HL Deb 01 November 2004 vol 666 cc115-36

(1) For the purposes of any of sections 39 to 55, regulations may modify any of the definitions mentioned in subsection (2) (as applied by any of those sections) in relation to—

  1. (a) a partnership or a partner in a partnership;
  2. (b) a limited liability partnership or a member of such a partnership.

(2) The definitions mentioned in subsection (1) are—

  1. (a) section 249 of the Insolvency Act 1986 (c.45) (connected persons),
  2. (b) section 435 of that Act (associated persons),
  3. (c) section 74 of the Bankruptcy (Scotland) Act 1985 (c. 66) (associated persons), and
  4. (d) section 736 of the Companies Act 1985 (c. 6) (meaning of "subsidiary" and "holding company" etc).

(3) Regulations may also provide that any provision of sections 39 to 50 applies with such modifications as may be prescribed in relation to—

  1. (a) any case where a partnership is or was—
    1. (i) the employer in relation to an occupational pension scheme, or
    2. (ii) for the purposes of any of those sections, connected with or an associate of the employer;
  2. (b) any case where a limited liability partnership is—
    1. (i) the employer in relation to an occupational pension scheme, or
    2. (ii) for the purposes of any of those sections, connected with or an associate of the employer.

(4) Regulations may also provide that any provision of sections 51 to 55 applies with such modifications as may be prescribed in relation to a partnership or a limited liability partnership.

(5) For the purposes of this section—

  1. (a) "partnership" includes a firm or entity of a similar character formed under the law of a country or territory outside the United Kingdom, and
  2. (b) references to a partner are to be construed accordingly.

(6) For the purposes of this section, "limited liability partnership" means—

  1. (a) a limited liability partnership formed under the Limited Liability Partnerships Act 2000 (c.12) or the Limited Liability Partnerships Act (Northern Ireland) 2002 (c. 12 (N.I.)), or
  2. (b) an entity which is of a similar character to such a limited liability partnership and which is formed under the law of a country or territory outside the United Kingdom,
and references to a member of a limited liability partnership are to be construed accordingly.

(7) This section is without prejudice to—

  1. (a) section 305 (power to modify this Act in relation to certain categories of scheme), and
  2. (b) section 316(4) (power to extend the meaning of "employer")."

On Question, amendment agreed to.

Clause 67 [Duty to notify the Regulator of certain events]:

Baroness Hollis of Heigham moved Amendment No.94:

Page 51, line 8, leave out from "the" to end of line and insert "meaning given by section 124;"

On Question, amendment agreed to.

Clause 69 [Reports by skilled persons]:

Lord Skelmersdale moved Amendment No. 95:

Page 52, line 3, at end insert—

"() This section is subject to section 309."

The noble Lord said: My Lords, I apologise because I have lost my speaking note. I am sorry: I have got myself into a total muddle.

Baroness Hollis of Heigham

My Lords, I think that the noble Lord's amendment is about gathering information and whether Clause 309, which deals with protected items, needs to be repeated at each stage or whether it is, so to speak, an umbrella under which all such references are covered.

Lord Skelmersdale

My Lords, I am grateful. The noble Baroness is absolutely correct. I rather think that she has just moved my amendment for me. Clearly, the point is that since Clause 309 is referred to earlier on, it is not in these particular cases. The object of the exercise is to determine why not and whether it should be. On that basis, the noble Baroness and I beg to move.

9 P.m.

Baroness Hollis of Heigham

My Lords, in that happy spirit, we do not disagree about the purpose here, but we do not think that the amendments tabled by the noble Lord are necessary, and I shall explain why.

This group of amendments seeks to ensure that whenever the regulator or the board exercise powers to gather information under Clauses 69, 70, 73 and 188 to 190, their actions will be subject to the provisions of Clause 309. As noble Lords know, this clause deals with protected items, which is information that is subject to legal privilege and that individuals are therefore not required to disclose.

However, the provisions of Clause 309 apply to the whole of the Bill. Subsection (1) specifies that: A person may not be required under or by virtue of this Act to produce, disclose or permit the inspection of any protected items". So Clause 309 ensures that persons may not be required by any power of the Bill to provide such protected items to any person. That includes information in the clauses I have identified. These amendments are therefore unnecessary.

Furthermore, they could actually reduce the scope and effectiveness of the overriding provisions of Clause 309. There is a very sound reason why Clause 309 is an overriding provision rather than making specific provision in each place it may have effect. That is because the current drafting ensures that wherever and whenever the question of disclosure to another party arises, there can be no doubt that Clause 309 applies.

Adding references to Clause 309 in some clauses and not in others would suggest that Clause 309 does not apply to any clause where there is no such reference. The amendments could, at best, create legal ambiguity. The view of the Association of Pension Lawyers is that these amendments would, dilute section 296 [under the old drafting] if it is only referred to in some sections". The independent professional body is on our side in that it prefers the way that we have handled this issue.

The noble Lord, Lord Skelmersdale, could respond by saying that we should add a reference to Clause 309 wherever it occurs. Again, that is not as straightforward as it might seem. Until any Bill is in force, it may not be immediately obvious that an overriding provision has effect on a particular clause until a real example arises in practice. That is why we have overriding provisions.

Other examples of overriding provisions are detailed in Clause 301 covering service of notifications, Clause 302 covering electronic form and Clause 307 covering offences by bodies corporate.

This is conventional drafting for an overriding clause. If we were to do as the noble Lord suggests, the reference would have to be inserted at any and every possible reference, and that would apply equally to all the overriding clauses. However, the advice we have had both within the House and from the Association of Pension Lawyers is that they prefer this form of drafting because it is secure against all possible questions of ambiguity. I hope, with that explanation, that we do not disagree and that we are on safer ground if we do not take up his suggestion. I hope that he will feel able to withdraw his amendment.

