no mechanism to determine which amendments were related to each other.

I am not sure whether it is the way in which the Bill was drafted in the first place, or whether it is the way the Government are bringing forward amendments, but the net result is that we are running into the dangerous procedural situation where the House is being asked to reach decisions on rather complicated matters which—dare I say it?—are almost inevitably not completely explained by Ministers at the point of deliberation.

We have apparently within our procedures and rules no mechanism currently of forewarning Members of the implications of the decisions that they are expected to take. It would seem to me there are two ways in which we can deal with this. One is for us to say to the Government, "Do not bring Bills to the House in this state. Make sure they are properly drafted to enable the House to consider those Bills in a sensible way". One can hope the Bills would be well thought out before they were presented to the House.

The second option is to ask the Procedure Committee to have another look at our procedures and try to work out some scheme whereby when there is significant amendment to Bills —as in this situation where we are faced with a whole raft of amendments—it will come forward with recommendations which will enable all Members of your Lordships' House to arrive at a situation where the decisions they have to take can be made in the light of reasonable information. I leave that matter in the Government's hands to think about. Our own Front Bench may have to think about it and discussions would have to go forward through the usual channels. That is, as it were, the procedural point. I thank the Minister for trying to explain, as best he could, the implications of these amendments. In practice, I suspect the Government will push these amendments and effectively write them on the face of the Bill. I do not think the Opposition will be in a position to be able to say that that is not necessarily a good thing to do.

We have to reserve our position with regard to the implications of the amendments for Third Reading. One aspect of the amendments that the Minister mentioned related to a concern that I raised in Committee. I shall obviously have to consider the implications in terms of what the amended Bill will contain.

Finally, the Minister made great play of the powers to suspend or prohibit an individual trustee or a trustee who was a director of a company which was itself a trustee. He referred to the ability to identify an individual who had transgressed and to ensure that that individual was prohibited from serving as a trustee in the future. Will that apply on an individual basis to a government Minister acting in the capacity of a trustee or the equivalent of a trustee? I raise that question in the light of an amendment which the Government have put down and which we shall discuss later. It will be interesting to know whether the amendments will ensure that an individual government Minister would be subject to exactly the same criteria as an individual trustee.

That is as much as I can say given the very complicated way in which the amendments have been tabled.

Lord Boyd-Carpenter

My Lords, I hope that my noble friend the Minister will have an adequate answer to the, on the face of it, not unreasonable criticism offered by the noble Baroness on the Front Bench opposite. As she reminded us, we are now at the Report stage of a Bill which has already taken a good deal of time in this House. It is a little unfortunate that it is necessary at this late stage to introduce such an enormous number of amendments. I express no opinion on their merits: I am sure that on the whole they are sensible improvements to the Bill, But procedurally it is unfortunate that it should be necessary to make these amendments at this comparatively late stage of the progress of a major Bill which has been before Parliament for a considerable time.

I am not without sympathy for the Minister. At one time I had responsibility for introducing several measures on this subject. I can tell your Lordships that whatever else those measures may have been they were a great deal shorter than this Bill and it was not necessary to amend them to anything like the same extent.

Although I have an open mind on the merits of the matter, I believe that the House is entitled to some explanation from the Government as to why it was necessary to introduce this enormous number of amendments at this very late stage.

Lord Lucas

My Lords, to deal with the questions raised in reverse order, my noble friend Lord Boyd-Carpenter asked why there were so many amendments. This Bill has not been in the public domain for very long. It started in this House. We have received a very large number of submissions and suggestions since the Bill was published. As I said in my opening remarks, we retain an open mind and we have looked again at many provisions of the Bill in the light of what has been said. Much of it is technical rather than controversial. Therefore, it has not been a matter of principle with us to hold to the original decisions. Rather, we have looked again at what we originally decided to see whether what was suggested was a better way of doing things.

As regards the last question of the noble Lord, Lord Monkswell, yes, if a Minister is acting in a personal capacity as a trustee he will be subject to the same arrangements as any other trustee. If that does not answer the noble Lord's question in full perhaps he will write to me, as we shall consider his earlier remarks and take into account the many interesting things that he said. I do not believe that it would be appropriate for me to reply to them now.

So far as concerns the remarks of the noble Baroness, Lady Hollis, if we give way on amendments we are said to be sloppy and if we do not we are said to be intransigent. We are being extremely accommodating on many parts of this Bill. As I said in the course of my remarks, this group of amendments results from something that the noble Baroness herself said in Committee. We believe that it is important to get this Bill in as good a state as possible. One of the principle functions of this House is as a revising chamber. We believe that the progress of this Bill is a very good example of how well it works as it is presently constituted.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 4:

Page 2, leave out lines 26 to 33 and insert: ("(b) that the Authority are satisfied that, while being a trustee of the scheme, this section has applied to the person by virtue of any other provision of this Part,

(c) that the person is a company and any director of the company is prohibited under this section from being a trustee of the scheme,

(d) that the person is a Scottish partnership and any of the partners is prohibited under this section from being a trustee of the scheme, or

(e) that the person is a director of a company which, by reason of circumstances falling with paragraph (a) or (b), is prohibited under this section from being a trustee of the scheme and the Authority are satisfied that the acts or defaults giving rise to those circumstances were committed with the consent or connivance of, or attributable to any neglect on the part of, the director;

or any other prescribed circumstances.

(2A) The making of an order under subsection (1) against a person who is a trustee of the scheme in question has the effect of removing him.

(2B) The Authority may, on the application of any person against whom an order under subsection (1) is in force, revoke the order, but a revocation made at any time cannot affect anything done before that time.

(3) The Authority may by order suspend a trustee of a trust scheme—

1. (a) pending consideration being given to the making of an order against him under subsection (1),
2. (b) where proceedings have been instituted against him for an offence involving dishonesty or deception and have not been concluded,
3. (c) where a petition has been presented to the court for an order adjudging him bankrupt, or for the sequestration of his estate, and proceedings on the petition have not been concluded,
4. (d) where the trustee is a company, if a petition for the winding up of the company has been presented to the court and proceedings on the petition have not been concluded, or
5. (e) where an application has been made to the court for a disqualification order against him under the Company Directors Disqualification Act 1986 and proceedings on the application have not been concluded.

(3A) An order under subsection (3)—

1. (a) if made by virtue of paragraph (a), has effect for an initial period not exceeding twelve months, and
2. (b) in any other case, has effect until the proceedings in question are concluded;

but the Authority may by order extend the initial period referred to in paragraph (a) for a further period of twelve months, and any order suspending a person under subsection (3) ceases to have effect if an order is made against that person under subsection (1).

(3B) An order under subsection (3) has the effect of prohibiting the person suspended, during the period of his suspension, from exercising any functions as trustee of any trust scheme to which the order applies; and the order may apply to a particular trust scheme, a particular class of trust schemes or trust schemes in general.

(3C) An order under subsection (3) may be made on one of the grounds in paragraphs (b) to (e) whether or not the proceedings were instituted, petition presented or application made (as the case may be) before or after the coming into force of that subsection.

(4) The Authority may, on the application of any person suspended under subsection (3), revoke the order, either generally or in relation to a particular scheme or a particular class of schemes; but a revocation made at any time cannot affect anything done before that time.").

On Question, amendment agreed to.

The Deputy Speaker (Lord Murton of Lindisfarne)

My Lords, as Amendment No. 4 has been agreed to I am unable to call Amendment No. 5 in the name of the noble Baroness, Lady Hollis of Heigham, because of pre-emption.

[Amendment No. 5 not moved.]

Lord Lucas moved Amendment No. 6:

Divide Clause 3 into two clauses, the first (Prohibition orders) to consist of subsections (1) to (2B) and the second (Suspension orders) to consist of subsections (3) to (5).

On Question, amendment agreed to.

Clause 4 [Removal of trustees: notices]:

Lord Lucas moved Amendments Nos. 7 to 10:

Page 2, line 39, leave out from ("section") to ("without") in line 40 and insert ("(Prohibition orders)against a person").

Page 3, line 4, leave out from ("section") to ("the") in line 5 and insert ("(Prohibition orders) against a person").

Page 3, line 6, leave out from first ("the") to ("cannot") and insert ("trustees of the scheme, except that person (if he is a trustee) and any trustee who").

Page 3, line 7, at end insert:

("() Where the Authority make an order under section (Suspension orders) against a person, they must—

1. (a) immediately give notice of that fact to that person, and
2. (b) as soon as reasonably practicable, give notice of that fact to the other trustees of any trust scheme to which the order applies, except any trustee who cannot be found or has no known address in the United Kingdom.").

On Question, amendments agreed to.

Clause 5 [Removal or suspension of trustees: consequences]:

Lord Lucas moved Amendments Nos. 11 to 13:

Page 3, line 12, leave out ("removed or suspended under section 3") and insert ("prohibited from being a trustee of the scheme under section (Prohibition orders) or suspended in relation to the scheme under section (Suspension orders)").

Page 3, line 20, leave out from ("person") to ("or") in line 22 and insert ("purporting to act as trustee of a trust scheme while prohibited from being a trustee of the scheme under section (Prohibition orders) or suspended in relation to the scheme under section (Suspension orders) are not invalid merely because of that prohibition").

Page 3, line 23, leave out ("section 3") and insert ("sections (Prohibition orders), (Suspension orders)").

On Question, amendments agreed to.

Clause 6 [Appointment of trustees]:

Lord Lucas moved Amendment No. 14:

Page 3, line 26, leave out from ("Where") to ("or") in line 27 and insert ("a trustee of a trust scheme is removed by an order under section (Prohibition orders)").

On Question, amendment agreed to.

The Earl of Buckinghamshire moved Amendment No. 15:

Page 4, line 1, after ("paid") insert ("reasonable").

The noble Earl said: My Lords, I remind your Lordships that I moved this amendment in Committee. I believe that it is necessary to insert the word "reasonable" in order to have some control over the fees that can be charged by a trustee imposed by OPRA. During the Committee stage my noble friend the Minister said that he would look at the way in which charges for trustees imposed by OPRA were made. I shall be interested to hear his comments having had an opportunity to think about the issue. I beg to move.

Lord Mackay of Ardbrecknish

My Lords, I have considered carefully the representations made by my noble friend and by the noble Lords, Lord Haskel and Lord Monkswell, following the earlier debate on a similar amendment in Committee. However, I still believe that the amendment is unnecessary. Perhaps I may explain to your Lordships why that is the case.

During the earlier debate on the Bill, and in another context, my noble friend Lord Renton highlighted very clearly the difficulty with the word "reasonable". He said that although the word "reasonable" was attractive it gives rise to a great deal of argument in the courts. Where the authority appoints a trustee to a scheme we do not wish to provide a means by which someone can stall the appointment by engaging in time-wasting court action over whether the fees to be charged are reasonable.

It is important that the authority's power to appoint trustees is sufficiently flexible to enable it to set out the terms under which the appointment is made. We accept that, where possible, the appointee should not be a professional trustee. But there will be situations where, in order to secure the interests of scheme members, it will be necessary to appoint professional trustees. This will involve a cost which it is appropriate for the scheme to have to bear. But at the outset, the authority will agree the terms of the appointment including the level of fees to be charged. Scheme members, employers or other trustees will be free to bring to the authority's attention any concerns they have that the terms of the appointment are not being adhered to. If the appointee has abused his position, for example by charging excessive fees, the authority has more than adequate powers to remove the professional trustee; and it would be unlikely to use the services of such a person in the future.

I appreciate the problem to which my noble friend draws our attention. However, I hope that he will agree with me that there is already provision in the Bill to prevent the problem about which he is concerned from arising; and that elsewhere in the Bill the authority has appropriate powers to deal with the issue that he raised. After hearing my explanation, I hope that my noble friend will be able to withdraw the amendment.

4.30 p.m.

The Earl of Buckinghamshire

My Lords, I am extremely grateful to the Minister for his full reply. It is extremely important that fees in this area are controlled. Much that he said has gone a long way to reassure me on the issue. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 9 [Civil penalties]:

Baroness Hollis of Heigham moved Amendment No. 16:

Page 4, line 27, leave out ("a prescribed amount") and insert ("0,000").

The noble Baroness said: My Lords, in moving Amendment No. 16, I speak also to Amendments Nos. 18 and 230. I had thought that I would speak also to Amendments Nos. 177 and 229 but there appears some confusion about the grouping. That is a pity because the amendments would have grouped well together.

I use Amendment No. 16 to raise yet again—although I promise your Lordships probably not again at Third Reading —the problem of regulations in the Bill. While the Minister's amendment would have been appropriate since he goes some way to meet some of the concerns as reflected in the scrutiny committee's report, one of the real worries that the Bill raises for industry is the degree to which vital matters are not set out on the face of Bill but are left to regulation—some 200 regulations. No one doubts that much of the detail or insertion of financial figures—they are essential to a Pensions Bill which might need up-rating or adjustment in the future—is best left to regulation. It is essential that the House is not troubled by a continuous repeat of primary legislation to deal with such technical and not significant issues.

But that is not what we are talking about. At numerous points in the Bill, unnecessarily wide—and in our view often dangerously wide—powers are given to the Secretary of State. What powers are we talking about? Clause 6, for example, allows OPRA to appoint a trustee in prescribed circumstances which could have considerable implications for the balance of the trustee board. Clause 9, to which Amendment No. 16 relates, allows authority to impose a penalty whose limit will be determined by regulation. Is that wise, my Lords? Hence we have an amendment which inserts the figure of £5,000.

I did not propose to trouble your Lordships with each and every point relating to clauses. That was the appropriate task at Committee stage. However, Clause 16 enables the Secretary of State to alter at his discretion any or all of the trustee member relationships and arrangements which have been designated by the Bill. Clause 65 allows the Government to modify significantly a public pensions scheme. That is undertaken by the Minister for Social Security by the negative procedure. If it is achieved by anyone else, it is provided for by the affirmative procedure. As the scrutiny committee reminded us, whether your Lordships enjoy a procedure by affirmative rather than negative resolution should not depend which Minister handles the issue.

