Clause 231 - Modification of this Act in relation to hybrid or multi-employer schemes

Pensions Bill – in a Public Bill Committee at 9:45 am on 22nd April 2004.

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Photo of Mr Win Griffiths Mr Win Griffiths Labour, Bridgend

With this it will be convenient to discuss the following:

Government amendments Nos. 561 and 562.

Government new clause 34—Consultation by employers: occupational pension schemes—

and the following amendment thereto: (a), in

line 21, at end insert—

'(5) A prescribed decision for these purposes is defined as one of the following:

(a) closing a scheme to future accruals;

(b) closing a scheme to new members;

(c) changing from a defined benefits to a defined contribution basis;

(d) significantly reducing or removing an employer contribution to a defined contribution scheme.

(6) The prescribed persons to be consulted hereunder will not include trade unions where an employer has established procedures for directly consulting employees in an alternative manner.'.

Government new clause 35—Consultation by employers: personal pension schemes.

Government new clause 36—Further provisions about regulations relating to consultation by employers—

and the following amendments thereto: (a), in

line 13, after 'ballots', insert 'where it is necessary for the purpose of selecting employee representatives.'.

(b), in

line 34, at end insert—

'(6) The discretion on an employer as to the persons who are to be consulted in subsection (2)(C) above shall be mandatory in cases where an employer has existing arrangements in place for direct consultation with employees.'.

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

The best way to approach the group is to start with the meat of the three new clauses. New clauses 34, 35 and 36 would introduce the requirement for employers to consult affected active members of their pension schemes, or representatives of those members, before making a major change to future pension arrangements. Many employers already consult on pension changes as a matter of good employment practice. The CBI and other business groups have been keen to stress that point, and I entirely accept it. However, we must recognise, from the history of the past couple of years, that some employers do not consult. Together these clauses would ensure that, in future, employers would have a statutory obligation to consult on a proposed major change before the decision was made.

New clause 34 relates to occupational pension schemes. It would enable regulations to require employers who propose to make a prescribed decision in relation to their scheme, or who have been notified by their trustees or managers that they propose to make a prescribed decision, to consult in the ways set out in the regulations before that decision was made. The clause also makes provision for trustees or managers not to make certain decisions until they are satisfied that the employer has fulfilled the consultation requirement. That takes account of the varieties of scheme rules, which may give different powers to trustees and employers.

Opposition amendment (a) to new clause 34 seeks to place the detail of prescribed decisions on which consultation should take place under primary legislation, and to ensure that the prescribed persons to be consulted would not include trade unions where an employer has established procedures for directly consulting employees, but employees have not specifically chosen that. Rather than adopting that approach, we intend to use the power in the new clause to prescribe decisions to cover the relevant changes.

I will come to our choice of the secondary legislative vehicle rather than the primary one. However, Committee members will first be interested in the substance of the relevant changes. Those will include winding up the scheme or closing it to future accruals, closing a scheme to new members, changing from a defined benefit scheme to a defined contribution or hybrid scheme, and significantly reducing or removing an employer contribution to a defined contribution scheme.

Although that statement obviously does not spell out everything in the regulations in detail, the types of change to pension schemes that I have just mentioned cover all the main issues that we would expect to see in the regulations. I hope that Opposition members of the Committee will accept that assurance.

I turn now to why we believe that there are good reasons why it would be more appropriate for the changes to be in regulation rather than in the Bill. We have opted to set out the detail of the consultation requirement in regulation so that we can ensure that the approach fits well with the forthcoming regulations on information and consultation, and so that there is scope to adjust the regulations as pension schemes develop and innovate over time.

To give an example, changes involving hybrid schemes are relatively recent. There are, no doubt, other ways in which pension schemes will evolve in years to come. We intend to use the power to prescribe who should be consulted to require employers to consult recognised trade unions or to consult via approved information and consultation arrangements that have been agreed by the employees. That is in line with our original commitment in the Green Paper to implement the requirement to consult on pensions alongside consideration of the implementation of the information and consultation directive.

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

I confess my almost total ignorance of these matters. Will the Minister clarify the current position: what current obligations are we changing? Will he clarify how what he is saying now relates to section 67 of the Pensions Act 1995, or does that involve a completely different set of issues?

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

Will the hon. Gentleman allow me to come back with an answer to that question later? As I mentioned earlier, recent years have shown that some employers, sadly, have initiated major changes to pension schemes without consultation. That shows that, whatever the existing arrangements may be, a great deal of progress needs to be made—hence the new clauses.

Compliance with the requirement to consult will be enforced by the pensions regulator, which will be able to impose civil penalties on employers or trustees who are in breach of their obligations under the regulations, as set out in section 10 of the 1995 Act. New clause 35 provides for regulations to require employers who offer group personal pension arrangements with a direct payment facility to consult when they propose to make certain critical decisions in relation to employees who are members of the scheme.

New clause 36 enables regulations to include further provision relating to the obligation to consult required under new clauses 34 and 35. It allows for regulations to set out the information that must be provided to those being consulted, and the time periods that must be allowed for consultation.

Opposition amendment (a) to new clause 36 is intended to clarify the purpose of subsection (2)(e), which refers to holding ballots, by making it clear that the ballots referred to are simply for the purpose of electing employee representatives. I can confirm that this subsection refers to circumstances in which employees opt to elect representatives who would be authorised to receive information on their behalf about changes to future pension arrangements, and

to be consulted about them. It does not relate to a ballot to enable affected members to vote on the outcome of any consultation. The Opposition amendment is therefore unnecessary.