Lord Skelmersdale

My Lords, this is very curious. If Clause 309 is overriding, why is it mentioned in some clauses and not in others? I leave that thought with the Minister for Third Reading. If she is right and the clause is overriding—

Baroness Hollis of Heigham

My Lords, it is.

Lord Skelmersdale

My Lords, in that case it is not necessary to mention it earlier at all. As I have said, I leave that with the Minister to consider between now and Third Reading in 10 days or so. In the mean time, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 70 [Provision of information]:

[Amendment No. 96 not moved.

Clause 71 [Inspection of premises]:

Baroness Hollis of Heigham moved Amendments Nos.97 and 98:

Page 53, line 34, at end insert—

"Part 7 (cross-border activities within European Union);"

Page 53, line 46, at end insert— Chapter 5 of Part 4 (early leavers: cash transfer sums and contribution refunds);

On Question, amendments agreed to.

Clause 73 [Inspection of premises: powers of inspectors]:

[Amendment No. 99 not moved.]

Clause 76 [Warrants]:

Baroness Hollis of Heigham moved Amendment No. 100:

Page 59, line 33, leave out from third "to" to "and" in line 35 and insert "the sheriff,"

The noble Baroness said: My Lords, in moving Amendment No. 100, I shall speak also to Amendment No. 226. These are probably the most exciting amendments of the day. We are doing well this evening, and long may that last. They arise in response to an amendment tabled by the noble Baroness, Lady Noakes, on 30 July in Grand Committee. I responded by saying that the noble Baroness had raised a valid point and agreed to look again at the clause.

As currently drafted, Clauses 76 and 192 allow a Justice of the Peace to grant a warrant. However, I accept that in Scotland it is in the interests of justice that such warrants be considered and granted by the sheriff rather than by a Justice of the Peace, which is the effect of these two amendments.

I notice that the noble Lord, Lord Skelmersdale, has tabled similar amendments. However, apparently, reference must be to "the" rather than "a" sheriff, which is why we seem to have gone for belt and braces. On a happy note of such consensus I hope that your Lordships are pleased, delighted, thrilled and excited by these amendments. I beg to move.

Lord Skelmersdale

My Lords, the Minister was good enough to accept three of the amendments that we put forward in Committee. This is the first thereof. I was rather surprised to hear my noble friend Lady Noakes getting the praise when I think that I am right in saying that it was my amendment. However, in a spirit of co-operation, friendliness and everything else—

Baroness Noakes

My Lords, I think that I helped the noble Lord out by standing in for him one day and moving his amendments.

Lord Skelmersdale

My Lords, I am not entirely sure that that was the right day, but never mind. In the spirit of co-operation and friendliness, it was not for any niggardly reason that I tabled Amendment No. 101, but to keep the Minister to her promise. I am delighted that she has kept it. She looks rather shocked, but it is my normal practice to keep the government of the day in check simply because it is a bounce-back from the days when I was in her position.

Baroness Hollis of Heigham

My Lords, did the noble Lord keep his promises?

Lord Skelmersdale

My Lords, it is not that I did not keep my promises, but I found that members of the Opposition tabled amendments to make sure that I did. I saw no good reason to change and I make no apology for tabling Amendment No.101. I am not sure that I can use all the adjectives of acceptance and praise that the Minister suggested. None the less, I am very pleased that she has kept the promise made in Grand Committee and I have no objection to her amendment whatsoever.

On Question, amendment agreed to.

[Amendment No. 101 not moved.]

Clause 80 [Restricted information]:

Baroness Hollis of Heigham moved Amendment No.102:

Page 60, line 35, leave out from beginning to "restricted"

The noble Baroness said: In moving Amendment No.102, I shall also speak to Amendments Nos. 103 to 106, 228, 229, 230, 232 and 235. This group of amendments tightens up the provisions relating to the use of tax information by the regulator, the board of the PPF, or any person to whom either of those bodies has disclosed tax information. With reference to Section 182 of the 1989 Finance Act, "tax information" is defined as any information held by any person in the exercise of tax functions.

As my colleagues in the other place and I have said previously during the scrutiny of this Bill, the Government's policy on the use of tax information is to ensure that the commissioners of the Inland Revenue, or of Customs and Excise as appropriate, effectively retain ownership of any tax information, even when there is a legitimate reason to allow legislation to enable it to be passed on to another body. There are circumstances in which either the regulator or the board of the PPF may reasonably require tax information in order to perform their functions and duties. That is why Clauses 86 and 200 enable tax information to be disclosed to those two bodies. We discussed that matter briefly in Committee.

However, the current drafting of the Bill contains two potential loopholes that could enable tax information to be onwardly disclosed without the prior consent of the commissioners. The amendments would close those loopholes and ensure that failure to obtain the commissioners' prior consent to disclose is an offence. I know that your Lordships have strong views on this matter so I hope that you will welcome the tightening up of the provisions relating to the use of tax information in the Bill. I would be happy to go into details of any of the particular amendments. However, we are basically responding to the spirit of the previous debate and seeking to close loopholes that we have found. I beg to move.

Lord Higgins

My Lords, the Minister is right in saying that these are matters that give rise to strong feelings. To the extent that the amendments seek to restrict the transmission of so-called tax information, the Government's proposal is certainly something that we welcome.

I have one or two points to make in connection with that matter. As I understand it, the commissioners can agree to disclose tax information. I presume that the Minister will be able to confirm that that means personal tax information of individuals—for example, on their income tax form—to people in the regulator's office. Previously, I have been concerned by the level at which such authorisation proceeds, and to ensure that such information, which is obviously highly personal, does not leak to a wider audience. Could the noble Baroness tell us at what level in the Civil Service hierarchy the information will be controlled, between the Revenue and the regulator?