Clauses 106 and 134 allow regulations by the Secretary of State to create a criminal offence by negative procedure. As I understand it, the amendments that we shall deal with tomorrow at least allow that issue to be brought within the framework of an affirmative procedure. That is why those amendments should have been grouped with the amendments that we now consider. Such a procedure helps a little. However, as your Lordships cannot amend or reject the matter, noble Lords have no power effectively to scrutinise the creation of criminal procedure by regulation. The House of Commons can do that, and we have been marginalised. I believe that will matter to your Lordships.

Why are we worried? There are two points. The first may be better made for me by the noble and learned Lord, Lord Simon: that so many and such extensive powers by regulation are given to the Secretary of State without the direct and active scrutiny of both Houses of Parliament. We do not suggest that there is not a proper role for regulation. There clearly is in such a technical Bill. But we believe that such power goes too far in field after field and vests too much in Secretaries of State who may not always be as well intentioned, and I have no doubt as well informed, as is the present Minister.

The second consideration is practical rather than constitutional. The practitioners in the industry—the pension fund managers, the advisers, scheme members, employers, trustees and the like—do not know what wide swathes of the Bill may mean or may come to mean. There is the Bill that we debate and there is a second Bill in the shadows, or in the back pocket of the Secretary of State, which will interpret, cut out, add to or modify the Bill as he sees fit in ways in which the industry cannot forecast, or with consequences that it cannot anticipate. When that will occur, industry does not know. When so much is left to regulation, no one will know what the Secretary of State can do, will do, ought to do, or is likely to do, as the case may be. Those practitioners will not know therefore how those at the sharp end of the business will manage it.

The scrutiny committee shared our constitutional concerns; and to some extent (but only to some extent) those may be met by the amendments which will be moved tomorrow. However, a second set of concerns is practical: the industry will not know where it stands if so much is left to the discretionary power of the Secretary of State and is not available for our scrutiny today. Amendment No. 16 is the only amendment that I ask your Lordships to consider today. But I believe that the Bill leaves far too wide powers to the Secretary of State and, together with some rather unfortunate sloppy drafting, produces for all of us an unfortunate situation. I beg to move.

Baroness Seear

My Lords, I support the amendment on the general principle about which we have complained again and again in your Lordships House: that the Government legislate more and more by regulation, and that that is constitutionally unacceptable. Of course a number of details which change as time goes on have to be provided for by regulation. We do not cavil about that. But the fact that the Government can insert a regulation into the Bill creating a possible criminal offence is totally unacceptable constitutionally.

Lord Boyd-Carpenter

My Lords, to substitute for a prescribed amount in two of the amendments the specific sum of £5,000 introduces an unnecessary rigidity into the Bill. It also does not take account of the fact that the value of money may change. Indeed, if we have a Labour Government the value of money will deteriorate very substantially indeed.

Baroness Hollis of Heigham

My Lords, there may be fewer offences.

Lord Boyd-Carpenter

My Lords, the value will go down enormously with the inflation which a Labour Government always produce. Therefore I believe it wiser to leave the amounts of the penalties to be prescribed in the circumstances of the time, taking into account the then value of money. I hope therefore that my noble friend will resist the amendment.

Lord Simon of Glaisdale

My Lords, I presume to agree with what the noble Baroness said on the general constitutional position. I am sure that the noble Lord the Minister cannot avoid knowing that we regard his department with the utmost suspicion when it comes to constitutional matters. That is, I am afraid, inevitable after the Child Support Act. Nor has it been mitigated by the modifications of that Act, including those that are now proposed in the Bill that is before the other place.

This amendment gives the Minister an opportunity to put things generally right. The Scrutiny Committee has been extremely indulgent and discriminating in its comments on the Bill. It has passed a great many matters as being of the nature of Henry VIII clauses but nevertheless being suitably dealt with by negative resolution. There are, however, one or two issues on which the Scrutiny Committee has drawn your Lordships' attention specifically to matters. I hope that when the noble Lord replies, he will say without any question that where the Scrutiny Committee has so signified a view, it will be unquestionably accepted by the Government.

Lord Mackay of Ardbrecknish

My Lords, I do not think that I will even be tempted to follow the noble and learned Lord down the trail of the Child Support Agency. That is—

Baroness Hollis of Heigham

You will, you will!

Lord Mackay of Ardbrecknish

That is coming to us, if the noble Baroness opposite will be patient. I think the principle of, Sufficient unto the day is the evil thereof', ought to be my maxim in this regard. Coming to the particular—

Baroness Seear

Is the noble Lord then, admitting that it is evil?

Lord Mackay of Ardbrecknish

My Lords, I was using a phrase. Of course it is not evil. I do not want to go down that path. It is perfectly proper that men should pay for their children; they ought not to burden other taxpayers. But that is another issue.

In Committee, we discussed the Scrutiny Committee's comments about Clauses 9, 105 and 64. Noble Lords will recall that I agreed to take away the points raised and consider them. Noble Lords will see, further down the Marshalled List, that we have indeed tabled Amendments Nos. 218 and 229. These will ensure that regulations containing criminal penalties made under the powers contained in Clause 105 of this Bill and Section 168(2) of the Pension Schemes Act 1993 will be subject to the affirmative resolution procedure as the Scrutiny Committee suggested. I am sure that noble Lords will welcome these amendments when we reach them.

Noble Lords

Hear, hear.

Lord Mackay of Ardbrecknish

We have not been able to bring forward amendments on the other two areas of concern at this stage. But I should like to reassure noble Lords that work is under way to bring forward suitable amendments at the earliest possible stage.

I am afraid that I cannot accept the amendments proposed here which seek to make changes to the powers to prescribe the level of civil penalty fines that can be imposed under Clause 9. Amendments Nos. 16 and 18 set down that the maximum civil penalty fine for a breach must not exceed £5,000. While we agree that there should be a ceiling placed upon the amount that can be imposed by way of a civil penalty fine for a breach of a particular duty, I do not believe that these amendments offer the best way to achieve that.

First, civil penalties under this clause will not only be imposed on individuals. Some of the obligations in the Bill will be placed on companies, and a maximum penalty of £5,000 might be considered too low to act as an effective deterrent to wrongdoing. The Financial Services Act regulators, for example, have imposed fines on companies in excess of £100,000.

Secondly, placing an amount on the face of the Bill means that it can be up-rated only by further primary legislation, as my noble friend Lord Boyd-Carpenter mentioned in his intervention. We consider that that would not provide the necessary flexibility for any amount to be changed—for example, to allow for periodic up-rating.

We are continuing to explore the options open to us for addressing the understandable concerns raised to ensure that we find the most appropriate solution which overcomes these difficulties. Amendment No. 230 contains one option, but we would prefer to give it a little more thought and come back with a fully developed solution.

Turning now to the final part of Amendment No. 230 concerning the powers to modify public service schemes, the noble Baroness, Lady Seear, moved an amendment in Committee which sought to ensure that orders made under Clause 64 would be regulations subject to the negative procedure. I promised to consider that. I am consulting the departments responsible for public service schemes, as I promised I would. Although we have not yet had time to prepare a suitable amendment, I want to reassure the House that it is our intention to make all the orders made under Clause 64 subject to scrutiny by the House by the negative resolution procedure.

Amendment No. 230 goes somewhat further than that. It seeks to make such regulations subject to the affirmative procedure. The Scrutiny Committee did not suggest that this was appropriate, and I do not believe it to be justified. Regulations made under this clause would not come into a category that the Brooke Committee suggested was appropriate for affirmative regulations, and I would not want to set such a precedent.

In view of what I have said about what is to come (I suspect later tomorrow) and my commitment to return either in this House or in the other place with amendments to deal with the other problems that I have outlined, I hope that the noble Baroness will withdraw her amendment.

4.45 p.m.

Baroness Hollis of Heigham

My Lords, I thank the Minister for his reply. It is a pity in a way that we could not have grouped all these amendments together. The Minister has indeed shown that he took the opinion of the House in Committee in respecting the problems that were identified by the Scrutiny Committee and is at least switching those powers by regulation which have a significant effect on the working of the schemes from a negative to an affirmative procedure. That is indeed to be welcomed.

This was a probing amendment. I take the Minister's arguments about company schemes. But I would point out that this was, again, one of those regulatory powers that the Scrutiny Committee suggested should not be handled by the negative, but by the affirmative, procedure. I think I am right in saying that the Minister did not accept the Scrutiny Committee's recommendation to that effect. If I am wrong, I should be grateful if he would correct me. He seems to be going down quite a lot of the paths outlined by the Scrutiny Committee—which is to be welcomed—but in respect of this particular one, which was also part of the Scrutiny Committee's recommendation for affirmative procedure, he appears not to be doing so. Is that a correct reading?

Lord Mackay of Ardbrecknish

My Lords, perhaps I can help the noble Baroness. We are currently looking to see what possible options are open to us to address the concerns of the House. That may be along the lines of the Scrutiny Committee, but it may be that other options are open to us. I should not like to go further than that.

Baroness Hollis of Heigham

My Lords, that is probably so far as we can go today. With the permission of the House, I should like to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Buckinghamshire moved Amendment No. 17:

Page 4, line 27, at end insert:

("() No penalty may be imposed on a trustee under this section except in respect of the trustee's own personal act or default and then only if the Authority is of the opinion that—

1. (a) the trustee deliberately disregarded his duties or was reckless as to whether or not he was properly discharging his duties, or
2. (b) the trustee knew that he had contravened, or failed to comply with, relevant provisions of this Act or regulations and then deliberately, recklessly or negligently failed within a reasonable time either to remedy his act or default in an appropriate manner or to take other appropriate action.").

The noble Earl said: My Lords, at Second Reading I made a comment about the civil and criminal penalties that were being imposed on member trustees under this Bill. I believe that the noble Baroness, Lady Turner, made the same comments.

The Bill seeks to encourage, among other things, the appointment of member trustees. Yet at the same time, Clause 9 enables a regulatory authority to impose new penalties on trustees who contravene regulations. There are at least 17 references in the Bill to the application of Clause 9 to trustees who fail to observe the new requirements and subsection (2) enables any number of additional contraventions where Clause 9 applies to be created.

The problem with Clause 9, as drafted, is that it gives too much discretion and direction to the authority regarding the precise circumstances in which a penalty can be levied. It is likely that new trustees will be put off from coming forward to be trustees of pension schemes; and indeed existing trustees may well wish to resign when they understand the full import of what this Bill is doing to them.

The amendment that I put forward this afternoon seeks to do two things. First, it restricts the imposition of a penalty on a trustee to cases where he has acted or defaulted. In other words, no penalty can be levied against the trustee for acts or defaults on others. For example, if he voted against a particular incorrect course of action but was overruled by his fellow trustees, he would not be able to be penalised.

Secondly, the amendment would authorise the authority to impose a penalty only if they believe that the trustee was deliberately negligent, reckless, or knew that he had done wrong and then failed to put it right within a reasonable time. That will mean that an honest and conscientious trustee does not need to be concerned about being penalised the next morning for some inadvertent offence, committed by him or the scheme administrator, about which he knew nothing the night before.

The Minister may argue that, under the Bill as drafted, it is likely that the authority will act reasonably and not impose unfair penalties. Even if that turns out to be true, it will be some years before a pattern of changing penalties has been established. In the meantime, I have concerns about people coming forward to be trustees; or they may well hesitate about becoming or remaining a trustee.

I commend the amendment to the House as a way of removing uncertainty on what I regard as a very important matter and as facilitating the appointment of more member trustees. I beg to move.

Lord Mackay of Ardbrecknish

My Lords, if the new regulatory regime is to be effective, the authority must be able to impose sanctions upon people found in breach of their statutory obligations introduced by the Bill. My noble friend's amendment seeks to limit the circumstances under which the authority may impose civil penalty fines on trustees of pension schemes.

While I have some sympathy with the intention behind the amendment, I consider that it would be wrong to restrict the ability of the authority to impose civil penalties on trustees in the rigid way that his amendment does. The authority must be able to impose a penalty on a trustee responsible for a breach, even though the trustee may not have committed that breach deliberately, recklessly or negligently. It must be clear that any breach of duty can attract a penalty, so that there is an effective deterrent to wrongdoing. No doubt higher fines will be imposed on a person who has committed a breach deliberately or recklessly; but that does not mean that breaches resulting from other causes—for example, sloppy administration or something of that nature—should not attract a penalty, albeit perhaps at a lower level.

We acknowledge that most trustees do a good job. We do not want to discourage people from taking up trustee posts. Nevertheless, the fact that a penalty can be imposed for any breach of a duty makes it clear to them that they must comply with the responsibility. The authority will have the discretion to decide in every case whether a civil penalty should be imposed, at what level, subject to the maximum, and upon whom. In many cases the authority may decide that a civil penalty is not needed. However, in other cases, circumstances may warrant the imposition of a civil penalty, even though action has been taken to put things right—for example, where the breach was found to be especially severe, was one of a number of similar breaches or it was found to have taken place after there had been a warning by the authority to the trustees.

In fact, we have just discussed a number of amendments introduced by my noble friend Lord Lucas, designed to enable the authority to target its civil penalties appropriately. I hope that my noble friend will agree that they go a long way towards meeting his concerns. For example, they take account of the fact that a trustee board may be a corporate body or a Scottish partnership. In those cases it may be more appropriate for the authority to impose a fine on those individuals whose actions, omissions or neglect resulted in the body or partnership breaching an obligation, rather than on the whole body or partnership.

The amendments will also ensure that those who had no part to play in the wrongdoing and who may indeed have alerted the authority to the breach can be excluded from the punishment where appropriate. For example, in the case of a trust board set up as a company, it will not be necessary for every trustee to be held responsible for a breach.

I hope that my noble friend, especially when he looks at the amendments to which we agreed earlier, can see that there are checks and balances to ensure that the authority makes fair and reasonable decisions on the imposition of civil penalties. In the light of my explanation and the amendments moved earlier today by my noble friend Lord Lucas, I hope that my noble friend Lord Buckinghamshire will be able to withdraw his amendment.

