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Clause 41 — Allowances claims

Major Capital Contracts (Skills Training Requirements) – in the House of Commons at 6:15 pm on 2nd March 2010.

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Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice 6:15 pm, 2nd March 2010

I beg to move amendment 55, page 24, line 14, at end insert-

'(6) In section 7 of that Act (information and guidance about taxation)-

(a) before subsection (1) insert-

"(A1) The IPSA must-

(a) prepare guidance for members of the House of Commons about making claims under the MPs' allowances scheme;

(b) review the guidance regularly and revise it as appropriate;

(c) publish the guidance in a way the IPSA considers appropriate;

(d) provide to any member on request such further advice about making claims as the IPSA considers appropriate.", and

(b) in the heading omit "about taxation".'.

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

With this it will be convenient to discuss the following: Government amendments 56 and 58 to 63.

Amendment 91, in schedule 7, page 78, line 7, leave out 'fund' and insert 'trust scheme'.

Government amendment 64, page 78, line 9, leave out sub-paragraphs (2) to (4) and insert-

'Number and composition of trustees

1A (1) The following are to be the trustees of the Fund-

(a) one person appointed by the IPSA after consulting the Minister for the Civil Service and the persons who are already trustees of the Fund,

(b) one person appointed by the Minister for the Civil Service after consulting the IPSA and the persons who are already trustees of the Fund, and

(c) 8 persons nominated and selected in accordance with arrangements under paragraph 1B ("member-nominated trustees").

(2) Paragraphs 44 and 45 make transitional provision about the trustees of the Fund.

Member-nominated trustees

1B (1) The trustees of the Fund must make arrangements for the nomination and selection of member-nominated trustees.

(2) The arrangements must provide for the member-nominated trustees to be-

(a) nominated as the result of a process in which all the members of a scheme under paragraph 7 and all the members of a scheme under paragraph 11 are eligible to participate, and

(b) selected as the result of a process in which all those persons are eligible to participate.

(3) The arrangements must-

(a) include provision for the nomination and selection process to take place within a reasonable period of any vacancy arising,

(b) include provision, where a vacancy is not filled because insufficient nominations are received, for the nomination and selection process to be repeated at reasonable intervals until the vacancy is filled, and

(c) include provision that, where the IPSA or the Minister for the Civil Service so requires, a person who is not a member of a scheme under paragraph 7 and is not a member of a scheme under paragraph 11 must have the approval of the IPSA or the Minister for the Civil Service to qualify for selection as a member-nominated trustee.

(4) The arrangements may include provision that where the number of nominations received is equal to or less than the number of vacancies, the nominees are to be treated as selected (subject to sub-paragraph (3)(c)).


1C (1) The IPSA may provide for remuneration and allowances to be payable to the trustees of the Fund.

(2) Any such remuneration and allowances are to be paid from the assets of the Fund.

Resignation and removal of trustees

1D (1) A person appointed as a trustee of the Fund by the IPSA under paragraph 1A(1)(a)-

(a) may resign by giving written notice to the IPSA, and

(b) may be removed by the IPSA after consulting the Minister for the Civil Service and all the other trustees of the Fund.

(2) A person appointed as a trustee of the Fund by the Minister for the Civil Service under paragraph 1A(1)(b)-

(a) may resign by giving written notice to the Minister for the Civil Service, and

(b) may be removed by the Minister for the Civil Service after consulting the IPSA and all the other trustees of the Fund.

(3) A person who is a member-nominated trustee-

(a) may resign by giving written notice to the other trustees of the Fund, and

(b) may be removed by all the other trustees of the Fund acting together.


1E (1) Subject to any provision contained in a scheme under paragraph 3 because of paragraph 3(1)(c), the trustees of the Fund may determine their own procedure.

(2) The validity of any proceedings of the trustees of the Fund is not affected by-

(a) a vacancy among the trustees, or

(b) a defect in the appointment of a trustee.'.

Amendment (a) to Government amendment 64, in paragraph 1B(2)(b), after 'which', insert 'some or'.

Amendment (b) to Government amendment 64, in paragraph 1C(1), after 'may', insert

'with the consent of the Treasury'.

Amendment 90, page 79, line 2, at end insert-

'(bb) the indemnification of the trustees (and former trustees) of the Fund'.

Government amendments 65 to 73.

Amendment 94, page 82, line 6, leave out 'the provision specified in paragraph 24(2)' and insert-

'(i) the provision specified in paragraph 21(1), unless with the consent of the trustees of the Fund,

(ii) the provision specified in paragraph 26, unless with the consent of the trustees of the Fund, and

(iii) the provision specified in paragraph 24(2)'.

Amendment 95, page 83, line 24, at end insert

', except the provisions specified in paragraphs 21(1) and 26 unless with the consent of the trustees of the Fund'.

Amendment 93, page 84, line 16, after 'puts', insert '(or might put)'.