Secondly, the staff of the regulator are not civil servants and would not therefore be bound in exactly the same way as civil servants would be bound, with regard to responsibility for the Official Secrets Act, and so on. What steps are being taken to ensure that those employed by the regulator, who are not civil servants, will maintain the degree of confidentiality which is in my view essential?

Baroness Hollis of Heigham

My Lords, the noble Lord is correct on the point about personal tax. The provision applies to personal tax, but only if it is relevant to TPR and PPF functions. Unauthorised disclosure by the TPR or PPF officials is a criminal offence—so the matter is taken very seriously indeed.

I will need to come back to the noble Lord on what level authorisation will take place. I am told that it is at a senior level, but I do not have the precise grading. If the noble Lord wishes to know, I will ensure that he gets that information.

Lord Higgins

My Lords, essentially we would like to know whether that is the normal level at which authorisation takes place between departments. Or should it be at a higher level because it goes outside the government machine?

Baroness Hollis of Heigham

My Lords, I am assured that the authorisation is at the chief executive level or the director, as appropriate, if personal tax information is involved. That surprises me, as I had thought that that decision would be made at a lower level than that. But it is made at the very highest level.

On Question, amendment agreed to.

Baroness Hollis of Heigham moved Amendment No.103:

Page 60, line 40, leave out "except" and insert—

"(1A) Subsection (1) is subject to—

  1. (a) subsection (1B), and
  2. (b) sections 69(9), 81 to 86 and 233.

(1B) Subject to section 86(4), restricted information may be disclosed"

On Question, amendment agreed to.

Clause 81 [Information supplied to the Regulator by corresponding overseas authorities]:

Baroness Hollis of Heigham moved Amendment No.104:

Page 61, line 24, leave out "80" and insert "80(1B)"

On Question, amendment agreed to.

Clause 85 [Other permitted disclosures]:

Baroness Hollis of Heigham moved Amendment No.105:

Page 63, line 13, at end insert "or of the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I. 2002/3150 (N.I. 4)),"

On Question, amendment agreed to.

Clause 86 [Tax information]:

Baroness Hollis of Heigham moved Amendment No.106:

Page 64, line 33, leave out from "Sections" to "except" in line 34 and insert "80(1B), 81 to 85 and 233 do not apply to tax information which is disclosed to the Regulator as mentioned in subsection (3), and such information may not be disclosed by the Regulator or any person who receives the information directly or indirectly from the Regulator"

On Question, amendment agreed to.

Clause 88 [Codes of practice]:

[Amendment No. 107 not moved.]

9.15 p.m.

Lord Skelmersdale moved Amendment No. 108:

Page 66, line 3, at end insert—

"() Any code of practice issued by the Regulator must include an analysis of the costs and benefits of the code."

The noble Lord said: My Lords, we now reach a rather more serious point, relating to the codes of practice, which was an issue—albeit of slightly lesser note—throughout Second Reading and Grand Committee. Now, I am afraid that I am at it again.

Clause 88(1) gives the new Pensions Regulator the power to issue codes of practice, which will provide "practical guidance" on complying with the requirements imposed on people by pensions legislation. That is fair enough—that is quite right. Breaching a code of practice will not in itself lead to legal proceedings, but the code will be admissible in evidence in such legal proceedings. There are certain areas in which the Pensions Regulator must provide codes of practice. In addition, he will be free to issue codes of practice on any other issue related to pensions legislation.

Under the Bill as drafted, the regulator could use codes of practice in a way that imposes large costs on those providing pensions in return for minimal or questionable additional security for pension scheme members. This is because the codes of practice will not have to include at any stage an analysis of the costs and benefits of the regulator's guidance. I believe that it would be preferable if the principle of proportionality—one of the Better Regulation Task Force's five principles of good regulation—was enshrined in the legislation from the start. The Financial Services Authority, which I mentioned a little earlier, is required under Sections 155 and 157 of its parent Act to undertake and publish cost/benefit analyses of proposed rules and guidance. These amendments would ensure that this regulator has to follow comparable rules.

I accept that similar amendments were discussed in Grand Committee and I hope that I am not going to be blasted yet again for repeating arguments that were made in Grand Committee. In response to those amendments, the Minister quoted the Cabinet Office document Better policy making: A guide to regulatory impact assessment, published in 1998. She said: Even if you think the effects of your proposals are likely to be negligible, it is still good practice to produce an RIA". Of course, she was quoting from the Cabinet Office document. It is not always clear when a proposal is being formulated whether there will be any impact on business … Early consultation or informal soundings with your stakeholders will be particularly important in the situation". The Minister also stated: The regulator will follow these good practice guidelines for its code of practice … where in doubt, there should be cost benefit analysis".—[Official Report, 13/7/04; col. GC 301.]

But I observe that the Government have not sought to change the wording of the Bill so there is no guarantee that the Pensions Regulator will follow such guidance in practice. The amendments would enshrine in law what the Government, the Opposition and the pensions industry have all said that they want to see and they would ensure that the new regulator has robust practices and broad support from the outset. The whole object of this exercise is to ensure the broad support of industry for the regulator, which, as I said on Second Reading, is a more stringent organisation than the current OPRA, for reasons that we all know well. Therefore, if this is the price of that broad support, I hope that the Minister will accept it in spirit, if not in verbiage. I beg to move.

Baroness Hollis of Heigham

My Lords, I am afraid that I am not able to respond to the noble Lord, Lord Skelmersdale, as he would wish. Clause 88 gives the regulator power to issue codes of practice and Clause 89 sets out the procedure for the issue and publication of the codes. These amendments would impose a statutory obligation on the regulator to include a cost/benefit analysis in codes of practice.