The Earl of Buckinghamshire

My Lords, I thank my noble friend the Minister for his full reply. I have to admit that in regard to the points made by the noble Lord, Lord Lucas, I got somewhat lost in the numbers, probably along with other noble Lords. I shall read what he and the Minister said. What he has indicated goes a long way to meeting the concerns raised in my amendment. On that basis I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 18 not moved.]

Lord Lucas moved Amendment No. 19:

Page 4, line 30, at end insert: ("(2A) Where

1. (a) apart from this subsection, a penalty under this section is recoverable from a body corporate or Scottish partnership by reason of any act or omission of the body or partnership as a trustee of a trust scheme, and
2. (b) the act or omission was done with the consent or connivance of, or is attributable to any neglect on the part of, any persons mentioned in subsection (2B),

this section applies to each of those persons who consented to or connived in the act or omission or to whose neglect the act or omission was attributable.

(2B) The persons referred to in subsection (2A) (b)—

(a) in relation to a body corporate, are—

1. (i) any director, manager, secretary, or other similar officer of the body, or a person purporting to act in any such capacity, and
2. (ii) where the affairs of a body corporate are managed by its members, any member in connection with his functions of management, and

(b) in relation to a Scottish partnership, are the partners.

(2C) Where the Authority requires any person to pay a penalty by virtue of subsection (2A), they may not also require the body corporate, or Scottish partnership, in question to pay a penalty in respect of the same act or omission.").

The noble Lord said: My Lords, in moving this amendment I shall speak at the same time to Amendments Nos. 215 and 217.

Amendments Nos. 19 and 215 insert additional subsections in Clauses 9 and 135 respectively. They provide for the authority to target the appropriate individual in any civil penalty fines that it may impose. That is similar to the way in which it may target criminal proceedings under Clause 104.

The amendments take account of the fact that a trustee board may be a corporate body or a Scottish partnership. In these cases it may be more appropriate for the authority to impose a fine not on the body or partnership but on those individuals whose actions, omission or neglect resulted in a body or partnership breaching an obligation. The individuals who may be so fined are limited. In the case of a corporate body, it would be its directors, manager, secretary, or other similar officer. In the case of a corporate body managed by its members, it would be any member with management functions. In the case of a Scottish partnership, it would be its partners.

The amendments provide that where the authority imposes a fine on an individual it may not impose a fine on the body or partnership in respect of the same breach. The amendments will ensure that those who had no part to play in the wrongdoing, and who may have alerted the authority to the breach, are excluded from punishment. For example, in the case of a trust board set up as a company, it will not be necessary for every trustee to be held responsible for a breach and tarred with the same brush as the wrongdoers.

In view of the references to a Scottish partnership, introduced into Clause 135 by Amendment No. 215, Amendment No. 217 adds a definition of the term to that clause. I beg to move.

On Question, amendment agreed to.

Clause 10 [Powers to wind up schemes]:

Lord Lucas moved Amendment No. 20:

Page 4, line 34, at beginning insert ("Subject to subsection (6)").

The noble Lord said: My Lords, in moving this amendment I shall speak at the same time to Amendments Nos. 22, 23 and 150.

These amendments all relate to public service schemes. The first three relate to powers to wind up such schemes; the fourth concerns powers to modify them. In general, public service schemes will be subject to the same regulatory framework as private sector ones. They will also be subject to similar provisions on winding-up.

While it must be regarded as an action of last resort, it is important that the authority should be able to wind up a public service scheme in a situation where it is not in the interests of the generality of the scheme members that it should continue. In this way, the protection for members of public service pension schemes will be no different than for those of private pension schemes.

Similarly, the new clause after Clause 10 re-enacts Section 143 of the Pension Schemes Act 1993, which provides that the "appropriate authority" can wind up a scheme that is being replaced or is no longer needed where the scheme itself does not have an adequate wind-up power. That may occur, for example, where a new scheme needs to be set up to reflect a restructuring of working practices. Without such a provision, schemes without an adequate wind-up power may have to be maintained where there are no active members or even no members at all. In such situations, where alternative provision can be made for any remaining deferred or pensioner members, it makes administrative sense to allow the "appropriate authority" to wind up the scheme.

Turning to Amendment No. 150, Clause 150 already provides that orders under the Bill can contain such transitional, incidental and supplementary provisions as appear necessary to the authority making the order. Amendment No. 150 removes an unnecessary duplication of this provision in Clause 64.

These provisions do not mean that orders amending public service schemes will not be scrutinised. I should like to take this opportunity to reassure the House that it is our intention to make all orders made under this Bill for modification and wind up of public service pension schemes subject to scrutiny by the House by the negative resolution procedure rather than only some of them. This issue was raised by the noble Baroness, Lady Seear, at Committee stage and we agreed to take it away for consideration. I repeat that work is currently underway on suitable amendments to make this clear in the Bill. I beg to move.

5 p.m.

Lord McIntosh of Haringey

My Lords, we have a lot of sympathy with the objectives of this series of amendments. It is certainly right that public sector schemes should be treated appropriately and that there should not be any way of them continuing when they are no longer in anybody's interests.

To some extent the amendments improve the wording introduced at Committee stage. However, to my mind a major problem exists—and I am sorry to see that the noble and learned Lord, Lord Simon of Glaisdale, is not in his place. My noble friend Lady Hollis referred on a previous occasion to the views of the Delegated Powers Scrutiny Committee. That committee did not consider the Henry VIII provisions in relation to these amendments—in particular Amendments Nos. 22 and 23—nor indeed in relation to Clause 10 as presently drafted. In fact, the Henry VIII provisions were not there and the committee therefore could not see them.

When Amendment No. 44 was moved in Committee by the noble Lord, Lord Lucas, he made only the briefest reference to Amendment No. 50, which introduced the bulk of the text of the present Clause 10. Clause 10 reads, An order under this section may be made and complied with … in spite of any enactment or rule of law … or without regard to any such enactment, rule of law". Those are Henry VIII procedures; they enable not only the Secretary of State, but also the occupational pensions authority to change the statute law.

In introducing the amendment, which was grouped with the principal Amendment No. 44, the noble Lord simply said that it mirrored the provisions of the Pension Schemes Act 1993. He did not refer to the fact that it allowed the authority to make changes to the statute law and, to my shame, I did not notice that. I was concentrating on the defects of Amendment No. 44 rather than the defects of Amendment No. 50.

We go further in Amendments Nos. 22 and 23. I did not hear any reference in the Minister's speech to what is now provided in Amendment No. 22, under subsection (6) (b), that, such an order may, as the Authority think appropriate, adapt, amend or repeal any enactment in which the scheme is contained or under which it is made". Similarly, in Amendment No. 23 subsection (4) states: Such an order may, as that authority think appropriate"—s interestingly, the wording is slightly different— adapt, amend or repeal any enactment in which the scheme is contained or under which it is made". I should have thought that the least the Government could do in introducing the power for an authority to change legislation is to give an explanation as to why it is necessary and to recognise that it does not seem to be desirable for these amendments to be introduced in such a way and in such a time that the Delegated Powers Scrutiny Committee could not see them or have an opportunity to comment on them.

Lord Monkswell

My Lords, I too am concerned about these amendments. I shall not repeat the arguments made by my noble friend Lord McIntosh—he expounded them very well. But I must declare an interest. I am married to a teacher who is a member of the teachers' superannuation fund. One of my concerns is the implication for members of public service pension schemes and what the Government can do if the amendment before us is agreed.

I am concerned about a situation where a public service pension scheme, for various reasons, develops a surplus of assets over liabilities. Once the benefits of the scheme have been approved up to the Inland Revenue limits and the surplus still exists, the Government would have a vested interest in winding up the scheme and effectively saying, "Let us have a different scheme or a different set of schemes for these people". They may encourage the members to believe that the new schemes are better than the old ones. The scheme is then wound up and effectively the Government pocket the surplus.

The private sector have engaged in such a practice for the past 10 or 15 years. It is well established and is effectively part of company takeover ploy. I am not sure that it is right for Government Ministers to make decisions in relation to the winding up of schemes. The whole record of this Government is that they are not concerned with individual employees and public service workers. They are not concerned with the public good and seem to be concerned only with the financial elements involved. In those circumstances, we must have grave reservations in relation to the way in which the Government utilise the powers that they are conferring on themselves by the amendment.

What are we to do? It is interesting that not only do the Government take powers to themselves to change statutes, as my noble friend Lord McIntosh pointed out, but they say also that there will be adequate scrutiny by Parliament by the utilisation of the negative procedure. It is perhaps not well known that one of the difficulties of dealing with the negative procedure is that one must obtain agreement through the usual channels—by and large that means the Government Benches—to debate the subject, whereas if the affirmative procedure applies, then the Government must table an order of some kind. That must then be debated or taken on the nod.

To introduce powers that can change statutes and that have the ability to change public service pension schemes without the express approval of Parliament is extremely dangerous. I hope therefore that the Government will think again on a number of these issues.

Lord Lucas

My Lords, I propose to end my remarks by giving some comfort to the noble Lord, Lord McIntosh. We believe that the procedures we have set in place are the right ones, given the specific nature of the public service pension schemes. Some of the schemes are set up by statute and therefore can only be amended by statute; in other words, we need a statutory means of dealing with them. Others—for instance, the teachers' pension schemes—are not funded schemes at all and therefore do not come within the scope of the problems mentioned by the noble Lord, Lord Monkswell.

We believe that the negative resolution procedure will properly cover all the circumstances in which the powers may be used. However, we shall be drawing the attention of the Select Committee to this clause and to these powers and we shall consider extremely carefully anything which it may have to say to us.

On Question, amendment agreed to.

The Earl of Buckinghamshire moved Amendment No. 21:

Page 5, line 5, at end insert: ("; and, unless the Authority consider that at the time when the order is made the scheme does not meet the minimum solvency requirement, an order may only be made under this section after consultation with each of the persons mentioned in paragraphs (a) to (c) (other than any on whose application the order is made).").

The noble Earl said: My Lords, Clause 10 deals with the wind up of schemes. If a scheme is no longer required or is to be replaced by a different scheme, an application for wind up can be made by the trustees, a manager, a person who has the power to alter the scheme, or the employer. I moved this amendment in Committee. I am bringing it back to the House because it is important that other interested parties should also be consulted. In Committee my noble friend the Minister gave assurances that OPRA would wind up a scheme only if it was deemed to be the most appropriate course of action. However, my noble friend took on board the argument that sometimes in the case of a surplus in a scheme wind-up may be in the short-term interests of those current members but not necessarily in the interests of the long-term members of the scheme. On that basis, my noble friend agreed that he would look at the issue again. I shall be very interested to know how his thoughts have progressed. I beg to move.

Lord Mackay of Ardbrecknish

My Lords, this amendment attempts to introduce a requirement for consultation between the authority and those involved in the administration and management of the scheme before an order for wind up is made by the authority. This requirement would relate only to wind ups precipitated by application made to the authority by the employer, trustees, or any other person authorised by the scheme's own rules to amend the scheme. I appreciate that my noble friend's amendment is designed to apply checks and balances for applications for wind up orders, but I do not believe that the introduction of this extra bureaucracy would be helpful to the authority, to managers of the schemes, or to scheme members.

The purpose of this part of Clause 10 is to provide that orders can be made to wind up a scheme that is being replaced or is no longer needed and where the scheme itself does not have an adequate wind up power. This might occur where working practices are being restructured and where the pension scheme needs to be altered to reflect that process. I am sure that your Lordships will agree with me that this provision is essential for the efficient management of occupational pension schemes.

These powers are intended to be the same as those currently available to the Occupational Pensions Board under Section 142 of the Pension Schemes Act 1993. The power in that section is limited by Section 138 of that Act, Section 138 requires that an application cannot be entertained if wind up can be achieved in a different way or if it could be achieved only by an unduly complex or protracted process. But the introduction of a formal consultation process between managers of a scheme would be bureaucratic and unnecessary, especially since such consultation is likely to have taken place informally anyway.

I believe that the best way to address my noble friend's concerns may be to make an amendment which restores provisions similar to those in Section 138 of the Pension Schemes Act 1993. I shall therefore look carefully to see whether such an amendment is necessary. If it is, we shall bring it forward in another place. With that assurance I hope that my noble friend will withdraw his amendment.

The Earl of Buckinghamshire

My Lords, I am extremely grateful to my noble friend. It serves the purpose of moving amendments at this stage if we get the answers that we like to hear. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

5.15 p.m.

Lord Lucas moved Amendment No. 22:

Page 5, line 20, at end insert: ("(6) In the case of a public service pension scheme—

1. (a) an order under subsection (1) directing or authorising the scheme to be wound up may only be made on the grounds referred to in paragraph (c), and
2. (b) such an order may, as the Authority think appropriate, adapt, amend or repeal any enactment in which the scheme is contained or under which it is made.").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 20. I beg to move.

Lord Boyd-Carpenter

My Lords, although this amendment was spoken to with Amendment No. 20 that does not exclude discussion now that the amendment itself has been put. On that basis I should like to say that the powers conferred, particularly in the final paragraph of the amendment, are very wide indeed. It is a question of whether the powers taken are confined entirely to the pension scheme concerned or whether, as think it could be read, they go wider and involve the whole structure of the particular organisation of which the pension scheme was a part. Paragraph (b) of the amendment states that such an order may, adapt, amend or repeal any enactment in which the scheme is contained or under which it is made". It looks to me that that goes beyond the actual existence of the scheme and relates, or could relate, or could be construed as relating, to the whole apparatus of the organisation as part of which the scheme was made. The powers seem very wide. I do not want to detain your Lordships any longer than necessary but I would welcome some reassurance that the width of these powers, which I understand are to be exercised subject only to the negative procedure, is being reconsidered.

