With this it will be convenient to discuss the following amendments:
No. 105, in
clause 2, page 1, line 15, leave out subsection (3).
No. 106, in
clause 2, page 2, line 9, at end add—
'(7) At least one of the non-executive members of the Regulator shall be a representative of an occupational pension scheme subject to the pension protection levies under this Act.'.
No. 107, in
schedule 1, page 164, line 24, leave out paragraph 3.
No. 108, in
schedule 1, page 164, line 32, leave out 'Secretary of State' and insert 'Regulator'.
No. 109, in
schedule 1, page 165, line 1, leave out 'Secretary of State' and insert 'Regulator'.
No. 110, in
schedule 1, page 165, line 4, leave out paragraph 6.
No. 111, in
schedule 1, page 165, line 18, leave out paragraph (c).
No. 113, in
schedule 1, page 166, line 2, leave out
'with the approval of the Secretary of State'.
No. 112, in
schedule 1, page 166, line 5, leave out paragraph 10.
No. 114, in
schedule 1, page 167, line 6, leave out 'Secretary of State' and insert 'Regulator'.
No. 115, in
schedule 1, page 167, line 10, leave out 'Secretary of State' and insert 'Regulator'.
No. 116, in
schedule 1, page 167, line 12, leave out 'Secretary of State' and insert 'Regulator'.
No. 117, in
schedule 1, page 167, line 18, leave out 'Secretary of State' and insert 'Regulator'.
No. 118, in
schedule 1, page 167, line 21, leave out 'Secretary of State' and insert 'Regulator'.
No. 120, in
schedule 1, page 171, line 30, leave out
'with the approval of the Treasury'.
This is a slightly disparate group of amendments. Amendment No. 104 would take away
from the Secretary of State the power under 2(1)(c) to appoint the five other members of the board of the regulator and give it to the chairman with the final approval of the Secretary of State. This is a small but important shift in the balance. A similar point is made in amendments Nos. 108 and 109 and Nos. 113 to 118, and a slightly different point is made in amendment No. 120, to which I shall return.
We argue that the Government cannot have it both ways. We support the setting up of the regulator, as I have already made clear. We can all agree that the regulator and the role of the PPF should be entirely independent. The regulator should be free to roam widely, with its powers and its duties to do its best for the resources that it is given, without fear of political interference at any level. The Government are presumably making a virtue of the fact that the PPF—and, I suspect, the regulator—will be watchdogs with teeth, which they will be willing to use, and will be free from any Government influence. That is as it should be. It has been made abundantly clear by Ministers that the Government are not standing behind the new fund—the PPF—we shall talk about that in much more detail, and at some length, in due course. Those organisations, including the regulator, are free-standing.
In the Government of which the Minister is a member, there is a trend for people to be control freaks, and not be able to let go—although I except the Minister from that accusation. Not only does the Secretary of State have his fingerprints all over the Bill, so does the Treasury. I have made the point before, but it is no less valid for that: the Department for Work and Pensions is a wholly owned subsidiary of the Treasury. The Chancellor likes to indulge in micro-management of almost everything in our daily lives; this matter, I fear, is no exception.
No doubt there will be an exhaustive and high-level procedure to recruit the best possible chairman for the new regulator—someone with exceptional qualities. The same goes for the chief executive. The chairman is to be appointed by the Secretary of State. We are content with that; like the creation of the world, the process has to start somewhere; the regulator cannot just appear out of the clouds.
I am not suggesting that, nor that we turn the Bill into some sort of religious movement. However, I think that the chairman and chief executive should work together, with the sort of people with whom they will be comfortable working, who will add value to their role. That is not to say that we would completely take away the role of the Secretary of State. As amendment No. 104 says, the appointment of the chairman should be
''approved by the Secretary of State.''
If someone wholly inappropriate were appointed to any of these jobs, the Secretary of State should certainly have a role. However, at the end of the day, my view is that the regulator should be master in its own house.
