Lords amendment: No. 416.

I beg to move, That this House
disagrees with the Lords in the said amendment.

With this we may discuss Government amendment (a) in lieu, thereof

I am sure that if Sir John Butterfill had had the opportunity to hear my arguments on the last group of amendments, he would not have felt it necessary to vote against them and use up still more time.

In the other place, clause 287 was amended on the subject of the funding of the financial assistance scheme. Lords amendment No. 416 requires that the FAS is paid for entirely from public funds and not in part or in full by way of a charge, levy or contribution from the private sector. I accept the spirit of the amendment, to the extent that imposing any sort of compulsory charge, levy or contribution on the private sector does not figure in our plans for the FAS. Indeed, my noble Friend offered repeated assurances in the other place that we will not impose such charges. That is just as well, because we do not have powers to do so under clause 287.

The amendment made in the other place has, however, a second and much more unwelcome effect. By prescribing that the FAS should be a scheme for making payments entirely from public funds, the amendment disables the FAS from receiving voluntary donations from the private sector. Because the FAS will increase confidence in pensions and will benefit the industry as a whole, we feel that it is right to keep open the option of obtaining voluntary financial contributions from the private sector. We are most grateful for the valuable assistance in kind offered by the pensions industry to date, both in sharing its expertise through the FAS industry working group and in supporting the data collection exercises that enhance our understanding of the problems that the FAS must address. We maintain a firm hope that the industry will further support the Government's leadership in assisting the individuals and we believe that it has a strong interest in doing so.

So far, has any company, industrial organisation or other body or individual indicated in any shape or form that they are remotely intent on making any voluntary contributions to the fund?

The hon. Gentleman knew the answer to that question before he decided to put it on the record. My point is that we should leave open the possibility that we might receive contributions from the private sector, because it will have a strong interest in providing them. As it stands, the Bill would shut the door in the face of anyone outside the Government who is willing to support our commitment to help the victims of pension wind-ups. That will ultimately reduce the potential level of financial assistance made available to those individuals, which none of us wants—although, sadly, we have seen attempts to vote out many aspects of the Bill, which could put that at risk.

I urge Members to disagree with the Lords in their amendment and to support our substitute amendment, which makes it explicit that regulations under clause 287 may not impose a levy or charge on anybody for the funding of the FAS. It does not, however, rule out voluntary contributions to the fund. I hope that Members will support that approach.

Although I am not sure that the word "concession" passed the Minister's lips, this is in fact another concession from the Government, for which we are grateful. I do not anticipate a Division, because we accept the Minister's comments on the drafting and technical points, and that his version may be an improvement on that proposed by the Lords.

The background to the concession is important, however. We all know that a situation had developed in which it became clear that more than 60,000 people had lost all, or a large proportion, of their pension rights and there was a mounting cross-party campaign on the issue. The Government were faced with a dilemma. They had set their face against doing anything more, but it looked increasingly as though they would be defeated in the House by a combination of the Opposition parties and Government Back-Bench rebels. So they probably panicked, but then, at the last minute, they cobbled together the so-called financial assistance scheme and produced the magic figure of £400 million.

Many people have tried to find some justification for that figure and the basis on which it was arrived at. We have yet to find the envelope on the back of which it was sketched out, but it is perfectly clear that it was the amount that the Treasury was prepared to make available. As the then Secretary of State said:

"The Government will therefore make available £400 million of public money . . . with the possibility of further contributions from industry."—[Hansard, 14 May 2004; Vol. 421, c. 32WS.]

A few days later, the Minister for Pensions said:

"It is open to industry to offer further support. We hope that that support will be forthcoming."—[Hansard, 19 May 2004; Vol. 421, c. 983.]

The Minister who has just opened this debate was not entirely clear in his answer to my intervention, but I think we can take it that from that day to this no one—but no one—in industry has come forward to say that they might even consider making any kind of offer to top up the £400 million, exactly as we predicted at the time. That particular fig leaf has, sadly, been torn away from the Minister—[Interruption.] I do not want to go too far down that road; it is nearly dinnertime.

Following that announcement in the middle of May, the whole credibility of the FAS has been systematically crumbling, partly due, it must be said, to friendly fire from the Government. There has been a series of leaked announcements about the people and situations that will not be covered by the FAS. We have seen a consistent retreat from the package. I can understand why Ministers might want to do that; it was clear from the start that the sum was woefully inadequate to meet the needs, especially in the cases put forward genuinely and often with passion by Back-Bench Labour Members representing their constituents.

