Financial Assistance Scheme (Modifications and Miscellaneous Amendments) Regulations 2005

– in the House of Lords at 7:25 pm on 22 November 2005.

Alert me about debates like this

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions) 7:25, 22 November 2005

rose to move, That the draft regulations laid before the House on 26 October be approved. [7th Report from the Joint Committee and 13th Report from the Merits Committee].

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, in moving the Financial Assistance Scheme (Modifications and Miscellaneous Amendments) Regulations 2005, I shall speak also to the Financial Assistance Scheme (Appeals) Regulations 2005.

Noble Lords will no doubt recall that in July we saw the introduction of the Financial Assistance Scheme (Appeals) Regulations, which allow someone who is dissatisfied with a review decision from the FAS scheme manager also to request an appeal against that review decision. The regulations set out the detail of the appeals process and appoint the Pension Protection FundPPF—ombudsman and the deputy PPF ombudsmen to hear appeals against internal review decisions that have been made by the scheme manager of the FAS. The persons who may appeal to the ombudsman are specified within these regulations. These are any interested persons to whom a notice of a review decision or subsequent review decision has been given by the FAS scheme manager under regulation 16 of the internal review regulations. "Interested persons" are defined as anyone who can apply under regulation 6 for a review of a reviewable determination under the internal review regulations, such as beneficiaries or potential beneficiaries, trustees, or those persons' representatives.

The regulations also set out the time limits for appealing and the information that must be contained in the notice of the appeal. The regulations set out the procedures that must be followed by the ombudsman when he receives notice of an appeal. He must send an acknowledgment of the notice of appeal to each party to the appeal or that party's representative. Where the appeal relates to a scheme notification of scheme eligibility decision, there is a requirement for the ombudsman to take reasonable steps to publicise to all other interested persons in relation to the appeal the fact that an appeal has been made.

Where two or more appeals are received in respect of the same matter relating to scheme notification or scheme eligibility, and those appeals are made on the same or broadly the same grounds, the ombudsman may make a single determination in respect of them all. That should speed up the time taken to reach a determination in some cases, and it will reduce the overall costs. Provisions are also contained in these regulations to provide for the ombudsman to convene an oral hearing where appropriate. The ombudsman can request an expert opinion on an appeal in respect of the FAS. If the ombudsman has given prior approval, he may pay costs and expenses incurred by parties to the appeal, witnesses who have been requested to attend an oral hearing, and any person he has appointed as a representative of a party.

The FAS (Modifications and Miscellaneous) Regulations 2005 set out the modifications that are required to the Pensions Act 2004 for the PPF ombudsman to carry out his duties in respect of the FAS appeals scheme. The regulations also include some amendments to the FAS Regulations 2005, the FAS (Internal Review) Regulations 2005 and the FAS (Provision of Information and Administration of Payments) Regulations 2005.

Noble Lords will be aware how important the need was to get the FAS up and running so that members could receive assistance as soon as possible. Through these amendments essential clarification is provided on certain aspects of the FAS scheme. When developing the appeals regulations we identified the need to clarify some definitions to ensure there was consistency. Other areas of work were also identified as requiring specific amendments to ensure that the policy intention was reflected clearly.

These regulations have been introduced to provide for modifications that are required to the Pensions Act 2004 in order for the PPF ombudsman to carry out his duties in respect of FAS appeals and to allow for necessary amendments to be made to existing regulations. These amendments will provide clarification on aspects of the FAS and, importantly, provide for initial payments to be made to survivors of qualifying members.

There is a requirement for the PPF ombudsman to provide the Secretary of State with a separate report on the duties he has carried out in connection with FAS appeals for each financial year. This is achieved through a modification to the section of the Pensions Act 2004 dealing with the PPF ombudsman's duty to prepare an annual report. This will now include a requirement for a separate report on the ombudsman's functions to be prepared in relation to the FAS. The modifications also provide the power that enables the making of the provision in the appeals regulations to meet costs and expenses.

These regulations allow the ombudsman to refer a question of law arising from the investigation of a FAS appeal to the High Court in England and Wales or in Northern Ireland, or the Court of Sessions in Scotland. Amendments have also been made to the FAS Regulations 2005 (S.I. 2005/1986) by substituting regulation 18 of those regulations and by making other consequential and minor amendments.