There is a separate point in amendment No. 120, which would withdraw the words
''with the approval of the Treasury''
from the Bill. That magic little phrase comes up quite often, and the Committee should wish to discourage it. We are certainly trying to discourage political interference from the Department responsible for the legislation; why should we encourage interference from the Treasury? In different parts of the Bill, we will try to strike out the words ''with the approval of the Treasury'', and I hope that it will be useful if at this stage, I explain precisely why.
Amendment No. 105 would take out subsection (3), which was a puzzle to us. It states:
''At least two of the members appointed under subsection (1)(c) must be appointed from the staff of the Regulator.''
I do not know whether that is a good thing or not, but I have tabled a typically probing amendment—although with a majority such as the Government's, every amendment is really a probing amendment—to find out the thinking behind it. Why should it necessarily be a good thing to have members of the regulator's staff among the other people? Subsidiary to that, does the provision have to be spelled out so rigidly? An alternative would be to table an amendment stating that the staff of the regulator would not be disqualified; if someone were clearly the right person, they could be appointed. I only throw the idea out; I have no intention of pressing this amendment, or any of this group, to a Division. However, I would be interested to hear the reasoning behind subsection (3).
Amendment No. 106 concerns a different issue. It would add a new subsection at the end of clause 2:
''(7) At least one of the non-executive members of the Regulator shall be a representative of an occupational pension scheme subject to the pension protection levies under the Act.''
The National Association of Pension Funds raised the point that amendment No. 106 addresses. It is rightly concerned that in its operations the regulator—and other bodies, including, or perhaps especially, the PPF—should have in mind the needs and problems of the industry, such as excessive regulation and the invasive regulatory concern that I mentioned earlier, and the cost, which it will ultimately bear, of the various layers of supervision and regulation.
Therefore, I propose that at least one of the non-executive members of the regulator should be a representative of an occupational pension scheme covered by the Bill. Who else has a more immediate and day-to-day appreciation of the role of the regulator vis-à-vis the industry? I would be a surprised if there were a serious objection to that. It would be interesting to learn what argument the Minister could have against that.
When the hon. Gentleman talks about a representative, does he mean a representative of the members of the scheme, the sponsoring employer or the trustees of the scheme? The TUC has called for a members' representative to be included in the new regulator.
Yes, I noticed that in the TUC briefing. I am entirely agnostic about this. The representative could be a member of any of those three groups; he or she need only be someone involved with a scheme whose day-to-day operation would be intimately affected by the Bill. I suspect that that would usually be a trustee or a representative of the sponsoring employer, but I have not spelt that out in the amendment and I do not see why it is necessary to do so.
Amendment No. 107 is intended to clarify matters. It proposes to leave out paragraph 3 of schedule 1, which states:
''No person is to be prevented from being a member of the Regulator (whether as chairman or otherwise) merely because he has previously been such a member.''
We could not work out what that was getting at. Is there a regulation somewhere else—perhaps in another piece of legislation—that I have failed to pick up that would bar people from standing again after serving for a certain period? What sort of situation is that paragraph meant to cover? This is a probing amendment; we are not wedded to it—but I would be interested to hear the Minister's comments on the subject.
Amendment No. 110 raises a similar point. Paragraph 6 refers to matters such as non-executive members ceasing to be members otherwise than on the expiry of their term of office. What kind of situation is envisaged there? Is it illness? I suppose it is not death, unless the compensation is to be payable to people's families. If the Minister were to talk us through what kind of situation he has in mind I am sure that we would be content.
Amendment No. 111 would delete the reference to ''additional staff'' being
''made available by the Secretary of State under paragraph 10.''
We are not necessarily set against that, but to question it is part of the business of insulating the new regulatory set-up from Government—from any Government. Governments have a habit of interfering, and none more so than this one. What is envisaged here? Is it seconding people with particular skills on a short-term basis, or on a long-term basis? We would like to know whether wholesale shifts of officials from the Department to the regulator are envisaged.