It has been indicated that solvent wind-ups will not be included in the package, even though it is impossible to make out the moral distinction between workers who have lost everything due to a solvent wind-up and those who have lost due to an insolvent wind-up. There is also the so-called gap year. Ministers or officials let it be known that, because they had changed the priority order, there was to be a period between May 2004 and April 2005—when the PPF is supposed to come into force and open its doors; at the present rate, the queue will stretch round the building—during which people would not be covered by the FAS.

That position was clearly unsustainable so the Department found another wheeze: to throw some of the liabilities forward into the PPF itself. The crucial thing we have to remember about the amendment is that, basically, it is recognising the inevitable: there is no way that industry will make contributions. Although we must let Ministers retain a certain amount of dignity, no one ever seriously expected them to impose a further levy, on top of all the other imposts they are intending to make on good, well-run companies and pension schemes, but they had that forlorn hope that people would be queuing up to give them the money. It is clear that that will not happen.

All sorts of things have happened to the Bill, bits have fallen off and new bits have been added, but one of the few wholly consistent themes running run through it from start to finish—like the word Blackpool through a stick of rock—has been that the PPF will not be retrospective. In fairness, the official Opposition and, I think, the Liberal Democrats, too, have always accepted that principle. The analogy, much overworked in various debates, is that one cannot insure one's house against fire after it has already burned down. Members on both sides of the House have accepted that the PPF, funded by the levy—going forward, in a phrase that the Minister has used more than once—cannot consider settling claims that have arisen by the date that it opens its doors; yet the other day, very quietly, under the cover of departmental questions, in which the matter received no mention at all, under the cover of a debate in the Lords on these very issues, in which it received no mention at all, not even as a footnote, the Minister put out a short statement, indicating that—surprise, surprise—some schemes that got into difficulties during the so-called gap year could fall within the PPF's responsibilities.

Since then, attempts to explain that statement have taken two separate directions. The Minister in the Lords, Baroness Hollis, made the point that there had been considerable media interest in the Minister's statement and said that she wanted to reassure the House. She continued:

"The Statement made on Monday simply confirmed how existing provisions in the Bill would apply . . . The position has not changed . . . the PPF has not, and cannot, become 'retrospective'."—[Hansard, House of Lords, 15 November 2004; Vol. 666, c. 1212.]

That seems fairly clear. However, on the day that the announcement was made, it became clear that, as is their wont, the Government had spun it to the newspapers. The spin put on it by a Government spokesman was that this was good news—the Minister used that very phrase in an earlier debate this afternoon. Indeed, it was good news, especially in the context of the Turner and Newell pension scheme.

I know about the Minister's reluctance to talk about that scheme; that is perfectly understandable and we wish it well. We all hope that its difficulties will be resolved in due course. The way things were put, however, meant that people in that position—perhaps I can stop referring to that particular scheme, and instead refer to "those in that position"—[Interruption.] The Turner and Newell scheme is a useful reference point, not least because it involves some 40,000 people and a shortfall of nearly £900 million on paper, so it is not exactly insignificant, but my point is that there must be a series of much smaller schemes that are in the same kind of no man's land, or what was no man's land until the Minister's statement clarifying the position. The indication is that the position has changed for people in that unfortunate situation. So which is right—the version in the Lords, that the statement changes nothing, or the version from the Minister of State to the effect that it does make a change, and it is good news because it is helping people in such a position?

I hope that when the Minister responds he will take the trouble to explain—I have tabled a parliamentary question on this subject because I think that it is sufficiently important—what estimate the Department made, before it issued that statement, of any extra liabilities that were likely to fall on the PPF as a result of that statement, or clarification if they prefer to describe it as such. That is an important question, to which the House deserves an answer.

What is at issue actually goes further than that, because it is suggested that we have had a tacit acceptance by Ministers that the £400 million fund is inadequate for the purpose, and hence this attempt, as I have said, to throw forward liabilities on to the PPF, completely contrary to the entire philosophy underpinning the Bill.

Many Members of the House will be familiar with the work of Dr. Ros Altmann, who has done sterling work over a long period in trying to help the now 65,000 or more people who have lost their pension rights through no fault of their own. She has done some number crunching, which actually does not tell us anything very new because I do not think that anyone, except possibly Ministers, actually believes that £400 million is remotely enough to compensate those people. Indeed, the Secretary of State admitted as much the other day in questions when he made a very clear distinction between assistance and compensation. One thing is very clear: there will be a large gulf between the benefits that people will receive under the PPF and the assistance that they might receive under the FAS. Let no one be in any doubt about that.