Moving now to the amendments to the FAS (Internal Review) Regulations 2005 (S.I.2005/1994), most are minor but I must draw noble Lords' attention to one amendment to the internal review regulations, which relates to the time limits for requesting a review. There is currently no time limit set for members to request a review of member eligibility or member assessment decisions. This amendment imposes a one month time limit and the policy intention is that it should be able to be extended to 12 months at the Secretary of State's decision.

I should draw noble Lords' attention to one aspect of the amendment. I regret that there is a typographical error in regulation 5(7)(c). This is the regulation which deals with the time for making an application for a review of a reviewable determination. At the end of that sub-paragraph it will be noted that current wording is "insert 'or (b)'". This should instead read "insert 'or (c)'". The current wording has the effect of allowing the scheme manager to extend the existing timescale in which to request a review of member-related decisions to 12 months where he considers that there are reasonable grounds for doing so. As there is currently no timescale in which to request a review, the scheme manager would be extending an already unlimited timescale by 12 months.

The explanatory memorandum for this instrument made clear that the intention was to introduce a one month time limit with discretion to extend that new timescale to 12 months. As drafted, the regulation allows for the one month time limit but not the extension. I apologise to the House for that and it is my intention that this will be amended at the earliest opportunity.

Minor amendments have also been made to the Financial Assistance Scheme (Provision of Information and Administration of Payments) Regulations 2005. They are necessary either to clarify existing definitions or to clarify certain requirements.

I should inform the House that the FAS operational unit which opened for business on 1 September has been receiving notification details from affected schemes and will do so until the end of the notification period on 28 February 2006. The operational unit has also begun making decisions on scheme qualifications, with the first decisions being made on 25 October. Affected schemes can refer to the DWP website, which is regularly updated for further information. I beg to move.

Moved, That the draft regulations laid before the House on 26 October be approved [7th Report from the Joint Committee and 13th Report from the Merits Committee].—(Lord Hunt of Kings Heath.)

Photo of Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay Spokesperson in the Lords, Treasury, Spokesperson in the Lords, Work & Pensions

My Lords, when I met the noble Lord, Lord Skelmersdale, earlier, he suggested that he would prefer to hold his fire until I had shot my bolt; so I am happy to start. I thank the Minister for his explanation of these regulations and for having the courtesy to write to me in advance with the apology for the correction that he has just mentioned. I am happy to accept that.

When we last debated a statutory instrument on the FAS, I drew attention to the estimated £16 million running cost of the scheme over its first three years of operation, including setting up costs. Can the Minister give us his latest estimate of those costs over the three years, bearing in mind that no robbed pensioner has had even the tiniest taste of a payment from this pitiful little pretence of a rescue fund? I should put clearly on the record from these Benches, as the spokesman for my party in this House, that government financial compensation payable under the financial assistance scheme should be on the same terms as those payable by the Pension Protection Fund.

I must press the Minister to reply to the serious concerns raised by the Merits of Statutory Instruments Committee. I was slightly surprised that he did not refer to those in his opening remarks. It stated:

"These Regulations are drawn to the special attention of the House on the ground that they give rise to issues of public policy likely to be of interest to the House".

It stated in Paragraph 11 of its report:

"We note the main Regulations setting up the scheme were made in July and the scheme came into operation on 1 September but it has taken until November for an appeals mechanism to be established. We would expect an appeals mechanism to be a more closely integrated part of the policy formulation".

The committee stated in Paragraph 13:

"This range of amendments strengthens our concern that the policy flowing from the Pensions Act 2004 has been in continuous evolution since the Act was passed. One of the criteria for this Committee to report an instrument is that it 'may imperfectly achieve its policy objectives'. We have found the long, continuing and evolving series of instruments which has resulted from the Pensions Act 2004 particularly difficult to assess in this regard".

Well, join the club. Amen to that. Not to put too fine a point on it, policy is being made on the hoof.

Turning to the details of the regulations, we broadly support them as being necessary to enable the FAS to do its job. I accept that the Minister is new, but I am bound to put again, as we did during the passage of the Pensions Bill, that it is a waste of time and money to have set up the FAS completely separately from the Pension Protection Fund, rather than let the scheme operate under the PPF umbrella. Clearly, this is a duplication of functions.

Photo of Lord Skelmersdale Lord Skelmersdale Deputy Chief Whip, Whips, Spokespersons In the Lords, Work & Pensions & Welfare Reform

My Lords, I echo the opening words of the noble Lord, Lord Oakeshott, and say that we few pensions addicts—not, I hope, interested persons, in the sense that the Minister used—are grateful to the Minister for explaining the regulations so clearly. I have no points of detail to raise, other than to echo the words of the noble Lord, Lord Oakeshott, not least in his remarks relating to the report of the Merits of Statutory Instruments Committee, of which the Minister is an aficionado, having been its first chairman.

