The Personal Accounts Delivery Authority

10:30 am
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Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)

I beg to move amendment No. 16, in schedule 6, page 59, line 13, leave out from ‘contain’ to ‘of’ in line 14 and insert—

‘a majority of persons who are either members or employees’.

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Roger Gale (North Thanet, Conservative)

With this it will be convenient to discuss amendment No. 17, in schedule 6, page 59,line 18, leave out paragraph 10.

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Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)

Good morning, Mr. Gale. I shall deal briefly with the amendments. May I say at the outset that they are not at the epicentre of the Opposition’s strategy on the Bill, in case the Minister was worried? They deal with two small points—you might even say they were niggling if you were in a churlish mood, Mr. Gale—and probe the Government’s position on committees.

Of course we accept that the delivery authority will have committees, and possibly even sub-committees. I cannot remember the Minister’s exact phrase, but he said in an earlier debate that the system would be “lean and mean”. It will be a smallish, focused body if it does its job properly, and it will have a relatively short life. It therefore seems a little counter-intuitive for it to be weighed down by a system of committees and sub-committees. The point behind amendment No. 16 is therefore simple: the requirement that

“at least one person who is either a member or an employee of the Authority”

serve on a committee will not necessarily provide the control over burgeoning bureaucracy that we seek. The probing amendment proposes that a majority of committee members should be members or employees of the authority, so that they can control matters and ensure that any relevant outside expertise is drawn into the committee.

Paragraph 10 would be removed by amendmentNo. 17, because committees are one thing and sub-committees are quite another. We hope that the authority will not become a burgeoning leviathan—it should have a short, focused life if it does its job properly.

The Minister for Pensions Reform (James Purnell) rose—

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Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)

I am fascinated to hear what the Minister has to say in defence of the blatantly bureaucratic provisions in the schedule.

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James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

May I say what a pleasure it is to serve under your chairmanship, Mr. Gale, and to have a majority of the Government Members in attendance to discuss amendments that could be described as important or, indeed, niggling? As we have said a number of times—in fact, ad nauseam—the Bill establishes an advisory authority, bringing on board relevant knowledge and professional expertise. Are visual aids allowed in the Committee, Mr. Gale?

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Roger Gale (North Thanet, Conservative)

Order. There is something called the Nelson touch, Minister.

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James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

As a normal part of its governance arrangements, the authority will set up audit, remuneration and nominations committees. We are making provision, too, so that it can set up other committees and sub-committees. The board needs maximum flexibility both to draw on relevant skills and expertise and to set up committees when it believes that it would be helpful to do so. The main purpose of setting up the delivery authority is to bring in such skills, so restricting the board’s ability to set up committees and sub-committees would reduce that flexibility.

I do not know what else I can say to reassure the hon. Member for Eastbourne. We want to bring in advisers so that the authority can do its work, and its normal work requires the establishment of committees and sub-committees, including remuneration and audit sub-committees. Some of them may not require a majority of people from the board; for example, a committee on socially responsible investment may want to advise the authority and would not necessarily need a majority of people from the authority. The schedule provides the right level of accountability by requiring at least one member to be appointed from the authority. Unless the hon. Gentleman wishes me to give him further comfort on specific matters, that is as much as I can say, so I urge him to withdraw the amendment.

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Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)

That was a pretty feeble set of arguments, but I am in a magnanimous mood, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)

I beg to move amendment No. 18, in schedule 6, page 62, line 28, at end insert—

‘18A Such grants shall be classified as—

(a) policy grants; or

(b) operational grants.

18B (1) Policy grants shall be used in support of the Authority’s work on advising on preparing for the implementation of, or the modification of, any relevant proposals about personal accounts.

(2) Policy grants shall not be made more than two years after the commencement of this Act.

18C Operational grants shall be used in supportof the Authority’s work in preparing for the implementation of proposals for personal accounts.’.

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Roger Gale (North Thanet, Conservative)

With this it will be convenient to discuss amendment No. 19, in schedule 6, page 62,line 34, at end insert—

‘(2A) A statement under sub-paragraph (1)(b) must show separately the purposes to which policy grants and operational grants have been applied.

(2B) A statement under sub-paragraph (1)(b) must show the interest charges that would have accrued on the operational grants if they had been loans taken out at commercial rates of interest.’.