I have dealt with amendment No. 113, which makes the point about approval. Amendment No. 112 makes the same point—it is about additional staff. I have dealt with amendment No. 114 as well as amendment No. 115 and so on. Unless someone is prepared to challenge me, I think that I have dealt with all the amendments. I hope that it is clear what we are trying to achieve, which, in some cases, is merely to draw out information from the Minister.
Further to that point of order, Mr. Griffiths. It was a helpful point to raise this early in our proceedings. I know that it is not my decision—far from it—but it might be helpful for you and your co-Chairman if I say that our broad approach throughout our discussions will be that when we have detailed debates on a series of amendments, Conservative Members will not seek a stand part debate unless there is a particular reason for doing so—and in that case, I would flag the fact up at the start of my remarks on the amendments, leaving the decision, as always, up to the Chair.
I am intrigued that the amendments seek to set the regulator more at arm's length from the Secretary of State. I cannot help reflecting that yesterday in the House, a Minister was trying to put the regulator as much at arm's length as possible, so as to evade any responsibility. If I may say so without any disrespect, I would have thought that we wanted the Secretary of State's mucky paws all over the regulator so that he or she is accountable for its failings—or, we hope, its successes—and for the Bill's failure or success in achieving its aims.
I am not sure that we want to reduce the Secretary of State's power of appointment to the regulator, and thereby distance it and make it so independent that, as with many of those bodies, it is hard to lay a finger on it because it is nothing to do with the Government. While I understand the points that the hon. Gentleman has made, I do not feel sympathetic to such amendments.
However, I do have some sympathy with amendment No. 106, which is about representatives of the scheme being part of the regulator. The hon. Member for East Carmarthen and Dinefwr raised the important question of what we mean by a representative. Clearly, people subject to the PPF levy have an interest, but presumably they might legitimately be on the board of the PPF rather than on the regulator. Immediately we start to see the overlap between those two bodies. I do not mean that the representative needs to be an employer just because employers are levied—that is the reference in amendment no. 106—but rather that there should be some sort of representative of a scheme, to give that perspective. I suspect that that representative might need to be an employer, because of the nature of what the regulator does. However, it would be helpful to get the Minister's response to the idea of a worker representative as well.
One of the problems with regulation in the past has been that the regulator has known what was going on, but the members of the scheme have not. If the members had known what the regulator knew, they might have stopped contributing to a scheme. Therefore, the amendment raises a strong question about how the new system will ensure that members of schemes have access to the information that the regulator has collected. I do not think that that will
be achieved by having a token worker on the board. There may be a case for that, but it will not achieve the objective that I have just described. I hope that the Minister will tell us what would achieve it.
It seems sensible to raise one other query, as we are discussing amendments to clause 2. Subsection (1) says:
''The regulator is to consist of the following members''.
It does not say ''the board of the regulator'' is to consist of the following members, and I do not quite understand the choice of that language. The PPF has a board, and later, the Bill refers to membership of the board of the PPF, but not about membership of the board of the regulator. As I understand it, subsection (1) says that the regulator ''is'' those seven people. I do not follow that. It may be related to the idea of its being a body corporate, as is stated in clause 1.
Can the Minister explain the language of the clause? I have some sympathy with the need for representation, but I am less convinced about the need to distance it from the Secretary of State. We want him to be responsible for the success of the regulator.
I add my support to the principle of having a members' representative on the board—or on the regulator—in line with amendment No. 106, although there is an argument to be had about what precisely we mean by representation.
The lay members—the non-executive members—have an important and distinct function under the terms of the Bill. It would be useful if the Minister could give us a flavour of the recommendation and the guidance that would be given on the profile of those members, regardless of whether, according to the Opposition amendment, they are appointed by the regulator having given due regard to the recommendation of the Secretary of State, or the other way round. It would be useful to have a greater sense of the nature of that representation.