I accept that it has been raised with us, as the noble Lord suggested, by various external bodies. We accept that it is a principle of good regulation that regulatory impact, including costs and benefits of codes of practice, should be assessed. We do not dispute that. There should also be statements, including in Parliament, to that effect. But we think that there needs to be some flexibility over when and how regulatory impact is assessed. We would not wish to be bound by a further statutory obligation in respect of the process for codes. Such an assessment of cost/ benefit may not be cost-effective. We also feel that, on occasion, it may be necessary to issue a code that is urgent without assessing costs and benefits, for example, to address a serious loophole in pensions legislation that is being exploited to the detriment of scheme members. There would be financial implications of such a statutory obligation and costs that would be passed on directly to schemes through the levy.

So, although we are required to consult through the development code, as we are doing under Clause 85, we think that that is the most effective way of assessing the costs that would be imposed by a code on the industry. We do not think that the noble Lord's proposal is the most appropriate way to go. I am afraid that I will not be able to help him tonight.

Baroness Noakes

My Lords, before the noble Baroness sits down, can she explain the difference between the regulatory arrangements that are being set up for the Pensions Regulator which affect pretty much all businesses, and those in the Financial Services and Markets Act which affect a large number of financial services businesses? The requirement was written into that legislation because it was recognised at the outset that significant regulatory burdens would be imposed. In principle, this legislation will impose similar burdens on business. It therefore seems perfectly reasonable that the FSA model should be adopted for the Pensions Regulator, rather than assuming that the regulator is just another NDPB that occasionally issues a bit of guidance that affects industry. This is a very serious area. That is why the amendment has been tabled in this way.

Baroness Hollis of Heigham

My Lords, as the noble Baroness, Lady Noakes, will know better than most of us, there are important differences in this respect between the FSA and the Pensions Regulator. First, the FSA can write its own regulations through its rule-making power. The Pensions Regulator's legislative powers, in contrast, are restricted to regulatory decisions such as freezing orders. Its codes of practice provide guidance and set standards but do so strictly in respect of legislative requirements set by Parliament.

The FSA, on the other hand, is able to issue a code which interprets legislative requirements that should also set, for example, the conduct expected of the individuals whom it regulates. Moreover, FSA legislation, including its codes of practice, is not subject to parliamentary approval. The Pensions Regulator's codes of practice will require the Secretary of State's approval and are subject to Parliament's approval.

Given those important differences, I do not think it reasonable to make the read-across as the noble Baroness has done. The greater powers and independence of the FSA argue for stronger measures to ensure that it is accountable—as it is in its regulatory impact assessment—separately from ministerial accountability to Parliament. The Pensions Regulator will be subject to that through the codes.

Lord Oakeshott of Seagrove Bay

My Lords, before the noble Baroness sits down, can she explain how Parliament will be able to review these codes of practice if no Cost/benefit analysis is attached? I am bound to say that I do not find her answers persuasive on this occasion.

Baroness Hollis of Heigham

My Lords, as I said, the codes of practice will be drawn up in consultation with industry. The draft codes will be published. I expect there to be either a regulatory impact assessment or an explanation of why that was not appropriate. In that case, the regulator can either think again or decide to pursue his path in that direction. However, the two examples that I gave seem to me good examples of where the costs will outweigh the benefits of a cost/ benefit analysis.

Lord Skelmersdale

My Lords, the Minister is absolutely right. There is parliamentary procedure for approval of the code of practice. There is also another parliamentary procedure for the revocation of codes of practice, under Clauses 89 and 90. However, that does not help. There will be occasions when such codes of practice do not bind the regulator himself, and I think that that is a mistake. I shall read very carefully what the noble Baroness said, but I do not believe that she has given a particularly full answer to this point.

As for the difference between the FSA and the regulator, I would suggest that the real answer in the back of the Minister's mind was a four-letter word: cash. Cash could very well be involved here. So, I do not think that that is a valid reason. At this time of night, however, I shall not pursue the point any further. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 89 [Procedure for issue and publication of codes of practice]:

[Amendment No. 109 not moved.]

Lord Skelmersdale moved Amendment No. 110:

Page 66, line 35, at end insert ", and

() in such a manner that provides a minimum period of twelve weeks for the submission of responses"

The noble Lord said: My Lords, I have just referred to Clauses 89 and 90. This amendment to Clause 89 would ensure that each consultation exercise on a draft code of practice had a minimum period of 12 weeks for the submission of responses. I welcome all the consultation which is going on both before this Bill gets Royal Assent and that which the Government have said will continue until we eventually get the final orders. I and my noble friend Lord Higgins are very grateful for the timetable which the noble Baroness sent out recently.

Clause 89 outlines the procedure for issuing draft and final codes of practice. Amending the Bill to ensure that each consultation has a minimum 12-week period for the submission of responses would enshrine criterion one of the Cabinet Office's own code of practice on consultation in the Bill. This provides the following direction: Consult widely throughout the process— the department and its Ministers have, indeed, done that— allowing a minimum of 12 weeks for written consultation at least once during the development of policy". The development of policy is a slightly elastic term. The Minister might well say that she and her department have been meeting this throughout the consultations on the preparation for this Bill, and, of course, she would be right. However, the development of policy on this particular Bill goes way beyond Royal Assent. It goes through codes of practice and through the various orders, as the noble Baroness admitted several times in Grand Committee and, indeed, several times today. Therefore, consultation will not finish with Royal Assent.

The quotation states, allowing a minimum of 12 weeks for written consultation … during the development of policy". The noble Baroness might note that in repeating the quotation I left out the vital words "at least once". That is not good enough. This amendment would ensure that pension providers and other interested parties, including organisations that directly represent pension scheme members, would have sufficient time and information to prepare accurate and thorough consultation responses. Indeed, amending the legislation in the way that I propose is the best way to ensure that these organisations have a full say in the development of each code of practice. The amendment would again—I presume that I shall get the same answer—replicate the practice of the FSA which seeks to provide at least 12 weeks not once but for each consultation.