Government amendment 74, page 84, line 18, leave out from 'if' to end of line 28 and insert-

'(a) the trustees of the Fund consent to the new scheme making the provision, and

(b) the person making the new scheme is satisfied that the consent requirement is met.

(4) The consent requirement is met if under the new scheme the provision has effect in relation to an accrued right only with the written consent, given in accordance with sub-paragraph (4A), of-

(a) the person ("P") in respect of whose service the right has accrued, or

(b) if P is dead, the persons ("the survivors") who because of the accrued right are entitled, or may become entitled, to a pension or the benefit of any pension.

(4A) Consent is given in accordance with this sub-paragraph if it is given after the person making the scheme has given P (or the survivors)-

(a) information in writing which adequately explains the nature of the provision and its effect,

(b) notice in writing that they may make representations about the provision,

(c) an adequate opportunity to make such representations, and

(d) notice in writing that the provision has effect in relation to the accrued right only with their written consent.

(4B) Consent may be given by a person acting on behalf of P (or the survivors); and the references in sub-paragraph (4A) to P (or the survivors) include a person acting on their behalf.'.

Amendment (a) to Government amendment 74, in sub-paragraph (4)(b), leave out

'pension or the benefit of any pension' and insert

'benefit or future benefit payable out of the Fund'.

Government amendment 75.

Government amendment 76, page 84, line 36, leave out sub-paragraphs (2) and (3) and insert-

'(2) "Accrued right", in relation to a provision of the new scheme, means a right or entitlement to or in respect of a pension or future pension payable out of the Fund which has accrued in respect of service before the provision comes into force.

(3) If the person in respect of whose service the right or entitlement has accrued is in service when the provision comes into force, the right or entitlement is to be determined as if the person left service immediately before then.'.

Amendment (a) to Government amendment 76, after 'means a right', insert '(including a contingent right)'.

Amendment (b) to Government amendment 76, leave out

'a pension or future pension' and insert

'a benefit or future benefits'.

Amendment (c) to Government amendment 76, leave out sub-paragraph (3).

Government amendments 77 to 79.

Government amendment 80, page 85, line 31, at end insert-

'( ) For the purposes of this Schedule "member"-

(a) in relation to a scheme under paragraph 7, means a person with service as a member of the House of Commons who, in respect of that service, has a right or entitlement under the scheme to a pension or future pension payable out of the Fund, and

(b) in relation to a scheme under paragraph 11 , means a person with service to which that paragraph applies who, in respect of that service, has a right or entitlement under the scheme to a pension or future pension payable out of the Fund.'.

Amendment (a) to Government amendment 80, in sub-paragraph (a), leave out 'pension or future pension' and insert 'benefit or future benefits'.

Amendment (b) to Government amendment 80, in sub-paragraph (b), leave out 'pension or future pension' and insert 'benefit or future benefits'.

Government amendment 81.

Amendment 92, page 85, line 40, at end insert-

'"trust scheme" has the same meaning as in section 124(1) of the Pensions Act 1995'.

Government amendments 82 to 88.

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

May I just point out to the House that there is an error in the text of proposed amendment (a) to amendment 64, tabled by Sir John Butterfill? On page 1153 of the amendment paper, the words proposed to be inserted should read "some or" and not "some of". I am sure that that will come as matter of great satisfaction to the House, and hopefully we can proceed.

Did you wish to make a point of order, Mr. Heath?

Photo of David Heath David Heath Shadow Leader of the House of Commons

That was my point of order, Mr. Deputy Speaker, and you have corrected the matter. Thank you.

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

I wish all were satisfied quite so quickly. I am obliged to the hon. Gentleman.

Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice

It may be convenient for the House if I inform hon. Members that I intend to accept amendments (a) and (b), in the name of Sir John Butterfill, to amendment 64, which is in my name; and his amendments (a) and (c) to my amendment 67. I also urge the House to accept amendments 90, 93, 94 and 95, which are in his name. I understand that the hon. Gentleman will make clear the reasons why he does not intend to move amendment (a) to amendment 74, amendment (b) to amendment 76, amendments (a) and (b) to amendment 80 and amendments 91 and 92.

The provisions relate to part 4 of the Bill, which implements a number of recommendations of the report by the Committee on Standards in Public Life on MPs' expenses-the Kelly report. Lest there be too much complaint that the Bill is longer now than when it began its journey, I should say that although that is true, one of the main reasons is that in the intervening time, we had the expenses scandal, the Kelly report and a decision by the House to establish the Independent Parliamentary Standards Authority, which was done via free-standing, emergency legislation last summer-the Parliamentary Standards Act 2009. That preceded the Kelly report, and we have decided to implement the parts of the report that require legislation in this Bill, because it is the only available vehicle. That inevitably means that the process has been a bit compressed, but I suggest that it would have been disastrous for the already damaged reputation of the House and of politics if we had not proceeded fully to implement the Kelly report by the time of the forthcoming general election.

