Clause 61

Pensions Bill – in a Public Bill Committee at 12:15 pm on 5th February 2008.

Alert me about debates like this

Functions

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions 12:30 pm, 5th February 2008

I beg to move amendment No. 35, in clause 61, page 28, line 23, leave out paragraph (b).

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

With this it will be convenient to discuss amendment No. 105, in clause 61, page 28, line 26, after ‘Part’, insert ‘but excluding sections 14 to 24’.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

The efforts on this group of amendments are a double-act, and I will leave the hon. Member for Rochdale to make his case for amendment No. 105, partly because I am not sure that I fully understand it. No doubt he will enlighten the Committee in a moment. Amendment No. 35 seeks to remove paragraph (b) of subsection (2). Clause 61(2)(b) adds to the functions of the Personal Accounts Delivery Authority, allowing it

“to give any assistance and advice that the Secretary of State or the Pensions Regulator may require, and any advice that the Authority considers expedient, for or in connection with arrangements to enable requirements imposed by or under Chapter 1 of this Part to be complied with and enforced.”

This is a probing amendment: I want the Minister to tell us the sort of situations in which he envisages that subsection (2)(b) would apply. Subject to that, I would not dream of pressing it to a division.

Photo of Paul Rowen Paul Rowen Shadow Minister, Work & Pensions

This is an important aspect of the Bill. We are looking at the functions of the Personal Accounts Delivery Authority, and amendments Nos. 35 and 105 seek to clarify the relationship of PADA to chapter 1 of the Bill. Chapter 1 sets the context in which personal accounts will operate in the pensions market. It mentions occupational pensions schemes, quality requirements, tests schemes and test-scheme standards—a whole range of issues that affect the pensions market. My support for amendment No. 35 and the reason we have tabled amendment No. 105, is because we were unclear, looking at its functions and at clause 61(2)(b), why PADA should advise the Secretary of State on a range of issues for which it is not responsible.

PADA is the delivery authority that will set up personal accounts. It will then hand that over to the pension trustee. In my view, it should not take an interest and involvement in the wider area. Occupational pensions schemes are already regulated, both here and in earlier Bills. It is important that PADA’s functions are clear from the beginning. Chapter 1 sets out the overall content of pensions. It moves on to define the responsibilities of various groups. That could be the responsibilities of the Pensions Regulator—another body whose modus operandi is changed by the Bill—or those of the Secretary of State, or of PADA. PADA should not be advising the Secretary of State on the totality of chapter 1 and if we accept clause 61(2)(b), that is what we will do.

Our amendment is slightly clumsy. It seeks to remove from chapter 1 clauses 14 to 24 which, in our view, have nothing to do with the operation of PADA. They may not be the responsibility of the Pensions Regulator, or those of the Secretary of State, in terms of the operation of the pensions market. However, given that it is PADA’s responsibility to set up personal accounts, we do not believe that it should have the responsibility or possibility of giving advice to the Secretary of State on issues that are not within its responsibility. The operation of occupational pension schemes and the job of the Pensions Regulator, which are covered in chapter 1, are not issues for PADA. It has to be focused and clear. It has a job to do in a short space of time, and if it is advising the Secretary of State on everything else to do with pensions, it will not do the job that it was set up to do. That is why amendments Nos. 35 and 105 are appropriate.

We think that the clause is another example of civil servants going awry. They are trying to include everything, including the kitchen sink, but we do not believe that that is appropriate in this case.

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

We are moving into another important part of the Bill. Clause 61 deals with the functions of PADA. I am grateful to hon. Members for introducing their amendments and for giving me the chance, I hope, to reassure them on the points that they have raised. I understand why they raised them.

The clause sets out the scope of the authority’s functions, allowing it to continue to advise on policy but also to undertake the detailed implementation work necessary to establish the personal accounts scheme and to support the regulator in establishing the processes to maximise employer compliance with the  new duties. The amendments would prevent the authority from undertaking some, or all, of the second part of that role, but it is absolutely important that it does, for reasons which I shall try to set out.

