Pensions Bill

Public Bill Committee, 9 March 2004.

Standing Committee B

Pensions Bill

Malcolm Wicks (Labour, Croydon North)

I beg to move,

That—

(1) during proceedings on the Pensions Bill the Standing Committee shall, in addition to its first meeting on Tuesday 9th March at 9.30 a.m., meet—

(a) on that day at 2.30 p.m., and

(b) thereafter when the House is sitting on Tuesdays at 9.30 a.m. and 2.30 p.m. and on Thursdays at 9.30 a.m. and 2.00 p.m.

(2) the proceedings to be taken at the sittings shall be as shown in the second column of the Table below and shall be taken in the order so shown;

(3) the proceedings which under paragraph (2) are to be taken on any sitting shall (so far as not previously concluded) be brought to a conclusion at the time specified in the third column of the Table;

(4) paragraph (2) shall not prevent proceedings being taken (in the order shown in the second column of the Table) at any earlier sitting than that provided for under paragraph (2) if previous proceedings have already been concluded.

TABLE SittingProceedingsTime for conclusion of proceedings 9th March (9.30 a.m.) Clauses 1 to 3, Schedule 1, Clauses 4 to 11, Schedule 2, Clauses 12 to 60, Schedule 3, Clauses 61 to 76, Schedule 4 and Clauses 77 to 80. — 9th March (2.30 p.m.) Clauses 1 to 3, Schedule 1, Clauses 4 to 11, Schedule 2, Clauses 12 to 60, Schedule 3, Clauses 61 to 76, Schedule 4 and Clauses 77 to 80 (so far as not previously concluded). — 11th March (9.30 a.m.) Clauses 1 to 3, Schedule 1, Clauses 4 to 11, Schedule 2, Clauses 12 to 60, Schedule 3, Clauses 61 to 76, Schedule 4 and Clauses 77 to 80 (so far as not previously concluded). — 11th March (2.00 p.m.) Clauses 1 to 3, Schedule 1, Clauses 4 to 11, Schedule 2, Clauses 12 to 60, Schedule 3, Clauses 61 to 76, Schedule 4 and Clauses 77 to 80 (so far as not previously concluded).— 16th March (9.30 a.m.) Clauses 1 to 3, Schedule 1, Clauses 4 to 11, Schedule 2, Clauses 12 to 60, Schedule 3, Clauses 61 to 76, Schedule 4 and Clauses 77 to 80 (so far as not previously concluded). — 16th March (2.30 p.m.) Clauses 1 to 3, Schedule 1, Clauses 4 to 11, Schedule 2, Clauses 12 to 60, Schedule 3, Clauses 61 to 76, Schedule 4 and Clauses 77 to 80 (so far as not previously concluded). 8.00 p.m. 18th March (9.30 a.m.) Clauses 220 and 221, Schedule 10, Clauses 222 and 223, Clauses 191 to 193, Schedule 9 and Clauses 194 and 195.— 18th March (2.00 p.m.) Clauses 220 and 221, Schedule 10, Clauses 222 and 223, Clauses 191 to 193, Schedule 9 and Clauses 194 and 195 (so far as not previously concluded). 5.00 p.m. 23rd March (9.30 a.m.) Clauses 81 to 83, Schedule 5, Clauses 84 to 123, Schedule 6, Clause 124, Schedule 7, Clauses 125 to 162, Schedule 8 and Clauses 163 to 177.— 23rd March (2.30 p.m.) Clauses 81 to 83, Schedule 5, Clauses 84 to 123, Schedule 6, Clause 124, Schedule 7, Clauses 125 to 162, Schedule 8 and Clauses 163 to 177 (so far as not previously concluded).— 25th March (9.30 a.m.) Clauses 81 to 83, Schedule 5, Clauses 84 to 123, Schedule 6, Clause 124, Schedule 7, Clauses 125 to 162, Schedule 8 and Clauses 163 to 177 (so far as not previously concluded).— 25th March (2.00 p.m.) Clauses 81 to 83, Schedule 5, Clauses 84 to 123, Schedule 6, Clause 124, Schedule 7, Clauses 125 to 162, Schedule 8 and Clauses 163 to 177 (so far as not previously concluded).— 30th March (9.30 a.m.) Clauses 81 to 83, Schedule 5, Clauses 84 to 123, Schedule 6, Clause 124, Schedule 7, Clauses 125 to 162, Schedule 8 and Clauses 163 to 177 (so far as not previously concluded).— 30th March (2.30 p.m.) Clauses 81 to 83, Schedule 5, Clauses 84 to 123, Schedule 6, Clause 124, Schedule 7, Clauses 125 to 162, Schedule 8 and Clauses 163 to 177 (so far as not previously concluded). — 1st April (9.30 a.m.) Clauses 81 to 83, Schedule 5, Clauses 84 to 123, Schedule 6, Clause 124, Schedule 7, Clauses 125 to 162, Schedule 8 and Clauses 163 to 177 (so far as not previously concluded). 11.25 a.m. 1st April (2.00 p.m.) Clauses 178 to 190. 5.00 p.m. 20th April (9.30 a.m.) Clauses 196 to 219.— 20th April (2.30 p.m.) Clauses 196 to 219 (so far as not previously concluded). 8.00 p.m. 22nd April (9.30 a.m.) Clauses 224 to 242, Schedule 11, Clause 243, Schedule 12, Clauses 244 to 248. 11.25 a.m. 22nd April (2.00 p.m.) New Clauses, New Schedules and remaining proceedings on the Bill. 5.00 p.m.