During debates in Committee on the Kelly provisions, Sir George Young and others raised a number of issues that I undertook further to consider. In particular, I undertook to look at how we give effect to the Kelly report's recommendations on MPs' pensions and at the enforcement powers of the compliance officer in respect of the expenses regime. I also told the shadow Leader of the House that I would look carefully at his proposal to require IPSA to be ready to offer guidance to Members on prospective claims for expenses, to avoid our getting into a position in which claims are made and rejected, which would be on the public record. It would be better for advice to be given in advance, and I am pleased to tell the House that an amendment in my name meets that concern.

On Members' pensions arrangements, the House will recall that paragraph 13.32 of the Kelly report suggested that either the Senior Salaries Review Body or the independent regulator could, among other things "set the terms and" oversee

"the...administration of parliamentary pensions."

Paragraph 13.34 states that the Committee, after consideration, thought that that should be a matter not for the SSRB, but for the new body. Recommendation 43 states:

"The independent determination of MPs' pay and pensions should be entrenched in primary legislation in the same way as expenses. The independent regulator"-


"should therefore be given statutory responsibility for setting MPs' pay levels and overseeing MPs' pensions as well as for dealing with expenses."

We made some progress on implementing the pensions provisions in Committee. I am grateful to the hon. Member for Bournemouth, West, my right hon. Friend Mr. Touhig, my right hon. and learned Friend the Leader of the House, and other trustees for their subsequent contributions. I fully recognise that the trustees of the pension fund, who do great, unsung work on behalf of current Members and pensioners are properly anxious to ensure that the new arrangements will work effectively and provide everyone-current Members and pensioners-with appropriate safeguards in respect of their accrued pension entitlements.

I have set out what Kelly recommended, and I think everybody accepts that we must remain faithful to the principles that Kelly set out. He said that the full remuneration package of MPs-expenses, pay and pensions-should be subject to determination by IPSA, and that IPSA should, to use its word, "oversee" the administration of the pension scheme. However, there was no suggestion in the Kelly report that IPSA should do everything in respect of pensions, and IPSA has not made that suggestion.

The first concern was that there should be proper safeguards for hon. Members' accrued pension rights. My aim is to ensure that the statutory safeguards afforded to members of other occupational pension schemes broadly apply to the parliamentary scheme. As with statutory protection for pension schemes elsewhere, amendment 74 would put a double lock on any provision adversely changing accrued pension rights. It would first be necessary for the trustees to consent to the scheme making such provision and, secondly, each member would have to give his or her informed consent to any changes to accrued rights.

It is the Government's view that in giving such approval, and indeed exercising any of their other functions, the trustees would need to act in the best interests of the members in accordance with their clear fiduciary duties as trustees. That protection means that if IPSA were to change the rules of the scheme, the pension entitlements that other hon. Members and I have would be safeguarded if we left service immediately before any change. No adverse changes could be made to that pension entitlement without the agreement of the trustees or our individual consent.

Secondly, there were concerns that schedule 7, as originally drafted, left open to doubt whether the new arrangements ensured the continuation of a trustee-based scheme with appropriate member representation on the board of trustees. Amendment 64 would put that beyond doubt and set out on the face of the Bill the structure of the board of trustees. The amendments provide for a board of 10 trustees, one of whom would be appointed by IPSA, a second by the Minister for the Civil Service, while the remaining eight would be member-nominated trustees. It will be left to the trustees collectively to make appropriate arrangements for the nomination and selection of the member-nominated trustees, but such arrangements must involve all members of the MPs' and Ministers' pension schemes.

The amendments include appropriate transitional provisions, so that there can be a managed progression from the current board of trustees to the new one, but the existing trustees will continue to be trustees until the end of the transitional period. There is also provision for the first eight member-nominated trustees to be chosen from among the existing trustees.

Thirdly, amendment 66 would require IPSA to obtain the consent of the trustees before making the administration scheme under paragraph 3 of schedule 7. This is an appropriate further safeguard, given that the administration scheme will set out the trustees' core responsibilities in respect of the administration of the parliamentary contributory pension fund and the management of its assets.

I have considered very carefully whether we have got the balance right between the administration scheme and the MPs' pension scheme. I know that this was another issue that has troubled the trustees. After much discussion, I am satisfied, and I hope that the trustees are too, that we have got the demarcation between the two schemes right. The pension scheme will determine the full range of pension benefits and entitlements. In accordance with the overarching principle of independent determination, these are properly matters for sole determination by IPSA, albeit-as the provisions in the Bill make clear-after consultation with the trustees, the Government Actuary, the Senior Salaries Review Body and others.

I have studied carefully the amendments in the name of Sir John Butterfill and other trustees, and I have had the opportunity to discuss them. I have advised the House on those that I think it should accept. I understand that the hon. Gentleman is ready to withdraw some of his amendments, but I shall address them briefly.