Insurance companies and others are concerned about the potential for overlapping or conflicting messages from the various regulatory bodies once the Pensions Regulator is up and running. Harmonising the consultation procedures for the FSA and the Pensions Regulator, both of whom will be involved in these activities, would be a small step in the right direction to help to avoid this. The legislation will allow Parliament to have 40 sitting days to consider the draft codes because they involve negative resolution and that is the praying time. Prior to that the Secretary of State will have as long as he or she needs to approve the draft codes. Given these arrangements it should be uncontroversial to ensure that the pensions industry also has sufficient time for proper scrutiny.

As a safeguard the clause, if amended in this way, would still be subject to Clause 89(4), which would ensure that where the Secretary of State considers consultation inexpedient for reasons of urgency—there will, inevitably, be occasions where urgency is paramount—it would not be necessary to have a statutory minimum consultation period of the sort proposed. I believe that the new regulator will be far stronger from the outset and will instil greater confidence if he has effective and clear procedures for seeking comments and input from those in the pensions industry and elsewhere, who will be directly affected by its guidelines. On that basis, I beg to move.

9.30 p.m.

Baroness Hollis of Heigham

My Lords, Clause 89 specifies in detail the procedure that must be followed for the issue and publication of codes of practice.

Before a code of practice can be issued by the regulator, a draft of the code must be published for consultation with people whom the regulator considers appropriate, and anyone further who the Secretary of State requires the regulator to consult. In the same way now, OPRA produces detailed guidance notes. It consults in advance, as appropriate. It may be up to 12 weeks—and routinely, which will not surprise your Lordships because we are all guilty—all the responses come in at the very last moment, which the external advisory group acknowledged last month.

We discussed the amendment in Grand Committee in July and I still believe that it is unnecessary and probably undesirable to legislate for a statutory 12- week consultation period. The regulator is firmly committed to consultation throughout the process of developing codes. Indeed, codes of practice can be issued by the regulator only after consultation has taken place with the appropriate industry and DWP policy representatives. Therefore, a formal 12-week consultation at the end of the process following consultation on draft codes would not be justifiable, helpful or meaningful in all cases.

The regulator will be working to ensure a "no surprises" approach in developing the codes, and working with the industry throughout the process, not just at the end. The only exception to consultation is when there is a need to issue a code as a matter of urgency—a provision contained in Clause 89(4)(b) that excludes a requirement for the regulator to consult if the, Secretary of State considers consultation inexpedient by reason of urgency". Amendment No.110 would directly conflict with that provision, so I ask the noble Lord, Lord Skelmersdale, to withdraw his amendment, given my description of the process that the regulator would expect to engage in.

Lord Skelmersdale

My Lords, I have two points to make. First, what on earth gave the Minister and her advisers the idea that the 12 weeks would be at the end of the process? The amendment makes no reference to that whatever.

Secondly, I accept that the draft order must be published and consulted upon. As I said earlier, there will be negative resolution procedure to approve it—or rather, with negative resolution procedure, I should say for Parliament to disapprove it. That would be a more accurate way of explaining the position.

I shall clearly have to go back to the pensions industry to see what it thinks of the Minister's remarks. Although we have agreed, we had a little go at the matter in Grand Committee. I do not think that either today's or the previous response is very helpful, but at this time of night there is nothing I can do about that, so I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 91 [The Regulator's procedure in relation to its regulatory functions]:

Baroness Hollis of Heigham moved Amendments Nos.111 to 113:

Page 67, line 41, at end insert—

"() the power to issue a clearance statement under section (Section 39 contribution notices: clearance statements),"

Page 68, line 2, at end insert—

"() the power to issue a clearance statement under section (Financial support directions: clearance statements),"

Page 68, line 4, at end insert— () the power to make an order under section 152(8), () the power to make an order under section 217(4),

On Question, amendments agreed to.

Clause 94 [Standard procedure]:

Baroness Hollis of Heigham moved Amendments Nos.114 to 117:

Page 69, line 44, at end insert—

"() Subsection (3) does not apply where the determination which is the subject-matter of the determination notice is a determination to issue a clearance statement under section (Section 39 contribution notices: clearance statements) or (Financial support directions: clearance statements)."

Page 69, line 45, leave out "that determination" and insert "the determination which is the subject-matter of the determination notice"

Page 69, line 45, after "function" insert "and subsection (3) applies"

Page 70, line II, at end insert— () the power to make an order under section 152(8); () the power to make an order under section 217(4);

On Question, amendments agreed to.

Clause 99 [Powers to vary or revoke orders, notices or directions etc]:

Baroness Hollis of Heigham moved Amendments Nos. 118 and 119:

Page 75, line 20, leave out "or"

Page 75, line 23, at end insert ", or

"() such other orders, notices or directions made, issued or given by the Regulator, in the exercise of a regulatory function, as may be prescribed."

On Question, amendments agreed to.

Schedule 4 [The Pensions Regulator Tribunal]:

Baroness Hollis of Heigham moved Amendment No.120:

Page 285, line 29, at end insert—

"In Schedule 15D to that Act (permitted disclosures of information) (as inserted by Schedule 2 to the Companies (Audit, Investigations and Community Enterprise) Act 2004), after paragraph 44 insert—

"44A A disclosure for the purposes of proceedings before the Pensions Regulator Tribunal.""

On Question, amendment agreed to.

Clause 106 [Membership of the Board]:

[Amendment No. 121 not moved.]

Schedule 5 [The Board of the Pension Protection Fund]:

[Amendments Nos. 122 to 124 not moved.]