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Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)

These amendments, too, are relatively modest, but there is a serious purpose behind them. They were tabled at the behest of the Association of British Insurers, and with its encouragement. Together, they are designed to tackle the possibility of cross-subsidisation in the setting up of personal accounts.

The ABI says that it is vital that there is a level playing field between personal accounts and existing workplace provision. It points out the danger thatthe Government could subsidise the setting up and administration costs of personal accounts by omitting to impose strict limits on the funding for the delivery authority. It argues, too, that Government subsidies for personal accounts would undermine existing provisions and be unfair on taxpayers, employers who provide good schemes and the workers who pay in to them. I shall have more to say later this morning about the effect of the proposals on existing pension provision, so I shall not develop that argument now. The ABI says that the purposes for which state funding to the delivery authority are used should be strictly limited to policy functions in designing the shape and structure of personal accounts.

The regulatory impact assessment states that£21 million has been set aside for the delivery authority. Can the Minister confirm that that is the limit of the taxpayer’s commitment to the delivery authority? If not, under what circumstances would it change during the authority’s relatively short life? The Bill gives the Secretary of State the power to make grants to the authority, but it does not set limits on what parts of its work can be funded by the Government. The vast majority of the expenditure on setting up and administering personal accounts will occur after the next Bill is enacted in due course, but both the ABI, representing its many members, and the Opposition would like the Minister to give a commitment today that there will be no state subsidy of personal accounts.

Amendment No. 19 deals with the separate but related issue of the delivery authority borrowing at commercial rates to cover set-up costs in the early years of the scheme that are not covered by the charges. That is a fall-back position, and I hope that the Minister will tell the Committee that, in the absence of a wholly unexpected and unforeseen occurrence, the £21 million will adequately cover all the authority’s costs during its lifetime and that the ongoing cost of operating the personal accounts system will be a matter for its successor body. I hope that I have set out clearly the nature of the amendments which, as the ABI says, are designed to produce a level playing field, and are not gratuitous measures designed to make life difficult for the delivery authority.

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James Purnell (Minister of State (Pensions Reform), Department for Work and Pensions; Stalybridge and Hyde, Labour)

This is an important debate, but it mostly concerns the next stage in the development of the delivery authority. At this stage, the authority will  merely advise the Government, so the question of spending costs on personal accounts is theoretical, not practical. It is important that we debate this matter, however, and at the appropriate time, it is important that the delivery authority and the personal accounts board comply with state aid rules and measures laid down by the Treasury on the use of public money in such situations so that they provide value for money for the taxpayer.

I hope that I can reassure the hon. Member for Eastbourne that those matters will be looked at properly after they are flagged up in the consultation on the White Paper, and during consideration of the next Bill. However, in the authority’s current phase, the key issue is what kind of work it does. It will give us advice, so it is right that that worked is funded by grant in aid. The Government’s intention is that in the long term the operation of personal accounts should be self-financing. In the short term, until revenue from scheme members’ contributions is available to cover operational costs, the setting up of personal accounts will need to be financed. Work is under way to evaluate which costs should be charged to members, but at this stage, it would not be inappropriate to use taxpayers’ money for the development of personal accounts policy.

Turning to the amendments, the authority’s spending is solely on the delivery of advice, so it is not necessary to classify grant payments as either policy or operational—I am not even sure that that is possible in practice—and it is not necessary, either, to calculate notional interest charges on those payments. Given that that is the case, and given the fact that it is normal and accepted Government accounting practice, the delivery authority will be funded by a singular grantin aid payment. The details of the arrangementsfor the payments will be confirmed in a financial memorandum to be agreed between the authority and the Department. Like other non-departmental public bodies within the Department for Work and Pensions, the delivery authority is required to report annually on its performance and financial position, including coverage of the purposes for which the singular grant in aid payments have been used. In its stewardship role, the Department will regularly review the expenditure and funding requirements for the delivery authority; annual accounts will be laid before Parliament and will be open to scrutiny. The hon. Gentleman makes a point that, like many of the points that we shall debate this morning, is important to the next phase of personal accounts. I hope that, with those assurances, he will withdraw the amendment.

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Nigel Waterson (Shadow Minister, Work & Pensions; Eastbourne, Conservative)

Those are important points, but not as important as those that we about to come on to, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 6 agreed to.