Amendments 91 and 92 are not necessary. There is no question that the trustees will owe a fiduciary duty to members of the scheme and that it will continue to operate as a trust-based scheme. Nothing in these provisions would alter the current position in that regard. Amendments 74(a), 76(b) and 80(a) and (b) relate to accrued rights. I think that these amendments were based on a misunderstanding, although everyone has had to run very fast with these provisions. It is important that we get them on the statute book quickly, so all of those advising us on all sides have had to work very fast.

The provisions in schedule 7 are based on the provisions in the Parliamentary and Other Pensions Act 1987. Our provisions use the language "pension or future pension", rather than the language "benefit or future benefit" as used in the Pensions Act 1995. The same outcome will be achieved, and there is no question that the use of different language will mean that members are disadvantaged.

Finally, I wish to address the IPSA expenses regime and the role of the compliance officer. In Committee, Sir George Young was keen to ensure that there was some explicit duty on IPSA to offer guidance to MPs, and I recognise the need for clear, comprehensive and consistent guidance, alongside the scheme itself. This will be essential if the mistakes of the past are not to be revisited. Moreover, such guidance needs to be a living document, regularly reviewed and updated in the light of experience.

In addition, while hon. Members must take personal responsibility for their own expenses claims, it is right that such guidance should be augmented by some facility to seek advice from IPSA, albeit that those arrangements must be a matter for IPSA to determine. In IPSA's consultation paper on the expenses scheme, it made clear its intention to provide such advice and guidance. Amendment 55 will provide statutory underpinning for this.

Finally, amendments 56, 58 to 60 and 62 respond to concerns that the enforcement provisions in schedule 5 to the Bill do not enable the compliance officer to exercise appropriate discretion when seeking to recover overpaid expenses in those cases where the compliance officer has established that IPSA was wholly or partly at fault. There may be circumstances where, for example, an MP incurs expenditure in good faith having sought advice from IPSA; IPSA then reimburses that expenditure; but it subsequently transpires that the advice was erroneous and that the expenses should not have been paid. If in exceptional circumstances such as these the compliance officer finds that IPSA is at fault, we agree that the compliance officer should have discretion not to require full repayment of the overpaid expenses.

I hope that I have given a helpful explanation of the amendments and that they will command the approval of the House.

Photo of Shailesh Vara Shailesh Vara Shadow Deputy Leader of the House of Commons 6:30 pm, 2nd March 2010

On this side of the House, and in common with many others, we have been absolutely clear that MPs' pay and expenses should be determined by an independent body. MPs setting their own financial package is simply not acceptable. Given all that has happened in recent months, that imperative has become ever more pressing. On that basis, we supported the Parliamentary Standards Act 2009.

Just as we supported IPSA's conception, we also pressed for its speedy inception, in order to ensure that the next Parliament can start under a new regime. After a long process of reviews and reports, the passing of the Parliamentary Standards Act 2009, and now with several additions and amendments to the 2009 Act being pursued through the Constitutional Reform and Governance Bill, we are close to ensuring that the next Parliament will be able to start with a clean sheet, so far as pay, expenses and allowances are concerned.

Many of the changes made so far to this Bill are welcome. They have strengthened the Parliamentary Standards Act, following the many important and welcome recommendations made by Sir Christopher Kelly. As a result, the future management of Members' pay and allowances will be independent and transparent, coupled with a more rigorous audit and assurance process.

In Committee, we raised several concerns regarding some of the new clauses introduced by the Government. These included the need for a clearer requirement for IPSA to provide advice to Members; the fact that the compliance officer had a dual role, giving advice as well as having an investigatory role; the manner in which the original schedule 7 dealt with the transfer of the MPs' pensions scheme to IPSA, along with an obvious lack of consultation by the Government with the scheme's trustees; and the issue of payment of costs by Members in cases where IPSA itself was wholly or partly at fault concerning the advice that it offered. It is clear that the Government have reflected on those and other issues raised by right hon. and hon. Members in Committee, and I am pleased that the result is an improvement in the sections of the Bill dealing with IPSA.

On the issue of repayment of overpaid expenses, and the payment of costs by Members, I am pleased that the points raised by my right hon. Friend the shadow Leader of the House have been acted on and addressed in amendments 56 to 62. On the former, it is sensible that the Government have confirmed a discretion on the compliance officer concerning the full repayment of overpaid expenses when the compliance officer has found IPSA to be wholly or partly at fault. Although the discretion is unlikely to be exercised often, it is important that it exists, if natural justice is to be seen to be done, and actually to be done, in cases where incorrect information has been provided to Members who have subsequently acted on that advice in good faith.