Lord McIntosh of Haringey

My Lords, I support what the noble Lord has just said. He is, I think he will recognise, expanding the argument which I made in speaking to Amendment No. 20. I was pleased to have, although I was too slow on my feet to say so, the assurance of the noble Lord, Lord Lucas, that these amendments will also go before the Delegated Powers Scrutiny Committee. That may go some way towards reassuring the noble Lord. But he is quite right that the power to repeal, in the extreme case, any enactment in which the scheme is contained", sounds very broad indeed. It may be that the enactment is extremely limited and needs to be repealed as a whole. But it may be that the enactment is a very much larger enactment; for example, one of the privatisation Acts. The idea that the Occupational Pensions Regulatory Authority should have the power to repeal one of those Acts might be pleasing to some of us, but I do not think it can be what the amendment actually intends.

Lord Lucas

My Lords, my understanding is that the ability to adapt legislation is confined to the power to wind up schemes and that no other changes could be made under it. But it is a point which the Delegated Powers Scrutiny Committee will wish to confirm.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 23:

After Clause 10, insert the following new clause:

Powers to wind up public service schemes (".—(I) The appropriate authority may by order direct a public service pension scheme to be wound up if they are satisfied that—

1. (a) the scheme, or any part of it, ought to be replaced by a different scheme, or
2. (b) the scheme is no longer required.

(2) In this section "the appropriate authority", in relation to a scheme, means such Minister of the Crown or government department as may be designated by the Treasury as having responsibility for the particular scheme.

(3) An order under this section must include such directions with respect to the manner and timing of the winding up as that authority think appropriate.

(4) Such an order may, as that authority think appropriate, adapt, amend or repeal any enactment in which the scheme is contained or under which it is made.").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 20. I beg to move.

On Question, amendment agreed to.

Clause 13 [Directions]:

Lord Lucas moved Amendment No. 24:

Page 6, line 12, leave out (" 3") and insert ("(Prohibition orders)").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 3. I beg to move.

On Question, amendment agreed to.

Clause 85 [Review of decisions]:

Lord Lucas moved Amendment No. 25:

Page 51, line 28, leave out paragraph (a) and insert: ("() to make an order against the applicant under section (Prohibition orders)").

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 3. I beg to move.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 26:

Page 51, line 30, after (" 9") insert ("of this Act or section 168(4) of the Pension Schemes Act 1993").

The noble Lord said: My Lords, this amendment extends the requirement for the Occupational Pensions Regulatory Authority to review upon application decisions to impose penalties made under this Bill to cover decisions to impose penalties arising from the provisions of the Pension Schemes Act 1993, as amended by this Bill. I am sure noble Lords will agree that that is desirable. I beg to move.

On Question, amendment agreed to.

Clause 86 [References and appeals from the Authority]:

The Earl of Buckinghamshire moved Amendment No. 27:

Page 52, line 31, leave out from beginning to ("may") in line 32.

The noble Earl said: My Lords, in moving this amendment perhaps I may give some of the background to it. I believe that there should be stronger rights of appeal to the court on the exercise of OPRA's powers; for instance, where it is going beyond points of law. I suspect that my noble friend the Minister will say that there are already provisions in the Bill for OPRA to review its decisions and its further regulation-making powers in this area. However, I wish to re-emphasise that OPRA will be a body with very strong powers. While it is supported by everyone in your Lordships' House and in the industry, there are points where OPRA will be both the investigator and the enforcer. In that situation I believe that there should be stronger rights of appeal in primary legislation. That would bring OPRA into line with analogous regulatory bodies. For instance, under the Charities Act individuals may appeal to the High Court against decisions of the Charity Commissioners. I am sure that noble Lords are aware that under the Financial Services Act bodies such as IMRO operate procedures for appeals to separate appeals tribunals. On that basis there is a strong reason for introducing this amendment which gives stronger rights of appeal to the court where OPRA's powers have been used. I beg to move.

Baroness Seear

My Lords, in view of the anxieties which we have expressed as regards this Bill and many others about the way in which the Government are taking powers which should be under control elsewhere, we are very glad to support any amendment which requires reference to the courts rather than leaving the matter in the hands of the authorities.

Lord Mackay of Ardbrecknish

My Lords, as I said in Committee when we discussed an identical amendment from the noble Baroness, Lady Hollis, our concern is that OPRA should be an effective regulator. I am sure that the noble Baroness, Lady Seear, agrees with me, despite her last comment, that we want OPRA to be a body with considerable authority and teeth to act when it believes that something is going wrong with a pension scheme. To do that OPRA will sometimes have to take difficult decisions, but such decisions will be made by the board of the authority whose members will be drawn from a wide field of expertise. They will be taken only after careful and lengthy consideration of the issues involved.

We expect the authority to have close involvement with schemes which appear to be experiencing difficulties. OPRA will resort to significant sanctions or major steps, such as directing the wind-up of a scheme, only when it is the sole means of securing members' rights without a further deterioration in the position of the scheme. Once made, such decisions will need to be implemented swiftly to ensure that we stop the rot.

I made clear that we recognise the case for providing that decisions of the authority can be re-examined. To that end the Bill provides a mechanism for the authority to review its own decisions. Anyone with an interest in the decision has the right to ask the authority to review significant sanctions such as the removal or disqualification of trustees and the imposition of fines. We intend to establish a clear framework in regulations for this review process which will ensure that the decision is re-examined in an impartial manner. We intend to consult the Council on Tribunals on these regulations.

However, I still believe that extending the right of appeal—

Baroness Seear

My Lords, how can the Minister say that the body will be impartial? Or have I misunderstood him? In effect, is not the review being undertaken by the same body which made the initial decision? There are occasions when one wants a completely outside, independent and different body to examine the decision. That is the whole point of going to court.

Lord Mackay of Ardbrecknish

My Lords, I understand the point the noble Baroness makes. Perhaps that does not show a great deal of confidence in the ability of OPRA to undertake its proper functions. Under the regulations, and with the help of the Council on Tribunals, we can have a procedure which means that if someone complains about a decision by OPRA they can feel that OPRA's own appeal procedure ensures that the case is again carefully examined and reconsidered.

We believe that if one extends the right of appeal—this is an important point which I hope the noble Baroness will take on board—to a court on any grounds, that will undermine OPRA's ability to act decisively and endanger its regulatory role. I believe that we are all agreed that we want this enforcement authority to be able to act swiftly and effectively. I believe that the amendment and the possibility of the case being taken to court, with all the costs and time that that can sometimes entail, would compromise the authority's ability to do that.

As I said, court action can also be very time consuming and there are already concerns about the load on the courts. As I pointed out earlier, the time taken for a case to come to court, let alone to resolve an appeal, could mean that the position of a pension scheme deteriorated further with members' legitimate pension rights being eaten away. I do not believe any of us want to lay out a scheme in this Bill which would bring about that sort of situation. One of the reasons for having a powerful regulator, able to take decisive and effective action, is precisely to avoid the delays and costs of court action. That is what, in the past, has made it so difficult for scheme members or trustees to take action. I do not believe that, with the rigorous review procedures that we will put in place, there is any need to hamstring the authority's effectiveness with an unnecessary mechanism of appeal to the courts.

I hope that having listened to what I have said and on reflection, my noble friend will be able to withdraw his amendment.

The Earl of Buckinghamshire

My Lords, I thank very much the noble Baroness, Lady Seear, for her support for the amendment. For much of this Bill we have had discussions on the balances and counter-balances required. We should be well aware of the very strong powers that OPRA has been given through this Bill. I listened to what my noble friend said; I am disappointed with his reply. I understand the points about bureaucracy and going through the law courts. But there is no method, unless we adopt this amendment or something close to it, of having some checks on OPRA's powers.

The noble Lord puts forward the opposite argument, saying that OPRA needs to be very effective in what it is doing. I do not believe that the amendment removes that effectiveness. It brings some fairness into the situation. I listened to my noble friend's words and I am disappointed, but at this stage I do not wish to take the matter forward. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 28 not moved.]

Clause 88 [Inspection of premises]:

Lord Lucas moved Amendment No. 29:

Page 53, line 32, after ("means") insert ("provisions made by or under").

The noble Lord said: My Lords, it has been argued that, as drafted, the inspector's powers to inspect premises under the Bill could be interpreted as being restricted to checking compliance with provisions in the primary legislation alone. That is clearly not desirable. The amendment puts beyond doubt that the inspector will be able to work under the regulations as well as the primary legislation. I beg to move.

On Question, amendment agreed to.

Clause 89 [Warrants]:

Lord Lucas moved Amendment No. 30:

Page 54, line 22, leave out ("or").

The noble Lord said: My Lords, in moving this amendment I shall speak at the same time to Amendments Nos. 31 and 32. The amendments concern Clause 89, under which the authority may apply to a justice of the peace for a warrant to enter and search premises. Amendments Nos. 30 and 32 add to the circumstances in which the authority may apply to the court for such a warrant. They provide that justices of the peace may issue a warrant if they are satisfied that there are reasonable grounds for believing that a person is liable to be prohibited from being a trustee of a scheme.

Amendment No. 31 is a minor drafting amendment which clarifies the meaning of "penalty" in Clause 89(1) (c) (iii). The meaning of "penalty" may be unclear and open to different interpretations. The amendment substitutes a reference to the authority's power to impose civil penalties under Clause 9 and Section 168(4) of the Pension Schemes Act and is intended to avoid doubt. I beg to move.

On Question, amendment agreed to.

5.30 p.m.

Lord Lucas moved Amendments Nos. 31 and 32:

Page 54, line 23, leave out ("this Act or") and insert ("section 9 of this Act or section 168(4) of").

Page 54, line 25, at end insert ("or

() a person is liable to be prohibited from being a trustee of a trust scheme under section (Prohibition orders),").

On Question, amendments agreed to.

Lord Lucas moved Amendment No. 33:

Page 54, line 46, leave out ("three") and insert ("six").

The noble Lord said: My Lords, this amendment extends from three to six months the period for which the authority may retain documents obtained by exercise of a warrant under Clause 89. The only exception to this limit is where proceedings are commenced within the six-month period, in which case any relevant documents may be retained by the authority until those proceedings are concluded.

Extending the time limit to six months will allow the authority a reasonable length of time in which to decide whether any proceedings are appropriate. The authority will not hold documents for any longer than is absolutely necessary and will be well aware of the need to keep disruption of the scheme to a minimum. Nevertheless, it is important that investigations are not hampered by an unduly restrictive deadline.

The power to obtain warrants will be used only where there are reasonable grounds for believing that a serious breach of a statutory obligation has occurred. Given the potential complexity of an investigation into the management of a large pension scheme, it is vital that the authority's inspectors have the time they need to conduct a thorough and proper investigation. A six-month time limit will bring the period for which documents may be held in line with the time limit for laying information in a magistrates' court.

When investigating offences or executing warrants issued under this provision, the authority's officers will have due regard to the appropriate code of practice issued under the Police and Criminal Evidence Act 1984. There is a code which specifically covers the exercise of powers to search premises and to seize and retain documents or records relating to the administration of a scheme. Among other things, the code provides that property shall not be retained for the purposes of an investigation, or for use as evidence, if a copy would suffice. It also provides for the person who had custody or control of any such property to have access to it, or to be provided with a copy of it, unless that would prejudice the investigation or proceedings.

It would be contrary to the authority's interests, having been set up specifically to ensure that those running schemes comply with their statutory obligations, if it were to allow its investigations to obstruct the day-to-day running of a scheme in a way which made it difficult for those running it to comply with the law.

We have selected a period for the retention of documents which we believe to be reasonable and which fits in with other provisions. We recognise that the removal of scheme documents may cause some inconvenience to schemes, but believe that it is a price worth paying to ensure that schemes are properly run. I beg to move.

On Question, amendment agreed to.

Clause 93 [Restricted information]:

Lord Lucas moved Amendment No. 34:

Page 56, line 23, leave out from ("Authority") to (which") in line 25 and insert ("in the exercise of their functions").

The noble Lord said: My Lords, this amendment is a drafting refinement. It is unnecessary to repeat the reference to the Bill and corresponding enactments for Northern Ireland. Moreover, as drafted, Clause 93(2) only protects information in the authority's possession gathered for the purposes of the authority's functions under the Bill. This is not our intention.

Where the authority investigates a particular scheme, it is likely to have access to a considerable amount of sensitive information relating to the affairs of the scheme and the parties to it. Not all of this information will necessarily be relevant to the exercise of the authority's functions, but could nevertheless be of a sensitive nature. It is therefore important that all information gathered by the authority while investigating possible infringements of duties and obligations should be protected by the safeguards in Clause 93. I beg to move.

On Question, amendment agreed to.

Clause 94 [Information supplied to the Authority by corresponding overseas authorities]:

Lord Lucas moved Amendment No. 35:

Page 56, line 39, leave out from ("functions") to ("by") in line 40.

The noble Lord said: My Lords, in moving Amendment No. 35, I should like to speak also to Amendments Nos. 36, 37, 38 and 42.

These amendments all reflect legal advice to the effect that, as all the authority's functions are under the Bill, the Pension Schemes Act 1993 or corresponding provisions in Northern Ireland, it is not necessary to refer to those enactments in order to refer to the authority's functions. These amendments delete the unnecessary references. I beg to move.

On Question, amendment agreed to.

Lord Lucas moved Amendment No. 36:

Page 57, line 4, leave out from ("functions") to ("or") in line 5.

On Question, amendment agreed to.

Clause 95 [Disclosure for facilitating discharge of functions by the Authority]:

Lord Lucas moved Amendments Nos. 37 and 38:

Page 57, line 10, leave out from ("functions") to end of line 12.

Page 57, line 14, leave out from (functions") to ("the") in line 15.

On Question, amendments agreed to.

Clause 96 [Disclosure for facilitating discharge of functions by other supervisory authorities]:

Lord Lucas moved Amendment No. 39:

Page 58, column 2, leave out lines 9 to 14 and insert ("Functions under the enactments relating to insolvency").

The noble Lord said: My Lords, in moving Amendment No. 39, I should like to speak also to Amendments Nos. 40 and 41. These amendments are all concerned with the disclosure of restricted information by the authority.

Amendment No. 39 enables the authority to provide restricted information to the Official Receiver, or in Northern Ireland to the Official Receiver for Northern Ireland, to enable or assist him to discharge his functions under the enactment relating to insolvency. It widens the "information gateway" to the Official Receiver so that it is not unnecessarily restrictive and brings it into line with similar provisions in other enactments providing for information to be passed to the Official Receiver.

