Clause 32

Pensions Bill – in a Public Bill Committee at 4:15 pm on 29th January 2008.

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Fixed penalty notices

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

I beg to move amendment No. 145, in clause 32, page 14, line 28, at end add—

‘(h) the Secretary of State shall have the power to apportion such amount as the Secretary of State thinks appropriate of fixed penalty notice payments for the benefit of qualifying jobholders in circumstances where their employers are unable to pay the prescribed contributions.’.

The amendment is an attempt to open up the question of where the money paid in fixed penalty notices will  go. Will it all go straight into the Government’s general coffers? Will it go to the Pensions Regulator? Is there, perhaps, the possibility I am suggesting; that jobholders—either the jobholders from the employer to whom the fixed penalty notice has been issued or jobholders more generally, who could be the subject of some sort of hardship fund if their employer had gone bust and contributions were not possible—might be able to benefit from these fixed penalty notices?

There are various times in public life when money is raised by fines or penalties of one sort or another. It is not always clear to the public where that money goes, what happens to it, or for what purposes it will be used. Amendment No. 145 is worded in a very wide way. It just gives the Secretary of State a permissive power to apply such moneys raised by way of fixed penalty notices for the benefit of jobholders, should he or she see fit to do so, at any time. It does not require the Secretary of State to do anything; it is purely a permissive power. On that basis, I would commend it to the Minister.

Photo of James Plaskitt James Plaskitt Parliamentary Under-Secretary, Department for Work and Pensions

The hon. Member for South-West Bedfordshire has had quite a good run with some of his amendments, but it has now ended, I am sorry to say. Let me explain why we are not keen on the amendment.

Clause 32 gives the Pensions Regulator the power to issue fixed penalty notices to persons who have failed to comply with compliance or contribution notices and the employer duty provisions. The primary role of fixed penalties is to act as a deterrent and, where necessary, sanction those who have not complied. The amendment gives the Secretary of State the power to decide which moneys arising from fixed penalties should be used for the benefit of qualifying jobholders. However, it is a long-standing practice that revenue from fixed penalties goes directly to the consolidated fund of the Exchequer, so that it can be used as appropriate on a full range of public services.

The regulator will not gain financially from the imposition of fines, and there will be no hidden incentives for their issuing. Importantly, this measure is fully in line with the findings of the Macrory review, separating revenue streams in order to eliminate all perverse incentives. The hon. Gentleman may know that we are taking forward the recommendations of the Macrory review via the Regulatory Enforcement and Sanctions Bill, which is currently at Committee stage in the Lords.

Photo of Paul Rowen Paul Rowen Shadow Minister, Work & Pensions 4:30 pm, 29th January 2008

I understand that that is a general rule, but it is not always the case. With speed cameras, for example, a proportion of the money raised is put to the benefit of the local authority for developing traffic management and safety schemes. Given what we are dealing with, an obvious possibility would be to develop hardship schemes when there are problems.

Photo of James Plaskitt James Plaskitt Parliamentary Under-Secretary, Department for Work and Pensions

I am not certain that that is a parallel, which might become obvious if we see what Macrory says. The hon. Gentleman will be familiar with what I cite, but I am going to put it on record.

Macrory recommends that we have seven principles for penalties. The seventh is germane to the argument:

“It is important that regulators do not have targets for different types of enforcement actions or any correlation with salary bonuses or similar incentives. This might incentivise staff to pursue certain enforcement actions inappropriately.”

He goes on:

“I would emphasise that regulators should not retain the revenue from Monetary Administrative Penalties, or exercise any control over how that revenue should be spent.”

Those points are relevant. Macrory reinforces the argument in a way that will help hon. Members later on:

“I want to avoid creating any perverse financial incentives for regulators that might influence their choice of sanctioning tool. This view is already entrenched in relevant section of HM-Treasury’s Consolidated Budgeting Guide and I echo their views on the separation of revenue streams in order to eliminate perverse incentives.”

Finally, he says:

“I have also emphasised that regulators must avoid creating perverse incentives (such as staff appraisal criteria) that will encourage the use of financial penalties without regard to the regulatory outcomes to be achieved.”

Given that here we are dealing with pensions and company contributions to pensions, which are therefore related to the other questions, and that, in implementing Macrory, we are pursuing his recommendations specifically on the issue, going down the route suggested by the amendment would take us in the wrong direction. The compliance regime is designed so that jobholders are not put at any sort of disadvantage. Where an employer is non-compliant, we are designing the regime based on the principles that employers are not better off by not complying, and jobholders are not worse off because their employer failed to comply. We do not want any risk-perverse incentives coming in. If we stick with the principle that sanctions of that nature come directly to the Consolidated Fund and there is no question of the regulator distributing them in any way, we can remain consistent with that principle. That is important for both this measure and that on sanctions regimes in general, which is being considered in the other place. Given that, I hope that the hon. Gentleman will withdraw the amendment.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

The Minister has explained where the money is going to go, which was not clear from the Bill. I am grateful for the Minister pointing to the Macrory review, with which I am somewhat familiar in other contexts. I accept what he says about that and about perverse incentives. We probably all agree that the Consolidated Fund of the Exchequer is not a bad place for the money to go—especially at the moment, given the state of Government finances. With that in mind, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 32 ordered to stand part of the Bill.

Clauses33 and 34 ordered to stand part of the Bill.