Steve Webb (Liberal Democrat, Northavon)

If we continue in the spirit in which we have begun, I hope that we can get through this matter in less than half an hour and get on with dealing with the Bill. On behalf of the Liberal Democrats and the hon. Member for East Carmarthen and Dinefwr (Adam Price) we welcome you, Mr. Griffiths, and your colleague, Mr. Cran, to the Chair. We look forward to serving under you.

Our approach to the Bill will be constructive. The Liberal Democrats and the nationalist parties supported the principle of the Bill on Second Reading. That signals that we will be positive in Committee. We want to make pension protection

effective, in keeping with the discussions on Second Reading.

We share with the hon. Member for Eastbourne (Mr. Waterson) some concerns about the balance of this schedule for debate. The sections on the regulator will be less controversial than the pension protection fund and, as we discussed in the Programming Sub-Committee, the discussion of the scheme-specific funding proposals will be of profound importance to the schemes. Those who are responsible for managing perhaps £1 thousand billion of the nation's assets might feel that more than a couple of hours of discussion of how much they must have in their pension funds can probably be justified.

Labour Members have shown flexibility on some of the timing issues that we discussed last night, and I hope that we can also have a bit more flexibility on the scheduling issues as we work our way through things. We welcome the assurance that at the end of this week we will see how far we have got and possibly revisit those issues.

My hon. Friend the Member for Chesterfield (Paul Holmes) and the hon. Member for East Carmarthen and Dinefwr have taken a keen constituency interest in these issues. All Committee members speak for their constituents, but we are also here to try to create a system of pension protection that will end some of the scandals of the past.

Malcolm Wicks (Labour, Croydon North)

We have got off to a useful start, except for a slip of the tongue on my part; I suggested that the hon. Member for Eastbourne represented the constituency of my hon. Friend the Member for Northampton, North instead of that seaside resort. I had a useful meeting with older people in my hon. Friend's Northampton constituency and what they had to tell me about pension strategy was still fresh in my mind. I apologise for that error.

My right hon. Friend the Secretary of State for Work and Pensions suggested on Second Reading that we would introduce amendments to several areas of the Bill. The Committee has already seen some of them. Committee members will have noted that many of them are technical or drafting corrections, often intended to ensure internal consistency and coherence. However, we still plan to table some more significant amendments in due course, covering new topics such as the requirement for employers to undertake consultation when they make major changes to pension schemes. We will bring them forward as soon as we are able. We are keen to do what we can to facilitate adequate scrutiny of the Bill, and we will do our best on timing.