I support the TUC's call for member representation. It is important in relation to the principles that underlie the Bill—transparency, greater accountability and greater security. Having a voice for the membership of schemes is essential in achieving those aims. The current proposals retreat from the present position, whereby OPRA has a members' representative. There is a requirement for that—I stand to be corrected if that is not the case. If we look across Europe, we see that most regulators have representation for social partners. Can the Minister tell us how we can guarantee that the interests of members are represented by the five non-executive members of the board of the regulator?
I, too, welcome you to the Chair, Mr. Griffiths. I hope that we will have a pleasant time in the coming weeks.
I do not often support Liberal Democrat or Plaid Cymru members, but I have sympathy with what the hon. Gentlemen are saying. I have been approached by Amicus, which asked how the board would be made up. How does the Minister envisage that that will be done? It is important that employees be represented,
particularly in the light of the problems that we have seen recently involving pension schemes that were wound up with little or no compensation for those affected.
When considering the amendments tabled by the Conservatives, I find it laughable, after what happened to Equitable Life, that we are talking about standing back and not allowing the Secretary of State to have an influence. It was all too obvious yesterday that the Opposition were trying to pin the blame on Labour Ministers, because those people were not there at the time. The Government take collective responsibility. That was shown by the contributions that were made.
Does the hon. Gentleman see a parallel between the desire to compensate those who lost out in the Equitable Life saga—a claim rejected by the Government yesterday—and the desire for compensation for the estimated 60,000 people who have lost their pension rights and will not be compensated retrospectively under the Bill?
The short answer is no. That was explained well by the Financial Secretary to the Treasury in the House yesterday, and I refer the hon. Gentleman to Hansard if he does not recall what was said.
There must also be some kind of scrutiny of the regulator and its body. The best person to do that is the Secretary of State.
Amendment No. 120 refers to the Treasury. The idea that the Treasury would not be involved when money is involved is laughable. The provision is about the accounts. If my right hon. Friend the Chancellor did not want to look at them, there would be something wrong. The amendments are mistaken, so I urge my hon. Friends not to support them if they are pressed to a Division. None the less, I ask the Minister to examine the make-up of the board. Perhaps he could tell us what the chances are of employees being represented on it.
We have had a useful mini-debate on the important issues relating to the amendments. I will not respond to the slightly gratuitous remark that my Department is a wholly owned subsidiary of Her Majesty's Treasury. I have been checking my pager to see how to respond to that devastating criticism, but for some reason the Treasury has not yet been in contact, so I will struggle on with the excellent notes provided by my colleagues in the Department for Work and Pensions, with my own gloss on them. I take on board the spirit in which the hon. Member for Eastbourne moved the amendments. I think that he was saying that they are essentially probing amendments, and they certainly raise some interesting questions, which I hope to address.
Amendment No. 104 would move the primary responsibility for the appointment of members of the regulator from the Secretary of State to the chairman of the regulator. It would not allow members to be staff of the regulator. That raises significant accountability issues. I noted that the hon. Member for Northavon was rather keen to ensure that my
With appointments to the board, we are, at a technical level, simply replicating the way in which members were appointed to the board of the Occupational Pensions Regulatory Authority by the then Secretary of State under the Pensions Act 1995. I am advised that our drafting merely follows the precedent used to establish appointment to the board of OPRA. Although we think that there are good reasons for following that precedent, the Conservative spokesman might once again accuse us of leaning towards the conservative side.
Is there not additional reassurance that my hon. Friend the Minister can give the Opposition Front Bench, in that since 1995, public appointments have come under much greater scrutiny to ensure that they are made on merit, rather than for political reasons? Those appointments will be subject to scrutiny by the Commissioner for Public Appointments, as they were not in the past.
I take that point.
Let me make some more progress. Clause 2 as it stands ensures that the Secretary of State is responsible for ensuring that the chairman is fully consulted and involved in selecting the members of the regulator. It also ensures that the members of the regulator fully reflect the skills, knowledge and experience needed to run the organisation. I think that we have got the balance right: appointments are made by the Secretary of State, but obviously the chairman of the organisation is fully consulted.
