Clause 167 - Meaning of ''reviewable matters''

Pensions Bill – in a Public Bill Committee at 9:30 am on 20th April 2004.

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

Photo of Mr James Cran Mr James Cran Conservative, Beverley and Holderness

With this it will be convenient to take Government new clause 16—Meaning of ''reviewable matters''—and Government new schedule 1.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I wonder whether the Minister would take us through his new clause. It may be helpful, and afterwards I can raise certain issues.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

We have discussed the main ideas of setting up a pension protection fund. We are now about to deal with some important consequential matters, after which we shall deal with issues regarding the new pension protection fund ombudsman. We have now had 16 sittings in Committee and, subject to the will of hon. Members, we may have six or so more sittings. As we expected, the Committee's proceedings are turning into more of a marathon than a sprint. That enables me neatly to note and congratulate the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Grantham—Gravesham—

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

Gravesham. Grantham is associated with another notable parliamentarian. I congratulate my hon. Friend on completing the London marathon in four hours and 15 minutes. He tells me that that was slightly worse than last year, but he was drafting new clauses as he was running.

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

The hon. Gentleman referred to the chicken. It was a little disconcerting at 19 miles to find

myself with a rhinoceros and three chickens still in front of me. Although this Committee's proceedings deprived me of the time to do the training necessary to improve on my previous time, they prepared me in other ways. The marathon was sometimes a painful event, and it took a long time. At the end, one ended up in the place in which one began. In that sense, experience of this Committee prepared me well.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

The intention is to replace clause 167 with new clause 16, which would provide a list of pension protection fund board decisions that could be disputed. The Government amendments have the following objectives.

First, as a drafting point, we have decided that, as the list of reviewable matters is extensive, it would be best placed in a schedule: new schedule 1. Secondly, the new schedule would extend the list of reviewable matters. Thirdly, new clause 16 would allow regulations to delete items from the reviewable matters list, if that was required. Finally, the new clause would provide a mechanism for determining whether the board had failed to reach a decision by reference to a prescribed time limit.

I do not intend to discuss each individual addition to the list of reviewable matters in detail; to do so would take up a great deal of valuable time. However, I would like to make the following point. As well as adding to the list of reviewable matters, the list would now include the failure of the board to reach determinations in certain circumstances.

If, for example, the board failed to determine a person's entitlement to PPF compensation within a prescribed period, that person would be able to ask the PPF board to undertake a review. The general intention behind the list of reviewable matters is to make clear in legislation which of the board's decisions could be challenged. On the face of it, it may seem reasonable to allow any board decision to be challenged, but there are good reasons for the dispute procedures to have relevant parameters.

For example, the fact that a compensation rate of 90 per cent. is payable to non-pensioners is not open to dispute, because it is set out in legislation. It is the calculation used for all, and there can be no deviation from it. Allowing such a decision to be challenged would result in delays and raise expectations that a different outcome was possible when it was not. Although PPF members would be unable to challenge the 90 per cent. compensation level, other matters regarding their compensation rate could be challenged. For example, if the board had based someone's compensation rate on 10 years' rights when they had had 20 years' rights, that, of course, could be disputed.

In a similar vein, schemes would be unable to dispute the formula used for calculating the levy. However, they would be able to challenge the board's decision that they were an eligible scheme and therefore had to pay the levy. If the levy calculation had been based, for example, on an incorrect

membership number, the scheme would also be able to challenge the amount of levy payable.

The clause aims to provide a procedure for dealing with PPF disputes that is fair and transparent, and that provides clarity of approach for people to raise disputes if they have a right to do so. It sets out those matters that may affect the civil rights of interested parties, and provides the basis on which actions may be challenged.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I add my congratulations to the Under-Secretary on his achievement. I hope that he raised a great deal of money for his favourite charity.

One of the briefing notes that has reached me, and I am grateful for it, is about the complexities of clause 167 and new clause 16. Let me say two things at the outset. First, I can see the logic, from a drafting point of view, of re-casting that as it has been done. However, it has the maddening effect, which is familiar to all hon. Members who have dealt with large Bills, that when we re-cast our amendments on Report we will have to change all the numbering. But we cannot have everything—at least, not in opposition.

Secondly, I should like to make another substantive general point, which I will, perhaps, develop in more detail on clause 168 to put in context my remarks on new clause 16. Do we need a review? We are in danger of developing a cumbersome and bureaucratic system. We will deal with the role of the ombudsman and everything else later. The Government are trying to mirror the provisions of the European convention on human rights and have been nervous about getting out of kilter with what that proposes. However, we are creating a new bureaucracy, when the answer is, perhaps, to cut out the review and go straight to the next stage. I will develop that point in a moment.

There are a few points arising from what the Minister said on the helpful explanatory note. If there is to be a review, it is most important that the list sets out those issues where the board has failed to reach determinations, let alone where it has made the wrong determination. One of the clear examples in the explanatory note is where the board fails to determine a person's entitlement to PPF compensation within a prescribed period. On a human level, that will be one of the most important reasons for having such reviews—and another good reason for trying to short-circuit the system. However, we are considering another part of the Bill, which will be heavily underpinned by regulations later on. I will not even raise the grant regulations, because I have long since given up on that.