Opposition amendment (b) to new clause 36 is intended add a new subsection at the end of the clause to ensure that the discretion placed on an employer to determine who should be consulted is in fact made mandatory when the employer has existing arrangements in place for direct consultation with employees. Subsection (2) allows employers to have some flexibility about whom they consult in certain cases. However, where there are recognised trade unions or appropriate information and consultation arrangements, which have been approved by employees, employers must use those existing structures. There is a strong expectation that where unions are recognised they will be closely involved both in drawing up information and consultation agreements, and in being consulted under them. Where employees have specifically chosen to be consulted directly on major changes to pension schemes, or where there are no existing representative structures, direct consultation will be allowed. That is in line with the approach taken in implementing the information and consultation directive. To ensure continuity of approach and to minimise complexity, it is important that the approach to implementing the directive and to these proposals is similar. For that reason we do not accept the Opposition amendment, which could effectively allow employers to opt out of the consultation process if they consulted directly with employees, even if the arrangements were not specifically approved by employees. However, we do intend to set out in the regulations that, if there are no representatives who may be consulted on pensions, or if the employees have already agreed to direct consultation in relation to pensions changes, the employers may consult employees directly.

New clause 36 gives a power to

''amend, apply . . . or make provision similar to''

parts of the Employment Rights Act 1996, the Employment Tribunals Act 1996 and the Trade Union and Labour Relations (Consolidation) Act 1992. That will ensure that trade union representatives, information and consultation representatives, and any other employee representatives who are involved in consultation on major pension changes, are entitled to an appropriate level of employment protection so that they can carry out their duties as representatives. It will protect representatives from suffering any detriment and from unfair dismissal, as well as ensuring that they are given adequate time and remuneration to carry out their consultation duties. The protection mirrors that already provided to employee representatives by reason of the Employment Rights Act 1996, and the protection that is proposed for information and consultation representatives.

Subsections (3) and (4) will assist the pensions regulator in policing compliance with the requirement to consult, and in investigating complaints relating to breaches of the regulations, by putting the onus on employers to provide the pensions regulator with

information about the action that they have taken in order to comply with the regulations, if required.

Subsection (5) puts it beyond doubt that where employers have other duties to consult on pension changes arising elsewhere they are unaffected by the new consultation provisions. For example, an employer may already have arrangements in place and we would not wish to undermine them.

Government amendments Nos. 560, 561 and 562 are technical consequentials related to the new clauses.

We have been in discussion with the CBI, the Trades Union Congress and other stakeholders and will continue to discuss how best to implement the requirement to consult within the enabling clauses. Therefore, and in light of the assurances that I can give about the type of pension scheme changes to be covered by regulation, the nature of the proposed ballots and the opportunity for employers to consult employees directly when there are no recognised trade unions or other representative structures, I hope that Opposition Members will withdraw their amendments. I might have the opportunity later in the debate to answer the hon. Member for Northavon when I have thought through his questions more carefully. I apologise for my speech being so long, but I did not have time to write a shorter one.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I am grateful for the Minister's comments, although he must not confuse a long speech with an informative speech. I accept that the Government's amendments are technical and minor and we have no particular problems with them. Indeed, our amendments to the new clauses are probing amendments. Without wishing in any sense to spoil the warm atmosphere that has developed in Committee this morning, I must say that there is no excuse for the new clauses to appear at this late stage in our proceedings. They have been flagged up for a long time to employers' organisations and others, so they are far from being an afterthought.

Organisations, such as the CBI and the Engineering Employers Federation, have been expressing their concerns to me about when the new clauses would be tabled and in what form. I can tell the Minister that employers' organisations, especially the CBI and the EEF, feel significant irritation about the lateness of the proposals. Their timing does not allow for significant consultation about their terms. The Minister said that consultation would take place later, but surely it is traditional and more sensible, given that employers' organisations have legitimate strong and developed views, that consultation should occur before the provisions are drafted, not afterwards.

Furthermore, there is no excuse for the dilatory way in which the provisions have been handled. The new clauses are not highly complex or legalistic. As I conceded in our short debate on the programme motion, the stuff on moral hazard and anti-avoidance is highly technical and, as the Secretary of State flagged up, involved some high-powered legal brains to obtain clarity. Even now, such measures may not be right, but the consultation matters are fairly standard stuff and, for the life of me, I cannot understand why they have appeared at such a late stage. Such action

risks legislation on the hoof and the alienation of responsible employers' organisations.

The Minister touched on responsible employers in his remarks. We tabled our amendments in a great hurry—the best that we could do in the circumstances. I make no apology for that, but I am speaking on behalf of those responsible employers' organisations, which already take seriously the need to consult their employees on such issues.

I appreciate, of course, that the Government have a separate agenda about giving trade unions more powers to interfere. One of the legacies of the Thatcher years is that we now often have responsible trade unions with a clear understanding of how business and capitalism work and the need for a profit motive and sensible approaches to workplace issues, whether pensions or other matters. Some other trade unions have not quite got with the programme and take a different view, so I hope that the thrust of the Government's policy behind the new clauses is not to produce a Trojan horse for companies that already have a harmonious relationship with their employees, especially when consulting on changes to the pension schemes.