I should say to the hon. Member for Northavon that when we refer to the regulator, we are often talking about the corporate body, rather than an individual. The way in which we describe the regulator equates to how we describe the pension protection fund. However, I understand his puzzlement about such terminology.
Amendment No. 104 would ensure that the responsibilities that I mentioned fell primarily to the chairman. I believe it more appropriate for such key responsibilities to be carried out by the Secretary of State—albeit consulting the chairman in due course, once the body has established itself—as he is answerable to Parliament. We need to establish that accountability.
Amendment No. 105 would remove from the clause the provision that at least two members of the regulator, as well as the chief executive, should be members of staff of the regulator. I can understand that point, and it is perfectly proper to debate whether staff should be on the board.
We were influenced in our approach by the recommendations of Derek Higgs's report on corporate governance, submitted to the Chancellor of the Exchequer and the Secretary of State for Trade and Industry in January 2003. Annex A, item 3 on board balance and independence states:
''The board should include a balance of executive and non-executive directors (including independent non-executives) such that no individual or small group of individuals can dominate the board's decision taking.''
Although Higgs obviously had in mind private companies, we considered it appropriate to follow that advice.
Amendment No. 106 would provide for the regulator to have a member who is a representative of an occupational pension scheme subject to the pension protection levies. Some members of the Committee have raised that issue. I understand where they are coming from, but we believe that the amendment would put an undesirable limitation on flexibility, which, as I have said, is designed to ensure that appointments to the regulator are based purely on the skills and knowledge required and the relative merits of each candidate. One of our difficulties, which relates also to the pension protection fund, is that we would be wary of different representative interests, albeit some important ones have been highlighted, and feel that their interests would be taken into account only if they have a member on the board.
We want the flexibility to choose the right people. I assure the Committee that, in terms of a range of skills, knowledge and experience, not all members of the board will be the same customers with the same interests. Although the regulator will have a role in respect of the pension protection fund, its primary objective is to protect members' benefits. As I am sure the Committee will agree, that is best served by an ongoing properly funded scheme and a solvent employer. It is worth noting, of course, that the regulator has responsibility for many types of scheme. Although a good point can be made about one interest being represented on the board, we are talking about defined contribution occupational pension schemes, personal pensions and stakeholder schemes, as well as defined benefit schemes, which will be subject to the pension protection levies.
A major issue would be that of contributions to stakeholder pensions. The regulator must ensure that the contributions of the employer and the employee, when collected by an employer, are paid into a scheme. That is one way in which the stakeholder would be relevant. If the hon. Gentleman wants more detail in writing, I shall consider his question to see whether I have fully answered it.
It is true that the board of OPRA consists of specified representatives of different groups within the pension community. However, we take the view that such a mechanistic approach is out of step with what is required for a modern and proactive regulatory body. I am confident that sufficient consultation procedures are built into the pension protection fund to make the amendment unnecessary.
Amendment No. 107 would remove the express provision in the Bill that allows a person to serve more
than one term as a member of the regulator. That would be undesirable as it would limit the pool of people who could be called on to serve as ordinary members of the regulator. It would also prevent someone who had previously served as a member from being promoted to chairman. Amendment No. 110 would remove the Secretary of State's discretionary power to authorise compensation to members whose term of office is cut short for any reason. The provision replicates existing powers in the 95 Act. In a changing environment, where the need for knowledge and skills may shift over time, it may be appropriate to appoint a new member and remove an existing one at short notice. It would be inappropriate to rule out even the possibility of compensating a member whose expectation of serving a full term is not met.
Amendments Nos. 111 and 112 would remove the possibility for the Secretary of State to make staff available to the regulator in the way that he currently does for OPRA. The 1995 Act enables the Secretary of State to make additional staff available to OPRA. That power to enable secondments of staff from my Department has proven useful for both OPRA and the Department. OPRA has benefited from the availability of experienced pensions officials, and the Department has gained invaluable experience of the realities at the front line of pensions regulation. I know from dealing with colleagues in OPRA who are working on these measures just how useful such cross-fertilisation can be.