We are also grateful that amendment 55 introduces a specific requirement on IPSA to provide further advice when Members request it. After the general election, all Members-whether old hands or newly arrived-will operate under the new regime, but it is inevitable that there will instances when a potential claim by a Member is not a black-and-white issue, no matter how well drafted the guidance from IPSA might be. The provision of advice will therefore help the process. May I say to the Secretary of State that his acceptance, on this issue, of the substance of the amendment tabled by the shadow Leader of the House and myself, in a spirit of cross-party co-operation, is much appreciated?

Then we come to pensions. Since we met in Committee, it has become clear that the Secretary of State has taken on board many of the points raised in the debate, and his amendments are a welcome step in the right direction. For example, they provide for member-nominated trustees on the board of trustees, which will give members a voice concerning their pension rights. As the chairman of the current board of trustees, my hon. Friend Sir John Butterfill, said, the amendments tabled will provide

"better protection to pension scheme members and better governance arrangements than those proposed at Committee stage."

However, the trustees clearly had some concerns-hence a number of amendments were tabled in the name of my hon. Friend and his colleagues, and to be fair, as we have heard, the Government have accepted a number of them. For example, amendment 90 provides indemnity for the trustees of the fund, past and present. If that was not made explicit in the Bill, we would certainly have problems trying to find people willing to serve as trustees. Amendments (a) and (b) to amendment 64, which allow for more effective selection of member-nominated trustees and a check on the payment of remuneration to trustees, are also highly sensible.

The Government, however, are not so supportive of another amendment tabled by the trustees. The Government have helped to clarify that the scheme will continue to be trust-based in the future, with amendment 64 dealing with how many trustees are to serve and how they will be appointed. However, the trustees assert that the point of the scheme being trust-based should be made explicit in the Bill, and they seek to do that with amendments 91 and 92. Although the scheme has operated on a trustee basis in the past, given that we are now transferring it to another body, it makes sense to make it as clear as possible that it will continue to be a trustee scheme in the future. On that basis, the Secretary of State might wish to reconsider amendments 91 and 92.

The trustees have also tabled amendment 94, which seeks to ensure that, if IPSA decides in the future to make a payment out of the fund to somebody who has not paid into it, the trustees must give their consent. Although that is an unlikely scenario, the Bill as drafted allows IPSA to do just that, and I am pleased that the Secretary of State has accepted some of the arguments for amendment 94. The trustees also have concerns about the protection of accrued rights, as evidenced by amendments (a) and (c) to Government amendment 76. Again, it is good that the Secretary of State is prepared to hear some of the arguments put forward, and I look forward to hearing what my hon. Friend the Member for Bournemouth, West has to say on that and other amendments.

The issues before us affect all Members, and I am pleased that the Secretary of State has taken note of the various suggestions made in Committee and the amendments before us today. The result is an improved Bill in so far as it relates to IPSA, which is welcome.

Photo of David Heath David Heath Shadow Leader of the House of Commons

There is a slight sense of a work in progress about this group of amendments, which is to be entirely expected when trying to translate into legislation the Kelly Committee proposals and to refine the IPSA legislation that we passed earlier in the year.

On pensions, I must say that I was disappointed in Committee that there had clearly been so little prior consultation with the trustees of the pension fund about the shape and detail of the legislation. It seems slightly bizarre that the amendments then tabled apparently had not been thought through properly in conjunction with the trustees such as to allow us to hear what they had to say. However, that was the start of a process that, by and large, has been productive, which is very good news. However, even today the Government amendments before the House are subject to amendments tabled on behalf of the trustees, so clearly the process of reconciling their views had not reached a conclusion when those amendments to the Bill were tabled.

We heard today that the Lord Chancellor is prepared to accept further amendments tabled on behalf of the trustees, which is good news, because it suggests that we are close to the point at which the two views can be consolidated into a single whole to be put before the House. However, I must say that most Members are not expert in this area and need, I think, the advice of those with much greater experience in order to understand some of the complexities of pension law. Nevertheless, even the least expert Member-probably me-recognised that the previous scheme, which did not provide for board-level representation of recipients of the pension scheme benefits, was out of kilter with what is considered good practice elsewhere. That obviously needed to be dealt with, hence the amendments before us.

I still do not understand entirely one slightly arcane point, although I hope that when I have heard the contribution from Sir John Butterfill, I will understand it better. It concerns the distinction, in terms of language, between a "pension or future pension" and a "benefit or future benefit", which I understand to be the language of the Pensions Act 1995-if I have got it right. I am not sure whether I understand what possible impact there could be of changing the language from one to the other, other than for the purposes of consistency. If that is the case, I should say that I am normally in favour of consistency, but I shall be interested to hear the arguments on either side. That said, it is not a critical factor, and largely I appreciate the work that has been done, the progress that has been made and the stance taken by the Lord Chancellor.

