Temporary restriction on the purchase of annuiities

Orders of the Day – in the House of Commons at 2:49 pm on 25 July 2007.

Alert me about debates like this

Lords amendment s : No. 22B. 22C and 22D

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions 2:59, 25 July 2007

I beg to move, That this House
agrees with the Lords in the said amendments.

We agree with the Lords amendments. We have only a short time for the debate, so my opening remarks will be brief. I hope that I will secure the consent of the House to respond to the points raised and that we can discuss post-legislative scrutiny in the time allotted.

The House disagreed with Lords amendment No. 22 on annuitisation because the draft would have had undesirable effects. Subsequently, the other place did not insist on it. However, the Government had some sympathy with the aim of the amendment and accepted amendment No. 22B from the Opposition in its place. We were persuaded by the arguments.

The background is that in this House last week I announced that the cost of extending the financial assistance scheme to give pensioners more might be met by better use of the assets remaining in pension schemes, in accordance with the recommendations of Andrew Young, along with a matching contribution from the Government. I am sure that hon. Members will welcome my noble Friend Lord McKenzie's announcement yesterday that we have decided to accept the Young review's recommendation that we should not enforce a cut-off date for employer insolvency. The cut-off date of 31 August 2007, announced by my right hon. Friend James Purnell, now Secretary of State for Culture, Media and Sport, will not be enforced. We will consult on whether there should be any cut-off date and introduce regulations in due course.

As I said last week, we wrote to trustees to urge them to consider very carefully whether purchasing annuities is in the best interests of their members. That might well have been enough, but we accept that reinforcing that message in law has some merit. Therefore, we will take powers to prevent annuitisation by FAS qualifying schemes to ensure the greatest benefit to the greatest number of pension scheme members.

Amendment No. 22B has the same broad objective as amendment No. 22, but achieves it without the difficulties of the previous version. Amendment No. 22B puts a hold on annuitisation for the benefit of members of qualifying pension schemes hoping to see the extra funds raised by the assets within schemes matched by the Government. However, it also allows trustees to buy annuities, where appropriate, if they have the approval of the FAS scheme manager, who in law is the Secretary of State for Work and Pensions. That is a sensible and flexible approach, although clearly we will need to give careful thought to the circumstances in which it might happen and how scheme managers exercise their discretion.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

I am grateful to the Minister for his concise introduction to the amendments.

As you know, Mr. Deputy Speaker—this is probably about as much as I can say on the matter—the debate on many of the amendments concerning the lifeboat fund has been ended by the invocation of the Parliament Acts. In short, I believe that the Government realised they were losing the arguments and decided to shut down the debate. That is a blatant affront, not only to this House but to the victims who have lost their pensions. This is probably our last opportunity to debate this Pensions Bill, although the joy of my job and the Minister's is that another Pensions Bill is always just around the corner.

Only recently, our new Prime Minister told the nation that he believed in

"restoring power to Parliament and rebuilding public trust in democracy."

He said:

"I want to lead a Government humble enough to know its place—where I will always strive to be—and that is on the people's side."

He should tell that to the 125,000 people who were looking to the lifeboat fund for help. The big clunking fist has crashed down, and the Government have invoked the Parliament Acts and stopped any further discussion. They have, in effect, torpedoed the lifeboat.

Even before the Government did that, however, there were dark threats from Government sources that if the lifeboat fund amendments did get through, they might abandon the whole Bill, leaving victims with even less money than they would have received under the Government's latest proposals. I hope that the Minister will take the opportunity to dissociate himself from such threats. I can assure him that the campaign to get proper help to those victims will continue both inside and outside Parliament. If the Prime Minister thinks that he has heard the last of this issue, he is very much mistaken.

The amendments on annuitisation are the remaining vestiges of the raft of lifeboat fund amendments. It is also perhaps worth reminding the House that that approach to bulk annuity purchase has been advocated by the Conservatives for at least a couple of years and by campaigners such as Ros Altmann for even longer. Can the Minister make an estimate of the pension fund assets that have already been committed to annuity purchase in the time scale and are therefore no longer available to provide direct help to the victims?