Amendment No. 40 provides for the authority to disclose restricted information with a view to instituting proceedings under Sections 7 or 8 of the Company Directors Disqualification Act 1986 or Articles 10 or 11 of the Companies (Northern Ireland) Order 1989. It removes the inappropriate restriction that limited it to disclosing information in respect of a director or former director of a company which is or was a trustee of a trust scheme, because the authority may come into possession of relevant information concerning a person who does not fall into the category.

Amendment No. 41 provides for the authority to disclose restricted information in connection with any proceedings under the Insolvency Act 1986 or the Insolvency (Northern Ireland) Order 1989 which the authority instituted or in which it has a right to be heard. The amendment removes the restrictions that limited disclosure to functions under certain parts of the Insolvency Act 1986. I beg to move.

Lord McIntosh of Haringey

My Lords, the intention of the amendment is acceptable, but we wonder whether the Insolvency Service was consulted before the Bill was drafted.

Lord Lucas

My Lords, I can confirm that it was consulted. I commend the amendment to the House. On Question, amendment agreed to.

Clause 97 [Other permitted disclosures]:

Lord Lucas moved Amendments Nos. 40 and 41:

Page 59, line 25, leave out from ("1989") to end of line 26.

Page 59, line 27, leave out from ("proceedings") to second ("the") in line 29 and insert ("under the Insolvency Act 1986 or"). On Question, amendments agreed to.

Clause 98 [Disclosure of information by the Inland Revenue]:

Lord Lucas moved Amendment No. 42:

Page 60, line 9, leave out from ("functions") to end of line 11.

The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 35. I beg to move.

On Question, amendment agreed to.

Clause 14 [Requirement for member-nominated trustees]:

The Earl of Buckinghamshire moved Amendment No. 43:

Page 6, line 32, leave out ("deferred members of the scheme") and insert ("those deferred members of the scheme from whom it is reasonably practicable to obtain approval").

The noble Earl said: My Lords, in moving Amendment No. 43, I should like to speak also to Amendment No. 48. I moved a similar amendment in Committee and should like to remind your Lordships that this amendment deals with the practical problems of consulting deferred members. When trustees consult members about changes to the rules of a scheme, they have to consult current pensioners and active members, but have discretion about whether to consult deferred members.

The current drafting of the Bill suggests that if the trustees decide to consult deferred members they must consult all or none. Practically, that would mean that none of the deferred members would be consulted, because in many schemes current addresses are not available for all deferred members.

In Committee my noble friend the Minister accepted the principle behind the amendment, but felt that the amendment as drafted would enable the trustees to be discriminatory. The amendments have therefore been redrafted to achieve the same purpose, but will no longer allow discrimination. On that basis, I beg to move.

Lord Mackay of Ardbrecknish

My Lords, the substance of these amendments was raised in Committee. At that time, I recognised that an important issue had been identified and I undertook to consider the matter very carefully.

I acknowledge that not all deferred members may be known to the trustees. For example, they may not hold up-to-date addresses for all deferred members. If trustees are faced with the difficulty and expense of tracing all deferred members they may be reluctant to use their discretion to include them in the statutory consultation procedure. I do not want this clause to work to the detriment of deferred members.

I am happy to accept the principle of this amendment. However, I do need to consider in more detail the specific wording needed and I hope my noble friend will allow the Government more time to consider what the appropriate criterion should be. We will thus be able to bring forward any necessary amendments in another place. With that answer, I hope that my noble friend will feel able to withdraw his amendment.

The Earl of Buckinghamshire

My Lords, I am grateful to my noble friend for his reply. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn,

Clause 14 [Requirement for member-nominated trustees]:

Baroness Hollis of Heigham moved Amendment No. 44:

Page 7, line 6, at end insert ("or, in the case of a money purchase scheme, at least two-thirds of the total number of trustees").

The noble Baroness said: My Lords, the amendment relates to trustee membership. In Committee we pressed an amendment that 50 per cent. of trustees of a defined benefit or final salary scheme should be scheme members. We argued that on the ground that it was standard practice among the country's blue-chip firms—Shell, Unilever, ICI, Boots, Sainsbury, Courtaulds, Albright and Wilson, Allied Lyons and many more —and that such companies valued such arrangements as they offer better scrutiny, a better information flow, and more confidence in the pension scheme and the company.

It seemed right that trustees should reflect the balance of interest involved to bring the poorer schemes up to the practice of the best. We emphasised, too, that it in no way reduced the employers' existing freedoms, in the sense that the pension remained voluntary: employers would still define rules of eligibility; they could still veto any improvement in benefit; they could still take contribution holidays; and they could still wind up the scheme. In other words, all the long-stop powers remained with the employer—a recognition of the fact that he stood guarantee for any deficit on the scheme.

When we argued in Committee that 50 per cent. of the trustee members for defined benefit schemes and final salary schemes should be scheme members, we were defeated. The Government made three points in reply. Two of them were contradictory. The third, I hope, makes my case tonight.

The Government argued, first, that trustees held a fiduciary duty on behalf of the scheme: they were not delegates and therefore it did not matter from which side of the management divide they came. Whether one-third or 50 per cent. of the trustees were scheme members should not alter their behaviour, according to the Government. The proportions were irrelevant.

The Government's second argument was precisely the opposite. So far as concerned the employer, the proportion suddenly became relevant. The Minister said: The employer is the one giving the guarantee. He is the one who has to top up or make good the fund in the event of any deficiency. Therefore the employer has a major interest in the successful operation of the fund. We believe that it is appropriate that that should be recognised in the composition of the trust board".— [Official Report, 13/2/95; col. 448.1

In other words, on the second argument the Minister was saying that trustees drawn from scheme members had a fiduciary duty to all interests and so it did not matter whether they formed one-third or one-half, but that the trustees nominated by the employer clearly had a primary duty to protect the employer's interests because of his responsibility for funding the deficit. Therefore the employer was entitled to claim, said the Minister, a majority two-thirds of the trustees. Scheme member trustees, on the Government's arguments, were stewards for all; employer trustees, however, were stewards for the employer.

Finally, the Government emphasised that because defined benefit and final salary schemes were voluntary, and they lay off the risk on the employer, who is obliged to meet the deficit, any tilt of power away from the employer on the trustee board would encourage employers to wind up defined benefit schemes and go instead for defined contribution or money purchase schemes, where the investment risk was laid off not on the employer but on the employee. And that, said the Government, was why Goode recommended that only one-third of trustees in defined benefit schemes should be drawn from the members whereas two-thirds of the trustees should be scheme members where money purchase schemes were being handled. That is the point of the amendment. We seek to follow word for word the logic of the Government's argument in Committee.

We are arguing tonight that if scheme members should represent only one-third of the trustees in defined benefit schemes, while the employer should have two-thirds because he takes the risk, then for those same reasons, in money purchase schemes, where the risk is taken by the employees, they too should have two-thirds of trustee members.

If the Government wish to argue the fiduciary point then each, in both sets of schemes, should have 50 per cent. of the trustees. If the Government wish to argue the opposite —that the majority interest of trustees should lie with where the financial risk is laid off—then if it is appropriate for the employer to have two-thirds on final salary schemes, it is appropriate for the scheme members to have two-thirds of the trustees on money purchase schemes. I do not mind which way the argument goes, but the Government cannot argue both, because they are contradictory.

As the Government said, either all trustees have a fiduciary duty, in which case we have 50 per cent. on both, or the majority reflects where the financial deficit funding lies, in which case, on money purchase schemes, the majority of trustees should remain with the employees.

Every argument the Government adduced for the two-thirds of trustees representing employers on defined benefit schemes applies word for word for two-thirds of scheme members on defined contribution schemes—no more, no less. That is why Goode recommended it, and stated: For money purchase schemes … where the employer has no liability beyond the employers' contribution, scheme members should be entitled (but not obliged) to appoint at least two-thirds of the trustees, with the employer being able to reserve the right to employ the remainder".

The Government Actuary's recent report makes it clear that whereas in final salary schemes employers may often be contributing between 10 per cent. and 15 per cent. while employees contribute about 5 per cent. to 7 per cent. only of salary where the scheme is not in surplus—in other words, employers contribute about 2:1 on final salary schemes—when it comes to money purchase schemes, the employees' contribution is usually larger than that of employers: employees contribute 6 per cent. to 7 per cent. while the employer usually contributes under 4 per cent. In other words, whereas in final salary schemes the employer pays more, takes the risk, and, therefore, according to the Government, has two-thirds of the trustees, in money purchase schemes, the employee pays more—a higher proportion—takes the risk, and should therefore also have two-thirds of the trustees.

We now wish to hold the mirror up to every argument put forward by the Government in Committee to make the same arguments on behalf of scheme members where they are dealing with their money, their savings, their financial contributions, their risk, and their right. I beg to move.

Baroness Seear

My Lords, the arguments were clearly put forward by the noble Baroness, Lady Hollis. I reiterate merely that the employers are not taking the risk in the case of money purchase schemes and they do not need to have a majority control; that is, if one accepts the argument, which I do not, that they need it for the other schemes. They can agree to a majority of two-thirds and they stand to lose nothing by so doing. I hope that the Government will accept the amendment.

Lord Mackay of Ardbrecknish

My Lords, in Committee I wondered why the Opposition did not argue the case for a majority of two-thirds in money purchase schemes. They concentrated on defined benefit schemes and divided the Committee on the issue of 50 per cent. I strongly suspect that however powerful I and my noble friends consider my argument the Opposition are intent on dividing the House on this matter. However, I shall try.

It is interesting and a little flattering to have my words in Committee quoted back to me. I have often wondered whether anyone bothers to read Hansard but I am glad to know that the noble Baroness finds it such good reading material. I did not say "such good bedtime" reading but in a sedentary intervention the noble Baroness indicated that that is what it is. I am sure that it is so riveting it does not help to put her to sleep.

The amendment is based on the recommendation of the PLRC that the balance of interest in a money purchase scheme is such that it is appropriate to provide that members, rather than employers, should have a majority on the trust board.

I certainly accept—with the noble Baroness scrutinising my words, of course I do—that in a money purchase scheme the employer's interest is less direct than it is in relation to a defined benefit scheme. The employer does not take on such substantial financial exposure. However, the employer retains a significant interest in the proper running of the scheme. First, it is normally a major part of the remuneration package and the employer has a significant business interest in the successful operation of the scheme and in the performance of its fund, Secondly, employers sponsoring defined contribution schemes, while formally insulated from the investment risk, may well, if the scheme runs into serious difficulty, feel under a moral obligation to ensure that former employees receive a reasonable pension.

Finally, and most importantly, under the proposed compensation arrangements we expect employers sponsoring defined contribution schemes to make good any deficiencies caused by the misappropriation of assets. Compensation will be payable only once the sponsoring employer is insolvent, having done his utmost to restore the fund. Those factors suggest that employers sponsoring defined benefit schemes can justifiably claim a significant interest in the fund, although perhaps not as intense as the interest of an employer sponsoring a defined benefit scheme—

Baroness Hollis of Heigham

My Lords, I accept the Minister's phrase "a significant interest". Does he believe that it is a majority interest?

Lord Mackay of Ardbrecknish

My Lords, if the noble Baroness will contain herself I shall address the question of why I believe that the PLRC was wrong in its suggestion that defined benefit schemes should have a majority of two-thirds whereas salary-related schemes should have only one-third.

I have mentioned the employer's interest, and the noble Baroness indicated that she does not disagree with that. However, pointing to the PLRC report, she justifiably indicates that the employer's interest is less in the kind of schemes which we are discussing than in defined benefit schemes.

I believe that the practicalities are important. How does one define a money purchase scheme? What arrangements should apply to the many different types of hybrid schemes? It seems easier to minimise the scope for argument and adopt a similar approach for all schemes, which at least delivers the basic policy intention of broadening the perspective of the trust boards.

The requirement is that at least one-third should be member nominated. As I said in Committee, there is nothing to prevent a trust fund being set up and employers agreeing the composition of a board on which more than one-third are member-nominated. There could be half or more and there is nothing to stop that happening. The requirement is for at least one-third, so that money purchase schemes could have two-thirds of member-nominated trustees if they wished.

Perhaps I may explain the problem of complexity. We have tried to make our provisions as straightforward as possible and to give the schemes the maximum freedom to make the rules which suit their particular circumstances. We had in mind the wide variety of schemes and arrangements currently operating. For example, hybrid schemes are a combination of salary related benefits with a money purchase top-up, or vice versa. In some arrangements, the same individual trustees may act for both a money purchase scheme and a salary related scheme. An additional point is that since 6th April 1988 all schemes approved by the Inland Revenue are required to allow their members to make additional voluntary contributions. Those contributions are passed to the scheme trustees, who invest them with the other scheme resources or with an outside agent. They can be used to purchase additional years and final salary schemes or, more frequently, to provide a range of benefits on a money purchase basis. Therefore, a salary related scheme can have funds to provide both salary related and money purchase benefits. I understand that approximately 1 million people have elected to pay voluntary contributions.

Obviously, that kind of hybridity could cause a great deal of argument about which way it falls. It may mean that people will try to separate schemes and that may not be to the benefit of the members of the scheme. There are practical reasons why we have decided that the statutory minimum should apply to both kinds of scheme and that it should apply at least at the one-third member nominated level. As I said, schemes are free to add more member-nominated members than the one-third, which is the minimum.

Those are the practical points which arise from the fact that some companies sponsoring different types of scheme have single trust boards. We believe that unnecessary difficulty would be caused to such trust boards if they had to split themselves up to meet the differing requirements in respect of different parts of their current responsibility.

Therefore, largely for practical reasons and based on the real world in which pension schemes operate we have concluded that it would be best if both types of pension schemes had to meet the same requirement. I hope that having listened to my compelling argument the noble Baroness, Lady Hollis, will withdraw her amendment. In the unlikely and surprising event of her putting the amendment to the test of a Division, I hope that my noble friends will support me.