I shall deal with the amendments relating to IPSA. As I have said from the start, I believe that there are still unanswered questions about the role of the compliance officer. We discussed the matter in Committee, and I was simply told that my concerns had no foundation-and no foundations there remain, because the Lord Chancellor has not put down any amendments about that role.

Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice 6:45 pm, 2nd March 2010

May I take the hon. Gentleman back to his question about the use of the terms "pension or future pension" and "benefit or future benefit"? It is a matter of drafting. "Pension or future pension" is a phrase used in the Parliamentary and other Pensions Act 1987, and the strong advice that I have had is that it is best to stick to that, because it is the foundation of our scheme. "Benefit or future benefit" is used in the Pensions Act 1995. It is a matter of drafting and cleanliness-and nothing else.

Photo of David Heath David Heath Shadow Leader of the House of Commons

I thought that that was the case. This is a question of who or what we are going to be consistent with. We cannot be consistent with both, but obviously at some stage, there has been inconsistency between the two enactments-hence the problem.

Returning to IPSA, I was saying that I still have some concerns about exactly to whom the compliance officer will be answerable, if anyone, and about the independence of their role, which will be critical to the operation of the process. I welcome amendment 55, which provides for IPSA to supply guidance, both general and specific, to Members. That function, however, must be separated from that of the compliance officer. The compliance officer cannot provide that advice, because they might find themselves taking a critical view of IPSA's actions, and their independence of action would be frustrated from day one if they were also the source of such advice. That has not been made explicit in the amendment, but no such linkage is suggested by it either. I hope, however, that IPSA will take note of my comments and ensure that the compliance officer is at least at one remove from the provision of any such advice.

The other principal area of amendment in this group relates to the discretion given to the compliance officer in dealing with Members who have been paid sums to which they are not entitled, when IPSA might be wholly or partly at fault. This raises a number of questions. I do not intend to divide the House on this point, but I should like clarification on the definition of fault in this context. Obviously, a simple arithmetical error would constitute a fault, but would a judgment based on advice that had been misconstrued be seen as a fault? We are getting into a difficult area here, in trying to define fault on the part of IPSA.

We should make a clear distinction between an overpayment in which the Member had had no involvement-for example, when they had claimed for a certain amount and more had been put into their bank account, unbeknown to them-and a case in which a Member had claimed for an item of expenditure to which they were not entitled under the scheme. The key question is whether the Member would have incurred the expenditure, were it not for the advice-or clearance, if we are to put it that way-from IPSA that they took before incurring it. It is not the claim that is the issue but the expenditure. If a Member has simply been overpaid, there should be no question but that they should pay it back. The money is not theirs. Whether they received it because of an error by IPSA is immaterial to the fact that they are in possession of public moneys to which they are not entitled.

There is a strong argument for a degree of discretion in arranging the manner and timetable of the repayment, but we should not afford ourselves any discretion in statute as to whether the money should be repaid at all. After all, we do not allow such discretion to people who are overpaid through tax credits, for example. I regularly meet people who are outraged because, having been overpaid in that way, through no fault of their own, they are then being required to repay the money, often at an inconvenient time, even though they have often spent it, perhaps on their children. This often happens to people who are not very well off. We should not give ourselves any latitude that we do not allow others when it comes to overpayment.

A separate issue involves expenditure incurred as a result of an inquiry as to whether it was properly allowable, the answer to which was yes. The expenditure, which would not otherwise have been incurred, is then made, and subsequently reclaimed. Again, the first responsibility must rest with the individual Member, and not on the advice that they were given. If there is to be a discretion to excuse Members who have claimed money inappropriately from repaying it when the claim is determined to be inadmissible, I would expect that discretion to be used very sparingly, if at all. I can see why it is sensible to have some discretion, but I would like IPSA to issue clear instructions on when it is appropriate to use it. I do not think that its use will be appropriate in most cases.

Photo of Mark Durkan Mark Durkan Leader of the Social Democratic & Labour Party

The hon. Gentleman says that the discretion is unlikely to be used, but may I remind him that we are talking only about provisional findings that might emerge from an investigation by the compliance officer? If it were to emerge that something was wholly or partly the fault of IPSA, that should be declared very readily; otherwise, people would always entertain the suspicion that, so long as a matter relating to an MP had been referred and investigated, it would always be the MP and only the MP who had done wrong.