The Minister touched on the recent report by Andrew Young and his team. It is worth quickly reviewing some of the major conclusions on this subject. On page 13, they concluded that there was some £1.7 billion of uncommitted assets in schemes eligible for FAS assistance that are in the process of winding up. What we do not know is where they are in that process at this precise moment. Andrew Young also concluded in chapter 4:

"The current process of annuitisation on a scheme by scheme basis is unlikely to offer the best use of residual scheme assets."

I am delighted that that is now accepted by hon. Members on both sides of the House in considering what should happen next to those remaining pension assets.

The latest amendments are a compromise. I am delighted to hear that the Minister is prepared to accept them. They were drafted by my colleague Lord Skelmersdale in the other place and they cover the issues of real concern to hon. Members on both sides of the House. The most important is amendment No. 22B, which places a temporary restriction on the purchase of annuities. It would fair to describe the others as consequential. The noble Lord McKenzie said:

"It strikes a pragmatic approach by putting a hold on annuitisation for the benefit of all members of qualifying pension schemes who hope to see the extra funds generated by the assets within their schemes matched by the Government, while allowing trustees to purchase annuities with the permission of the scheme manager where it would be appropriate to do so."—[ Hansard, House of Lords, 24 July 2007; Vol. 694, c. 711.]

I have some questions, which the Minister may be able to deal with today, with the leave of the House, or in correspondence. First, the Young report talks about total unallocated assets of £1.7 billion in pension funds within the FAS. What proportion of those assets is likely to be affected by the proposed regulations? Secondly, the Government have promised to publish regulations. I think that that was made clear by Lord McKenzie. Can the Minister give me an idea of the time scale during which he expects to be able to do so? Thirdly, the Minister told us that he had written to trustees. Is he prepared to put a copy of that letter in the Library and perhaps supply copies to Front-Bench spokesmen in this and the other House so that we can see exactly what he has said to them?

May I also touch on the issue of circumstances in which some trustees may wish to proceed with purchasing annuities in the usual way? That was dealt with by Lord Skelmersdale in the other place when he made the point that his principal amendment gave the FAS scheme manager—the Secretary of State—discretion to allow annuities to be purchased in

"some—I expect rare—instances. For example, that could be where a scheme is only lightly under-funded and therefore members are unlikely to benefit from the FAS overall."—[ Hansard, House of Lords, 24 July 2007; Vol. 694, c. 713.]

I must say in parentheses, however, that one wonders why they might be in that situation in the first place. Will the Minister confirm today or in writing that it is his understanding that the scheme manager—the Secretary of State—would permit such a purchase only in rare circumstances, and usually when there were merely small amounts of underfunding in a scheme? If that is not his understanding, will he tell us what circumstances he envisages triggering the purchase of annuities?

My understanding of the Government position—I am happy to allow the Minister to intervene if I am overselling it—is that in almost every case they are now expecting trustees in schemes that are in the FAS not to bulk-purchase annuities for the foreseeable future, and that in the rare cases when they might want to purchase annuities they would almost certainly be almost totally funded and would seek the permission of the scheme manager.

There is consensus between Ministers and Conservative Front Benchers that from this day forward the bulk purchase of annuities for FAS-based schemes will be rare, and that assets will be husbanded with a view not to buying annuities but to providing benefits directly to scheme members. On that basis, I commend the amendments—I call them the Skelmersdale amendments —as providing a sensible and practical resolution of an honourable and decent difference of opinion on how to approach the issue. I hope that they are workable, I look forward to seeing the regulations in draft, and I would be interested to know when they are likely to appear.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State for Work and Pensions

I welcome the opportunity to debate this amendment and those that we shall soon address. As Mr. Waterson made clear, the amendment on annuities, which this House debated last week and which the House of Lords rejected and replaced with those before us today, was part of a wider raft of amendments on the lifeboat fund. I can do no better than quote the remarks in the House of Lords debate yesterday of my party colleague Lord Oakeshott of Seagrove Bay. He quoted the conclusion of the Young review. On page 29 of the review it is stated that

"the current FAS scheme is not the best way of ensuring good value, as there is a complicated process and benefit structure, considerable duplication of administration, insufficient risk-pooling etc."

