This part of the Bill gives new powers to the regulator, so it is worth recapping the problems that gave rise to the need for them. Most of the thinking here came from the joint work of the former Work and Pensions Committee—I pay tribute to my predecessor as its Chair, Frank Field—and the Select Committee on Business, Innovation and Skills, after the awful problems at two firms: BHS and Carillion.

BHS had two defined-benefit pension schemes. They were in a combined surplus of £43 million when Sir Philip Green bought the company in 2000. The surplus gradually declined and the schemes fell into a combined deficit in 2006, following the period when large dividends had been paid to members of the Green family. By the time of the sale of BHS in 2015, the value of the schemes’ assets was almost £350 million short of their liabilities. As the schemes fell into deficit, the BHS board repeatedly resisted requests from the scheme trustees for increased contributions.

In 2012-13, there were negotiations over a deficit recovery plan and they concluded with a 23-year recovery plan. At the time, eight years was the median rate for a recovery plan and 95% of comparable schemes had a recovery plan of less than 17 years. The plan we got in the case of BHS was for 23 years. The payments under that plan barely covered the interest on the scheme’s deficit and so the deficit continued to grow even while that plan was being followed.

The two Select Committees concluded that the Pensions Regulator had acted too slowly. Having received the 23-year plan in September 2013, it did not send the first information request to the trustees until January 2014. The Committee added, however, that the onus for resolving problems was on Sir Philip Green.

In the case of Carillion, it left a pension liability of around £2.6 billion. The 27,000 members of Carillion’s defined-benefit pension schemes will now be paid reduced pensions by the Pension Protection Fund—one of the biggest calls ever on that fund. I agree with what the Minister said earlier about the success of the fund, which was introduced by the previous Labour Government.

Richard Adams was Carillion’s finance director for ten years. He refused to make adequate contributions to pensions schemes, and the chair of trustees said that he seemed to consider them a “waste of money”. The scheme actuary, Edwin Topper from Mercer, said that Carillion’s

“primary objective was to minimise the cash payments to the schemes”.

The Committees heard that the Pensions Regulator threatened seven times to use a power that it had never used, concluding:

“These were empty threats; the Carillion directors knew it and got their way.”

The Committees added:

“The Government has recognised the regulatory weaknesses exposed by this and other corporate failures, but its responses have been cautious, largely technical, and characterised by seemingly endless consultation. It has lacked the decisiveness or bravery to pursue bold measures recommended by our select committees that could make a significant difference. That must change. That does not just mean giving the FRC and TPR greater powers. Chronically passive, they do not seek to influence corporate decision-making with the realistic threat of Intervention. Action is part of their brief. They require cultural change as well.”

Since then, the Pensions Regulator has launched a new approach. It says that it will take a

“clearer, quicker and tougher approach to driving up standards in the pension sector.”

We must all hope that the new approach, facilitated by the new powers under discussion, will do the job.

More recently, the current Work and Pensions Select Committee has expressed its support for the lenient approach that the Pensions Regulator has taken during the pandemic to employers seeking to reduce deficit reduction payments for defined-benefit pension schemes. We warned, though, that

“following our predecessor Committees’ experience with BHS and Carillion, the Pensions Regulator must remain alert to the risk of unscrupulous employers not in financial difficulty seeking to take advantage.”

We recommended specifically:

“If an employer is making deficit reduction contributions at a lower rate because of the pandemic, no reasonable person would expect them simultaneously to be paying dividends to shareholders and bonuses to senior executives. We recognise that there may be a small number of exceptions to this, but we would expect them to be wholly exceptional. We urge the Pensions Regulator to keep a close eye on this area, and to raise the alarm if it detects abuse.”

When the Government respond to the report, I hope that the Pensions Regulator will accept that recommendation, and we must all hope that the entirely sensible changes being made by the Bill do the important job that history makes clear is needed.