Photo of David Heath David Heath Shadow Leader of the House of Commons

I should like to make it plain to the hon. Gentleman that I am not talking about the findings. The findings should clearly state whether there was a reasonable case that a Member had been misled by the authority. I am talking about the repayment direction, which is a different matter. As I have said, we do not extend any latitude to others. Her Majesty's Revenue and Customs do not do so, and the Treasury does not do so via the tax credit system. We must be very careful here. For heaven's sake, if we have learnt one lesson over the past year, it ought to be that we apply the same rules to ourselves as we apply to others. That is the plea that I am making, and I believe that that can be encompassed in the amendments before us today, provided that the discretion is exercised appropriately. But I absolutely agree with the hon. Gentleman that findings that exonerate a Member from blame for a mistake made by others should be made absolutely clear. There should be no question about that, and if it needs to be set out in the way that it has been, that is entirely appropriate. That would not necessarily excuse anyone from repayment, however.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

The trustees are extremely grateful to the Justice Secretary, who has worked with us tirelessly of late to try to reach agreement on these extremely complex matters. It is important that we do not miss any issues, and that everything is properly understood. The trustees-and, ultimately, pensioners-will face unwelcome and unfair unintended consequences unless we get this right. The trustees have a long track record of trying to act very sensibly-in the interests not only of Members but of taxpayers-in administering the scheme in the past. We have made a number of changes that have resulted in significant savings for the taxpayer.

I can now say that the Bill is much improved; I am confident that there will be good will from IPSA if any matters remain unresolved. There are some instances, however, where the trustees felt it right to bring forward amendments at this stage because of the importance of the issues for members of the scheme and the trustees and because of the need for understanding of matters that need to be shared.

What I have to say about the Bill should be seen in the context of the fundamental shift that is going to take place, as recommended by Kelly, when future benefits for Members of this House are to be set by IPSA. That is what will happen and as it goes forward, the trustees will be consulted-but only consulted-on any future scheme. Because of the complexity of pensions, however, and the fact that current and former members have accrued rights within the pension scheme that should be protected, the role of the trustees is important for the administration and the management of the scheme in the future. I hope that the trustees will be helpful to IPSA in dealing with the most complex areas.

The trustees have tabled a number of amendments. After discussion with the Secretary of State, we have been quite happy to amend some of them in a minor way. Amendment 91-amendment 92 is related-states that the parliamentary contributory fund is a "trust scheme". We put that in for the reason that we have always understood, as I think has everybody, that it is a trust scheme, so we felt that it would be sensible to show it on the face of the Bill. The Secretary of State has said that he does not think it absolutely necessary because he has confirmed in this place that it is a trust scheme-I am sure that I am not misrepresenting him on that-so we will not press these amendments.

In amendments (a) and (b) to amendment 64, we have put forward some technical amendments to the method of selection of members. Originally, we were in a position of having to go out to every single Member-deferred members, retired members and sitting members-and organise a huge ballot, which would have been extremely complex and rather difficult to achieve. It might not have achieved the selection of people with sufficient skills and knowledge to act within the trustee scheme. We are grateful that the Government will accept our amendment, which provides a good deal more flexibility and will work for the benefit of the scheme as a whole. It will, of course, be consistent with section 241(2)(b) of the Pensions Act 2004. Whatever we do about our own schemes in this place, it is important that we comply with the requirements that we impose on everyone else in the nation; it would be wrong if that were not so.

Under amendment (b), the Treasury would have to consent to the use of PCPF assets to remunerate trustees. There again, we think it must be right that if IPSA is to provide remuneration or allowances for trustees out of the fund's assets or for spending on other matters that may arise, it must be right to protect the taxpayer by making that particular area subject to the Treasury's consent. I am quite sure that IPSA would not expect anything else.

Amendment 90 deals with

"the indemnification of the trustees (and former trustees) of the Fund".

As was said earlier, it would be impossible to find anyone willing to serve as a trustee if they did not have an indemnity; indeed, they would be stark raving mad if they did the job without having it. The indemnity will come from the funds. We are grateful that the Secretary of State has agreed to this. Currently, the 1993 regulations provide each trustee and former trustee with an indemnity from the fund's assets, except where prohibited by legislation or in cases of dishonesty, bad faith or recklessness-one hopes that none of those ever arises in the future. Although we should be confident that IPSA would not want to remove this indemnity, it is none the less inappropriate for IPSA alone to have the power to do so without the consent of the trustees.

Amendments 94 and 95 require trustee consent to aspects of proposed IPSA and Minister for the Civil Service benefit powers. Amendment 94 would leave out

"the provision specified in paragraph 24(2)" of schedule 7 and would insert the stated words in sub-paragraphs (i), (ii) and (iii). I am sorry that these are rather complex amendments and apologise if they are difficult to follow. Amendment 95 would insert

"except the provisions specified in paragraphs 21(1) and 26 unless with the consent of the trustees".

I welcome the Justice Secretary's agreement that paragraph 21(1) of schedule 7, which empowers IPSA or the MCS in relation to the Ministers' scheme to provide

"for the application of assets... in or towards the provision of pensions to be paid otherwise than out of the Fund".

There again, we think that if that happens, it should be subject to the trustees' consent, as it is not appropriate to exercise those powers without the consent of the trustees, who have a duty to safeguard the interests of all the PCPF's members. It is a historic power that has not been used and the safeguard of trustees' consent is necessary.