Although it is difficult to get a handle on the time scale that Ministers, for example, might have in mind, perhaps I may use this example to draw the Minister out. This is a clear case of somebody who may be in personal difficulties because they have not been given the compensation to which they are entitled, their company has gone bust and their pension scheme has left them high and dry. What time scale is envisaged for trying to deal with such issues? Presumably, some issues would be relatively easy to deal with and could be dealt with rapidly on the basis that they were simply book-keeping or technical errors by those running the

system. For example, the Minister mentioned the question of 10 or 20 years. The note talks about trying to produce clarity of approach. I am concerned—I shall develop this in a debate on another clause—that we shall get into a confusing, rather than a clarity-inducing, situation.

Paragraph 3 of the schedule, which, as the note says, was omitted from the list in clause 167, deals with the question of the scheme's trustees having to apply to the board to assume responsibility if they think that

''the employer is unlikely to continue as a going concern, and . . . the prescribed requirements are met''.

That is set out in clause 101(3). There is a similar provision in subsection (4), and so on. That is an important provision, so why was it left out? Perhaps there was a reason why, at the time of first drafting, it was thought that it was not appropriate for this part of the Bill.

Another issue arises in paragraph 5 of the schedule—formerly clause 167(d)—which has now been set out in different wording:

''a scheme that is eligible to enter the PPF should not start to wind up during an assessment period if it has insufficient assets to meet its PPF level of liabilities. The Board may validate . . . the action of a scheme's trustees or managers to wind up the scheme''.

That significant decision has to be made by the board. Is there any view that there should be a fast-track way of dealing with that kind of determination and review, where there are problems with a scheme? I congratulate the Government on belatedly putting forward the regulations relating to wind-ups. We look forward to debating those, I hope fairly soon. I believe that those regulations are due to come into force in May; that is good news, albeit belated. There is some read-across to paragraph 5 of the schedule. Is there any way of having a fast-track approach to dealing with the matters?

Another important point relates to paragraph 10. As I understand it, that paragraph includes a brand new provision, although I may stand to be corrected. The provision follows the introduction of the large schemes requirement. According to the notes,

''Where a scheme rescue is not possible for a large scheme and the scheme has sufficient assets to meet its PPF level of liabilities, the trustees or managers must apply to the . . . Board for authority''.

That is an important decision. It will be interesting to hear from the Minister how that relates to the relationship between the PPF level of liabilities, the statutory funding requirement and the requirements of FRS 17; we have already touched on the subject.

I will give a final example, because from anyone's point of view, the redrafted schedule is pretty voluminous. Paragraph 14, formerly clause 167(j), is about the

''determination . . . of a person's entitlement to compensation''.

That partly relates to a point that I made earlier. A person might challenge the number of years of accrued rights on which his compensation is based. That strikes me as another clear example of something that could affect a person significantly. Is there not an argument for a fast-track approach to the reviews, or for some

reviews to move faster than others? Does the Minister have an idea of an overall global time scale in which the matter should be resolved?

The note makes it clear that the formula—and so, for example, the 90 per cent. figure for non-pensioners—cannot be disputed. However, there may be a genuine dispute about the number of years' accrued rights, about how someone's compensation is calculated, or even about someone being denied compensation. Those issues must be resolved rapidly, either by cutting out the review stage altogether—that is an option, and we will perhaps say more about it later—or by ensuring a fast-track method of challenge for those concerned. I hope that that is helpful.

As I say, I entirely understand the logic of how the provisions have been recast. It is helpful to have so much more detail included, but many details are still out there somewhere in draft regulations.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 9:45 am, 20th April 2004

Whereas many of the provisions that we will consider raise issues that had never been in the Bill, new clause 16 is a second go at an issue that was always in the Bill, and was botched the second time round. That is slightly worrying. It is a little worrying that, probably only a month or two after the clause was first written, it was realised that there were holes in it, and it had to be rewritten.

I asked my children in which of the Wallace and Gromit stories the characters are rushing down a railway track, furiously laying down track before the train can get to it. [Hon. Members: '' 'The Wrong Trousers'.''] Yes, that is right; other hon. Members have children, too. My feeling is that the Bill is very much a matter of the Government trying to get to provisions before the Committee does. The ink is sometimes still wet, and it is still wet on new schedule 1. Does the Minister have any reflections on that subject?

Occasionally, the Opposition's draft clauses and schedules are not quite perfect when they emerge from the womb. However, this measure is not very contentious: the PPF has a job to do, and if it does not do the job, one asks it to look at the matter again, and then one goes to an ombudsman. That does not sound particularly complicated, yet here we are, rewriting it within a few weeks of its first being written. That is slightly disturbing. Will the Minister comment on it? How confident is he that the rest of the Bill will survive more than a couple of months once it is in action?