In other words, even the Government's own review comes to that conclusion. Lord Oakeshott further said, on other amendments with which this one had been grouped:

"One hundred and twenty-five thousand members of failed pension schemes have been robbed twice; first when their funds collapsed, and now by a government ruse to block House of Lords"—[ Hansard, House of Lords, 24 July 2007; Vol. 694, c. 708.]

debate on the Pensions Bill. I wholeheartedly agree with Lord Oakeshott's sentiments—and I also pay tribute to his work in campaigning for the 125,000 pensioners whose pension rights have been removed and who have campaigned so assiduously.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

I heard what both Front-Bench spokesmen said about a Government ruse in relation to the Parliament Act 1911, but financial privilege is regularly invoked, so this is nothing new. It is done in respect of a fair number of Bills where the other place makes finance proposals. Why does the hon. Gentleman say that it is a ruse when it is a regular event?

Photo of Danny Alexander Danny Alexander Shadow Secretary of State for Work and Pensions

The situation has not been made at all clear, and although privilege might occasionally have been invoked it has not been used often in the past few years.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

According to my research, the 1911 Act has been invoked only on seven occasions, and on Bills to do with matters such as the Welsh Church, Home Rule, war crimes, sexual offences and hunting. It is hardly an everyday occurrence.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State for Work and Pensions 3:15, 25 July 2007

I am grateful for that intervention. The Minister referred to Lords amendment No. 22B, which would provide support for members of the FAS by blocking the bulk-purchase of annuities using the assets that remain in schemes. Its purpose is to allow the unused funds that are left in the pension schemes to be used to improve the benefits within the FAS. It is a great shame that the Minister is still unwilling to state that he agrees with the position set out by the Liberal Democrats and the Conservatives and, more significantly from the Minister's point of view, by many of his Back Benchers. The right, just and decent thing to do would be to ensure that those whose pension schemes collapsed before the introduction of the Pension Protection Fund and who therefore benefit under the FAS should receive benefits at the same level as those in the PPF. We have consistently articulated that position. That is the purpose to which any funds that can be husbanded through the judicious and speedy application of regulations under the amendment should be put. That is what the 125,000 people, organised so admirably by Dr. Ros Altmann and others, have been campaigning for. Much anger was expressed on this matter in the debate in the other place, but such anger is more strongly felt by the 125,000 people who believe that, unaccountably, they will have to wait longer than they had expected to get what they regard as a just and decent settlement.

We welcome the amendment. In last week's debate, I observed that what was then amendment No. 22 served the Government's purpose. At that time, the Minister denied that. I am delighted that common sense has prevailed and that the Government have accepted this revised version of that amendment.

I have a couple of questions about how the Minister intends to implement it. Lord McKenzie has made it clear that the Government intend to introduce regulations under the amendment. How quickly do they intend to do so? Clearly, the regulations are subject to a negative procedure. Can they be introduced during the summer recess, or will that have to wait until October? As has been said, time is of the essence. According to the Young review, £1.7 billion of assets remain in the schemes. As the Young review also made clear, and as was made clear in last week's debate, any delay could result in some of the funds being annuitised by scheme managers.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

I agree that it is important that the rules are introduced quickly. We will use the negative procedure, and we will seek to move as quickly as possible as we want them to be in place by the autumn. The House must have an opportunity to debate that, if it wishes to do so. However, although I agree with the hon. Gentleman on this, the consequence will be that we will not have a consultation period; we will just introduce the rules. We will be happy to share them with Opposition spokespersons in advance.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State for Work and Pensions

I am grateful to the Minister for the speed with which he is seeking to act and for his generosity in suggesting a consultation, which I would welcome. He is right—time is of the essence and we should get on with this. If that means that a shorter than usual consultation period is necessary, or no consultation period at all, we Liberal Democrats would be perfectly happy with that, given the imperative in these circumstances.

If I have read amendment No. 22B correctly, it places a restriction on the purchase of annuities for a maximum of nine months. Subsection (1) of the proposed new clause states:

"The Secretary of State must by regulations make provision for securing that, during the period of 9 months beginning with the date on which the regulations come into force, the trustees of the relevant pension schemes are prohibited from purchasing, or agreeing to purchase, annuities on behalf of qualifying members".