Baroness Hollis of Heigham moved Amendment No. 125:

Page 290, line 14, leave out "(4)" and insert "18A(1)"

The noble Baroness said: My Lords, in moving the amendment, I shall speak also to Amendments Nos. 126 to 130, 218, 222 and 233. The group of amendments brings consistency to how the PPF board administers and delegates its various levy functions, but it may be helpful if I begin by setting out why they are required.

The PPF board will be required to determine issues such as which schemes, as prescribed by the Secretary of State, are required to pay an initial and pension protection levy, and if so the amount payable. Although it will be for the board to reach such determinations, the Pensions Regulator will actually hold the data on which they will be based. The Bill allows the board to delegate the calculation, invoicing and collection functions relating to those levies to the Pensions Regulator. However, any determination reached by the Pensions Regulator will still be made on behalf of the PPF board.

A scheme may disagree with a determination that has been made by the Pensions Regulator on the board's behalf. For example, if the levy has been calculated on a scheme membership of 500 where there are, in fact, only 50 members, the scheme trustees are likely to request that the determination is reviewed. For reasons of administrative efficiency, it makes sense for any first-stage review to be undertaken by the regulator. Amendments Nos. 125 to 130 therefore make provision for that.

In order to delegate the first stage of the review process on fraud compensation levy determinations, which is also provided for by Amendments Nos. 125 to 130, the board must be allowed to delegate the identification of liable schemes and the calculation and invoicing of any fraud compensation levy to the Pensions Regulator. Amendment No. 222, which mirrors provisions on the other levies in Clause 179, therefore clarifies that the above functions must be carried out by the board and that the board may delegate those functions to the regulator. If a scheme requests a first-stage review in relation to any fraud issue determined by the regulator, the regulator will undertake the review on behalf of the board.

In order to achieve that, we have added two new "reviewable matters" to Schedule 9 through Amendment No. 233. The first is whether a scheme is liable to pay the fraud compensation levy. The second relates to the amount of fraud compensation levy payable by a scheme. If the regulator chooses to outsource his levy administration functions to a third-party contractor, using paragraph 21(e) of Schedule 1, the combined effect of the amendments will be to enable the regulator to require the contractor to undertake any first-stage review in those cases. We are talking about basic information.

Finally, a minor technical amendment to Clause 177—Amendment No. 218—clarifies that where the board has delegated its risk-based levy collection activities to the regulator, eligible schemes should provide the regulator rather than the board with an actuarial valuation for calculating the risk-based levy. I beg to move.

On Question, amendment agreed to.

Baroness Hollis of Heigham moved Amendments Nos. 126 to 130:

Page 290, line 14, leave out "sub-paragraph (1)" and insert "paragraph 18(1)"

Page 290, line 16, at end insert "any delegable review function.

(2) Where the Regulator is required to or may exercise any function on behalf of the Board by virtue of—

  1. (a) section 179(4) or 187(6B) (administrative functions relating to levies),
  2. (b) section 179(7)(b) or 187(8)(b) (recovery of levies), or
  3. (c) regulations under section 179(8) or 187(9) (collection, recovery and waiver of levies),
the Board may also require the Regulator to exercise on behalf of the Board any delegable review function.

(3) In this paragraph, "delegable review function", in relation to a delegated function, means—"

Page 290, line 17, after "205(1)(a)" insert "or (3)(a)"

Page 290, line 18, leave out "that" and insert "the delegated"

Page 290, line 26, after "(4)" insert—

""delegated function" means a function which is exercisable on behalf of the Board as mentioned in sub-paragraph (1) or (2);"

On Question, amendments agreed to.

[Amendment No. 131 not moved.]

Clause 108 [Board's functions]:

Lord Higgins moved Amendment No. 132:

Page 79, line 26, at end insert—

"() In discharging its functions, the Board (and, in relation to the functions set out in section 110(5), the Non-Executive Committee as defined in section 110(1)) must act in a way—

  1. (a) which is compatible with the objectives of this Part, and
  2. (b) which is appropriate for the purposes of meeting those objectives.

() In discharging its functions, the Board (and, where relevant, its Non-Executive Committee) must have regard to—

  1. (a) the need to use resources in the most efficient and economic way,
  2. (b) the need to minimise any adverse effects that may arise from anything done in the need to discharge of those functions, and
  3. (c) the need for openness with regard to its activities."

The noble Lord said: My Lords, noble Lords will recall that the amendment is similar to one that I moved in Committee. Before I turn to its substance, I want to make a suggestion to the House that was put in mind to me by the noble Lord, Lord Jenkin of Roding, who was much concerned with the then Energy Bill.

We had 11 sittings in Committee and need to look back, for example, to our earlier debates on these matters. It is terribly tedious to cart around 11 full daily parts of Hansard. They contain the report of proceedings not only in Grand Committee, but of other debates that took place on each particular day. Much of what we are saying here may be of subsequent interest to those in the industry. It might be helpful if, instead of them having to plough through innumerable thick Hansards covering much information which is not relevant, the bound volume of the Grand Committee and, perhaps, the Report stage, might be put in a single volume. I do not recall that that has been done before, but when we are dealing with Bills of this size and companies ask for all the individual parts, it must result in an enormous number of volumes. Perhaps noble Lords and the other place should consider some alternative form of presentation.

The amendment is somewhat similar to one which we moved in Grand Committee, designed to set out the manner in which the board would operate. The initial reaction to the amendment was favourable—even the noble Lord, Lord Borrie, said that it was well done, although he ended by asking whether it was necessary. That was an unfortunate remark, because the Minister said, "No, it's not necessary". Consequently she rejected the amendment.

During the earlier debate on codes of practice, reference was made to the situation regarding the Financial Services and Markets Act 2000, which created another regulator. In the context of codes of practice, the noble Baroness suggested that it was not appropriate to follow the precedent that was carried out regarding that Act. But the amendment is almost word-for-word the section of that Act that sought to give a statutory framework to the work of the Financial Services Authority. The amendment seeks to do the same. There is a clear analogy with the work of the regulator. It is not appropriate that the manner in which the regulator operates should simply emerge some time after we pass the legislation.