On the subject of flexibility, I should say that the Programming Sub-Committee had a useful meeting last night. We should continue in that spirit and ensure that those aspects of the Bill of concern to Committee members get proper scrutiny. I have already undertaken to consider whether we have the balance right between time for the regulator and time for the other aspects of the Bill.

Nigel Waterson (Conservative, Eastbourne)

First, on the consultation proposals for trade unions and others, is there an intention to consult with bodies such as the CBI on that?

Secondly, there has been a lot of lobbying—I think that we have all had a lot of that—in favour of extending the Bill to cover defined benefit schemes. However, that should also have a more detailed relevance to defined contribution schemes. Will the Minister table amendments on that subject? It was not flagged up by the Secretary of State. I am grateful for the general undertaking on timing.

Malcolm Wicks (Labour, Croydon North)

On the consultation issues, we are in agreement in principle and we will table amendments. However, I have no doubt that without initiating a formal consultation procedure, we would want to discuss with all interested parties—employers, trade unions and others—how to ensure that that sort of consultation was meaningful. I give that undertaking.

Much of the Bill is about final salary schemes or defined benefit schemes; the protection fund is the obvious example. However, other aspects of our proposals on regulation have equal meaning, or some meaning, for defined contribution schemes. We shall come to that, although there is no plan at present to define specific amendments on defined contribution schemes.

If the Secretary of State's undertaking to meet the hon. Members for Havant (Mr. Willetts) and for Northavon still stands, a letter or some form of communication on that will be with Committee members very shortly.

Question put and agreed to.

Win Griffiths (Labour, Bridgend)

I remind the Committee that there is a money resolution and a ways and means resolution in connection with the Bill. Copies of those resolutions are available in the Room. I also remind Committee members that adequate notice of amendments should be given, and that, as a general rule, my co-Chairman and I do not intend to call starred amendments, including those reached during an afternoon sitting.Clause 1 The Pensions Regulator

Clause 1 - The Pensions Regulator

Malcolm Wicks (Labour, Croydon North)

Before moving clause 1, I should like to say a few words—and I do mean relatively few, Mr. Griffiths—about the Bill as a whole.

I have already mentioned that the Bill is long and that it deals with complex material. Committee members will know that the two central planks of the Bill are aimed at establishing the pensions regulator, which we are about to discuss, and at establishing the pension protection fund. All being well, we will come to that in a couple of weeks' time in part 2. There are, of course, other important changes in the rest of the Bill, and many of them will provide administrative easements for pension schemes and will help people plan their retirement, in terms of information. I have just given undertakings that we

will do our best to ensure that colleagues receive Government amendments as soon as possible.

Clause 1 establishes in law the pensions regulator. That body will be in place from April 2005, subject to the passage of the Bill and, therefore, Parliament's will. The current pensions regulator, the Occupational Pensions Regulatory Authority, has laid good foundations for the regulation of work-based pensions ever since it was established in 1997. We propose to build on OPRA's experience of more than seven years of regulation. However, we recognise that OPRA's effectiveness has been restricted by the current legislative framework, which often obliges it to take action in respect of many minor breaches of the law.

Our proposals for the new regulator will remove such restrictions and make the pensions regulator more flexible and responsive. Our proposals for the regulator also implement wide-reaching recommendations made about the regulation of work-based pensions in a number of key reports. The Pickering report, the quinquennial review of OPRA and the National Audit Office study of OPRA all recommended that any regulator should target its resources on the cases in which members' benefits are at greatest risk, and should avoid cheapening the regulatory currency, as one organisation put it, by wasting time on what might be regarded as petty breaches. That is exactly what we propose that the pensions regulator will do.

