Clause 9 - Functions exercisable by the

Pensions Bill – in a Public Bill Committee at 3:30 pm on 9 March 2004.

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Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne 3:30, 9 March 2004

I beg to move amendment No. 124, in

clause 9, page 5, line 2, at end insert—

'(g) the duty to monitor the costs of enforcement of this Act upon occupational pension schemes and their sponsoring employers.'.

This is an echo of a point that has been raised once or twice already. It was inspired by our friends at the National Association of Pension Funds, who take a close interest in our deliberations. The amendment seeks to impose an extra duty on top of the six already set out for the non-executive committee. Again, we enter the lists argument: once one starts to put lists in the Bill, there is a compulsion to keep adding to them. However, I do not think that the Under-Secretary can claim all wisdom on such matters. The people who will have to work with the regulator and with the non-executive committee would be thoroughly reassured to have this requirement in the Bill. There are real concerns about the likely burdens and costs involved in enforcing the Act, and they are not the creatures of my fevered Conservative imagination.

I should have thought that the non-executive members would be the ideal people to flag up that sort of thing. Hopefully, they would bring their own experience of the real world from outside—they might have actuarial, investment or other backgrounds—which would not only help to make the regulator successful and effective, but reflect back the concerns of the people whom they are used to working with in running the schemes.

I can almost hear the Under-Secretary telling me about the philosophy of this particular list. If we are to have a list with no fewer than six headings, why not have another heading?

Photo of Mr Chris Pond Mr Chris Pond Parliamentary Under-Secretary, Department for Work and Pensions

In a moment, we shall discuss the little list to which the hon. Gentleman referred and we shall talk about the role and functions of the non-executive committee.

As the hon. Gentleman said, the amendment would give an additional duty to the non-executive committee of the regulator. The primary reason to have such a committee is to provide a degree of autonomy in overseeing the governance and strategy of the

organisation. That is one of the issues that he is concerned about. The creation of a non-executive committee will ensure that the regulator remains efficient and accountable; that is what it is there for. That makes the most appropriate use of the regulator's resources, which will be paid for by the levy and therefore by schemes.

A duty to monitor the costs of the legislation once it is in force would not sit well with the committee's other duties. It is also likely to be administratively costly, which would again feed through into the levy. We have discussed on points of order the regulatory impact assessment and my hon. Friend the Minister of State has given an assurance that we will get that to people as soon as possible. That is of course an important mechanism for considering the Bill's impact. With that assurance, we ask that the amendment be withdrawn.

Photo of Peter Atkinson Peter Atkinson Conservative, Hexham

If I heard the Under-Secretary correctly, he made an extraordinary comment. He said that my hon. Friend the Member for Eastbourne was proposing to add an extra duty, which is correct, but he also said that it would be too costly for the non-executive committee to monitor the financial and regulatory impact of its decisions. That is extraordinary. The amendment proposes a light-touch duty; it asks the committee to bear in mind the impact of its actions. To say that it will not do so on the grounds that it might be costly makes absolute nonsense of what the Minister of State said.

Photo of Mr Chris Pond Mr Chris Pond Parliamentary Under-Secretary, Department for Work and Pensions

I think that the hon. Gentleman has misunderstood. I said that the purpose of the non-executive committee is to ensure that the regulator remains efficient and accountable. I think that that is his objective, too. I also said that giving the non-executive committee the responsibility to monitor the costs of the legislation once it is in force would not be a sensible use of its time given the other important roles and tasks that it has to fulfil. That is why I hope that when we discuss clause 9 he will feel reassured; it will become clear that the objectives that he is properly pursuing—that the resources of the regulator are appropriately used, properly targeted, and employed in an efficient, transparent and accountable way—will be fulfilled by the non-executive committee when we look at its range of functions.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

The Under-Secretary has flagged up a wider discussion that we can perhaps have in a moment, so I will speak only briefly on this matter. I echo what my hon. Friend the Member for Hexham (Mr. Atkinson) said; it cannot be right that the main reason for not including this duty is that it will be administratively expensive. That makes my heart sink.