Baroness Hollis of Heigham

My Lords, I can well understand the Minister hoping that his noble friends will support him. He can rely on nothing other than hope; certainly not his arguments. We are invariably delighted to hear well-argued or reasonably argued presentations from the Minister. However, tonight even he must accept that he was scratching around for an argument with which to support a proposal that so offends natural justice.

The Minister made two points, both of which were dealt with by the Goode Committee, as he knows perfectly well but chose not to remind the House. First, the Goode Committee specifically dealt with hybrid schemes. They are nothing new. The Government have not suddenly thought about the issue; it is not some sudden complexity with which they do not know how to deal and must therefore throw it away and keep to the basic lowest common denominator of one-third. Goode suggested the regulator rule as regards the side of the divide on which a particular scheme should fall and therefore which trustee board membership rules apply. It is very simple. That is what the regulator is there for. He is there to provide codes, guidance, regulations and rulings. Goode anticipated, addressed, answered and demolished in advance every argument the Minister has made this evening. That was the first of them.

The second argument, which Goode recognised the Minister might wish to employ and which was answered and demolished in advance, is that regarding where financial interests and responsibility lie. If the primary responsibility of a trustee was fiduciary, employers and employees should have an equal 50 per cent. on both sets of schemes. But in Committee the Minister persuaded your Lordships that if the employer had an overriding, rather than significant, financial interest in final salary schemes because he contributed more and picked up the deficit—it is correct that they contribute more and pick up the deficit—those interests should be protected by two-thirds trustee membership.

What happens now? We are now discussing money purchase schemes, not hybrid schemes. What do the Government now say, in precisely the same circumstances, where scheme members pay more than the employer, and scheme members rather than the employer accept the financial risk? They are not consistent. The Minister has made a 180 degree turn. Is that because we are dealing with scheme members rather than employers? Is that what is going on?

This deeply offends natural justice. There is no practical or administrative problem but there is a problem in relation to fairness and justice if the Minister will not allow scheme members to protect their savings, investment and risk in their pension schemes. By definition, money purchase schemes, unlike final salary schemes, are the members' schemes. They are not a joint arrangement and a joint sharing of risk with the employer. The Minister's answer was deeply unfair and I think he knows it. Therefore, I propose to test the opinion of the House.

6.1 p.m.

On Question, Whether the said amendment (No. 44) shall be agreed to?

Their Lordships divided: Contents, 74; Not-Contents, 129.

Division No. 3
CONTENTS
Acton, L.	Bruce of Donington, L.
Airedale, L.	Carmichael of Kelvingrove, L.
Ashley of Stoke, L.	Clinton-Davis, L.
Barnett, L.	Craigavon, V.
Beaumont of Whitley, L.	David, B.
Birk, B.	Dean of Beswick, L.
Blackstone, B.	Dean of Thomson-le-Fylde, B.
Bledisloe, V.	Desai, L.
Brookes, L.	Donaldson of Kingsbridge, L.

Dormand of Easington, L.	McIntosh of Haringey L.
Eatwell, L.	McNair,L.
Elis-Thomas, L.	Merlyn-Rees L.
Ennals, L.	Milne L.
Ezra, L. [Teller.)	Molloy
Falkland, V.	Monkswell, L.
Farrington of Ribbleton, B.	Monson, L.
Freyberg, L.	Moms of Castle Morris, L.
Gallacher, L.	Nelson, E.
Geraint, L.	Nicol, B.
Gould of Potternewton, B. (Teller.)	Perry of Walton, L.
	Peston, L.
Graham of Edmonton, L.	Prys-Davies, L.
Hamwee, B.	Rea, L.
Harris of Greenwich, L.	Redesdale, L.
Haskel, L.	Richard, L.
	Russell, E.
Healey, L.	Seear, B.
Hollis of Heigham, B.	Sefton of Garston, L.
Hughes, L.	Serota, B.
Jay of Paddington, B.	Stedman, B.
Jeger, B.	Stoddart of Swindon, L.
Jenkins of Hillhead, L.	Taylor of Gryfe, L.
Jenkins of Putney, L.	Thomas of Walliswood, B.
Kennet, L.	Turner of Camden, B.
Kilbracken, L.	Varley, L.
Kirkhill L.	Westmorland, E.
Lovell-Davis, L.	Williams of Mostyn, L.
Mason of Barnsley, L.	Winchilsea and Nottingham, E.

NOT-CONTENTS
Addison, V.	Gage, V.
Ailsa, M.	Gardner of Parks, B.
Aldington, L.	Glenarthur, L.
Alexander of Tunis, E.	Goschen, V.
Allenby of Megiddo, V.	Gray of Contin, L.
Astor of Hever, L.	Greenway, L.
Astor, V.	Gridley, L.
Barber of Tewkesbury, L.	Harding of Petherton, L.
Belhaven and Stenton, L.	Harmar-Nicholls, L.
Blaker, L.	Harrowby, E.
Blatch, B.	Hayhoe, L.
Borthwick, L.	Hemphill, L.
Boyd.Carpenter, L.	Henley, L.
Brabazon of Tara, L.	Hertford, M.
Brains of Wheatley, L.	Hives, L.
Brougham and Va., L.	Holderness, L.
Buckinghamshire, E	Holderness, L.
Burnham, L.	Holmpatrick, L.
Butterworth, L.	Howe, E.
Cadman, L.	Hylton-Foster, B.
Caithness, E.	Inglewood, L. [Teller.]
Campbell of Croy, L.	Jenkin of Roding, L.
Carnegy of Lour, B.	Killearn, L.
Carnock, L.	Kimball, L.
Cawley, L.	Kingsland, L.
Chalker of Wallasey, B.	Lauderdale, E.
Charteris of Amisfield, L.	Lindsey and Abingdon, E.
Chelmsford, V.	Long, V.
Chesham, L.	Lucas, L.
Clanwilliam, E.	Lyell, L.
Clark of Kempston, L.	Mackay of Ardbrecknish, L.
Colnbrook, L.	Mackay of Clashfern, L.[Lord Chancellor.]
Colwyn, L.
Cork and Orrery, E.	Marlesford, L.
Courttown, E.	McColl of Dulwich, L.
Cox, B.	Melville, V.
Cranborne, V. (Lard Privy Sea]	Mersey, V.
Cumberlege, B.	Miller of Hendon, B.
Davidson, V.	Milverton, L.
Dean of Harptree, L.	Monteagle of Brandon, L.
Dixon-Smith, L.	Montgomery of Alamein, V.
Elles, B.	Mottistone, L.
Elton, L.	Mountevans, L.
Faithfull, B.	Munster, E.
Fanshawe of Richmond, L.	Murton of Lindisfarne, L.
Fraser of Carmyllie, L.	Napier and Ettrick, L.

Newall, L.	Saltoun of Abernethy, Ly.
Norfolk, D.	Seccombe, B.
Norrie, L.	Shaw of Northstead, L.
Northesk, E	Skelmersdale, L.
O'Cathain, B.	Stewartby, L.
Orkney, E.	Strange, B.
Oxfuird, V.	Strathclyde, L. [Teller.]
Park of Monmouth, B.	Strathcona and Mount Royal, L.
Pearson of Rannoch, L.	Sudeley, L.
Peel, E.	Swansea, L.
Pender, L.	Tebbit, L.
Peyton of Yeovil, L.	Thomas of Gwydir, L.
Platt of Writtle, B.	Trumpington, B.
Rankeillour, L.	Ullswater, V.
Rawlings, B.	Vivian, L.
Rees, L.	Wade of Charlton, L.
Renton, L.	Whitelaw, V.
Renwick, L.	Wise, L.
Rodger of Earlsferry, L.	Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.

6.10 p.m.

Baroness Seear moved Amendment No. 45:

Page 7, line 9, at end insert: ("() Once a scheme provides for a majority of pensioner members, the arrangements must provide for at least one trustee to be nominated by pensioner members of the scheme.").

The noble Baroness said: My Lords, I am hoping that the Minister will see the light even at this late hour. Indeed, perhaps I may anticipate what I know he will say—namely, that everyone who is a member of a trustee board is there as an independent person and is thinking about the interests of the scheme and not about the interests of any special group. We all know that is the case, and therefore we need not waste any time in your Lordships' House by having it repeated yet again. It is not as a representative of special interests that I am moving the proposal that there should be at least one pensioner on a trustee board where such a board represents a substantial number of pensioners.

The person who is a pensioner has a different experience and knowledge about how the scheme is working from someone who is either an employer or a working member who is anticipating a pension later on but who is not currently a pensioner. Surely it stands to reason that someone who is already a pensioner has something to contribute, not an interest to defend. He or she has knowledge, experience and a point of view to contribute to the running of the scheme. It seems to me to be quite extraordinary that schemes which are there for the benefit of pensioners should exclude from their managing body the very people for whom the whole exercise is being undertaken. Therefore, briefly, but very determinedly, I wish to move the amendment. Pensioners should be allowed a place on the trustee boards of schemes. I beg to move.

Baroness Turner of Camden: My Lords, I rise to express my support for the amendment moved by the noble Baroness. It will be recalled that we attempted to persuade the Government in Committee that it was necessary for pensioners to be represented among trustees. Unfortunately, we did not succeed. However, there are mature schemes where there is a very high proportion of scheme members who are actually pensioners. In such circumstances, it would seem quite undesirable that there should not be pensioner representation on the board of trustees.

The amendment before the House is a modest one. It simply provides that, once the scheme has a majority of pensioner members, the arrangements must provide for at least one trustee to be nominated by pensioner members of the scheme. I should have thought that was very fair and reasonable. I cannot see how the Minister can argue against it. I am sure that he will, but I do not know upon what basis. The proposal seems to me to be so fair, right and proper that I shall be amazed if the Government persist with their opposition to the notion. As I said, I support the amendment.

Lord Pearson of Rannoch

My Lords, in supporting the amendment, I should declare a slight interest in this part of the Bill in that I am a trustee of my own company's pension scheme. The company is a young one, only 30 years old. Most of the members still have a long way to go until they reach pension age. So I can look forward to the day when the majority of members will have retired. I cannot help feeling that the deliberations of the trustees at the time would be very much helped by those who, after all, will by then be the main beneficiaries of the scheme.

I was inspired into joining support for the amendment by the National Federation of Post Office and BT Pensioners whose members are in a different category altogether so far as concerns size. I would be most interested to hear any comments that my noble friend the Minister may have as to why the amendment should not be accepted.

Lord Dean of Harptree

My Lords, I believe that the arguments are very finely balanced on the issue. However, I am inclined to favour the amendment proposed. When my noble friend the Minister resisted similar amendments in Committee, I remember that he said that it was important to retain flexibility in the selection of trustees. I believe that noble Lords would agree with that view. My noble friend also said that it was important that trustees should recognise that they represent all members and not a particular group in a scheme.

However, I suggest to your Lordships that we must bear in mind the fact that the Bill has, to some extent, moved away from that position. It provides that members should have the right to select one-third of trustees. Therefore, we can say that there has been some move away from that rigid principle.

From my experience when I was a trustee, I found that pensioners, for the most part, made good trustees. Indeed, they have the time, the experience and by definition, because they are pensioners, they have a good knowledge of the company concerned. It may be a little out of date; but, nevertheless, they have a good knowledge in that respect. Further, they are not subjected to the pressures which sometimes apply to employee members. Their pensions cannot be withdrawn from them, whereas in the case of employees there is always the risk that some subtle pressure could be exerted upon them.

One could ask why we do not leave all such matters to the good practice of occupational pensions schemes. Indeed, many such schemes already have pensioner trustees. I take the point made by my noble friend; namely, that made by the National Federation of Post Office and BT Pensioners. In their closed schemes, there are a great many more pensioner members than there are employee members. However, I am told by the federation that it has repeatedly requested that there should be at least one pensioner trustee on the board, but that that request has been turned down. I am informed that the reason for refusal of the request in that case—and, I gather, in others—is that the employee trustees are nominated by trade unions which are not prepared to have a pensioner trustee. If that is the case, I suggest to your Lordships that it is really not reasonable for trade unions to have a veto on the nomination of pensioner trustees.

It seems to me that the latter information spreads a somewhat different light on the discussions which took place in Committee. Moreover, I wonder whether there is a precedent under the Railways Act. When that legislation was being discussed during the Session before last, the point was made that there should be the possibility for BR pensioners to be represented on the board. However, I gather that that provision was not written into the legislation. But if my information is correct, the BR pension schemes do now have trustees on the board. I do not know whether that arises as a result of government pressure. Nevertheless, if that is so, I suggest to my noble friend the Minister that there is perhaps a precedent in that respect. There is at least something to be looked at if in fact it is true that trade unions do exercise a veto in some cases as regards pensioner trustees.

Lord Boyd-Carpenter

My Lords, I hope that the Government will think again about this amendment. I recall—as I am sure does my noble friend the Minister—the discussion in Committee which I found a rather unhappy one. There is no doubt at all that there is a considerable demand for something of this sort, including—this has relevance to what my noble friend behind me has just been saying—among some very responsible trade unions. Therefore it seems to me that to have at least one pensioner trustee where the majority of people in the scheme are already pensioners is a reasonable reassurance to them, and, so far from introducing any unnecessary rigidity into the scheme, would give a certain element of support to it which I think might well be found helpful by those responsible for running it. In other words, I hope that my noble friend will not persist in the line that he took in Committee. I think he will find that on the whole Members of your Lordships' House are in favour of this, or something of this sort. I beg of him to think hard about it.

Lord Ezra

My Lords, like the noble Lord, Lord Pearson, as chairman of a medium-sized company I have experience of a scheme which has a pensioner trustee. In the light of the Maxwell affair —like many other companies, I have no doubt—we reviewed the constitution of our pension scheme and its operations. We decided that we would immediately bring on member trustees, and we also decided—this was a specific recommendation which I made—that we would have a pensioner trustee. The reasoning behind that was simple, and indeed the noble Lord, Lord Boyd-Carpenter, has referred to it: it gives a good cross-section of interests in the matter. The parties most involved in pension schemes are the employers, the members—in other words those still in the employment of the company—and those who are past employees who are drawing their pensions. It seems totally logical and rational that those three parties should be able to have representatives on the schemes and to express opinions from their particular point of view.

