Clause 64

Pensions Bill – in a Public Bill Committee at 6:30 pm on 5th February 2008.

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Finance

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

I beg to move amendment No. 50, in clause 64, page 29, line 37, leave out ‘grants’.

Photo of Janet Anderson Janet Anderson Labour, Rossendale and Darwen

With this it will be convenient to discuss amendment

No. 51, in clause 64, page 29, line 38, leave out from ‘which’ to end of line 39 and insert

‘shall include conditions about repayment and interest at commercial rates.’.

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

We are back to our old friends “grants” and “interest-free loans”—in other words, the level playing field. Perhaps the Minister could take as read what I said during debates on previous amendments trying to get at this issue. I hope that he will not take it personally if I say that I have found him a rather slippery customer when it comes to this issue. He has kept up a ferocious rearguard action, refusing to give any kind of commitment. Clearly he is the right man in the right job in the right Government at the right Department. Ferocious is perhaps not the right word for the hon. Gentleman, but he has given us not a jot of comfort about the possibility of a bung being given to PADA in the shape of a non-repayable grant or some dodgy loan, which would have to be repaid or which would not attract any interest, let alone at commercial rates.

Let us try again. I will go back a stage or two. In the regulatory impact assessment on the previous Pensions Bill, the Government set up a figure of £21 million for what they called the funding requirement of the delivery authority between 2006-07 and 2008-09. At the time, we tabled amendments trying to tackle what  we then called cross-subsidisation and I asked for a breakdown of how that £21 million was going to be spent. In retrospect, I suspect that a lot of it has been spent or spoken for, so it would be nice to have a breakdown of where it has gone or is going. Perhaps the Minister will write to me about that.

In the debate of 1 February 2007, I asked what the limit was of the taxpayer’s commitment to the delivery authority. We are not Johnny-come-latelies on this issue, not that that has done us a lot of good. The then Pensions Reform Minister, now the Secretary of State, explained that in the longer term, personal accounts would be self-financing. That has been a mantra from the Department for some time up to the present day. Paragraph 18 of schedule 6 of the 2007 Act provided for the Secretary of State, subject to Treasury consent, to make grants to the authority out of the money provided by Parliament. The clause will replace that paragraph to extend the ways in which the Secretary of State may give financial assistance to the authority. The important word in that sentence is “extend”. Really, the Government are giving themselves more opportunities to shove money in the direction of the authority.

I always make a point at Committee stage of referring to the explanatory notes at least once because there is bound to be some poor devil who has spent half a lifetime drafting them. As the explanatory notes helpfully say in paragraph 189:

“It allows the Secretary of State to provide finance to the Authority in connection with its functions, for example, through grant or loan. Any of the finance may be subject to conditions.”

Perhaps “Don’t spend it all at the same shop” might be one of those conditions because there certainly seem to be no conditions about interest, repayment or anything of that sort.

The impact assessment makes the point that during its advisory phase, the authority is being funded through grant in aid. In paragraph 3.80 it says that

“in the long run, the personal accounts scheme is intended to be self-financing”.

We still have not got anywhere near finding out what the Minister thinks long term means. Also, rather interestingly, in the same document, the Government say in paragraph 3.81:

“At this stage in the development of the personal accounts scheme the Government cannot publish its estimated cost due to commercial confidentiality and the potential risk that doing so could influence the commercial process.”

I do not begin to understand that. Surely it would be more relevant if there was an issue about who they were going to spend the money on in terms of who they were going to buy expertise, services, equipment or whatever from. For them simply not to be able to produce any estimate of their overall costs due to commercial confidentiality seems to me to be simply trying to hide behind the words rather than being open and transparent.

Perhaps as well as pursuing my traditional arguments about grants and loans I could ask the Minister to be a bit more open and frank about the ongoing costs of the PADA than his impact assessment appears to want to be. Will he particularly deal with the issue of where the £21 million has gone or is going? While we are about it, I referred this morning to the £6 million plus that has already been spent on consultants in the development of personal accounts, according to a written answer  provided by his colleague, the Minister for Pensions Reform, the other day. Perhaps I could also have a breakdown of that figure, allowing for any commercial sensitivities that might be involved.

Photo of James Plaskitt James Plaskitt Parliamentary Under-Secretary, Department for Work and Pensions 6:45 pm, 5th February 2008

We are back on some fairly familiar ground, in respect of where we were this morning. The hon. Member for Eastbourne wanted me to take his contribution for read. I could perhaps say the same about mine, but I will not. I will once again revisit the issues about PADA funding.