It is particularly unhelpful that, as with other aspects of the Bill, industry must wait for detailed regulations that will be dealt with later, on a sleepy afternoon in a Committee Room quietly out of the public gaze. However, it is clear from the Bill that there will be stringent civil penalties for people who do not comply with whatever will be set out in the way of obligations. The Government's attitude to my amendment (b) is particularly worrying—

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 10:00 am, 22nd April 2004

That is something that I was looking for when the hon. Gentleman mentioned stringent civil penalties for those who fail to comply with the provision. Can he tell me where that is stated?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I see; the hon. Gentleman wants me to read the Bill for him. One of my officials, or his officials, will come back to me with a note. It is in there somewhere, because I saw it early this morning.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I promise the hon. Gentleman that I did, but at the moment I cannot find it. There is a certain amount of scurrying in the Government's dugout.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I thought that it was. I am afraid that the Minister has a problem, because his comments may not always attract the close interest that they deserve and perhaps they read better in Hansard. I have a feeling that the Minister did touch on the matter, but I am not paid to answer such questions and the Minister is, so perhaps he will take the opportunity to do so.

I was gobsmacked that, at the time, the Minister could not deal with the legitimate query by the hon. Member for Northavon, which I had also flagged up to raise, about the relationship between these new clauses and section 67 of the Pensions Act 1995; we

shall discuss that later. One set of proposals imposes potentially onerous obligations on employers to consult the work force about changes to pension schemes, but in a different part of the same Bill there is a raft of provisions that were designed—they do not succeed—to make it easier for employers to change the terms of the pension scheme rather than shut it down, which is the easy and practical option for many companies at the moment. I cannot believe that the Minister could not, at least off the top of his head, deal with that query. There must be some interconnection.

On the face of it, these are two elaborate sets of proposals, carefully honed, presumably by different parliamentary draftsmen, and produced, coincidentally, at around the same time in the life of the Bill, but in many respects they are totally contradictory, with totally different aims. It is as if two separate gangs in the Department for Work and Pensions or the parliamentary draftsman's office were given totally different briefs and have come up with clever proposals—

Malcolm Wicks indicated dissent.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

The Minister is shaking his head furiously and I shall stop speaking about this issue because I do not want him to do himself an injury. It reminds me of a scene from ''The Exorcist''.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

When the green slime starts to appear, I shall sit down.

If the Minister has not already applied his mind to the point, which seems to have occurred naturally to both me, as the shadow Minister, and the Liberal Democrat spokesman without the massive support that the Minister has. There is a major contradiction and if he cannot deal with it straight away, I hope that he will do so at length and I reserve the right to return to the matter later.

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

It is obviously a difficult point for the hon. Gentleman to grasp and I may say a little more about it later, but section 67 is about past rights and has no actuarial impact on individuals. We shall discuss that at the appropriate time. We are discussing changes to future pension rights and decent consultation is proper practice. In a moment, the hon. Gentleman may say whether he thinks that it is proper to consult workers about their pension rights. He has not yet come clean on his view about that.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I have. Just as the hon. Member for Northavon was not listening to the Minister, the Minister clearly was not listening to me. We should all have those great glass screens erected around us as we have in the Chamber.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

It could. I am delighted to have the Minister's assurance, orally, that the two groups of new clauses approach two different sorts of rights. Although the boffin from the Liberal Democrats will, I am sure, correct me, I do not think that that is clear in the legislation as it stands. We can return to that in more detail.

As for not listening, the Minister clearly was not listening to me. I am afraid that this debate is going to be a long one because it brings together the new clauses and our amendments to them. With your indulgence, Mr. Griffiths, I will touch on a couple of points. They would arise on stand part, but I think that we can obviate the need for a separate debate if you are reasonably liberal with me.

I have made it clear that we believe that the best employers do consult their employees and that employers should be encouraged or required to do so. What we—and the employers' organisations—are concerned about is a Government agenda to try to give trade unions pre-emptive rights to interfere in those matters where they are not wanted. In many companies there will be a relationship that works between the trade union and the employer. That is what we are trying to get at and that is what is behind the amendments.

The amendments are all probing and are inspired by the employers' organisations. My first point arises from a briefing note. It says:

''Certain employers are to be exempted from this requirement, for example public service pension schemes, which already have statutory consultation arrangements, or employers with less than a specified number of employees.''

I hope that the Minister will be able to answer a couple of practical questions. First, does he have a feel for the number of employees that will be the cut-off? Secondly, why should the public service pension schemes be treated in that way, and not the private sector schemes, just because they happen to have statutory consultation arrangements that may not work well? The thrust of our amendments is that if it can be shown that there is a sensible and fair procedure in place in any given company—involving the trade unions or not—they should be exempted from the requirements.

Yesterday the Engineering Employers Federation had a meeting of its employment policy committee. Much concern was expressed about the new clauses. The EEF says that

''if there was an excessive requirement placed upon employers, this would be yet one further reason why employers would think seriously about whether they should continue maintaining pension provision for their employees.''

It also says:

''There was a universal view . . . that the Government should set a fixed period of time for consultation on pension changes (along the lines of the fixed periods for consulting on collective redundancies)''.

That is something that we touch on in at least one of our amendments.

The EEF makes the point that many of its

''companies already consult before making changes to their occupational pension scheme.''

It wants to see provisions that allow flexibility for

''companies to retain existing consultation arrangements that best suit them and their employees.''

That is the position of the official Opposition. It certainly does not think, and nor does the CBI, that there should be an automatic requirement for employers to consult trade unions in particular companies.

As we are dealing with the shadowy issue of what will be in the regulations, it would be helpful if the Minister would state clearly whether the regulations will include a requirement for trade unions to be involved willy-nilly, even if there is no existing penetration of trade union membership in a particular company. The EEF makes the point that the new clauses

''provide very little detailed information about the Government's thinking'',

particularly on prescribed persons.