It was perhaps Lord Skelmersdale who came up with the nine-month period, but the Government obviously agreed to it. Does the Minister think that that is the length of time needed for the Government to introduce and act on the conclusions of the Young review? Given that the House has reached a positive consensus on this very narrow issue, it would be a shame if the limited time scale specified in the amendment meant that, although bulk annuitisation was restricted for that period, it was not until after that period had elapsed that progress was made on using the assets in those funds. Perhaps the Minister will clarify that point.

Like our colleagues in the House of Lords, we Liberal Democrats in this place are more than happy to accept these amendments, which represent a good step forward. I wish only to register my deep sadness that they are not part of the wider lifeboat scheme under which the original amendment was introduced.

Photo of Michael Weir Michael Weir Shadow Spokesperson (Work and Pensions), Shadow Spokesperson (Trade and Industry), Shadow Spokesperson (Environment, Food and Rural Affairs)

I just want to make a few points. I agree with what the hon. Members for Eastbourne (Mr. Waterson) and for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) said about the lifeboat fund. It is a shame that it is not in the amendments; none the less, I do support them.

To my mind, the original House of Lords amendment was perfectly adequate, and I do not understand why there has been such a hoo-hah about changing it. I am concerned about subsection (2) of the proposed new clause in Lords amendment No. 22B, which states:

"The regulations must make provision...for authorising the scheme manager to approve the purchase of any such annuities if the scheme manager thinks it appropriate to do so."

We are talking about a nine-month period; however, speed is of the essence in dealing with these issues. One scheme in my constituency, operated by a solvent employer, illustrates the slow crawl through this legislation that has taken place to get some justice. As the Bill progressed, the Minister rightly agreed that that employer should be covered by the financial assistance scheme, which it previously had not been. The trustees were asking that annuities be bought for those in the scheme who were retiring. Had that change not been made when it was, that scheme would have been annuitised and the assets lost. There is therefore an urgent need to get this situation sorted out.

The original amendment would have imposed a straightforward ban for nine months on annuitising such schemes. I can understand why some slight wriggle room has been provided in certain circumstances, but I am concerned that in cases where trustees want to annuitise a scheme, they will have to make an application to the Secretary of State, who will presumably have to investigate the particular circumstances of that scheme before deciding whether to allow annuitisation. That is an extra burden of bureaucracy that the original amendment did not impose; it simply provided for a nine-month ban until the situation has been sorted out. Presumably, all the scheme assets would then have gone into the general FAS pot, which is a better approach. Does the Minister feel that amendment No. 22B imposes an extra bureaucratic layer that could lead to delay, and could require the Secretary of State to investigate many schemes that it would otherwise not have been necessary to investigate?

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

With the leave of the House, I seek to reply to this debate and to some of the points raised. Let me first deal with what should perhaps be described as the political knockabout points, before moving on to the serious stuff.

Various claims were made about the Parliament Act 1911, which has a number of different provisions. It was invoked, as described by Mr. Waterson, when the other place refused to accept particular pieces of legislation regularly passed by this House. That probably happened on about seven occasions—indeed, I think that I was part of the process with one of them—but that is not what we are talking about here. Rather, we are talking about the invoking of financial privilege, which happens to be dealt with in the 1911 Act, but which has been regularly invoked in this place over many years. It is therefore an entirely different matter from the point raised by the hon. Gentleman. The parliamentary procedures are different, and such invoking in the other place merely means that the Lords would have to table a differently worded amendment.

It was therefore possible—I assumed that Opposition Members knew this—to table a differently worded amendment, if the Opposition really want to bring back their lifeboat proposal. Frankly, however, it was pretty well sunk by the Young report, so they were better off not doing that. The lifeboat proposal was torpedoed not by the Government, but by the Young report, which said that the basis on which it was framed—that pensions and the various insurance assets were unclaimed and lying there, and could easily be accessed—faced impediments so great that it was not a realistic option.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

I do not want to follow the Minister down the route of discussing the 1911 Act, because I suspect that I would be ruled out of order. However, I remind him that—amendments or no amendments, and whatever their wording—if the Government had accepted the principle of a lifeboat fund and getting help to people sooner rather than later, as we suggested, we would have been happy to accept any drafting from the Government. It is because they set their face against that principle and the proposed timetable that we are where we are. The Minister referred to dealing with knockabout political points before moving on to the serious stuff. The serious issue is the people who need help from the FAS but are not getting it, and might not get it for some time.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