The Bill introduces an obligation on employers to enrol eligible workers into a workplace pension and to make contributions to it. We could not introduce such a duty on employers without also having an effective compliance regime—the two go hand in hand. Otherwise, there would be no way of ensuring that more workers have the opportunity to benefit from the reforms, nor of ensuring that employers comply with the law and do not in any way disadvantage their work force.

Photo of Paul Rowen Paul Rowen Shadow Minister, Work & Pensions

Does the Minister accept that compliance is the responsibility of the Pensions Regulator, not PADA?

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

I am about to come to that very point. I am sure that if the hon. Gentleman will just hang five, we will get there.

This is a major project, and although the regulator will be leading on delivery, there are benefits at this stage to be gained from sharing expertise. Many of the challenges in setting up an effective compliance regime are not dissimilar to the challenges in establishing the personal accounts scheme; for instance, specialist planning and project support for what is, clearly, a large programme. There is a significant amount of preparatory work to be done on the design of the compliance processes.

That work needs to start quickly, and we do not want to jeopardise the timetable for delivery. We think that the most effective approach to the scale of the project is for the regulator and the Department to utilise the authority’s resources, skills and expertise in the design of the personal accounts scheme, and in support of the establishment of a compliance process. I believe that the hon. Gentleman accepts that that is of critical importance.

Amendment No. 35 would prevent the regulator having access to the authority’s experts in such areas as project management, procurement and design. I am aware that in taking the approach that we are, there could be a perceived conflict of interest between delivering the personal accounts scheme and supporting delivery of the broader compliance regime. I believe that that is what is exercising hon. Members in this group of amendments.

Let me be absolutely clear: the regulator, not the delivery authority, will be responsible for ensuring that the compliance regime is fit for purpose. That is a clear distinction. The role of the authority will be restricted to supporting delivery of the compliance processes, and clause 61 simply enables it to carry out that role. Its detailed remit will be set out in other documentation, largely the framework document still to come. It will clearly specify the degree of the authority’s responsibilities in supporting the regulator, and also its more substantial role in respect of personal accounts.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

We have been here before. A few months after the passing of the 2004 Act, which set up the regulator and the Pension Protection Fund, it became  apparent that a written protocol was needed to work out the boundaries between the two. Are we not heading for the same problems in this instance?

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

No, I do not think that we are. I am saying that these bodies need to show their authority and expertise during the building process. Once we move into the regime, however, the functions are very clear and do not have the overlap that the hon. Gentleman is concerned about. The boundaries will be very clear once the scheme is in operation. Furthermore, the authority’s annual business plan will set out its key objectives and targets. Both of those will be published along with the framework document once the authority has legal authority to carry out its extended role. Those governance and practical arrangements, supported by robust stewardship from our Department, will ensure that any potential conflict of interest is removed from the decision-making process.

Photo of Paul Rowen Paul Rowen Shadow Minister, Work & Pensions

On the framework document, can the hon. Gentleman give us a time frame in which he expects it to be published? Clearly, the document is key to removing some of our concerns about how the clause will operate.

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

It is a key document, and the hon. Gentleman is right to describe it as such. I cannot tell him precisely when it will be available. It will be available for study in the Library of the House in plenty of time before the scheme is up and running. I am grateful to the hon. Gentleman for clarifying amendment No. 105, which seeks to exclude the authority from even giving advice and assistance on clauses pertaining to qualifying schemes.

Let me try to reassure the hon. Gentleman that there will be no conflict of interest here. While the authority will be able to advise the Secretary of State on setting the criteria for qualifying schemes, there will be no role beyond that. Any body or stakeholder that the Government consult when drawing up the regulations will have no additional role. It will be for the Secretary of State to satisfy himself that the regulations achieve the appropriate policy outcomes and to ensure that the criteria continue to support all good quality provision. In due course, it will be for the House to pass those precise regulations.

Moreover, excluding the authority from providing support to the regulator, under clauses 14 to 24, as the amendments seek to do, could, in fact, lead to a confused and fragmented approach. That is another kind of problem that I am sure the hon. Member for Rochdale would want us to avoid. It would be very difficult for the authority to offer constructive support on the compliance process without regard to the spectrum of schemes that could fulfil those duties.