The effect of amendments Nos. 108 and 109 would be to remove from the Secretary of State the power to authorise the regulator to make payments for pensions, allowances or gratuities to, or in respect of, non-executive members of the regulator. The power would be transferred instead to the regulator.
Amendment No. 113 would remove a provision for the Secretary of State to approve the terms, conditions and remuneration of regulator staff. The effect of that would be to remove Government control over those matters, including those relating to the members of the regulator.
Amendments Nos. 114 to 118 would remove the Secretary of State's right to determine the scale and nature of pay, allowances, pensions and compensation payments to members of the determinations panel of the regulator. They would leave those matters to the discretion of the regulator.
We wish to put in place sensible and appropriate working arrangements that help to ensure that the chairman and chief executive can operate effectively and at arm's length from the Government, while being supported by the Department. That is why pay, terms, conditions and so on are for the regulator to determine and the Secretary of State to approve. That is in line with Cabinet Office guidance to Departments on setting up non-departmental public bodies, which recommends that key decisions such as the remuneration, allowances and pensions of chairs and senior members are matters for Departments, not the body itself. Furthermore, I do not believe that those who will be funding the regulator through the general levy would want to see the regulator itself controlling
the level of salaries and wider terms and conditions without reference to external scrutiny.
Amendment No. 120 is designed to remove the statement that the regulator's accounts must comply with any directions given by the Secretary of State with the approval of the Treasury. That covers issues such as accounting methods and the detail of the information to be provided in the accounts when they are presented to Parliament. The provision in clause 2 is common to the accounts of non-departmental public bodies. It allows the Treasury, which leads both on accounting matters in general, and on the presentation of accounts of public or quasi-public bodies to Parliament in particular, to provide input to the Secretary of State of the relevant sponsoring Department, in this case the DWP. That provision replicates the provision for OPRA in paragraph 16(2) of schedule 1 to the Pensions Act 1995.
I hear the suspicion of the hon. Member for Eastbourne, but I hope that I have assured him that what we are proposing is routine practice, which has been practised by previous Administrations. I ask the hon. Gentleman to withdraw his amendment.
I am grateful to the Minister for that comprehensive explanation of most of the points that I raised. I remain deeply suspicious of the Treasury, but he has reassured me that this particular provision relating to Treasury approval is common and routine.
I accept the Minister's arguments about the role of the Secretary of State and keeping the regulator at arm's length. It is just that we do not agree philosophically on the meaning of keeping the regulator at arm's length. However, for the moment I shall not press those amendments.
I see the point about flexibility regarding the membership of the board, but I think that the industry would be surprised if—other things being equal—there would not normally be at least one representative of an active pension scheme on the board giving their day-to-day experience from that perspective. I can put it no higher.
I thought that I was careful in moving the amendment to say that it was not necessarily a bad thing for people to be reappointed. I was trying to puzzle out, through the Minister, what provision said that they could not be appointed again and what provision we were trying to tackle. I am neutral on whether reappointment is a good thing. It depends entirely on the individual.
I was slightly puzzled about compensation and the removal of existing members at short notice when their skills are no longer required. I should like to draw an assurance from the Minister—a nod of the head would do—that we are not talking about people being removed for incompetence, inability or non-attendance; that we are talking about those who had a legitimate expectation of continuing for a period; that people would be appointed in the first instance for a set period that would possibly be renewable and then, for reasons that were outwith their own
inadequacy or incompetence, would be compensated. There is nodding of heads, so I shall quit while I am ahead.
On the secondment of staff, I was just trying to ascertain that there would not be great shoals of double agents, as it were, coming in from the DWP or the Treasury, trying to subvert the independence and rigour of the new regulator. The Minister assures us that that practice has produced value on both sides when used in respect of OPRA and I am happy to accept that. On the basis of those explanations I am happy not to press these amendments to a Division. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 2 ordered to stand part of the Bill.