Lord Desai

My Lords, I, too, wish to add my support to the amendment. Noble Lords will recall that in Committee I moved an amendment to this effect. While we did not like the Minister's answer, this is a good matter to which to return. It is said that trustees should do their job, as it were, freely and fairly and should not represent particular partisan interests. That is quite right. That is the duty of trustees. But at the same time we have to recognise that interests have to be represented broadly on the trust. We have recognised the employers' interest throughout this Bill. We have also recognised the employees' interest. There is a third interest; namely, that of pensioners. I am sure that trustees who represent these different interests will also do their job properly as trustees without any conflict between their role as trustees and their representation of separate interests.

Lord Mackay of Ardbrecknish

My Lords, although this issue was raised in a different form during the Committee stage of this Bill, I regret to have to tell your Lordships, despite the blandishments of the past few minutes, that my argument against it remains the same. The effects of this amendment are no different. It would oblige schemes to allow pensioner members to select trustees and would therefore give them a status and privilege greater than that given to other members. We believe that schemes should be free to determine their own arrangements and we will therefore oppose any amendment which seeks to elevate one section of scheme membership above another.

It seems to us that there is no justification for moving towards a rigid and uniform selection process which would not do justice to the wide variety of schemes which currently operate. It is, as I have said, our intention that schemes should be free to develop their own arrangements for the selection of trustees, subject to the approval of active and pensioner members. It is these arrangements which will determine who is eligible to nominate trustees. Members' interests will be protected by a rigorous statutory consultation procedure.

I would say to my noble friend Lord Dean and to my noble friend Lord Pearson of Rannoch who referred to BT that the matter they raised in your Lordships' House concerns the current position of the BT pension scheme. But under the statutory consultation procedures all active and pensioner members will have the chance to approve the nomination and selection procedure. If members want a pensioner trustee or pensioner trustees, they will be able to take steps to do something about that. If they want open nomination and not trade union nomination, as my noble friend drew to our attention, they will be in a position to take steps to bring that about because pensioner members—like active members —will have a right to approve selection rules.

Common sense dictates that if a majority of scheme members are pensioners, they are likely to communicate to their existing trustees that they wish to take part in the selection procedure. However, we do not intend to fetter this freedom by insisting that a certain section of the membership must nominate a trustee. As the Bill stands, it gives equality of opportunity both to active and pensioner members and it is for scheme members to decide together the best way to nominate trustees, hearing in mind the needs of their particular scheme. If it goes to election, it is up to the members to decide who they want to elect. If they want to elect more active members than pensioner members, that surely is up to them. If they want to elect more pensioner members, that is equally up to them. To start dividing up the democratic process and saying, "This little group and that little group will be able to elect somebody", is not the proper way to proceed.

However, the prime argument against requiring any particular interest group—after all, there are not just pensioner members; there are deferred members and there are active members, all of whom have an interest in how the pension scheme is run—to select a trustee representative of that interest is that it would undermine one of the fundamental strengths of trust law which is that each trustee must act impartially in the interests of all the beneficiaries.

I am sorry if the noble Baroness, Lady Seear, does not wish to hear this argument again, but she will hear it again because it happens to be a relevant and good one. While we are talking about Goode, that was the reason why the PLRC opposed the idea of compulsory pensioner trustees. Perhaps we all do a little picking and mixing as regards what we like and what we do not like and as regards what we accept or what we do not accept. However, it is not more than an amendment ago that I was being lambasted because I was not taking the Goode proposals hook, line and sinker, so to speak.

Baroness Hollis of Heigham

My Lords, I was asking for consistency!

Lord Mackay of Ardbrecknish

My Lords, I am not sure whether the noble Baroness is saying that she is being consistent, because if she is being consistent she will agree with me about this particular amendment because the PLRC opposed the idea. I believe its argument continues to be persuasive. I am not arguing that pensioner trustees would be partial but if they had to be appointed—that is the point—there would be a serious risk that members and others would begin to classify all trustees as representative of one interest or another. That would not enhance confidence in trust boards.

We defeated a similar amendment in Committee. I trust that if it comes to it this amendment will also be voted down. As the Bill stands, pensioner members have the same rights with regard to member-nominated trustees as active members; that is, to approve any selection rules proposed by their schemes' trustees. If it is the wish of the members, I have no doubt they will indeed elect pensioners as trustees. The chances of that happening will obviously be greater in schemes where pensioner members are in a majority. I would say to my noble friend Lord Pearson that nothing in the Bill prevents pensioner members being elected as trustees. If a scheme consists of a considerable number of pensioner members—a majority of pensioner members for example—and those pensioner members want to elect someone onto the board who is a pensioner, it seems to me that the numbers will stack up and they will find themselves with a pensioner on the board. Equally, there is a good argument for saying that active members may think it sensible to have a pensioner on the board.

I believe that when one begins to compartmentalise democracy those people who are outside the group which has been singled out will stop even considering voting for people in the group singled out because they will feel that they have already been catered for. I do not believe that that would be in the interests of pensioner members or of the members as a whole. After all, all the members of the scheme have an interest. Pensioner members may have a more immediate interest, but active members have a long-term interest which they will wish to feel all the trustees are considering.

I believe that to accept the amendment would fetter the choice of both pensioners and active members by imposing preconceived selection arrangements. It would restrict the freedom of schemes to develop their own selection rules and would increase the risk of trustees being perceived as representatives of whichever group or interest selected them. I hope that the noble Baroness will withdraw her amendment. If she does not, I hope that my noble friends will support me in the Division Lobby.

6.30 p.m.

Baroness Seear

My Lords, I am disappointed but not in the least surprised, because the Minister's mind is not open to new ideas. He indulged in a wide variety of conflicting arguments. We have been told that having one pensioner trustee would create rigidity. We have already created the great rigidity that the majority of trustees have to be employer members, What greater rigidity could there be? Compared with that rigidity one miserable pensioner representative would not make the scheme positively arthritic, as the Minister seems to think. He appears to believe that to introduce such a requirement would introduce rigidity to an intolerable extent.

In view of the votes that we have just had and of the support all round the House, and in view of the fact that a great many people who would vote if we called a Division now would not have heard not only the eloquent arguments from this side of the House but also the very convincing arguments from the other side of the House, I propose not to press the amendment tonight. However, I give the Minister fair warning that I shall reintroduce it at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Hollis of Heigham moved Amendment No. 46:

Page 7, leave out lines 22 to 25 and insert: ("(b) a simple majority of members eligible and voting has supported such a proposal;").

The noble Baroness said: My Lords, with this amendment I should like to return to an issue that we discussed at Committee; namely, the balloting arrangements. Most pension schemes at present do not have a minimum of one third of trustees drawn from scheme members. Two-thirds of schemes have no scheme members at all. That will need to change once the Bill becomes law. There will be a presumption in favour of one third of trustees being drawn from scheme members unless there is general agreement that the present arrangements work well and should remain unchanged.

We do not object to that. Our problem is how that general agreement to leave matters unchanged is to be determined. The Minister insists that 10 per cent. of employees must signal that they wish to make a change. Why should they have to take the initiative to secure the rights bestowed on them in the Bill? We believe that the presumption should be on the employer who is seeking no change to ensure that he has support for his proposal. In other words, the employer who seeks to withhold rights should seek consent by ballot; those who wish to exercise their democratic rights should not first have to ballot in order to do so.

Why do we believe that it should be that way round? In Committee, in a remarkable reply which becomes even more remarkable when one re-reads it, the Minister said that the employer should be required to circulate information about the scheme and trustees and should attach a tear-off slip which scheme members could return if they wanted to trigger a ballot. If 10 per cent. did so there would be a ballot, the outcome of which would determine whether there were scheme members as trustees. The Minister said that that would reduce costs and friction. The exact opposite is true. As a species of sophistry that was a quite effective argument.

I have two points. First, employers have to circulate proper information together with a tear-off slip—a ballot paper on whether scheme members want a ballot. If 10 per cent. want a ballot there is a second ballot. Since when have two ballots cost less than one? If one makes that original tear-off slip the ballot costs are reduced and justice served. Having a ballot on whether to have a ballot is absurd, costly and time-consuming, unless the Minister's intention is to place hurdles in the way of those wishing to exercise their rights under this Bill.

On reflection, there is a difference between the one-ballot procedure which we seek and the two-ballot procedure which the Minister favours. The one-ballot procedure would presumably be a secret ballot in which scheme members would express their views free of pressure from the employer or their trade union. It would represent their true opinion. However, under the two-ballot procedure proposed by the Minister, scheme members who call for a ballot in order to have a ballot will presumably be identified by name, so it will not be a secret ballot. It becomes a "stand up and be counted" ballot in which scheme members face the potential annoyance of their employer or pressure from trade unions.

Why should those who wish to exercise their democratic rights be asked to put themselves into a confrontational position? It is simply not fair. I honestly do not see why the Government are doing this. The one ballot procedure which the amendment would restore is cheaper, because one ballot is always cheaper than two; confidential because one does not have to sign up in order to obtain one's rights; fairer; quicker and sensible. The Government's proposals are costly, confrontational and against natural justice. I beg to move.

Baroness Seear

My Lords, I support the amendment. This is a right which the members ought to have, whatever the size of the organisation. The intention in the Bill is that that right goes by default unless specific steps are taken in order for people to assert that right. We say that the right is there and that people should be able to operate it. The size of the scheme or the enterprise makes no difference whatever.

Lord Mackay of Ardbrecknish

My Lords, this amendment resurrects an issue which was defeated during the Committee stage of the Bill. In effect, it requires employers to hold a ballot of scheme members if they wish to opt out of the requirement to appoint member-nominated trustees, even where members may be perfectly content with their existing arrangements.

In our view it is not the means of consulting members that is important but how effective that consultation is; in other words, the statutory consultation procedure. I can assure your Lordships that the statutory consultation procedure we propose will leave members in no doubt as to their rights and options. We intend that it will require employers to hold a ballot if their proposals are rejected by a given percentage of members (possibly 10 per cent). Our proposals will not deprive members of the right to a ballot and if employers want to opt for a ballot at the outset as a way of avoiding the possibility of extra costs they will be free to do so. We see no justification for imposing the requirement of a ballot at the outset in all cases. However, we see considerable advantages, both to scheme members and to the employer, in the more flexible statutory consultation procedure that we are proposing.

We arrived at these proposals following a consultation exercise in June last year, when we received a great many comments from pensions professionals, schemes and employers asking us not to make a ballot an automatic requirement. Those respondents were concerned about the inflexibility of such a requirement. They were also concerned that an automatic ballot could enable a vociferous or disaffected minority to overturn otherwise satisfactory arrangements.

We have listened carefully to those views and, on balance, we agree with them. A ballot is inflexible. Members can either approve or disapprove. On the other hand, under our proposals, the employer would be able to test the water and find out members' views before committing himself to a full ballot. He could then, if appropriate, rethink and perhaps modify his proposal to meet members' concerns before putting his revised proposal to a full ballot. I would also argue that a "10 per cent. objection process" could prove to be a more favourable arrangement from a member perspective. It is I think inevitable that some scheme members will be apathetic whatever consultation procedure is used. However, it would clearly be easier to achieve a 10 per cent. objection against an employer's proposal than to obtain majority disapproval at a ballot. If a ballot then followed as a direct result of a 10 per cent. objection, members who were originally apathetic might actually take more notice.

To some extent, the noble Baroness rather assumed that every scheme would go to a ballot. I do not think that that would be the case. Therefore the suggestion that our proposals will place extra cost on schemes by requiring an objection exercise and then a ballot does not hold water. It would be the case only where members object to the proposals. If the employer wishes to rethink and submit other proposals, then a ballot would still not be necessary. If members do not object, there will be no need for a ballot and such schemes will have been spared the extra expense that a formal ballot would involve.

I believe that a rigorous statutory consultation procedure which directs that all pertinent information must be given to members and leaves the choices to them is the best way to protect members' interests.

At first sight, an automatic ballot may appear attractive. However, it does mean that a disaffected minority could be the only ones who bothered to vote, thus producing an unbalanced or unrepresentative result. We believe that a full disclosure of proposals and sound directions by way of the statutory consultation procedures are the best way to protect members' interests. While there is nothing in our proposals to prevent a ballot at the outset, our arrangements will allow employers an opportunity to gauge members' views, and, if necessary, to make the kind of alterations to the scheme which their members require. If the required proportion of members object to the employer's proposals, then those proposals must be put to a full ballot.

I believe that the position that we take up is a more flexible situation which leaves it in the hands of the members to decide whether they wish to go so far as to have a ballot. It allows the employers to modify their schemes in the light of the representations that they receive. Many schemes, as my noble friend Lord Pearson of Rannoch mentioned earlier, are quite small and are perfectly satisfactory. Their members will be perfectly satisfied with them. They will not need to ballot. Our procedures allow for that situation as well as for the other situation in which members are very unhappy and at the 10 per cent. level can trigger the kind of ballot which the noble Baroness would like to apply to every scheme.

Baroness Hollis of Heigham

My Lords, again I find the Minister's reply quite baffling. I should be surprised if he believes most of it himself.

Does the Minister believe that when the employers send out the first information as part of the statutory consultation procedure it will be full, complete and in such a form that members can make up their minds? I assume that the answer is yes, otherwise the employers would be failing in their duties. Does he believe that when the employers send out that information they will have to include a piece of paper asking whether the members seek a ballot? In the light of what the Minister said at Committee stage, I assume that the answer is also yes. Therefore what will have happened? The employer will have sent out all the information required on which to make a decision. He will have sent out, secondly, a piece of paper on which a disagreement would have to be registered. The only two differences between that and a full-scale ballot is, first, that returning the paper would not be confidential. The Minister did not address that point. Secondly, there would be the minor cost of counting the responses. That is all. To avoid the minor cost of counting the response on that first consultation exercise, the Minister proposes to go to the cost of a second ballot. That is absolutely absurd. Does the Minister really seek to persuade the House that two ballots are cheaper than one? Does he really seek to persuade the House that the Minister's scheme will require such modifications that he needs time in which to consider, consult and modify before he goes back to the members a second time? Should he not have done that before he first sent out the ballot paper?