I have already raised the issue of the timetable, but the EEF wanted us to probe Ministers on other specific matters as well. I do not know why I am doing this; I should have thought that it was a job for officials and the organisations themselves, but clearly that stage was left out in the preparation of the new clauses. The EEF wants to know whether employers will have a choice on the type of consultation mechanism they use and, if so, whether the Government have a view on which mechanisms might be appropriate. It asks what type of changes to occupational pension schemes employers will be required to consult on, bearing in mind that the Government have talked in the past about substantial changes; I believe that the Minister touched on that. The CBI repeats the point about the fixed period of consultation and asks about penalties if employers fail to comply with the new consultation arrangements.

To return to the point raised by the hon. Member for Northavon, I am sure that somewhere in the Bill are provisions for penalties.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

If the hon. Gentleman has found the clause, I should be delighted to give way.

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

I must admit to a certain amount of inspiration. Clause 237 covers penalties, and the explanatory notes on the new clauses suggest that that clause would apply to them as well.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

Thank God for that. It would have really ruined my day if we had not been able to pin that down. I was sure that I had seen a reference somewhere in the forest of explanatory notes, late amendments, briefings and other ''stuff''.

We are not talking about an exhortation to be good employers but about specific provisions that involve significant civil penalties. We were not even privy to most of them, because they have not been produced in draft regulations. I am amazed that the Government seem to have made so little effort to carry the employers' organisations with them. If I were them, I would have found that extremely worrying.

The concerns of the CBI very much parallel those of the EEF. It states:

''A key concern to emerge since the publication of the Bill . . . is the lack of clarity in new Government clauses to provide information and consultation rights.''

It says that the vast majority of companies in its membership already consult and that it does not want to end up with a ''one size fits all'' approach. It refers to the ''great uncertainty'' of all these matters being left for subsequent regulations. It does not want trade

unions automatically to be given preferential or special treatment. I hope that that is not what is behind the provisions, because it has become clear in the past 20, 30 or 40 years that trade unions are not the only answer to achieving fairness in the workplace, that sometimes they actually work in an opposite direction, and that there are other ways that decent, responsible employers can ensure that their employees are consulted and treated fairly. The falling number of trade union members during my political lifetime is one measure of that development.

The CBI thinks that employers

''should have the ability to protect consultation arrangements that are already in place and have the support of employees''.

That is as high as I shall put my case. If it can be clearly demonstrated that arrangements are working and have been in place satisfactorily for some time, they should not be changed. The CBI also discusses the need for direct consultation.

Amendment (a) to new clause 34 is designed to set out the prescribed decisions. We can all get into the traditional argument about what should be in the Bill and what should be in the regulations. The amendments are intended to draw out the Minister and are based on previous pronouncements by the Department about which decisions would be covered. It would be interesting to know in principle whether the Minister would add to or subtract from the list and whether the Committee can send a message to employers that certain issues and not others will be included.

Proposed subsection (6) of amendment (a) states:

''The prescribed persons . . . will not include trade unions where an employer has established procedures for directly consulting employees in an alternative manner.''

If the Government's sole motive is to ensure that there are proper, transparent consultation arrangements for pension matters in every company, they cannot possibly object to that subsection of our amendment. If their real motive is to give a boost to trade unions that might otherwise not have become involved in arrangements with particular companies, however, that would inform a view—

Photo of Vera Baird Vera Baird Labour, Redcar 10:15 am, 22nd April 2004

The amendments seem to be an attempt to oust trade unions from the consultation, even where they are already present. Is that not right? The hon. Gentleman seeks to add a subsection to the end of new clause 36 to ensure that the discretion to determine who should be consulted is mandatory, where arrangements already exist.

New clause 36(2) already allows for flexibility, however. Where there are recognised trade unions, there is of course a strong presumption that employers must use the existing structures. Is the hon. Gentleman seeking to oust that as a presumption, too, and introduce a Trojan horse of his own, so that even recognised trade unions should be ousted from a workplace to allow flexibility and direct consultation with an employer? That could not help future employment relations.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I want to limit the number of Trojan horses involved, or we could get into all sorts of difficulties. The hon. and learned Lady misreads my intention. I would expect that, in a well-run company with existing and well recognised consultation arrangements and a recognised trade union, unions would already be involved in those arrangements. I cannot see any problem with that.

Equally, however, in this post-Thatcher era it is perfectly possible to envisage large, well run companies that have excellent consultation arrangements in place but no trade union recognition and limited, if any, trade union membership within the work force. I am trying to draw the line there, so there is no Trojan horse on the Conservative Benches.

Photo of Vera Baird Vera Baird Labour, Redcar

Does the hon. Gentleman not accept the need for flexibility, however? Although shops can be unionised or not unionised, companies can merge or not merge, and departments can change to become parts of other departments, there are times when a previously non-unionised shop becomes partly or wholly unionised. Surely the Government's position, which allows for complete flexibility, is the best way forward. The hon. Gentleman's amendment is truly an attempt to oust the influence of trade unions, in a characteristically Tory fashion.

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

Again, I am not guilty. I do not know where the hon. and learned Lady gets the notion of flexibility, unless she has had sight of draft regulations, which no one else has. We do not know what the flexibility or lack of it will be, and the CBI and the EEF have a suspicion, based in part on the clear lack of consultation, that the Government want to give the trade unions a special position in those matters, which they do not deserve. I am sure that the hon. and learned Lady would not agree with that.