I am waiting with bated breath to hear what sum of money the Conservatives will put into the FAS to rectify the faults that he is now picking on.

I have never known what bated means, but I hope it is not painful. If the hon. and learned Lady will bate her breath just a little bit longer, I will come back to the point that she very reasonably raised.

I return to the point that I was discussing. Dr. Ros Altmann has done some figures, and on her calculations, the £20 million a year that the Government are proposing to put into the FAS would buy a pension of £6,000 a year for 130 people. Compare that to 65,000 people who we know for sure have lost a large proportion or all of their pension rights. And for many people, £6,000 does not begin to compensate for what they have already lost. Let me repeat: on Dr. Altmann's calculations, 130 people might be assisted.

I think, in fairness—I am not trying to pre-empt something that the Minister may want to say—one must add to that any remaining assets of those funds that would be carried into the FAS, in the same way as I assume they would be carried through into the PPF when that is up and running, but by definition those assets are inadequate for the purpose of paying pensions and buying annuities under the current system.

Is it not strange that before the announcement of 14 May, the mantra we consistently heard, over and over again from Ministers, whether in Opposition day debates or departmental questions, was that they did not want to raise false hopes? I am afraid that the charge now is that on 14 May they did precisely that; they raised false hopes by cruelly making a lot of people think that they were going to be compensated for the pension they had lost.

I think it is somewhere in Sherlock Holmes that there is talk about the dog that did not bark, but I think this is more a question of the dog that stopped barking, by which I mean those Labour Back Benchers who have been so persistent and vociferous in pursuing the interests of their constituents who have lost their pension rights. They have largely, if not entirely, fallen silent. These are intelligent Members of Parliament, who, I hope, display a cynical disbelief in what most Governments have to say, so it cannot be, I trust, that they believe that the £400 million will be enough.

While my hon. Friend is talking about cynical disbelief, may I point out to him that the effect of the Government amendment to the Lords amendment is that it does not rule out private contributions as long as they are voluntary, but of course there are various ways of ensuring that one might get voluntary contributions, such as a great deal of arm twisting? Has it occurred to my hon. Friend, for example, that it might be rumoured that the Government were thinking about new tax changes that would affect the industry, but of course if members of the industry were to make voluntary contributions, that might become unnecessary? Should we not therefore reconsider whether we support the Government amendment?

My hon. Friend makes a very good point. There are sectors where the Government might have more leverage, such as the defence sector or any sector where the Government are the customer. Computer procurement and IT might be another area.

There is another example in this very sector, and that is of course the banks. They were asked whether they would contribute to the costs of the universal bank that the Government were setting up through the Post Office and the Department of Trade and Industry. When the Minister uses the phrase "obtain a voluntary donation", that is exactly what happened; the banks were strong-armed into making that donation. I would not be at all as sanguine as my hon. Friend is about the effect of Government amendment (a). I hope that he will start opposing it soon.

My hon. Friend makes another very good point. All I can say is that, so far, the arm twisting has clearly failed to produce any results.

I was just touching on the fact that all the noise and fury we heard from Labour Back Benchers stopped, in effect, on 14 May and we have heard very little from any of them since. It cannot be because they believe that the £400 million is adequate, but could it be that, with an election looming, they realise that it is not in their interests to rock the boat? Is that the real purpose of the £400 million and the announcement of the FAS on 14 May?

I return to the point raised by Vera Baird. She knows what I am going to say, but let me say it anyway. We do not believe in using yet more taxpayers' money to make the FAS workable. We have long borrowed the proposal, originally made by Mr. Field, to use unclaimed assets. Despite the Secretary of State's round abuse of that idea—put forward by his own Chancellor—until relatively recently the mantra of the Treasury was that just because assets are unclaimed does not mean that they do not belong to somebody. Then suddenly, in the small print of the last Budget, we saw that unclaimed assets were suddenly available but for a different purpose. My understanding, having met the British Bankers Association among others, is that those proposals are continuing and are going forward, and we expect, because I was told so in a reply to a question the other day, that we shall have an update on that policy in the pre-Budget report.