Paragraph 26 of schedule 7 empowers IPSA or the Minister for the Civil Service in relation to the Ministers' scheme to make

"Provision conferring functions under the scheme on persons specified in or determined under the scheme", and I welcome again the Secretary of State's agreement to the amendment. Its purpose is to ensure that all the functions currently exercised by the trustees in conjunction with the relevant experts cannot be changed without the consent of the trustees. Commutation factors are relevant, for example. Although they are nominally brought in by the trustees, they are derived from work done by the Government Actuary's Department, which will periodically clarify what the commutation factors should be in line with changes in the market. We did not feel it appropriate for the trustees themselves to dictate that; it should be done through the use of some independent expert.

It is the same with provisions for ill health retirement. Again, the trustees do not determine whether someone is sufficiently ill to merit it. We go to an outside medical opinion, and whether or not someone is entitled to the ill health retirement will derive from whatever that opinion might be. We think that that is a sensible regime, which we imagine IPSA will wish to continue.

I am losing my place here. Amendment 95 is, of course, consequential on amendment 94. Amendment 93 deals with accrued rights protection. We must be sure that the protection of accrued rights for members who have paid in-for many years in many cases-are suitably robust. The amendment would thus insert after "puts", the phrase "(or might put)". We are pleased that the Secretary of State has agreed to that amendment. It will make the accrued rights protection consistent with section 67A(4) of the Pensions Act 1995, which applies to a modification that would or might affect subsisting rights.

We tabled amendment (a) to Government amendment 74 to ensure that accrued rights would apply to all benefits, not just pensions, because we were aware that some benefits under the scheme were not really pensions. Payment to a widow on the death of a Member, for instance, would not constitute a pension, but would fall within the jurisdiction of the present scheme. We have received assurances that the current drafting of the Bill does not limit accrued rights protection to pensions generally, but includes benefits more widely.

Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice 7:00 pm, 2nd March 2010

That is the phrase used in the Parliamentary and other Pensions Act 1987. "Pensions" obviously includes other rights and benefits that are already being paid. I know, and have been advised, that the phrase is widely drafted, but I am grateful to the hon. Gentleman for accepting that it is better to stick with the language of the original foundation scheme than to adopt language that could, to my certain knowledge, produce consequential problems.

Photo of John Butterfill John Butterfill Conservative, Bournemouth West

I am pleased to say that the legal advisers to the trustees have confirmed that that is an appropriate interpretation of the legislation. We will therefore not press the amendment to a vote, and the same applies to amendment 80 as amended by amendments (a) and (b).

We tabled amendments (a) to Government amendment 76 because although in the case of a new scheme all the accrued rights will be covered and secured, some rights may be contingent. People who retire because of ill health, for example, will not know of their rights before the new scheme starts, because those rights will be contingent on the deterioration of their health. We are grateful to the Secretary of State for supporting the amendment. Many private sector schemes provide similar protection.

If the Government accept the amendment-which I understand that they will-I shall want to put on record the trustees' recognition that the Government wish to empower IPSA to create a scheme relating to the pension benefits that Members of Parliament will earn in future. The protective words being sought in relation to rights that Members have earned are not intended in any way to prevent IPSA from creating such a scheme. However, the trustees consider it important for the contingent rights of serving Members, which have been paid for by Members' contributions, to be protected.

Photo of Jack Straw Jack Straw The Lord Chancellor and Secretary of State for Justice 7:15 pm, 2nd March 2010

I grateful to the hon. Members for Bournemouth, West (Sir John Butterfill), for North-West Cambridgeshire (Mr. Vara) and for Somerton and Frome (Mr. Heath) for the general welcome that they have given our proposals. I do not need to say much more about them.

The hon. Member for Bournemouth, West was good enough to accept my explanations in respect of his amendments (a) to amendment 76, (b) to amendment 74, (a) and (b) to amendment 80, and amendments 91 and 92. A total of six amendments refer to only two issues, the substitution of "benefits" for "pensions" and the issue of a trust scheme. I hope that in both instances my explanations have been adequate.

The hon. Gentleman was also good enough to confirm the view of the trustees, which I know is also the view of the whole House-I paraphrase his words-that we should stick faithfully to recommendation 43 of the Kelly report, which states:

"The independent regulator should... therefore be given statutory responsibility for setting MPs' pay levels and overseeing MPs' pensions".

The recommendation is more explicit about IPSA's power to set the terms and oversee the administration of parliamentary pensions.

I believe that our proposals achieve the necessary balance. What I am about to say is almost otiose, but it may just be worth my saying it. If it transpires following the election-it will have to be then, but I hope that this will become law-that because of the speed with which we have had to undertake these measures there are some glitches in the drafting, the House will have to return to the matter. However, given the explanations offered by the hon. Member for Bournemouth, West on behalf of the trustees and those offered by me, and given the spirit in which the changes are being made, I hope that that will not be necessary.

Amendment 55 agreed to.