The Government did not accept the lifeboat scheme for the very reason that we set out, which the Young review confirmed—that the basis of the scheme was full of financial holes. The Young report stated clearly that the idea that sitting in pension and insurance funds are assets that could easily be accessed is unrealistic as an option to help those pensioners.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

I do not want to labour this point and I am conscious of the time, but I will give way to the hon. Gentleman.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State for Work and Pensions

I want to have one last brief go at this point, and then I shall allow the Minister to move on. The Government still have not stated clearly why they do not want to allow FAS beneficiaries to receive benefits at the Pension Protection Fund level. We Liberal Democrats have put forward a range of options for funding that, and the financial cost would be slim, given the figures that we have heard mentioned in the Lords, such as £25 million a year for the first 10 years. If the issue is purely a financial one, that figure seems like pretty slim pickings, given that we have just heard that billions more are to be spent on aircraft carriers.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

It was the Young report, not the Government, that torpedoed the lifeboat, but it was pretty leaky anyway. Rafts were mentioned in various analogies, and the lifeboat was a cobbled-together raft that sank of its own volition. We warned the Opposition that it would sink, and it did. Let us move on and see how, realistically, we can help the pensioners involved, because that is the important thing.

Danny Alexander asks, reasonably, why the funding will not be to the PPF level. The answer is that the PPF is essentially an insurance scheme and people make contributions to it, as a result of which they are entitled to payments from it. If we were to go to PPF levels, that would have to be funded. The hon. Gentleman has made it clear that the Liberal Democrats would be happy to put Government funding into that. That is a straightforward point of view, and I understand and respect it. However, the Conservatives have always said that they would not put loads of Government money into the scheme. They would not be prepared to spend an extra £1 billion. They are silent on that point, and as far as they are concerned, there would be no extra money. They claim that the funding would somehow be obtained from the unclaimed assets, but that idea has now been torpedoed.

The various claims being made by the Opposition parties differ. I give the hon. Gentleman credit for saying straightforwardly that he would spend more taxpayers' money. However, I think that we should be cautious about deciding to spend large amounts of Government money on ensuring that those who have not paid the insurance premiums into the pot, as the people in the PPF scheme have paid, should get the same benefits because the Government chipped in. We have to get the right balance between the rights of the pensioners and the rights of the taxpayers. By saying that they would not spend large amounts of taxpayers' money, the Conservatives recognise that that balance needs to be struck, but they claim that they can magic the money from somewhere else. I do not accept that.

The claim is made that a threat has somehow been made to withdraw the increase to 80 per cent. if the Bill goes into the spill-over period. That was the substance of a letter that Conservative Front Benchers sent out earlier today, but it is complete nonsense. It is true that I warned in the last debate that if the Bill was delayed into the spill-over period the increase from 60 per cent. to 80 per cent. in the cover under the financial assistance scheme would also be delayed, and pensioners would not get it over the summer—and I think that they deserve it. That is why I am pleased that the Opposition have agreed to the amendments and that the Bill can receive Royal Assent so that the increase to 80 per cent. can begin to be paid by the FAS operational unit. That will happen within days of Royal Assent, which I hope will occur shortly.

The hon. Member for Eastbourne made several other points, which I shall address briefly. He mentioned that Lord Skelmersdale had drafted the amendment, but for the sake of clarity I suggest that he had a little help from his friends. As far as the Young report is concerned, the total assets are £1.7 billion. He asked what percentage was likely to be effective, and the answer is that almost all of that sum will be covered, as he suggested.

As for the regulations and the timescale, I have already said that we would like to introduce the regulations as quickly as possible. We will happily show them to Opposition Front Benchers, but we want to put them into operation quickly. That means that we will not consult widely on them. I am happy to put a copy of the letter that I sent last week in the Library, and send one to Opposition Front Benchers. I apologise for not ensuring that that had been done before.