I was too lazy to draft the same amendments to new clause 35, but the Committee should take it as read that I would have put down more or less exactly the same wording had I been able to rev up my word processor, and the necessary enthusiasm. The Minister tells me that amendment (a) to new clause 36(2) is unnecessary. I was always willing to accept that from his lips, but the amendment is based on another CBI concern. The CBI says that it is unclear whether new clause 36(2)(e) refers to choosing

''representatives should a company go down this route or whether it refers to balloting affected parties with respect to the key change being consulted upon.''

It says that it

''would be extremely concerned if it is the latter and if it is the former then this should be spelt out more clearly in primary legislation.''

The Minister may argue that my amendment is unnecessary, but I hope that he sees the wisdom in spelling it out in primary legislation, because it clearly concerns the CBI.

Amendment (b) to new clause 36 would make it clear that where proper arrangements for direct consultation are already in place—which I believe is the case in many companies, and especially large ones—they should be left as they are. Our motto on such matters is: if it ain't broke, why fix it?

May I, with your indulgence, Mr. Griffiths, discuss an issue that has been raised with me by various people about clause 231 in its entirety, and particularly about subsections (1) and (3)? There is a general issue with hybrid schemes, and we may wish to return to it on Report. As the Minister knows, my view is that the entire Bill is an elaborate funeral oration for defined benefit schemes; we are not going to get any new ones as a result of this legislation, and neither will any that would otherwise have closed be saved.

The future is—not orange, but defined contribution schemes rather than defined benefit schemes, or hybrid schemes, which are becoming extremely popular. I do not profess to have the technical learning to know exactly how they work, but they seem somehow to combine DB and DC in one scheme, which is why they are called hybrid schemes. The people who administer, market and produce them are getting worried about the effects of the legislation as a whole on hybrid schemes. One of the issues that the Minister has flagged up for Government amendments on Report is the effect of the legislation on DC schemes; we discussed that some time ago. Hybrid schemes are a new development, but we have to keep up with the times. Can the Minister say whether they too will be dealt with in that regard, because there is concern? We might have to return to this in more detail on another occasion.

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

The hon. Gentleman has covered a number of the issues that need to be raised. One of the merits of the time that we spend in Committee is that it gives Ministers the opportunity to put on the record what that they think is likely to appear in regulations. The Minister has described a few of those things. The hon. Member for Eastbourne has read out what the EEF wants to know about the regulations, and I am interested in the answer to those questions as well.

The Liberal Democrats support the principle that people have a right to be consulted about significant changes to their pension arrangements. Pensions are increasingly understood to be deferred pay, and just as people would not expect their pay to be altered in a unilateral manner, they should not expect their pension rights to be altered unilaterally. We support the principle behind the new clauses.

The Minister intervened on the hon. Member for Eastbourne to try to tease out the relationship between the new clauses and section 67. I understood him to be saying that section 67—and the replacement for it in the new clauses that we will address later—is about changes to rights that have already accrued, whereas these new clauses are about consultation on changes to the scheme going forward; they are about rights that have yet to accrue.

However, I wonder whether the distinction is as clear as the Minister seemed to be implying. As the hon. Member for Eastbourne said, there is a bit of a paradox here; we are slightly watering down the rights of members with regard to changes to the rights that they have already accrued, but we are also beefing up the requirement to consult on changes that have yet to take place. Can the Minister confirm that these new clauses do not relate to any changes that might be made to rights that have already accrued—that they

are entirely about changes in rights going forward? It is my understanding that that is the case.

One of the dilemmas about consultation is: when is it meaningful? All Members know what sometimes happens when public bodies make decisions. For example, a decision might be made to close a post office, and after that a consultation takes place; everybody always knew what the answer would be, because the decision had already been made. The consultation is a sham, and, frankly, a waste of everybody's time. In such cases the right to be consulted is not worth the paper it was written on.

I am still slightly unclear about the new rights to be consulted. Are they veto rights? There is a reference in one of the new clauses to ballots. If there were a ballot of the affected members and they said no to the change, would that be binding? Would it be indicative? Regulations might require ballots, but would they require binding ballots? People who run schemes—who do not have to run them in the first place—may be obliged to consult members on major changes, but are they obliged to do anything once they have heard the results of the consultation? I am not clear about that fundamental question in the light of our discussion. I hope that the Minister can clarify that for me.

I have a couple of other observations. Most requirements under this part of the Bill are left to regulation, and we have already heard that employers' organisations have a lot of concerns. We know that the way in which such matters are handled in the House means that those regulations are unamendable. Even if we understood them, we could not change them. We have to say either yes or no. Will the Minister assure us that in preparing those regulations he will consult employers' organisations—and the relevant trade unions as well—so that the kind of amendments that we might table in Committee are reflected in the regulations, which will be presented to the House in a take-it-or-leave-it fashion? That would offer some reassurance to the employers' organisations.

I have to part company with the employers' organisations on their comments about trade unions. I cannot see why the regulations might not—at least in certain circumstances—require consultation with the relevant trade unions. I do not see why one would want to remove that requirement at all. They would be the obvious people to consult, and in certain circumstances a requirement to do so would seem right and proper.