In summary, robust Government arrangements will ensure that the regulator will be responsible for questions of design in the compliance regime and the authority will be restricted to supporting delivery. With those reassurances, I hope that the hon. Gentleman will agree to withdraw his amendment.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

I am grateful for the Minister’s reassurances. It seems that we have to wait for the framework document, which will answer all our concerns and worries. I beg to ask leave to withdraw my amendment.

Amendment, by leave, withdrawn.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

I beg to move amendment No. 36, in clause 61, page 28, line 36, leave out paragraph (b).

Photo of Nicholas Winterton Nicholas Winterton Conservative, Macclesfield

With this it will be convenient to discuss amendment No. 37, in clause 61, page 28, line 37, leave out subsection (7).

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

The amendments may have a familiar ring to them. The Minister can just read out what he said in answers to previous amendments. Amendment No. 36 seeks to take out the authority’s power to borrow money, which is a bigger concern for us than the trustee corporation. I do want not want to rehearse those arguments. We need clarity about where PADA is going to get its money from, whether it will get a bung from the Government if it gets its figures wrong and whether it will be lent money at absurdly low interest rates, or no interest rate at all, and so on.

Amendment No. 37 would remove subsection (7), which has the Secretary Of State getting in on the act yet again. That is the right approach and it is encapsulated neatly in the two amendments, which set out clearly the parameters for the PADA to operate in and let it get on with it.

Photo of James Plaskitt James Plaskitt Parliamentary Under-Secretary, Department for Work and Pensions 12:45 pm, 5th February 2008

As the hon. Member for Eastbourne said, there is a certain familiarity about the arguments that we are engaged in, so I will try to be as brief as possible.

As we have already established in debates on previous amendments this morning, there will be an initial period when the scheme has insufficient revenues to cover all its costs. For example, it is envisaged that the authority will incur costs in finalising the design of the scheme and making payments to contractors before the scheme has actually opened its doors to its first members. Clearly, given our intention that the scheme be ultimately self-financing, the likely source of financing for those costs could, indeed, been borrowing. However, as I hope I have already made it clear in earlier debates, no decision on how the personal account should be funded has yet been taken and we have not yet decided whether any borrowing will be from the private sector, the public sector or from a mixture of both: that will depend on a number of factors, including the scale of any borrowing requirement and the willingness of the private sector to engage with a project of this scale.

We can only be certain of the right approach once the authority has been given time to finalise the scheme design, develop its procurement strategy and engage with the market. If borrowing is required, then, like any other non-departmental public body, the Personal Accounts Delivery Authority will need to comply with all the existing guidance and legislation to show that value for money can be achieved.

As we have heard in previous debates, it is vital that we keep all the options open at this stage and allow the authority to recommend the best financing strategy for the personal accounts scheme. We should, at this stage, try to tie the authority’s hands by removing any of the options that are open to us.

Conversely, amendment No.37 would allow the authority to borrow, but, again, it would remove the requirement for the Secretary of State's consent. As the Committee will be aware, it is normal for borrowing by non-departmental public body to require precisely that consent, because its financial arrangements are required to be taken into account under its parent Departments’ budgets. Therefore it is right and necessary that such an arrangement is subject to scrutiny by the sponsoring Department’s Secretary of State. That process also provides a crucial safeguard to ensure that the wider interests of the taxpayer are being taken into account and, indeed, that the personal accounts scheme will be self-financing in the long run and will meet the non-departmental public body’s objective to set up a scheme that balances low charges for members against ensuring that the scheme is commercially viable.

For reasons that are, by now, somewhat familiar, I hope that the hon. Member for Eastbourne will ask leave to withdraw his amendment.

Photo of Nigel Waterson Nigel Waterson Shadow Minister, Work & Pensions

The familiarity of the arguments makes them no more persuasive. The Minister’s reiteration of what Donald Rumsfeld calls the known unknowns—let alone the unknown unknowns—is tedious to the point of rendering us comatose. I will not tempt the Minister to say any more about this, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 61 ordered to stand part of the Bill.

Further consideration adjourned.—[Mr. David.]

Adjourned accordingly at nine minutes to One o'clock till this day at Four o'clock.