However, that brings me to statutory instruments generally, and the second one that we are debating in particular. I accept that the Minister has come clean, not only today but in his helpful letter to the noble Lord, Lord Oakeshott, and myself, on the drafting mistake in the modifications regulations. This drafting mistake raises two issues. The Minister's officials will no doubt know that I got quite incensed at what I regularly described in the Joint Committee on Statutory Instruments as "sloppy drafting". Regulation 5(7) of the order to which I am referring is a current example. How on earth can officials extend the existing timescale in which the scheme manager can request a review of member-related decisions when there is no timescale? What has happened to the checking which used to take place in the Minister's department when I was there?

Paragraph 7(c) of the regulations refers in error to a previous regulation which we are not amending and in which, as I said, the time for appeal is open-ended, so there is no point in amending it here. The original paragraph 3 of the Financial Assistance Scheme (Internal Review) Regulations needs a redraft, which we are promised.

That brings me to my second point. If these regulations were negative, not only would we not be debating them but they would already be law, and so an amending order would be necessary, forthcoming and, again, not debated. These regulations—indeed, all regulations—concerning the Financial Assistance Scheme are made under the affirmative resolution. I was brought up, parliamentarily speaking, to believe that parliamentary time is a valuable commodity. The proper course for the Government would be to withdraw these regulations and relay them properly drafted. They should have done so last week. Had they not already been passed by another place, I would have asked the Minister to do just that—withdraw them—and, if he refused, I would have sought the opinion of the House. However, they have now slipped through another place and so that is not the position that we are in today. Therefore, the Minister will be relieved to know that, on this occasion, I will not do what I have just threatened. Nevertheless, I put him on notice for the future.

As I said, as far as these orders go, I have no questions but, like the noble Lord, Lord Oakeshott, I want to make some general points. Does the Minister yet know how many people will be given financial assistance under the scheme? This subject has arisen each time we have debated the Financial Assistance Scheme and the various adjuncts to it made through orders. At the time of the Bill, the figure was 60,000; a couple of orders ago, the figure was 70,000; now, it is suggested that 85,000 people have a realistic claim under the scheme.

Like the noble Lord, Lord Oakeshott, I am on record as saying that £20 million over 20 years—in other words, £400 million over the life of the scheme—is mean, and I believe that it was the smallest amount that the Government thought they could get away with. But let us for a moment give the Government the benefit of the doubt and say that it was sufficient for 60,000 people. How can it still be said to be enough now that there are so many more impoverished pensioners within the scheme; or is the Minister going to tell us that it does not really matter as some of them will be eligible for pension credit and all will be well in the end? I hope not—that would really annoy my noble friends, especially as some of the recipients will either be expected to have, or will be trying to get, further employment and thus will not be eligible.

Lastly, no assistance has yet been paid out. The Government speak of payments starting "at the end of the year". Does that mean before or after Christmas, and does the Minister mean that this timetable is still viable?

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, I am grateful to both the noble Lords, Lord Skelmersdale and Lord Oakeshott, for their comments. Although they made some criticisms of the Government's handling of this measure, I am grateful for their general support for the regulations.

I start by dealing with the issue of errors and, again, I apologise to the House. It is most unfortunate. Noble Lords will know that, when I was chair of the Merits of Statutory Instruments Committee, I took a particular interest in the proper production of statutory instruments and the ability of this House properly to scrutinise them. I do not depart from that, and it is a matter of great disappointment to me that I have to come before your Lordships' House to apologise for an error that has occurred. I can assure noble Lords that I will do everything in my power to ensure that this does not happen again and we will try to put it right as soon as possible.

I turn to the specific comment of the noble Lord, Lord Oakeshott, and the Merits of Statutory Instruments Committee about the pace and timing of the various statutory instruments that have to be brought forward. Much of that reflects the need to get this new FAS system up and running as quickly as possible. Inevitably some problems have arisen in the timing of the regulations and some of the changes that have had to be made because of the need for speed. In answer to the noble Lord, Lord Skelmersdale, I am advised that the FAS unit intends to make payments by the end of the year. I take that to be the calendar year and will stand by that. If I can give the noble Lord any more details, I will write to him, but clearly it is very important to get payments out as soon as possible.