The hon. Gentleman also asked whether seeking the consent of the Secretary of State was likely to be rare. From our point of view, it would be rare. It might happen if an otherwise fully funded scheme was close to being wound up, but found that it had a small gap. It would therefore not stand to benefit very much from the FAS, so the trustees might ask the Secretary of State whether they could annuitise in those circumstances. The Secretary of State would look at the facts and take a view. Such circumstances would be rare, which is why we do not want annuitisation to proceed for funds engaged with the FAS—and that would be the purpose of the amendments.

The only other question that I was asked had to do with the nine-month period, and I can tell the House that we are looking at the nine months from September. We hope that Young will report in November, and we expect to be able to make some decisions fairly quickly thereafter. We do not yet know the full terms of the Young report, so we will have to wait and see what it contains, but we want to put various alternative courses of action before the House as quickly as possible. Details of any substitute scheme will be made known in regulations put in place before the nine months elapse.

Finally, despite the bit of political knockabout that we had, I am grateful for the positive reaction of the hon. Member for Eastbourne to the amendments, and I hope that he will adopt a similar approach to the next group.

Lords amendments agreed to.

Lords amendment: No. 28.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions 3:30, 25 July 2007

I beg to move, That this House
insists on its disagreement with the Lords in their amendment No. 28 but proposes amendments (a) and (b) in lieu.

I shall be brief. We considered that Lord Fowler's amendment No. 28 was unnecessary, not least because we have already made commitments to keep under review the reforms enacted by this Bill. We also have reservations about the exact terms of the amendment. Although we may have an idea about what the term "post-legislative scrutiny" means, we are reluctant to commit the Secretary of State to complying with a duty until there is a clear understanding of what that might entail. No final agreement has been reached about what post-legislative scrutiny would entail, so we have proposed instead that the Secretary of State present to Parliament a report on the operation of the Act that will give Parliament an opportunity to consider and debate the findings.

We also took the view that 2011 would be too early for a review to be conducted, as only the measures relating to new qualifying conditions for state pensions would have come into effect by then. Many of the provisions in the Bill would not have come into effect by that date, so we suggested in the other place that the Secretary of State should present the report by the end of 2017. That would follow a period of some years when all the measures, apart from the increase in state pension age, had had time to bed in. It would also allow us to consider whether we were taking the appropriate steps to ensure the smooth implementation of the state pension age changes in 2024.

It was evident from yesterday's debate in the other place that their Lordships were dissatisfied with the proposed date for the Secretary of State's review. We now propose, therefore, that he should present his report by the end of 2014. I understand that Conservative Front-Bench spokespersons in the other place would be satisfied with that compromise, and for completeness I should tell the House that Government amendment (b), to clause 28, is purely consequential. Clause 28 defines the extent of the measures in the Bill, and the amendment would ensure that any review of the operation of the Act in due course would take account of the provisions as they relate to Northern Ireland.

I believe that the proposed amendments in lieu are sensible, and consistent with the principles of good administration. I hope that they command the support of the House.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

As the Minister has explained, the Government amendments are, in effect, a compromise arising from the Lords debates, and on behalf of the official Opposition, I welcome them. Lord Fowler made a powerful case in the Lords for the principle of post-legislative scrutiny. In recent times, we have heard a lot about pre-legislative scrutiny, and that of course has its place. However, one can actually sustain the argument that scrutinising the effects of legislation after the event is every bit as important, if not more so.

In a powerful speech in the Lords on 11 July, Lord Fowler made his case extremely well, based on his massive experience in such matters. He gave two specific examples. The first related to the Social Security Act 1986, the state earnings-related pension scheme and subsequent issues such as compensation claims and the non-issue of leaflets. In that case, he thought that post-legislative scrutiny would have made a significant difference.

Lord Fowler's second example related to some of the issues dealt with by the parliamentary ombudsman, the High Court, the European Court and Select Committees in recent times. It is not for me to rehearse all the arguments on this occasion. The issues are currently before the courts, but he uses them to show how a post-legislative scrutiny procedure could have picked up some potential problems and some of the misinformation on the basis of which the ombudsman found that there had been maladministration.

Lord Fowler came in for a certain amount of criticism from the Minister in the other place for leaving rather vague the issue of who would actually perform such scrutiny. However, as Lord Fowler said:

"The amendment would give the Government maximum flexibility."—[ Hansard, House of Lords, 11 July 2007; Vol. 693, c. 1410.]