Overall, on behalf of my party, I welcome the fact that pensions will increasingly be seen as integral to the remuneration package. That is probably the world into which we are moving. In a world where good pension schemes are something sought after, having the right to consultation when they are changed must be enshrined in legislation. The principle of the proposals is right, but my critical question is whether these rights entitle people to be told what is going on—although they are clearly more than that: they are the right to express an opinion on what is going on. Do they, however, give the right to veto something if the vast majority of members do not want it?

Photo of Nigel Waterson Nigel Waterson Conservative, Eastbourne

I am following what the hon. Gentleman is saying closely. Would thresholds—such as a two-thirds majority—or other such provisions be required? There might be a small vociferous group opposed to a change and a majority in favour. Of course, the people being consulted will have different interests. Some will have already retired, some will still be working, some will be nearing retirement, and each group may legitimately have a totally different take on any proposals.

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

The hon. Gentleman is right. We need to be much clearer about the way in which the views expressed will transform into decision making. He also raises the interesting question of who will be consulted. Will it be all the scheme members—the retired, the active and the deferred? Presumably it must be, but in other discussions, we have found that retired members have had little right to consultation. To the extent that we are discussing newly accrued rights, we may not be talking about retired members at all. I sense that we probably are not.

The situation is a bit grey and unclear. What rights are people actually getting? Are they rights to say what one thinks and then be ignored? Given that it is the employer who decides whether to run a scheme, how far are we giving the members of the scheme rights to change it or to refuse changes? Will such changes simply be nodded in the direction of the employer, only for the scheme to carry on pretty much as it would have done? How much meat is there in those rights? That is the key question.

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

I have a few questions and comments to make about the Government new clauses. Consultation by employers is important, and it is right that that should happen, but we also have to ensure that employees' views are taken into consideration. They must have a real say on any changes that might happen to their pension.

What does ''consultation'' mean? As a trade unionist, to me, it usually meant that the employer said, ''I've told you so. That's it. I've consulted you.'' Sadly, that is so. I would like the Minister to give me a definition of the real meaning of consultation. Does it just mean that because the employer or the fund has said something, that is counted as a consultation, or is it a two-way dialogue? Consultation, like communication, is a two-way process. Part of it is speaking and part is listening. The meaning of the word ''consultation'' does not come out in the Bill.

The comment by the hon. Member for Northavon about the consultations that took place about the post offices was reasonable, although it was not entirely accurate: I have saved one of my local post offices—[Hon. Members: ''Hear, hear!'']—with the help of the local community, of course. Consultation has worked in the past—although not very often. I accept the hon. Gentleman's underlying concerns.

The Government should be congratulated on being willing to speak to the CBI and the trade unions, even at this late date. I do not regard this as the sort of thing that the hon. Member for Eastbourne described—a willy-nilly consultation. I hope that in answer to my

request for an explanation and description of the word ''consultation'', we do not receive a willy-nilly description, and that we can include in the Bill something that everybody will understand in future.

The Minister mentioned the assurances about the type of pension scheme changes to be covered by regulation. He also spoke about the nature of ballots, and the opportunity for employees and employers to be recognised, and the trade unions, and the trade union representative. What recourse will employees have if they feel that they have not been consulted properly? To whom do they say, ''I have not been consulted'', or, ''I do not think that the consultation that I received was correct and would meet the obligations imposed by the meaning of the word 'consultation' ''?

The hon. Member for Eastbourne made a churlish attack on the Government for talking to people. If the Government stopped talking to people, then they would be open to the complaints that he made. Even until the last minute before the Bill gets the stamp of approval, I would expect the Minister and his Department to be talking to people at all times. For the hon. Gentleman to have a go at the Minister for doing that at a late stage in a Bill is unfair, to say the least.

The hon. Gentleman also talked about the responsibilities of employers. He was right to say that there are good employers. However, there are also bad employers. Although I understand where he is coming from and the kind of people whom he is trying to represent, he would do his argument a lot more good if he remembered that there are a great many bad employers that must be considered, and the employees of these companies should be protected. Had the hon. Gentleman remembered that during his contribution it would have been more even-handed, and I could probably have agreed with some of it. When people put only one side of an argument, they should not expect those who have leanings towards the other side to see what they are saying. Fortunately I am more even-handed, and I know that there are good employers who consult their employees, as well as bad employers.

I had some sympathy for the hon. Gentleman's point about treating private and public pensions the same. It is important that no matter what kind of pension people have, they are treated the same as everybody else, because at the end of the day, they suffer the same as everybody else. Any person who has been contributing to a pension, possibly for a number of years, will suffer just as much as anybody else. The fact that one pension is slightly different from another pension should not mean that one member of the public is treated differently from another.

I shall finish by referring again to consultation. The new clauses, and the Bill, are good, but sometimes we need a defining moment, and a defining word: I want a definition of the word consultation. I want to know what people really mean by consulting. If the Minister tells me that, he will have my full support.

Photo of Vera Baird Vera Baird Labour, Redcar 10:30 am, 22nd April 2004

I congratulate and compliment the Government on tabling the new clauses. Although they come late in the day, I am not sure that that is a justifiable criticism, because to a fairly detached observer of industrial relations, they seem well balanced. The criticism that the Government have not carried the CBI with them is not justified. It is clear that consultation has been carried out. Even the CBI points that were raised by the Opposition would be appropriate to be negotiated within the ambit of the statutory instruments that are to follow, which will regulate the arrangements in detail.