It would be better that some framework should appear on the face of the Bill. Following the FSMA precedent, that would be more appropriate than the situation that exists regarding OPRA, to which the noble Baroness referred when she rejected the similar amendment in Committee. The legislation regarding OPRA is older than the FSMA legislation; both the FSMA legislation and the amendment would be more in keeping with the manner in which matters such as corporate governance have developed in recent years. It is appropriate to set out some statutory framework which would create a situation in which the regulator could operate under legislation set down by this House, rather than one which emerges at a later stage, with all the uncertainty and vagueness that that is likely to entail. I beg to move.

Baroness Hollis of Heigham

My Lords, the Opposition's amendment seeks to set a statutory framework for how the PPF board and its non-executive committee discharge their functions. Perhaps I may concentrate on the PPF board. We all agree that the board should act in an open, efficient and economic manner. So, at first sight, the amendment might seem a sensible additional means of assurance as to the way in which the board will operate. There were worded amendments regarding the board and PPF in Committee.

However, my briefing says that the amendment is unnecessary, is arguably ambiguous, probably unworkable and legally unenforceable. That aside, it is sensible. I cannot support the amendment because it poses difficulties, both of principle and practice. It is unnecessary, because, in accordance with general administrative law principles—which is one of the distinctions between us and the FSA regarding the code of professional practice within which we operate—the board will, in any event, be obliged to exercise its powers in a fair, reasonable and proper manner and, where applicable, with proportionality.

9.45 p.m.

The first part of the amendment refers to the objectives of Part 2, but as the PPF board does not have specific statutory objectives, there will be an immediate obstacle to the board's ability to achieve that aim. Any yardstick would have to be in the form of non-statutory, self-imposed targets or objectives which would make it hard to implement and achievement would be very hard to impose or to measure. I really do not see, and I find it difficult to assess, what value the first part of the amendment would add.

Part 2 as a whole, in conjunction with Schedule 5, provides the legal and procedural framework for the board's activities. Taking these powers together, it is difficult to see how the board could legally act in a way that would be inconsistent with its remit. Again, we are back into the apple-pie situation.

On the second part of the amendment, general administrative law principles, concerning openness and efficiency, would at any rate apply to the PPF. Those mean that, at all times and in everything that it does, the board acts in an efficient and proportionate manner and with due regard to efficiency and economy. As public bodies, the regulator and the board will also be bound by data protection and freedom of information Acts which govern their use of information and the obligations for openness.

However, given the nature of some of the information that the regulator and the board may hold—I refer back to the discussion we had only 10 minutes ago—which could include tax information, it would not be appropriate to require them to be as open as the amendment would necessitate, which is why we have made specific provision, for example, to protect legal professional privilege and the definitions and uses of restricted information.

Lord Higgins

My Lords, I have difficulty relating the first part of the response of the noble Baroness to the second part. As regards openness, I would have thought that that applies equally to the FSA, not perhaps with regard to tax information, but certainly with regard to a number of other matters. I do not believe that anyone has suggested that similar provisions for the FSA have been unworkable. I do not understand why she believes it is unworkable.

Baroness Hollis of Heigham

We do not disagree that in terms of the amendment this is an appropriate description of how the board should operate. As I said, in that sense it is apple-pie stuff: being efficient, economical, resourceful, full of integrity, and so on. The point is that within the framework of general administrative law, that is how an NDPB must operate; those are its responsibilities; those are its requirements; and those are its controls. Therefore, the only difference between us is whether or not we spell it all out on the face of the Bill. We say that that is not necessary because that is already the framework within which that body must operate.

As regards the FSA, the difference is that the FSA is a statutory body; it is not an NDPB. It has power to make its own legislation; it is not accountable to Parliament in the usual way; and it does not come within the framework of general administrative law which is the vocabulary, the language, the narrative, if you like, within which those bodies will operate. That is the basic distinction. It is a distinction that was explored earlier this evening.

I assure noble Lords that I do not believe that there is any difference in principle between us. We do not believe that this is necessary on the face of the Bill because to perform its duties properly and diligently it has to perform exactly in the way described by the noble Lord, as general administrative law requires it to do.

Lord Higgins

My Lords, why did the Minister say that it was unworkable?

Baroness Hollis of Heigham

My Lords, we could have fun with some of the words in this clause; for example, the need to minimise any adverse effects that may arise from anything done in the need to discharge of those functions". One could have questions about conflicting interests between various parties, the need for openness with regard to its activities—we have problems there with tax information, and so on, which again would probably make it unworkable—and legal provision information. If the noble Lord really wants me to, I could have a go at most of the paragraphs of the amendment. However, I do not believe that the amendment adds anything to the way in which, subject to general administrative law and good practice, the regulator and the pension protection fund are required to operate. I suppose I think it is redundant.

Lord Higgins

My Lords, I do not find that to be a satisfactory reply, even at this hour of night. The noble Baroness has not explained her opening remark that the provision was "unworkable", which is the kind of phrase which ministerial drafts tend typically to use. She has not demonstrated how it is unworkable; still less has she demonstrated why the FSA finds that its provisions are unworkable. I really think that there is a fairly close analogy with regard to that.

Having said that, I would not wish to pursue the matter this late at night. However, I shall wish to consider it rather more carefully again. I thought the Minister gave an unsatisfactory answer. There is a case for giving the provision a statutory framework, rather than leaving it to be decided after the matter has passed into law. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Lucas moved Amendment No. 133:

Leave out Clause 110.