The Cabinet Office's Better Regulation Task Force has stated, from its experience of working with regulators across Government, that regulatory bodies are most effective if they can focus their resources on areas of real risk. The taskforce has also recommended that regulators should, wherever and whenever possible, adhere to the principles of better regulation as expressed by the taskforce, and should be proportionate, targeted, accountable, consistent and transparent in their approach to regulation. We intend the pensions regulator to embed those principles in its design, working processes and overall regulatory approach.

Clause 1 establishes the new regulator for work-based pensions. The pensions regulator will be funded indirectly through a levy on pension schemes, just as OPRA is. The regulator will collect that levy on behalf of the Secretary of State. We currently estimate that the regulator's running costs will be about £23 million a year. That compares with a projected £17 million for OPRA's final year, which we think will be 2004–05.

The increased running costs reflect the staffing and processes required to support the wider and more flexible powers of the new regulator, its additional responsibilities in respect of the pension protection fund, and its more proactive, outward-focused approach to regulation. We will need to review the precise coverage of the new levy and issues such as whether it will continue to include, as the OPRA levy now does, an element for funding the Office of the Pensions Advisory Service, often known as OPAS.

An effective and well respected regulator is central to our reforms. As far as possible, we must ensure that

pension schemes are well run and that their considerable funds are protected against poor administration and wrongdoing. That is the purpose underlying the creation of the new regulator and its governance structure.

Nigel Waterson (Conservative, Eastbourne)

This is a useful moment to pull together some of the arguments that will re-appear when we deal with the amendments to part 1 of the Bill, and to look at the philosophy behind the regulator. I was grateful for what the Minister had to say about OPRA. [Interruption.]

Win Griffiths (Labour, Bridgend)

Order. There is extraneous noise. However, it seems now to have disappeared.

Malcolm Wicks (Labour, Croydon North)

Another kind of OPRA.

Nigel Waterson (Conservative, Eastbourne)

I would grasp any excitement that there is during this Committee stage.

The Minister rightly said that this is not a question of junking OPRA and saying that it has been a failure—quite the opposite. I hope that the Government—not only in the Minister's opening words, but in the regulatory impact assessment and in the fact sheet that appeared yesterday—have conceded that OPRA has made a contribution. However, it is time to move on. There was a growing impression that it was spreading itself far too thin and was ticking boxes across a range of issues, rather than focusing on the cases that mattered.

We are looking at a different philosophy. The Minister mentioned, as I have briefly, the review by Dr. Davis, the quinquennial review, the National Audit Office report and the comments made by Pickering about having a new kind of regulator. As Pickering says, the new kind of regulator is envisaged as having the authority to intervene in a proactive way. We welcome that and support the regulator, subject to a few points of detail—six sittings' worth, I suspect, from looking at the timetable.

I want to put one cultural point to the Minister. As Pickering says, it will be a new kind of regulator that will be different in its approach; it will be proactive and focused and it will have significantly more resources—I will return to that in a moment. One hears that a large proportion of the OPRA staff are expecting to be TUPE'd over to the new body, and I see the Minister nodding at that. I am sure that some element of continuity is important, but is he satisfied that if that happens, the new culture that the Bill is rightly trying to engender will be apparent? I am not necessarily suggesting a re-education programme for the staff, but it is difficult to get people out of their old ways and habits sometimes. I would like some reassurance from him on that, particularly as to how that would apply to the people at the top of the existing structure, although I do not want to get into discussing personalities.

Then there is the question of cost. A variety of concerns have been flagged up by organisations. The Association of Consulting Actuaries, which plays a major role in Committee, has expressed concerns

about whether the proposals would lead to what it calls an ''invasive regulator.'' It said:

''If the additional requirements placed on the New Regulator manifest themselves in widespread additional paperwork . . . this will lead to an acceleration in scheme closures''.

That is one of the themes—one of the leitmotifs—that will run through this Committee stage. Will having a highly invasive regulator in a complex new structure, together with the requirements of the PPF, which we shall discuss later, have the opposite effect to the Government's laudable aim of not only protecting, but encouraging that type of pension scheme? That is a concern that has been flagged up.

