In a film, the late, great Kenneth Williams memorably said, “Infamy! Infamy! They’ve all got it in for me!” I hope that PADA does not feel that I have it in for it by trying to block a source of income or personal accounts at the start of its fledgling career. It is important to pin down the Minister on exactly what the Government have in mind in respect of propping up PADA in its early days, particularly if is not as successful as Ministers hope and predict.
Amendment No. 59 is straightforward. It would remove “grants” from the provision. I do not know on what basis the Government are considering making grants to the trustee corporation. Perhaps we should be told. The nature of a grant is that it is not expected to be repaid, so what notion of grants is the Government looking at? What size and basis do they have in mind? In what circumstances would a grant of taxpayers’ money be appropriate to an organisation that is conceded by Ministers to be self-financing in the long term? I would prefer them to use the description “medium term”.
Amendment No. 60 is designed to make sure that, if money is lent by the Treasury or the Department, to PADA, it is repaid and that the terms of such loans should be transparent and based on commercial rates, with a proper and appropriate period for repayment.
It would send some serious messages to the industry if the Minister were not prepared to accept at least the second of these amendments, and to clarify the nature of grants in this context. Looking at the evidence of Mr. Stephen Haddrill, from the Association of British Insurers, when I asked him about the level playing field and the public subsidy issue, he said:
“The primary one that concerns me is that there is a power in the Bill for the Secretary of State to make loans to the personal accounts system and to do so without necessarily charging any interest and I cannot see why that should be the case.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 35, Q50.]
I am sure that many of the companies that make up the Association of British Insurers would be delighted if the Government were prepared to offer them interest-free loans with rather loose arrangements for repayment. He goes on:
“It is very important that the system and the consumers of it—the people who go into it—absorb the costs of it just as people who are in other pension schemes have to absorb the costs of those pension schemes...Why should someone who is in a personal account get a taxpayer subsidy other than the basic pension subsidy when somebody in another scheme does not?”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 35, Q50.]
That is a good question, one that I hope the Minister will feel able to answer.
We talked about borrowing. There is not an unrealistic view from the industry. Dick Saunders said at the evidence-taking session:
“There will be a need for the scheme to borrow in the early years to beat that J-curve, which any business plan has. Obviously, that borrowing should be on arm’s-length terms; I am sure the Treasury will not want to lend to it interest-free.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 36, Q50.]
In addition, Mr. Haddrill said,
“what we do feel is, if there is a level playing field with no taxpayer subsidy, that we will take on the competition. That is the sort of industry it is.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 37, Q52.]
I commend that kind of thinking.
I do not think that ABI members or others are fearful of personal accounts; they made it clear in their oral and written evidence that in principle they support the notion of trying to tackle the problem of the target group or groups, who are not currently saving for their retirement and should be. In fairness, they have trooped into the endless seminars, discussions, working groups, consultations and everything else, trying to be as helpful as possible. Where they draw a line, on behalf of their shareholders, is unfair Government subsidy to make personal accounts overly competitive with existing provision. That would be bad for business, but more importantly, it would erode existing pension provision, where we know that the average employer contribution in DB schemes, according to the National Association of Pension Funds, is something like 16 per cent., which dwarfs the 3 per cent. envisaged in personal accounts.
I must pin the Minister down on these amendments; he must give a satisfactory explanation, to the Committee and the industry, of the circumstances under which grants will be given from the Government to PADA, and the basis on which loans would be advanced.