We are back on money again. Amendment No. 33 would curtail the powers of the trustee corporation to borrow money. I am happy not to press the amendment if the Minister is able to give me the assurance that he was not able to give on the previous amendment—that any money borrowed would be borrowed on commercial terms and repayable over a reasonable time.
Amendment No. 34 would remove subsection (4). The hon. Member for Rochdale spoke on previous amendments about the Secretary of State being a control freak when it comes to dotting all the i’s and crossing all the t’s. Surely, if we are setting up the corporation with proper people, any power that they have, particularly under subsection (3), to enter into agreements and to invest money, particularly if the power to borrow money is to be removed from them, they can do on their own without regularly having to go to the Secretary of State cap in hand.
Those are the reasons behind the amendments. I commend them to the Committee.
Yes, indeed, we are back on money. I shall try again to reassure the hon. Gentleman. We are clear in the intention that the personal accounts should be self-financing in the long term, something that we have already established. However, we know that there will be periods when the scheme will have insufficient revenues to cover its costs. Clearly one source of financing for those costs could be borrowing, which could be from the private sector—the banks or even other pension providers—or from the Government, or a mix of both. We do not know at this point—we could not possibly know—if borrowing will be required. I have touched on the delivery authority’s role in recommending a financing strategy for the personal accounts scheme, and we will have more opportunity to consider it when we reach clause 61.
I reassure the Committee that, if borrowing is required, like any non-departmental public body the trustee corporation will need to comply with existing guidance and legislation to show that value for money for the taxpayer can be achieved. It is important to stress that a decision about how the personal accounts scheme should be financed has yet to be taken. We can only be certain of the right approach when the delivery authority has been given time to finalise the scheme design, develop its procurement strategy and engage with the market, which it can do only when its functions are extended under clause 61. It is vital at this stage that we do not restrict the options for financing the scheme. Doing so would compromise the ability to get value for money for members who are participants in the scheme. By taking away the trustee’s ability to borrow, amendment No. 33 would do just that.
Amendment No. 34 would allow the trustee corporation to borrow and invest, but without the consent of the Secretary of State. As a non-departmental public body, it is normal for functions such as borrowing and investing to require the consent of the Secretary of State. That is because an NDPB’s financial arrangements are to be taken into account in its parent Department’s budgets. Therefore, it is right and necessary that it is subject to scrutiny by its sponsor Department’s Secretary of State. That provides a safeguard to ensure that the wider interests of the taxpayer are taken into account, as well as the NDPB’s objectives. In the case under discussion, the trustee corporation would be responsible for balancing low charges for members against ensuring that the scheme is commercially viable. However, the Secretary of State’s consent is needed to ensure that its actions would not jeopardise the sound management of the Government’s finances.
I ask members of the Committee to note that we have made one exception to that rule under clause 58, which reflects the trustee corporation’s role as sole trustee of the personal accounts scheme. Provision has been made in subsection (5) to ensure that the trustee corporation retains an ability to act independently when acting as the trustee of the personal accounts scheme—for example, with regard to investing members’ contributions to the scheme. In the case of investing, it is clear that that must be the responsibility of the trustee acting in the members’ best interests.
I need to check that I am following the Minister’s remarks correctly. Is he saying that, under certain circumstances, subsection (5) could overrule subsection (4) so that in some cases when the trustee corporation is exercising certain powers under the scheme as set out in clause 50, it might not need the consent of the Secretary of State, or are we into an entirely circular situation?
I am making an important separate distinction, which I have tried to explain. It concerns the importance of the trustee corporation’s ability to act independently when acting as trustee to the personal accounts scheme. That is a separate set of circumstances, which is why the provision has been made.
The hon. Gentleman asked whether non-commercial rates would ever be contemplated. As in other issues such as grants, it is difficult at this point to anticipate the position. It would largely be for the market to determine when loans are being sought. Again, I say to him that, if we tried at this stage to impose severe restrictions on any of the financial options, even though an individual restriction that he sought might have reasons behind it, that would damage the overall context of allowing flexibility and protecting all of the other interests that he rightly wants safeguarded. Pinning down any one restriction would potentially raise difficulties in others. I am sure that he would want, across the whole of the funding arrangement, to maintain flexibility, not only to ensure the success of the scheme, but to minimise any set of issues that might arise if there was over-reliance on one particular source of funding, as I tried to argue in respect of charge levels.
It will have a range of options open to it, which is the whole point of my argument about flexibility. It may well take private money, it may well have a loan from public sources. That is all the more reason why it is important at this stage to retain flexibility about funding requirements, so that all options are there, in order to protect and maximise the options for the scheme’s success, bearing in mind the point that I have made about transparency and that any loan, or even grant support, to the authority would have to be consistent with the European requirements. As it happens, those requirements allow for the option of grants because this is a service of general economic interest and in those circumstances particular rules apply.
The Minister has been helpful, for a change. Is he convinced that the European regulations are directly relevant here? The Government are not proposing to give grants to a manufacturer of aircraft wings or whatever. The personal accounts system will not be competing in any sense with any similar organisation in other European member states, so I wonder how relevant the European dimension is to this situation.
Very relevant is the answer, because the regulations that I refer to relate to what are known as services of general economic interest. As the hon. Gentleman rightly says, that is not comparable to a manufacturer in a competitive situation, but the regulations are specifically set down because there will sometimes be large-scale services that are deemed to be of general economic interest. In those circumstances, where there are not the usual commercial constraints, it is important to have a set of rules about the degree to which they may be publicly funded. That is why I cite the rules; they are specifically important for this precise set of circumstances. With those reassurances, I hope that he will agree to withdraw his amendment.