We debated the issue of running costs in July. The figure is the same as I gave then—that is, £16 million—and at present there is no change to that estimate. Obviously, in the light of experience, we will have to look at the matter again but that is the figure that I have. We shall be employing about 60 people in the York office of the FAS. It has had to be produced and I want the administration of the scheme to be as efficient as possible. I am sure that we are working towards that. None the less, the scheme will cost money and we must accept that.

I do not know whether I should respond to the general points raised by the noble Lords, Lord Oakeshott and Lord Skelmersdale. I think that the matter has been debated and, in the end, Parliament has reached the decision that this is the route down which we should go. Inevitably, hard decisions have had to be made in setting up the assistance scheme—I do not think that anyone would disagree with that. Any government in our position would have to make similar decisions, although there may be disagreement about the approach taken. No one can be in any doubt whatever about the personal consequences for individual pension scheme members when their pension schemes go down. We discussed that in a debate last week and one can only have extraordinary sympathy for anyone affected in that way.

The £400 million is the amount of money that we have set aside. I believe I said in July that that will be reviewed in the next spending round cycle, and we will then know more about the number of schemes that the FAS has accepted and the number of scheme members involved. At the moment, we envisage that up to 15,000 members who are within three years of the scheme's normal retirement age will benefit from the FAS topping up their pensions. I say to the noble Lord that it is early days. The period during which applications have to be made ends on 20 February and we will know much more after that date. When that date is reached and we have more up-to-date estimates, I shall of course be very happy to write to both noble Lords.

Photo of Lord Skelmersdale Lord Skelmersdale Deputy Chief Whip, Whips, Spokespersons In the Lords, Work & Pensions & Welfare Reform 7:45, 22 November 2005

My Lords, I am grateful to the Minister for giving way. In view of the figures that were bandied about when we discussed the Bill and on subsequent occasions, 15,000 seems to me to be a very small figure. Is that because so far applications have not been made or is there another reason? Is the department advertising the existence of the scheme?

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, these are the latest estimates that I have been given. However, they come with the caveat that at the moment it is very difficult to estimate the number of pensioners, and I think that we will have to wait until the end of February to have a clearer idea. It is important to consider the number who will benefit from the scheme in relation to the number of pensioners who may be affected by insolvent schemes but will not be eligible to receive payments from the FAS scheme. The figure of 85,000 that he has quoted may reflect estimates of the number of those people rather than of those who are eligible. As I say, it is early days. I cannot say much more at this stage, but I will come back to the noble Lord when I have further information.

Photo of Lord Oakeshott of Seagrove Bay Lord Oakeshott of Seagrove Bay Spokesperson in the Lords, Treasury, Spokesperson in the Lords, Work & Pensions

My Lords, I thank the Minister for giving way. He mentioned the question of the amount under the scheme being reviewed in the next public spending round. My honourable friend Danny Alexander, whose constituency's name I will not attempt to repeat at this time of night as it would detain us, mentioned a fair point in the Commons. As the public spending round was now being put off for review from 2007 to 2008, that is effectively a year's wait for people. He did not get a proper answer. Now that one has had a few days to consider it, will the Minister undertake to raise with the Chancellor of the Exchequer the fact that those who suffer under the FAS should not have to wait an extra year for it to be reviewed, just because the public spending review has been put off?

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

No, my Lords, I do not think I can do that. It is quite clear that the review of the required sum for the FAS will have to be set alongside other government priorities. It must therefore fall to be dealt with within the next spending round review.

I say again that this discussion will have a rather better foundation when we actually know the likely numbers involved. We will not know that for a certain amount of time. As I said, as soon as I can, I will of course make available to noble Lords as much information as I can.

Photo of Lord Skelmersdale Lord Skelmersdale Deputy Chief Whip, Whips, Spokespersons In the Lords, Work & Pensions & Welfare Reform

My Lords, I am sorry to come back again. However, just now I asked about the department's advertising of the scheme, to which the Minister did not respond.

Photo of Lord Hunt of Kings Heath Lord Hunt of Kings Heath Parliamentary Under-Secretary, Department for Work and Pensions, Parliamentary Under-Secretary (Department for Work and Pensions)

My Lords, my understanding is that information is available on the web. However, I will double-check to make sure that it is. To be fair to everyone likely to be involved, we clearly have a responsibility for making sure that publicity is available. I will check what manner of publicity is available, but we will be seeking to make information available to all who may be eligible.

On Question, Motion agreed to.