The British Chambers of Commerce says something similar:

''The Bill imposes more onerous duties on trustees, managers and other persons involved with pension schemes to provide information to the Regulator.''

I do not think that anyone would disagree with that being the case and with that being useful. However, it points out:

''This will translate into higher costs for employers that operate schemes''.

That is a genuine concern, which needs to be addressed. Similar concerns have been touched on by organisations such as the National Association of Pension Funds.

It is instructive to examine the regulatory impact assessment. With all due respect to whoever drafted the explanatory notes, the RIA is often more interesting and more helpful on large Bills. As the Minister did, it begins by registering the fact that:

''Opra has made a good job of fulfilling the role it was required to perform, and encouraged better governance of pension schemes.''

I place on the record that that is something that Conservative Committee members agree with. However, it says:

''When addressing breaches of pensions legislation, the regulator should not just punish''.

It then goes on to talk about compliance, and we shall return to that in more detail.

As the Minister has said, it is estimated that the regulator will have annual running costs of approximately £23 million, including the costs of any monitoring or enforcement action. That represents an increase of £6 million—25 per cent.—on OPRA. There will be a one-off start-up cost of approximately £6 million and a further £20 million for IT development.

My initial concern is that the estimate is conservative. The position of the regulator is a new one, with a new range of powers, some of which are far-reaching. It will need to extend TUPE across a lot of the existing OPRA areas, and I suspect that it will have to take on some specialised new matters, particularly given the tight time scale for implementing and setting up the bodies that we are discussing.

Will the Minister reflect on whether that estimate needs to be revisited? We do not want to end up with a son of Ofcom—a large, lavish, expensive, invasive regulator. These are early days. We not want to have a

regulator that is out of control, both financially and in other areas. That is why the Opposition will try to persuade Committee members that here and there there should be limitations on the activities and powers of the regulator. That is all in the detail. We accept the principle, and think it is a good idea. We support the new regulator, and clause 1.

Steve Webb (Liberal Democrat, Northavon)

We too support the principle of the establishment of a new kind of regulator. Establishing a regulator who is proactive and who looks for major breaches that could lead to large numbers of people losing large amounts of money—rather than one that is bound by statute to chase up nit-picking breaches of the regulations—has to be the right way forward. In principle, we are in favour of establishing a new kind of regulator, so we support clause 1. However, there are a couple of broad issues that we wish to raise, and it will be sensible to put them on the table now and come back to them in more detail later.

First, how will the new regulator relate to other bodies? The briefing note that the Minister circulated to Committee members is helpful. It says that the Financial Services Authority and the pensions regulator are intended to be complementary, and attempts will be made to ensure that there is no overlap, and no gaps. That is a challenge. There is a risk that some elements of the pensions world will be regulated by both bodies, and some—if we are not careful—by neither. Each of those outcomes would be unsatisfactory.

There are, for example, grey areas concerning group personal pensions. There is clearly an employer aspect to those, but an individual personal pension would be regulated by the FSA. Are there other such areas, in which companies, employers and providers could find themselves regulated twice if we are not careful? I hope that the Minister will reassure us that that matter has been thought through systematically, and that there is no overlap between the functions of the two regulators.

Nigel Waterson (Conservative, Eastbourne)

Does the hon. Gentleman share my concern that on the fact sheet, which I suspect is helpful, and is certainly designed to be fairly simple to follow—I can follow it, so it must be—a simplistic distinction is drawn on page six? It states that the pensions regulator should not be concerned with sales and marketing, but with the ongoing regulation of pension arrangements. Does the Minister agree that in practice it may be difficult to draw that line?

Steve Webb (Liberal Democrat, Northavon)

I think that the hon. Gentleman is correct. There will be grey areas. He expressed a concern that regulation should be proportionate. Double regulation is unlikely ever to be proportionate. I hope that the Minister can reassure us on that point.