The noble Lord said: My Lords, we had a long discussion in Grand Committee about this rather strange and unusual arrangement for a non-executive committee. The noble Baroness assured us that there was a precedent in government that worked beautifully, but that she would go away and check that that was so and that everything was tickety-boo. I think that the Bank of England is the only example of this arrangement having been perpetrated in the UK. I should very much like a report from the noble Baroness on her researches. I beg to move.

Baroness Noakes

My Lords, I should like to say a couple of things before the noble Baroness replies. Since we discussed the matter in Grand Committee, I have gone away and looked again at the two examples that were quoted: first, the Bank of England; and, secondly, the FSA. The FSA has a rather restricted set of functions for its non-executive directors. If you look at its annual report you will find absolutely no mention of it. The FSA operates itself as though this requirement for a non-executive committee does not exist. You can find in an obscure bit of the website a typed-up government statement that there is a non-executive committee which repeats the Act, but it appears to have no impact whatever on how the FSA operates.

It is some years now since I was associated with the Bank of England, but in its annual report there is a governance and accountability statement which explains how "Nedco"—the non-executive committee—actually works. As I explained to the Grand Committee, Nedco is chaired by its senior non-executive and has the executive to the bank in attendance. The court then meets. Both meetings—Nedco and court—have the same people. They do not have separate people, so the concept of Nedco as a separate organisation has no meaning in the Bank of England. The final sentence in the particular paragraph in the Bank of England's annual report for 2004 says that, from time to time Nedco has a private meeting without the executive present to consider matters such as its own annual report". The net effect of all that is that the Bank of England operates as though the Act did not exist. It does not have a separate non-executive committee in any meaningful sense at all.

This grand experiment was brought in post-1997. It does not exist throughout the public sector and did not exist before 1997. It was brought in only by those bodies that the Treasury had significant influence on in the early days of the Labour Government.

I suggest to the Minister that this experiment has been a failure and should not be visited on all future bodies that are created by government. We should go back to unitary boards, which has been the conventional model for all public sector bodies for as long as I can remember.

Lord Higgins

My Lords, I very much agree with my noble friend. We discussed this matter at some length in Grand Committee. I think that the effect of creating this sort of subgroup tends to be divisive. On balance, we think that it would not be appropriate to go down that route. I agree with my noble friend.

Baroness Hollis of Heigham

My Lords, the first question asked of me was what research we have done. Basically, that was the research that I was going after. I was just checking back on what I said in July. I am certainly willing to seek advice and briefing on the effect on the Bank of England, but in all the briefing that I have read, I am led to believe that NDPBs, as they are now developed by government, will proceed down that road, unless there are very good reasons to proceed otherwise and that that is where best practice lies, as based on both the Higgs report and the report on corporate governance.

I know that it is late at night and, in any case, I defer to the Baroness, Lady Noakes, who has served as a non-executive director of the Bank of England, but I have briefing here on the Bank of England structure that suggests that this is an appropriate model for us to follow.

As I said, we discussed it at great length and there was perhaps more common ground between us than has been acknowledged. I hope that, as a House, we can agree that, first, as a body corporate, the PPF needs a unitary governing board that is empowered as a whole to make decisions on the strategic direction, management and finances of the organisation.

Secondly, I hope that we agree that the role of the non-executive members of the board is distinct from that of the executives and should be recognised as such. Thirdly, I hope that we agree that the PPF is a new kind of organisation with an especially sensitive remit. Therefore, as I say, we have produced a structure that we believe is consistent with the Higgs report and the Combined Code on Corporate Governance. We think that the non-executive committee will have a key role to play: for example, in the strategic direction of the board; in ensuring that the board meets its objectives while ensuring that its financial affairs are properly controlled; and in monitoring the board's adherence to its reporting requirements to the Secretary of State.

We think that the board's performance will therefore be strengthened by having a formalised non-executive committee, but we see that very much as complementing and not subverting the meetings of the board as a whole. That is better for transparency than having an informal system of get-togethers among non-executive members that would not be guaranteed to encompass all the roles that we envisage, and where they were not required to account for their actions in the board's annual report—for example, in scrutinising performance.

I could go on, but I did what I said I would do, which is to research the structure of the Bank of England. I am led to believe that that was an appropriate model for us to follow. The noble Baroness shakes her head; she may be right. I would not wish to engage in hand-to-hand fighting about the Bank of England, for she has infinitely greater experience of this than I, but all the guidance that we are now receiving from both the Higgs report and the combined code suggests that this is the way to go. That is why I fear that the Government have not heard anything tonight or in Committee to suggest that we should change our mind about the clause.

Baroness Noakes

My Lords, before the noble Baroness sits down, she asserted that Higgs, which was earlier asserted to be completely irrelevant to the bodies under this Bill, supports this structure. It does not. Higgs merely requires the non-executives to meet once a year to consider the chairman's performance and to meet the chairman—who, of course, is not a non-executive—to consider the chief executive's performance. There is absolutely nothing in Higgs that requires the non-executives to meet for any other purpose. Indeed, anything else would be wholly contrary to the unitary board that is a prized and central feature of our corporate governance in this land. I do not know what the Minister's officials are telling her about Higgs, but it is not true.

Lord Lucas

My Lords, I hope that my noble friend and I will be able to persuade the noble Baroness that this is an issue that we should take seriously on Third Reading. It is daft to allow this to go on. In the two instances in which it has been tried, it does not work. As it is structured, it will be nothing but a hindrance, to the extent that it is employed at all, to maintaining a unitary and effective board. One can take some comfort from the fact that the two organisations have survived with it, but that is absolutely not the way to go and if we let this go on to be a precedent it will crop up again and again until, at some point, it does some real damage. Clearly, this amendment as drafted does not pick it up in all the right ways. Until Third Reading, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Evans of Temple Guiting

My Lords, I beg to move that consideration on Report be now adjourned.

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

House adjourned at ten o'clock.