As I understand it, one of the main changes in new schedule 1, as distinct from the original clause 167, is that people can ask the board to look again when it has failed to do something, not merely when it has done something wrong. That raises the issue of timetabling and time scale, which are referred to in the explanatory notes. When a company goes out of business and its pension fund starts to be wound up, people face the elastic problem of how long it will all take before they know where they stand. New schedule 1 is trying to tackle that point by saying that when things have gone on too long, people can go to the board and say, ''You haven't done this. How about

it?'' The board might shuffle its feet nervously, and people could then go to the ombudsman.

Can the Minister give us some indication of the time scales that we are talking about? We are setting up the pension protection fund. If my medium-sized but fairly smallish employer with a typical scheme goes out of business today and the scheme falls into the hands of the PPF, how long will it be before I know where I stand? This new schedule gives me powers to go to the board if a decision has not been made in a prescribed time, but we do not know how long that period is. Will the new schedule apply after days, weeks, months or years? Some schemes take years to wind up. For people who have lost their pension rights, will the PPF represent a speeding up in working out their new entitlements, or a slowing down? Will the fact that the PPF is involved mean that people are left in limbo for longer? It all depends on what the prescribed time is.

A problem linked to that, which seems germane, is getting hold of information from the Department for Work and Pensions when schemes are wound up. Will the PPF have any privileged position in getting hold of information from its sponsoring Department so that schemes can be wound up and people can be told what they are entitled to more quickly? Will the fact that the PPF has been set up by the DWP—albeit at arm's length—mean that people can get information and know where they stand more quickly? Stepping aside from the minutiae of the list in the schedule, the point is that when workers have lost their job or their company has gone out of business, they want at least to know what their pensions will be. We do not know from the schedule how long they will have to wait, or whether the whole process is longer or shorter. I have no understanding of the big picture, so I hope that the Minister can share his understanding.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

This has been a useful discussion. We have opted for a two-stage review process for the PPF, as we believe that that strikes a reasonable balance between fairness and administrative efficiency. Errors occur in any organisation, and although we intend to keep those to a minimum in the PPF, it is more efficient for straightforward reviews to be dealt with by the original decision maker. The hon. Member for Eastbourne had some doubts about whether we needed a two-stage process, but I argue that, particularly for errors—or rather, alleged errors—that are relatively easy and quick to resolve, resolution is best done as part of an internal review.

If the complainant remains dissatisfied with the outcome of the first-stage review, a second-stage review can be requested. That will be carried out by a specially constituted committee of the board to be known as the reconsideration committee. In terms of scale and administration, the PPF will be much larger than occupational schemes, and we recognise that compelling schemes to have a two-stage process is not always administratively efficient. We have therefore agreed that schemes should be able to have a single dispute resolution process, provided that the decision on the dispute is reached by the scheme's trustees and is not delegated.

As for how long the process will take, obviously we want disputes resolved as quickly as possible. We want to avoid unnecessary delays. Some PPF board decisions cannot be unpicked at a later stage—for example, the decision to take a scheme into the PPF. It is therefore important to allow those involved the right to an impartial review. Only then can we be 100 per cent. sure that the right decision has been reached, and that all the relevant information has been taken into account. It is therefore possible that if a PPF decision is disputed, it could take longer to reach the final decision—after all, we are talking about important matters. In such cases, compensation will remain in payment until the final decision is made.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

I want to make sure that I have explained myself clearly. My question about time scale was not so much about situations in which something is done, but those in which something is not done. If the PPF gets involved, it might take a long time for it to do its sums and get the information, but if nothing is done, people can go to the PPF board at some point and ask for a review. I want to know how long things can go on for before people have the right to go to the PPF board.

The question is how long the whole process of getting anything done at all can take, rather than how long it takes to query something that has already been done.

Photo of Malcolm Wicks Malcolm Wicks Minister for pensions, Department for Work and Pensions

I understand that question, and its importance. I am bound to say that to some extent many of those matters and the detailed questions will have be left to the PPF. It will be its task to develop good practice and possibly to consider whether to set targets. However, we will put time limits in regulations, and they can be revised if necessary, with a view to ensuring that the PPF board provides an effective and efficient service to its customers. We will have to consider how detailed those regulations will be, because it would be wrong to make in Committee decisions on minutiae that would be best left to the board. I hope that hon. Members will realise that we want decisions to be made as quickly as possible, provided that that is compatible with the seriousness of the issue that is being raised.

The hon. Member for Eastbourne asked why there was one omission from the original drafting. I am afraid that that comes down to a simple drafting error, and it is best to admit that. The hon. Member for Northavon asked why we were revising these matters. Again, I have to say that we are working in complex territory. We took the decision early on, and we have explained to the Committee that, given the importance of getting the PPF up and running, it would have been wrong to delay this legislation by a year. However, as we have admitted, that has meant that a good number of Government amendments have been made.

I know that the hon. Member for Northavon will be sensitive and sympathetic to the need to examine drafting carefully, because I think that before Easter he admitted that one of his amendments, although good natured in intent, would have meant that my Department had to increase the pensions of everyone throughout the world. Errors can be made.

Photo of Mr James Cran Mr James Cran Conservative, Beverley and Holderness

I shall now put the Question on the clause, and I remind the Committee that Government new clause 16 and Government new schedule 1 are associated with it.

Question put and negatived.Clause 168Review and reconsideration by Board of reviewable matters