There is some merit in that view.

Most important is the common-sense point that every time we pass pensions legislation in the House the law of unintended consequences runs through it. It was trumpeted that one of the principal aims of the Pensions Act 2004 was the protection and enhancement of defined benefit schemes. In fact, the measure accelerated the closure of such schemes to new entrants and even to existing members, so I permit myself a wry smile when I consider the arguments in the Lords about the time scale for post-legislative scrutiny. Is it not interesting that within barely two years of the 2004 Act the Government's White Paper announced a review of its provisions? Any Government worth their salt would look closely at such legislation in a much shorter time scale than that proposed in either the original amendment or the compromise amendment. It is ironic that on this very day the Government published the results of the regulatory review.

We on the Conservative Benches are keen supporters of Lord Fowler's proposition that major legislation deserves proper post-legislative scrutiny. I join Lord Fowler in noting the fact that the new Prime Minister has said that he wants to restore the role of Parliament, and we welcome the Government's deathbed conversion to the principle. I understand that Lord Fowler and his colleagues in the Lords are content with the amendment proposed; therefore I am too, so we shall not oppose it. However, if and when we win the next election we shall certainly carry out our own thorough review of this and other recent pensions legislation.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State for Work and Pensions

The activities in the other place to add the concept of post-legislative scrutiny to the Bill played a useful role. The work done by Lord Fowler, supported by Liberal Democrat, Conservative and Cross-Bencher colleagues, in insisting on that concept has in the end managed to wheedle from the Government a useful amendment in response. That goes some way towards meeting the objectives set out in the Lords and on that basis I welcome the Government's amendment.

The Bill will have a very long-term impact indeed. The main impact of the legislation will be felt not in one, two, three or four years' time, but for generations to come. It is appropriate therefore that there be scrutiny of the Bill's impact once it receives Royal Assent and becomes law. That is true for a number of reasons, the first of which is the point that Lord Fowler made in his speech in the other place about perceiving and acting on errors or mistakes that may have been made. Government amendment (a) will allow the possibility of proper scrutiny in the future of some of the flaws in the Bill that my hon. Friends and I have highlighted during its passage. The Government deny that there are flaws, but the truth will become certain only with the passage of time. Government amendment (a) will allow time to elapse before those issues can be properly examined.

I hope in particular that, in implementing Government amendment (a) in relation to reviewing and preparing a report on the operation of the Act, the Secretary of State, whoever that is by 2014, will have regard to questions about the extent to which means-testing is still a pervasive part of the system by that date. No doubt we will debate this when the next pensions Bill comes down the track—one is expected in the next Session—but I remain of the view that the extent to which means-testing or mass means-testing, is still a pervasive part of the system, should be considered. I believe very much that that could well undermine personal accounts, the establishment of the delivery authority for which is part of the Bill.

The Liberal Democrats have concerns about what the way in which the Bill operates will mean for the rights of many women pensioners to have access to a full state pension—a matter which we debated briefly last week. Again, I hope that the Secretary of State can include that in his report. The Minister rightly referred in his opening remarks to the increases in the state pension age that will follow the Bill. Again, reviews of the proper operation of the implementation of that will be important.

The Bill relates to the uprating of pensions in line with earnings. We have been given a date—I think that it is 2012—but we have also been told that the uprating might not happen for two or three years after that. It might well not happen until the end of that Parliament. Although I am not able to predict the dates on which Parliaments begin and end, it is possible that the uprating in line with earnings will not start until 2015. I hope that the timing of the report before the end of 2014 will, if necessary—I hope that it will not be necessary—act as a strong corrective to any governmental wish to delay yet further the implementation of the uprating in line with earnings.

The Minister will know that the Liberal Democrats have called for that uprating to take place immediately, and I remain of that view. Even if the Minister is not of that view, I hope that by including the report in the Bill under Government amendment (a) and by requiring the Government to produce such a report and bring it before Parliament, where we would expect to debate it, so that it could come under scrutiny and pressure from hon. Members about possible failure to deliver the content of the Bill, we will ensure that Ministers act quickly to do the decent thing in relation to the uprating in line with earnings and introduce it, at least by their own timetable, inadequate though the Liberal Democrats believe that is. With those few words, I say that the Liberal Democrats will be happy for the House to pass these amendments.