It seems eminently suitable for issues of detail to be delegated to statutory instruments so that they can be flexible and can, if necessary, change more readily as needs change. This is the advent of the issue of information and consultation, and these steps must be something of a pilot. It is important that they are flexible, by being made through statutory instruments, which will give them that extra characteristic. Now that the framework is reasonably clearly set out, it is entirely appropriate to devolve the rest to statutory instruments. The sooner those statutory instruments can be produced, the better industry and the unions will be able to consult, and the smoother the transition will be to understanding in full how the Bill will work.

I am concerned that the Tories, through amendment (b), seek an opt-out where there is a recognised trade union shop. They are trying to slip into this legislation the flexibility to do that, while appearing to champion employees' rights. I cannot think of a worse way of affecting industrial relations than sanctioning, at the very least, the distancing of recognised trade unions, which should be the preferred mechanism for consultation where they exist or may come into being. I remind the Opposition that consultation of separate individuals is capable, at worst, of being an opportunity to divide and rule, and at best of creating a position in which individuals will not have to hand the expertise, the resources and the pensions advice that is available from a trade union. Those people will be less able to follow the consultation process, marshal resources and have a clear view to put forward. Without the backing of trade union expertise, they are likely to be less able to make a contribution that suits their interests. Trade unions are keen to be kept at the forefront, and I congratulate the Government on the new clauses that do exactly that.

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

This has been a useful debate and I thank everyone for their contributions. I particularly welcome my hon. and learned Friend's support for the balanced approach that we are trying to present, whereby we can deal with the detail in regulation.

The hon. Member for Eastbourne seems to be in a grumpy mood this morning. We are in favour of a consultative, rather than an insultative, approach. It is not for me to defend the hon. Member for Northavon, and I am happy to criticise him when I think it appropriate. However, it is a peculiarly English disease—I know that you, coming from your great nation, do not suffer from this, Mr. Griffiths—to attack people for being intelligent. We use words such as ''boffin'' and we accuse people of having two brains,

and perhaps we have been guilty of that—[Interruption.] I am sure that my PPS, my hon. Friend the Member for Greenock and Inverclyde (David Cairns), has. Most other European countries would have some respect for intellect. I always think that people who use terms like ''boffin'' may be guilty of having no brain at all. We must be careful. It was nice to see the hon. Member for Northavon acting as a kind of unpaid research assistant for the hon. Member for Eastbourne, who had not quite, on this occasion at least, marshalled all the evidence that he required.

I will not take everything in a logical order, because of the flurry of questions—[Interruption.] The hon. Member for Eastbourne must be in an insultative mood again. He really must cheer up. We are engaged in a great piece of business to put on the statute book an important piece of legislation. One day, his grandchildren will look back and be proud of his intellectual approach in helping us with these deliberations.

My hon. Friend the Member for Glasgow, Anniesland (John Robertson) asked what we mean by the word ''consultation''. The hon. Member for Northavon spoke on the same theme. I may have to disappoint them by saying that the requirement to consult is not necessarily a requirement to reach agreement. If there is a disagreement between the employer and the employees, we are not saying that we have, somehow, to force an agreement; otherwise, we would be moving towards compulsion in schemes.

John Robertson rose—

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

Before I give way to my hon. Friend, I should say that although there is a valid debate about compulsion, as opposed to a voluntary approach, there is a Pensions Commission to consider those issues. The Bill is not about that.

John Robertson rose—

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

I shall go one step further before giving way to my hon. Friend. Consultation involves taking account of views and explaining how they have been taken account of, but it is not about compelling the employer to abide by them.

Photo of John Robertson John Robertson Labour, Glasgow Anniesland

I was not insinuating that there should be an agreement. However, the Minister used the word ''discussion'', which always means to me a two-way process—with me talking to someone and them talking to me, although I might not agree with them, which is fair enough. I am concerned that bad employers will conduct a one-way conversation, and that the people who receive the conversation do not get the opportunity to conduct a discussion.

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

I understand that, which is why we are creating powers, through the regulator, to ensure that proper consultation has taken place. The nature of the discussion involved is important, and we should consider it when consulting further and drawing up the regulations. In better companies—if I can put it that way—pensions issues are on the table through collective bargaining. In that sense, after a consultation there would be a chance for that bargaining process to take place. However, I concede that that is not always so.

The Government look forward to a time when more widespread partner engagement on pensions would make it a suitable topic for the statutory collective bargaining procedure. However, most voluntary arrangements still do not include pensions. It would not be appropriate for the statutory procedure to move so far ahead of current practice in voluntary arrangements. The Employment Relations Bill contains an order-making power to add pensions to the three core topics. The Secretary of State for Trade and Industry can thereby exercise that power when there is evidence that typical practice in voluntary recognition agreements is for pensions to be included as a bargaining topic. I hope that that encourages my hon. Friend.

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

May I paraphrase what the Minister has just said? I am endeavouring to listen, and I think that he said that it was not yet normal to include pensions in collective bargaining—and that the Government are not going to legislate to make it part of the statutory collective bargaining framework because not enough people do it yet. However, surely the argument should be about whether it is right, rather than whether people do it yet.

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

As I said, the Secretary of State for Trade and Industry has that power, which can be brought into being at an appropriate time. The hon. Gentleman makes a perfectly proper point—that would be an interesting debate, and in a way, we are having it now. It relates to the issue of compulsion. The Government position is clear: we would prefer a voluntary approach to those arrangements, in terms of bargaining and the provision of occupational pensions. We would like that voluntary approach to work.

The employer task force is helping us with that, to encourage the development of good practice among employers, and the Pensions Commission is keeping a watchful eye on the success of the voluntary approach. The door is still open to compulsion, but that is not the Government position at the present time. We would prefer a voluntary approach to work. The alternative position is perfectly respectable, and a great debate about this issue is taking place.

Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions 10:45 am, 22nd April 2004

Is there not a paradox here? The employers' organisations say in response to this group of new clauses: ''There are lots of good firms out there; leave us alone.'' The Minister's response is, ''Well, I do not care. Some are not good, and we have to legislate.'' There is an inconsistency in the approach to the two issues. There is a voluntary approach to the issue of collective bargaining rights over pensions, but a mandatory approach to consultation. That seems an odd inconsistency.

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

I do not think so. We say that to consult is proper practice and decent behaviour in the workplace. We wish that it could happen voluntarily, but it has not: there have been some bad cases in recent years. We are therefore going to make it a statutory obligation. That is perfectly appropriate. To say that occupational pensions should be compulsory would

represent further moves along the continuum. That is a different order of issue.

Compliance with the requirement to consult would be enforced by the pensions regulator, which would be able to impose civil penalties, as set out in section 10 of the Pensions Act 1995, on employers or trustees who are in breach of their obligations under the regulations.

I welcome the broad support, on behalf of his party, of the hon. Member for Northavon, although he asks some probing questions. Will we consult on regulations? Yes, we have been consulting the—I had better not say the usual suspects—the usual stakeholder groups already. The consultation would only affect active members of schemes, not deferred members or pensioners, because any changes would only affect future accruals, which are only relevant to active members.

I turn to some of the issues raised by the hon. Member for Eastbourne. ''Why so late?'' he asked. As well as doing its other important and urgent work, the Department has already been consulting with the TUC, CBI and others about how the legislation should work and how the primary and secondary routes should be developed together. This consultation has already cleared some essential issues and hurdles.

The issue of where fines should be dealt with arose during debates between those on the Opposition Benches. Perhaps I can help by saying that the breach of regulations is dealt with in clause 237, which we shall probably debate later today. Penalties would go up to £5,000 for individuals, and up to £50,000 for other cases.

Earlier, when I was making my initial, rather long, speech, I was asked about current obligations. I gave an off-the-cuff answer; the more considered one is not dissimilar, which is a happy circumstance. Consultation at the moment only exists in certain schemes; there is no legislative requirement to consult generally—hence our proposals. Again, I have more or less dealt with the issue about section 67—we shall be discussing it later. That is about an attempt to rationalise past accruals, not least to simplify schemes for employers and to do so in such a way that actuarially there is no significant impact on the individual. However, we are talking about future rights and we will get on to discuss section 67 at the appropriate time.

On the issue of exemptions for small employers, which was raised perfectly properly by the hon. Member for Eastbourne, that is something that we will consult on with both sides of industry. Two possibilities occur. One would be to exempt those with fewer than 50 scheme members, which, I understand, would be in line with the information and consultation regulations. Another would be to exempt those schemes with fewer than five, which would be in line with stakeholder pensions. We do not have an empty mind on that; we have an open mind on it and we are consulting on the matter.

On public sector schemes, public service has a long-established tradition of consultation with interested parties. For example, very large public service schemes generally have statutory requirements to consult, which are set out in primary legislation that governs those schemes. We do not intend to disturb those existing arrangements. However, consideration will be given to extending the requirement to consult to schemes that are established and governed under arrangements that are comparable to those in the private sector, such as trust-based schemes. Such trust-based schemes are therefore likely to benefit from the safety net of statutory protection where none currently exists.

The hon. Member for Eastbourne was exercised by any mention of trade unions. I think that I dealt with this in my speech, but I emphasise that where there are recognised trade unions or appropriate information and consultation arrangements that have been approved by employees, employers must consult one or more of those bodies. Our proposals will ensure that that happens in accordance with our Green Paper commitment to implement the pension consultation requirement alongside consideration of the information and consultation directive. I have made it clear that although trade unions are crucial to that where appropriate, that is not the only route that we are taking.

On our old friend the balance to be struck between primary and secondary legislation—the role of regulation—some of the situations described in the hon. Gentleman's amendment are precisely what I said in my opening speech would be covered by regulation. However, the CBI has said that it does not want a ''one size fits all'' approach. That is exactly what accepting the amendment would give us. If we were to accept it, we would not be able to respond to new types of substantial change in future.

I was struck by the fact that the hon. Gentleman mentioned hybrid schemes, albeit in a slightly different context. That is a good example of how the pensions world is moving rather quickly in terms of approaches to pensions arrangements. Hybridity is a relatively new concept and there is a track record in the United States on that. I think that the hon. Gentleman was suggesting that it might grow in future. If we had been legislating on this subject just a few years ago, hybridity might not have been included in the Bill. That would have been a great mercy for the English language but it would not have helped those who are subject to those schemes. It is for that reason that we need to keep the door open to changes and it is why secondary routes and regulation are rather important.

I hope that I have dealt with most of the points that were raised. As usual in these circumstances, if I reflect that there are one or two that I have not dealt with sufficiently, I will e-mail the hon. Member for Eastbourne, who prefers that modern route. For those who prefer more traditional methods I will write using a quill pen.

Amendment agreed to.

Amendment made: No. 561, in

clause 231, page 154, line 40, at end insert—

', and

'( ) sections (Consultation by employers: occupational pension schemes) and (Further provisions about regulations relating to consultation by employers) (consultation by employers).'.—[Malcolm Wicks.]

Clause 231, as amended, ordered to stand part of the Bill.

Clause 232 ordered to stand part of the Bill.