I invite the Minister to respond to some of these points. I must say that of thin answers tonight, this is one of the thinnest. Does the Minister believe that two ballots are cheaper than one? Does he believe that members will not have the full information at the first ballot? Does he think that more confrontation or less will arise as a result of people having to put their names to the ballot, it therefore being no longer secret? I invite the Minister to reply.

Lord Mackay of Ardbrecknish

My Lords, with the leave of the House, perhaps I may respond, although, frankly, I have nothing to add to the points that I made. One's impression of thin ice depends upon whether or not one is on it. I think that I am on pretty reasonable ice on this issue. The noble Baroness obviously disagrees.

The position is quite clear. First, I suspect that for most schemes the proposals will be perfectly satisfactory and there will be no need for postal returns, with the costs involved or of ballots, and so on. Secondly, if there are some problems, they may be minor and can be addressed. I should have thought that that was a much more reasonable way to proceed. The idea that we have people in embattled positions is perhaps dear to the mind of the noble Baroness who likes to paint everything fairly black or white. However, that idea seems pretty alien to what will occur when the consultation procedures take place. Perhaps minor or not significant amendments will make the scheme proposed by the employer satisfactory to his members. If it is not satisfactory, then it seems to me that the members have the right, if they wish, to call a ballot. If the employer is not prepared to move, then that ballot will go ahead and the members will be in a position to make whatever decision they will.

I believe that we should stick to the position that I have outlined, which has support in the industry, and so on. The consultation procedures that I have mentioned and the statutory procedures that we have laid down, will I believe lead to a proper consultation with the members, and a proper conclusion. It will mean that those many schemes which are perfectly satisfactory to the members will not need to go to the expense of a ballot.

Baroness Hollis of Heigham

My Lords, I am sorry to turn the discussion into a Committee-style debate. However, I am even more baffled now by what the Minister says. If the employer produces a first scheme, the responses might in the normal process have triggered a ballot. However, the Minister says that such responses would be used by the employer to modify or tweak the scheme, in the light of the representations made. What happens then? Does the employer reissue the scheme before he goes to a ballot? Will it be an everlasting series of proposals by the employer? Will the employees vote on the modified scheme? It will be different from the scheme on which they called for a ballot in the first place.

The Minister needs to clarify the position. It seems as though people are being invited to ballot on proposals on which they were not balloted. Perhaps the Minister will enlarge further. The more he continues, the more he walks on quicksands. What will happen between the first and second ballot? The proposals put forward can be modified. What then will people believe that they are voting on? What chance will they have to consider the further modifications if the employer produces a second ballot paper on a quite different set of proposals from the first? I apologise, but the Minister really must clarify further.

Lord Mackay of Ardbrecknish

My Lords, if I have the leave of the House—it is beginning to look more like a Committee stage; we ought to have dealt with those issues then if that is what the noble Baroness wished—perhaps I may simply say this to her. It is difficult to envisage what the objection might be. It might not be a serious objection. It might be one on which the scheme can easily be amended. The employer will then have met the objections and the scheme will be satisfactory. That is perfectly sensible.

My recollection of the Bill—if I am wrong, I shall write to the noble Baroness—is that there are some time limits. As I think the noble Baroness suggests, if I understand her correctly, the employer could not string the process along for ever and a day so that he never got round either to having member-nominated trustees or to having his own proposal accepted. Although I cannot find the provision as quickly as I need, I am pretty certain that there are time limits. If there are not, I shall certainly write to the noble Baroness.

The safeguards are there; I do not think that we need to go to a ballot. I have made my point. The noble Baroness clearly wants ballots at every possible turn. She wants a ballot right at the beginning. I do not believe that that is necessary. I am afraid that there is just a bit of a division between us.

Baroness Hollis of Heigham

My Lords, the reason that we are treating this matter rather as we would in Committee—for which I beg the indulgence of the House—is that the Minister is producing arguments on Report that were never even mentioned in Committee. We have heard for the first time tonight that employers will have the right to modify what they propose to members between the first circulation of the information and the right to a ballot. It is the first time that we have heard of it. This is a significant change, so far as I am aware. I defer to the Minister.

Lord Mackay of Ardbrecknish

My Lords, I intervene for the last time. If the employers were not in a position to modify what they had proposed, there would be no point in their proposing it. The whole proposition is to ensure that the members are satisfied with what is being proposed.

Baroness Hollis of Heigham

My Lords, when the Minister reflects on the debate tonight, as I am sure he will, I hope that he will see that the further he goes, the more entangled—I really mean this—his argument has become. It was a pretty sorry argument. It is for that reason that I shall not press my amendment tonight: I hope that the Minister will come back to the House on this matter. He is in an impossible position. He faces a set of receding issues. However, with the leave of the House I should now like to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 47 and 48 not moved.]

Baroness Turner of Camden moved Amendment No. 49:

After Clause 15, insert the following new clause:

Protection against victimization

(". In relation to a member-nominated trustee appointed under section 14, the Employment Protection (Consolidation) Act 1978 and the Trade Union and Labour Relations (Consolidation) Act 1992 (referred to in this section as "the 1992 Act") shall each have effect as if—

1. (a) the purposes specified in section 146(1) of the 1992 Act (action short of dismissal on grounds related to trade union membership or activities) included preventing or deterring him from carrying out any relevant functions as a trustee, or penalising him for doing so; and
2. (b) the reasons specified in section 152 of the 1992 Act (dismissal on grounds related to trade union membership or activities) included the reason that he had carried out, or proposed to carry out, his functions as a trustee.").

The noble Baroness said: My Lords, we are revisiting issues that we debated in Committee, when I am sure many noble Lords on all sides of the House were sympathetically inclined to the amendment that I moved. The Bill rightly gives a key role to trustees and in that regard it follows the recommendations of the Goode Report. It also envisages election or selection of employee trustees, as we know.

The duties and responsibilities of trustees are quite onerous, and we have to get the balance right to ensure that suitable employees are not frightened off. We have already discussed this point in connection with penalties and other matters. But if, added to that, trustees are to be concerned for their jobs if they attempt to do what they believe to be a proper task on behalf of the employees as a whole, it will be even more difficult to persuade the right type of people to come forward.

As I said in Committee, the late Robert Maxwell had employee trustees. But one cannot imagine that they would have felt able to stand up to the force of his dominant personality. Trustees are likely to be the first people to know if something has gone wrong or may be going wrong. A good trustee could well make himself or herself unpopular with the employer simply by asking too many questions deemed to be awkward. Trustees may make mistakes in good faith or out of naivety. But they must feel free to express a view without being fearful of the consequences. It is possible for employers to be quite vindictive, particularly if they have something to hide.

My amendment seeks to give extra protection against victimisation in such circumstances. It would mean that an employee trustee, if dismissed as he or she believes through endeavouring to exercise the trustee function effectively, would have the immediate protection of the 1978 Act without any qualifying service, the present period of two years being non-applicable in such circumstances. This could be quite important, since it is by no means certain that all trustees would have had two years' continuous service.

Secondly, such an individual would be entitled, if a claim to an industrial tribunal succeeded, to the maximum amount of compensation available. In Committee, the noble and learned Lord, Lord Hailsham, asked whether, something could be put into the employment protection legislation that would put the burden of proof on the employer who wanted to disadvantage a person who happened to be a trustee of the scheme in the conditions of his employment to show that it was nothing to do with the way in which he had behaved as a trustee".—[Official Report, 13/2/95; col. 471.]

However, that is what my amendment does. It reverses the burden of proof.

In Committee, the Minister said that he thought I had intended my amendment to refer to Section 152 of the 1992 Act, and I agree. I therefore amended the wording appropriately. There was support in Committee from all sides of the Chamber; and the Minister himself seemed sympathetic, and promised to look at what had been said. I had hoped therefore that there would be a government amendment. But as there is not, I wonder whether I can, this time round, persuade the Minister to accept this amendment. I beg to move.

Lord Mackay of Ardbrecknish

My Lords, as the noble Baroness, Lady Turner, indicated, I was struck by the force of the arguments put to me at Committee stage from all sides of the House about extending protection for employee trustees against victimisation by their employers. In this Bill, we are emphasising the responsibilities that trustees have for ensuring that a pension scheme is properly run and for looking after the interests of scheme members. We are aware that member-nominated trustees will often be in a minority on trustee boards, and that sufficient protection should be provided to an employee trustee in the same way as we are seeking in the Bill to provide protection, in a number of important areas, for trustees in their role as trustees.

In the Committee debate, I gave an undertaking that, if I could see a gap in the legislation, we would give serious consideration as to how we could close it. Having considered the position carefully, I can reassure noble Lords that, after consulting colleagues responsible for the relevant legislation, we do not believe that such a gap exists.

Individuals who have two years' service fall under the generalised protection against unfair dismissal. In such a case any dismissal is potentially unfair and the onus is on the employer to show that it was not. Employees would, of course, have to show that they have been dismissed and have not, for example, simply resigned, before they can establish their case. The Government do not believe that all employees, regardless of their length of service, should have such a general protection. The two-year qualifying period is necessary to ensure that the legislation does not create too heavy a burden on employers making them reluctant to recruit.

The Government have recognised that there should be specific protection in certain kinds of areas where fundamental rights are at stake, even where individuals do not have two years' employment—for example, for trade union and health and safety activities. In these cases it is up to those seeking to rely on this special protection to show that their complaint falls within its scope. That is in line with the time-honoured principle of UK law that it should be for those whose case depends on establishing certain facts to prove those facts.

The qualifying period is a major component of government policy, to ensure that employment protection legislation does not weigh unjustifiably on employers. The likelihood —I also mentioned this point in Committee—of pension scheme trustees having fewer than two years' service is perhaps minimal. We do not therefore see their position as justifying extending the list of exclusions. To do so might well bring pressure to extend the list still further.

In Committee, the noble Baroness, Lady Turner, expressed concern about the effect that mergers and takeovers might have on an employee's length of service, and how that came into the two-year rule. Indeed, I took her point, and that was one of the matters that we looked into.

I say to the noble Baroness that this is unlikely to be a problem, either generally or in relation to pension scheme trustees. The reason is that events such as mergers and takeovers would not normally break an employee-trustee's continuity of employment. I should like to make three main points about that, because it was one of the valid points that the noble Baroness brought to my attention.

First, employment protection legislation provides for continuity of employment to be preserved in most cases where a firm is taken over by another, either by the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) or under paragraph 17 or 18 of Schedule 13 to the Employment Protection (Consolidation) Act 1978. Secondly, TUPE provides broadly for the continuity of employment where a business or part of a business is transferred to a new employer. Thirdly, Schedule 13 to the 1978 Act provides for continuity when a wider category of business is transferred or if the employee moves to an associated employer.

I hope that I have managed to persuade the noble Baroness that the particular problem that she envisages of somebody having to go back to the beginning in the light of a merger, a takeover or something of that nature and start the two-year clock running again, is very, very unlikely. Indeed, I submit that under the three points that I have made it will not happen at all.

I turn to the related matter of victimisation and bullying by an employer which falls short of actual dismissal, a point that was also raised in Committee. In the Government's view, employees are already protected against significant victimisation or bullying by employers for whatever reason. If they suffer financial loss, they may be able to complain to an industrial tribunal or to the civil courts. If the employer's actions amount to a fundamental breach of contract, the employee will be entitled to resign and, if he qualifies, complain of unfair dismissal to an industrial tribunal. In any event, we do not believe that acting as a pension scheme trustee will put individuals in any more vulnerable a position with regard to victimisation by an employer. After all, employers set up pension schemes voluntarily; so any real employer-trustee conflict should be something of a rarity.

As I indicated, I have great sympathy with the concerns expressed during our debate in Committee. I undertook to look seriously into the position, which I have done. I appreciate the concern of noble Lords in Committee and that of the noble Baroness this afternoon. However, I am satisfied that the present unfair dismissal provisions already provide the legislative protection that we all believe the trustees need.

In the light of that explanation of to where trustees can look for protection in existing law, I hope that the noble Baroness will be reasonably satisfied and feel able to withdraw her amendment.

7 p.m.

Baroness Turner of Camden

My Lords, I thank the Minister for that detailed response to the amendment, but I am not entirely satisfied.

In the first place, the Minister produced the argument that an employee, if he were a trustee, would normally have had at least two years' service. That is not entirely true. There could be a fairly new firm in operation which decided to introduce a pension scheme. The individuals concerned would not have had the opportunity of working for two years with the same employer.

Secondly, he advanced the arguments in relation to TUPE and the Acquired Rights Directive in regard to mergers and takeovers. I understand that continuity of employment is guaranteed to a certain extent by the TUPE regulations. However, one of the reasons for attempting to write into the Bill some protection to trustees was, as it were, to flag up to employers who might feel inclined to exercise some intimidation or intimidatory tactics that there was special protection available to a trustee in such circumstances.

There was one aspect of my amendment to which the Minister did not address himself. It was my intention that if an individual succeeded in demonstrating to an industrial tribunal that he had been victimised, he would then be entitled to the maximum damages available to somebody dismissed under that particular section of the legislation. In other words, the employer would know that should an individual succeed before an industrial tribunal in demonstrating victimisation, then by decision of that tribunal the maximum amount of compensation could be claimed and made payable.

I am not entirely satisfied with everything that has been said. On the other hand, in view of previous votes that have taken place this evening and considering the hour, I do not feel inclined to press this matter to a Division. I shall consider very seriously what the Minister said. It may be possible to come back at Third Reading with a different form of words. The Minister's explanation does not entirely satisfy all the arguments that we advanced. I do not feel that trustees are adequately protected against victimisation or intimidation. However, in the circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lucas

My Lords, I beg to move that further consideration on Report be now adjourned. In moving the Motion, I suggest that the Report stage begin again not before 7.50 p.m.

Moved accordingly, and, on Question, Motion agreed to.