Photo of Brian Jenkins Brian Jenkins Labour, Tamworth 3:45, 25 July 2007

With regard to post-legislative scrutiny, when provisions come before the House, many Members are at a disadvantage in so far as we do not have the time to go through the detail. Would the Minister like to give an undertaking to ask the National Audit Office to produce a report that covers certain key sections to inform Members, so that they can fully take part in any scrutiny debate in the House?

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

I begin by thanking both Opposition spokespersons, and, indeed, my hon. Friend Mr. Jenkins, for supporting the amendment.

Photo of Alan Haselhurst Alan Haselhurst Deputy Speaker and Chairman of Ways and Means

Order. The hon. and learned Gentleman should seek the leave of the House to reply to the debate.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

Forgive me, Mr. Deputy Speaker. I beg to ask leave of the House to reply to the debate.

These are important amendments. It is perhaps fitting, as we move towards the conclusion of the Bill, that the amendment has been dealt with in a spirit of compromise. That is important because pensions, above all, require a consensus to be built around long-term planning to develop security for the elderly in the future.

The Bill will enable a lot of legislation to be passed—some of it potentially quite controversial, such as the provisions to increase the retirement age. We have been able to put those provisions through the House because the Turner report, and those who worked on it, provided the basis for a consensus to be built around pensions policy. There were some issues of political controversy during the course of the Bill. In the course of reviewing the Bill, perhaps a Minister will look at some of those issues, as well looking at the areas where we all agreed. It was important that we had that level of agreement and that we were able to get through some potentially very difficult issues. I extend the Government's thanks to Opposition Front-Bench Members for their broad approach to many of the issues.

May I also place on record my thanks—and those of my predecessor, my right hon. Friend James Purnell, and other Ministers who dealt with the Bill before I did—for the way in which officials briefed us and ensured that we were able to find our way through some quite complex legislation? Of course, I look forward to working with the hon. Members for Eastbourne (Mr. Waterson) and for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander) on the next Bill, which is likely to come forward fairly soon. I will consider the suggestion from my hon. Friend the Member for Tamworth for the NAO to be involved. I will not give a commitment at this point, but it is an interesting suggestion and the Government will consider it.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

I am grateful to the Minister for giving way for what I imagine will be the last time during the passage of the Bill. May I join him and express the thanks of the official Opposition to the officials, the Clerks, all hon. Members who have spoken during the various stages of the Bill, the Minister's predecessors and the previous Secretary of State? Any blame for decisions about the Bill that we think were wrong is attached entirely to Ministers. We are very grateful to everybody else.

Photo of Danny Alexander Danny Alexander Shadow Secretary of State for Work and Pensions

May I add some remarks from the Liberal Democrat Benches to follow the remarks of the Minister and Mr. Waterson? Although I have not been associated with the Bill for very long, my hon. Friends the Members for Yeovil (Mr. Laws) and for Solihull (Lorely Burt) were involved in the Committee stage and I would like to express our gratitude to the officials, the Clerks and so on, all of whom have assisted with the passage of the Bill. Although the consensus has not always been complete, there has been a model of working to achieve that. There may be a deal more controversy with the next Bill, but I look forward to the efforts that the Minister has said he will make to build consensus in that instance too.

Photo of Mike O'Brien Mike O'Brien Minister of State (Pension Reform), Department for Work and Pensions

I thank the hon. Gentleman. The press will no doubt report the arguments. I suppose that, in a democracy, debate is what creates stories for the media. However, the real story has been that a difficult and controversial issue has been dealt with sensibly by Members. We have reached a consensus. We have put forward one piece of legislation, which has broad support. I hope that, in due course, the following piece of legislation, which will build on this Bill, will be passed in the spirit of continued co-operation and good will. We still have a lot of work to do on pensions. It will take a lot of effort, but the good will is there to make sure that we provide for the pensioners of the future.

Lords amendment disagreed to.

Government amendments (a) and (b) in lieu of Lords amendment No. 28 agreed to.