Clause 64 amends schedule 6 of the Pensions Act 2007 to extend the ways the Secretary of State may fund the authority in carrying out its functions. In addition to grants, the Secretary of State may provide loans, guarantees and indemnities to the authority, which may be subject to conditions. This clause is linked with clause 61, which allows the delivery authority to borrow money.

I should like to reassure members that any costs arising from the authority’s work in relation to implementing the personal accounts scheme will be recovered from the revenue from membership charges. However, it is important to draw a distinction between the work the authority will be doing on the implementation of the scheme and other work it will be taking forward. As the Committee is aware, the Government are already funding the authority. This reflects its current role to provide advice to Government on the operational implications of policy. It is right that Government should meet the cost of that advice.

The hon. Member for Eastbourne asked me to say more about the £21 million allocation. He will know that it was an early estimate of the cost of establishing the delivery authority. The estimate was made even before the appointment of the chairman and chief executive. We currently anticipate that PADA will achieve its grant-in-aid status later in the current financial year. At that point it will be sufficiently well established to start incurring costs on its own account and to pay for these from its grant in aid. We have so far provided around £10 million in support for the creation of PADA. That figure is correct up to December 2007. I hope that that gives the hon. Gentleman a little bit of extra information.

This Bill will also extend the authority’s remit so that it can work with the Pensions Regulator to support the delivery of the systems that will enable employers to comply with their new duties. This will benefit all those eligible for auto-enrolment into any qualifying scheme, not just the members of the personal accounts scheme. It would not be right to require personal account scheme members to pay for this aspect of the authority’s work. We want to retain the flexibility to fund this activity in the right way, most probably through grant in aid from the Government.

Amendments Nos. 50 and 51 would remove that flexibility. As the hon. Gentleman knows, no decision has yet been made on the best approach to financing the personal accounts scheme in its initial stages. It will be for PADA to consider the options available to provide initial finance for the scheme, and then make  recommendations to the Secretary of State on the best possible approach. However, this work can occur only once the authority’s powers have been extended through this Bill, when it is able to take the next steps towards implementing the scheme.

I should like to reiterate that if any degree of Government support is involved to help the scheme get up and running, then it will be fully compliant with European requirements on competition and state aid. It is common practice to take broad powers to finance a non-departmental public body that will be tasked with the delivery of a major project such as personal accounts. Again, as I said in respect of a similar discussion this morning, it is important at this stage that we do not second guess the outcome of its work or restrict the authority in its considerations.

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

On the basis that we are moving from the stage where money is shelled out by the Department to it being shelled out by the authority itself, can I take it that there will at least be a written statement to the House when there is a grant in aid in excess of the £21 million that has already been earmarked for the authority?

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

There are two things to say in respect of that. First, when annual reports are published, he will be able to see all sources of income to the authority. That is quite right and proper. I have already indicated that we have given the £21 million estimate for the setting up of PADA. I have tried to reassure him on that point. I have given him an indication of how much has been allocated to date. It is clear that within the existing financial year it will reach grant-in-aid status, after which it will incur costs on its own account. He can deduce from that timetable the information that he needs.

I stress that that does not mean that the specific powers that we are taking in the clause for the sources of funding will necessarily be used. They will simply ensure that the authority has the flexibility to identify the funding strategy that provides the best deal for its members. It would be wrong to fetter the development of the best funding solution by insisting on any particular approach. I also stress to the Committee once again that we have no intention of unfairly subsidising the personal accounts scheme.

My reassurances are similar to those that I gave this morning. I may anticipate what the hon. Gentleman thinks about them, but I hope that my explanation has reassured him of the Government’s intentions and made it clear why flexibility is important both for getting the best deal for members of the scheme and funding the authority’s activities. I hope that that is sufficient to encourage him to withdraw the amendment.

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

I am grateful to the Minister, who has built up a large bank of reassurances on similar matters today. It is late in the day, and I am in a generous mood, so I am prepared to take them at face value and put them in the bank myself. I hope that we will be kept posted of any significant shift in the amounts of grant in aid, and I can only reiterate the point that I have made a number of times that not just the official  Opposition but the industry want a level playing field and no hidden public subsidy. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 64 ordered to stand part of the Bill.

Clauses 65 and 66 ordered to stand part of the Bill.