A respected body—the Unclaimed Assets Register—stands by its estimate that there are £15 billion of unclaimed assets in this country, and it is estimated that some £3 billion of pensions remain unpaid every year. The Government trouser vast sums in unclaimed gilts and national savings; they simply put that money in their own pocket because no one has claimed it. So a variety of different pots of unclaimed assets are available. In Ireland, such assets are disposed of for charitable purposes.

There must be proper safeguards—I shall not discuss them in detail today, although I hope that we will hear more about them when the Chancellor reports on his own pet project for unclaimed assets—but when the next Conservative Government take office, possibly in May next year, I hope that we will find a new, finely honed, glossy fund, produced under this Government, for claiming unclaimed assets and putting them to good use, and one of the good uses to which we intend to put them is providing compensation over and above the existing £400 million to the people who have lost their pension rights.

In the unlikely event that you are in government come next May, what payment would you take from—

Order. The hon. Gentleman must use the correct parliamentary terms. I think it most unlikely that I will be in government next May, whatever happens.

We would have to look at that at the time. Let me finish the paragraph if not the sentence. We still have not got from the Government the details of how their scheme will work. What is the level of benefit? How will it be paid? Who will be excluded and who will be included? The one thing that will certainly not happen this side of next April, at the earliest, is that anyone will see any money. Again, that seems extraordinarily convenient.

Is the hon. Gentleman saying that the Tories would not put a penny of the Government's money—the taxpayer's money—or anyone's money, apart from the unclaimed assets about which there is strong argument, into trying to save all the 65,000 people who have lost their pensions? Is he making it clear that the Tories would not give them a penny piece?

Let us be clear on two issues. First, the £400 million is already part of the public expenditure figures. We would take that over, and I am talking about topping it up to a realistic figure by the use of unclaimed assets. Secondly, the only argument about unclaimed assets is going on within the Government between the Chancellor and the Secretary of State for Work and Pensions, who has expressed tremendous independence and freedom of thought since he took over, but I am sure that people in the Department will eventually beat that out of him. They are the ones who are arguing, not us—we have said all along that those assets are available. The only argument is between the Treasury and the Department for Work and Pensions.

We accept—I do not want to seem entirely churlish—that the Government have made a concession. They have had to recognise the wisdom of the Opposition's arguments. We also accept, as I said at the start, what the Minister says about the drafting and technical issues on these amendments.

The purpose of Lords amendment No. 416 was to ensure that private funds were not required to top up the inadequate sums in the financial assistance scheme, and I am perfectly happy to accept the principle that Government amendment (a) will do so rather more effectively than the Lords amendment. In the unlikely event that such a contribution was freely given—I understand the comments made by Sir John Butterfill—it would be slightly absurd if statute prevented that money from being accepted into the financial assistance scheme, so the change is sensible.

The very fact that the Government said that private contributions might be part of the package proves that £400 million was not enough. If £400 million were enough, extra money would not be needed from the private sector to make it up to a decent level. Indeed, that money would be turned away as excessive and unnecessary—so the £400 million is inadequate.

There has been an important development this afternoon with regard to the prospects of the people who will come under the financial assistance scheme getting justice. The parliamentary ombudsman announced this afternoon that she will investigate the alleged maladministration of several Departments, including the Department for Work and Pensions, leading to the loss of those workers getting a fair deal. I wrote to the ombudsman last May to ask whether, in principle, she would investigate. I met her, together with Dr. Ros Altmann, who was mentioned by Mr. Waterson, and members of a pensioners action group in July. I and other Members, including the hon. Gentleman, have made submissions to the ombudsman. I am delighted that she has confirmed that she will investigate, because that seems increasingly likely to be the only way that the workers covered by the financial assistance scheme will get justice.

The Minister for Pensions, speaking at the weekend, appeared to be rather surprised that the private sector had not come up with some cash to top up that inadequate fund. We need to understand just how inadequate that £400 million is. It inevitably sounds like a lot when added up over 20 years. If my overdraft was added up over 20 years, it would look even more terrifying. We are talking about £20 million each year. In the context of a departmental budget of £100 billion a year, the Government are putting in 0.02 per cent. of the Department's budget. That is clearly not enough. When the scheme was proposed, the figure of £400 million was presumably based on the assumption that schemes that went to the wall in the infamous gap year would not be covered. Assuming that the scheme was not adequate on that basis, it is clearly even more inadequate now.

The key point with regard to Government amendment (a) is that, even if the sums were to come from the private sector, they are likely to be extraordinarily limited in scope. Even if the private sector were to become extraordinarily generous, it will not begin to touch the millions of pounds of underfunding. The best estimates are that £20 million a year over 20 years should have been perhaps £75 million a year over 40 years. The idea that the private sector might come up with £50 million every year for 40 years to bail out an underfunded scheme seems wholly implausible.