The Under-Secretary referred to the regulatory impact assessment, which is available at all good booksellers and on all good PCs. I have made it clear that Opposition Members find it difficult to accept the 25 per cent. extra cost conclusion. I fear that the overall costs of the new regulator could be considerably more than that, on top of what OPRA is currently costing. That makes it even more important that this amendment is agreed to.

However, I will leave the matter there. I may have to return to it, and we might pick up on some relevant points in the broader clause stand part debate. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Photo of Mr Chris Pond Mr Chris Pond Parliamentary Under-Secretary, Department for Work and Pensions

Now we come to the meat of the issue that we have been skirting around. As I am a vegetarian, perhaps I should not use such analogies; I do not do them terribly well. Clause 9 sets out the functions that must be exercised by the regulator's non-executive committee. The hon. Member for Eastbourne expressed his concern that the regulator should operate efficiently, effectively, proportionately and transparently. The proposed functions of the non-executive committee, as they are spelled out in clause 9(3), are

''to contribute to and keep under review the strategic direction of the Regulator . . . to scrutinise the performance of the Chief Executive in''

ensuring

''that the functions of the Regulator are exercised efficiently and effectively . . . to monitor the extent to which the Regulator is meeting its objectives and targets . . . to monitor the Regulator's reporting of its activities to the Secretary of State . . . to review . . . whether the Regulator's internal financial controls''

are in order, and,

''subject to the approval of the Secretary of State'',

to determine

''the terms and conditions''

and remuneration of the chief executive. Those functions are standard for any non-executive committee; I hope that hon. Members will agree that they will ensure that the regulator remains efficient and accountable.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I shall now carry out an apparent volte-face on what I was saying earlier about amendment No. 124 and query whether we are heaping too many duties on these non-executives. Although the arithmetic is a bit tricky, I understand that as things are set up under clause 2 the chairman will be non-executive, and it is clear that at least two of the five other persons must be executive, rather than non-executive. We are talking about a maximum of three people plus the chairman, and possibly fewer than that. A relatively small group of people, who are not full-time employees, will have a broad range of duties, including keeping the chief executive up to scratch, considering the strategic direction, monitoring targets and objectives, monitoring reporting, looking at internal financial controls and so on, as well as dealing with remuneration for senior people, as is common for non-executives.

That leads me to ask what sort of people the Government and the regulator will be looking to appoint to undertake this task. We all know that jobs offered to people that are supposed to take one day a week take five—often in charitable activities. Does the Under-Secretary have some detailed ideas about what requirements will be placed on those people? We have debated this point already, so I will not cover the same

ground. However, we are making it clear that these people cannot be full-time employees of the regulator, so they will have another job too. There will possibly be two or three of them. I hope that they will not have an enormous number of duties, because their functions are, on looking at them on the printed page, totally central to the direction of the new regulator. Will they be able to fulfil that function, or will those doing the recruiting observe a series of requirements in terms of availability and time? Presumably, that will also have to be reflected in the package that they are offered to do the job. I do not know how far the Under-Secretary has gone down that path, but it would be interesting if he shared his progress with us.

Photo of Mr Chris Pond Mr Chris Pond Parliamentary Under-Secretary, Department for Work and Pensions 3:45, 9 March 2004

The hon. Gentleman is right. The non-executive committee will fulfil a central oversight function within the regulator to ensure that it performs its role properly. That will be a serious responsibility for those who take on that role. He is also right in saying that there will not be armies of people. The non-executive committee will have a responsibility to report annually on its activities. Any of the functions that I have listed can be discharged to sub-committees of the non-executive committee, as under a normal arrangement. Although the non-executive committee provides the independent oversight of the way the regulator is operating and it has a list of important functions that it must carry out, it can decide to delegate those functions to sub-committees at any time.

The hon. Gentleman asked whether the non-executive committee structure is adequate. The corporate structure was set up in that way to be consistent with the Higgs report on corporate governance. One of the Higgs recommendations was that there should be a non-executive committee of this type led by a senior independent director, and that it should meet at least once a year. Clause 2 provides that at least five other members are appointed in addition to the chief executive and the chairman, and that extra people could be appointed. There will be sufficient resources to carry out the important functions of the non-executive committee, especially bearing in mind that it will have the opportunity to discharge some of its responsibilities to sub-committees.

Question put and agreed to.

Clause 9 ordered to stand part of the Bill.