Although we shall reach the end of our consideration of these amendments to the Bill in a few moments, we shall still end up in a wholly unsatisfactory situation, with a huge hole in the financial assistance scheme. Government amendment (a) will allow the possibility of the private sector bailing the Government out, but no one seriously expects contributions of anything like the necessary level and the people who will lose out are those workers who trusted Governments of successive parties, who believed that their company pensions were safe and who have been cruelly let down. I am afraid that the financial assistance scheme is wholly inadequate to deal with that problem.

I agree with Mr. Webb on one point: £400 million will certainly not be adequate. It was always a fairly suspicious figure—suspiciously divisible by 20. That is the real explanation. The figure will not be enough, but I caution my hon. Friend Mr. Waterson on thinking that it can be simply topped up from unclaimed assets. If he has talked to the banks and the British Bankers Association, he will know that the pot of gold of unclaimed assets may not be quite so large as he thinks. Those assets are certainly very difficult to define in statute. I am not at all sure that the Conservative party should be in the business of expropriation, but that is for my hon. Friend to justify in the necessary legislation.

I was broadly in favour of Government amendment (a) until the Minister was honest enough to explain it. Until he made it absolutely clear that not making provision for any levy or charge left open the opportunity of obtaining voluntary donations, I was on his side, but it is now clear what will happen. Those in the pensions industry will be told that extra taxes and regulations will laid on them, unless they feel obliged to make those voluntary donations. The phrase "obtain voluntary donations" is sufficiently chilling for us to encourage my hon. Friend the Member for Eastbourne, who speaks from the Opposition Front Bench, to oppose that amendment.

When the programme of assistance was first announced, the Government said that they would get voluntary funding from the industry and, at that time, I asked what was meant by "the industry". If it means other insurance companies that may handle the pensions of individuals, such funding can be obtained only to the detriment of those who save with the people providing their personal pensions. If it means the companies that are paying for final salary schemes for their employees, such funding could be obtained only to the detriment of those companies and their employees. If the Minister means the trustees of existing pensions funds, they would be in breach of their fiduciary duty if they made contributions.

The only reason why the Government have changed the wording inserted by the Lords is so that they can engage in the arm-twisting that my hon. Friend Mr. Fallon has just described. It is entirely likely that that will happen. That has happened on many occasions in different instances, and we will be deluding ourselves if we do not believe that it will happen now. I urge my hon. Friend Mr. Waterson to reconsider his opinion. I, for one, will be voting against amendment (a).

The House and the thousands of people looking to the financial assistance scheme and the PPF to assist them in what is a real tragedy for many of them will see through the position taken by Mr. Waterson. The House will remember that he voted to decline to give a Second Reading to a Bill that establishes the PPF. He now tells us that the financial assistance scheme is, in his words, "woefully inadequate", but he would not he tell us how much he would put into the scheme and he would not allow us to obtain contributions from the private sector. It is clear that the position that he has taken throughout is to talk down the PPF and to talk down the extra protection in the Bill. Now, he is talking down the financial assistance scheme, to which thousands of people are looking to help them out of the tragedy that they face.

Lords amendment disagreed to.

Motion made, and Question put, That amendment (a) in lieu of Lords amendment No. 416 be made.— [Mr. Pond.]

I think the Ayes have it.

No.

What does the hon. Gentleman wish to do?

I want to vote against Government amendment (a).

I shall put the Question again.

Government amendment (a) in lieu of Lords amendment No. 416 agreed to.

Lords amendment No. 417 disagreed to.

Government amendment (a) in lieu of Lords amendment No. 417 agreed to.

Remaining Lords amendments agreed to [some with Special Entry].

Motion made, and Question put,

That a Committee be appointed to draw up Reasons to be assigned to the Lords for disagreeing to their amendment No. 359; David Cairns, Margaret Moran, Mr Nigel Waterson, Mr. Steve Webb and Malcolm Wicks to be members of the Committee; Malcolm Wicks to be the Chairman of the Committee; Three to be the quorum of the Committee; Committee to withdraw immediately.—[Margaret Moran.]

The House divided: Ayes 354, Noes 148.

Question accordingly agreed to.

Reasons for disagreeing to Lords amendment No. 359 reported, and agreed to; to be communicated to the Lords.