If a constituent comes to me with a company pension problem, I am sometimes confused about where to go, and where to send them. There seem to be a plethora of different organisations, each with a slightly different role. My worry is that the new regulator will not sweep them away, but could instead add to the complexity. There will be a pensions regulator, and a pensions regulator tribunal where

people who do not like what the pensions regulator said can go; the pensions regulator will have a determination panel; and OPAS will continue. There will also be a pensions compensation board, a pensions ombudsman and a pension protection fund—and those all relate to company pensions.

We might be missing an opportunity. I appreciate that each of those organisations has a different role, but what scope is there for bringing not all of them, but some of them, under one roof? I would be grateful for the Minister's reflections on that. The public—employees and members of pension schemes—are not well served if they do not know where to go or who is responsible. If something goes wrong, do they go to the regulator, the ombudsman or the advisory service? That needs to be made clear for the public. I am worried that even in these early clauses we are creating lots of different institutions that may confuse people.

The only other observation that I should like to make at this stage relates to the overlap between the regulator created under the clause and the pension protection fund, which we will deal with later. It is important that those two bodies dovetail effectively and that there is not an overlap between them. I am already slightly confused—it did not take long for me to get confused—about whether if a fund is not looking healthy, the pension protection fund will say to the regulator, ''That's your job. You keep an eye on it. You issue an order to them. You make sure they're keeping up to the funding requirements.'' Will the pension protection fund sit and watch, or will it be monitoring funds, looking at and seeking information, and ensuring that schemes are funded to such a level that the PPF will not be drawn on? Will that duplicate the regulator's activities? I appreciate that the Bill says that the information that the regulator gathers can be for the purposes of the PPF—so information can be passed on—but will the PPF be asking for the same information as the regulator, or related information?

How do all the different bodies fit together? We have plenty of scope to explore that idea, but we want a proactive regulator that sees the big picture, not one that duplicates or triplicates what other bodies and regulators are doing. We want members of schemes to know who to go to, and how these bodies relate to each other. Perhaps we have missed an opportunity to streamline the system when we create yet more bodies, which is always a danger when tackling a problem. I should be interested to hear the Minister's reflections.

Malcolm Wicks (Labour, Croydon North)

This has been a useful preliminary discussion of some important issues. The hon. Member for Eastbourne rightly notes that staff who are working for the existing body, OPRA, have rights to transfer to the new body—the regulator. As he said, those two bodies will be covered by TUPE. I take on board his important question. As we are using an existing body as the foundation for a new body, how are we to ensure that it is genuinely a new body—not one that throws away all the good practices of the past, but one that has, to use the hon. Gentleman's term, a new culture? I am exercised by that question. In another life, when I was Under-Secretary of State for Lifelong Learning and we created the learning and skills councils, there were those who were concerned

that that would be a re-badging of the then TECs, and others who thought that it might be a re-badging of the Further Education Funding Council. I shall not say any more about that—but these are important issues in public policy.

I am satisfied that we can get the right balance on continuity. I thank the hon. Gentleman for his positive remarks about the work of OPRA, which are justified given the framework in which it has been operating. On visiting OPRA recently, I was impressed in different ways. Colleagues there are some of our major champions of the need for change and some of the keenest and most expert supporters of the concept of the new regulator. There has been much change in that organisation in the past year or so. I also understand that in terms of the leadership of the regulator, at both professional and board level, we need to make some judgments about the right mix of continuity and change. We intend to make those judgments. When there is news about important appointments, we shall try to bring that to the Committee.

I am satisfied that we can get the change we want. As the hon. Member for Eastbourne implied, there is no need to take the OPRA troops out into the fields and re-educate them in a Maoist fashion—or rather, given their location in Brighton, to take them on to the Sussex downs or the beaches. We do not need to fight this battle on the beaches; there are others way to do it.

The hon. Member for Eastbourne raised the important issue of how we make sure that new, and in many respects recalcitrant and tougher, regulations do not become too invasive for the generality of organisations. There is no one single answer to that. Throughout our deliberations on pensions and in the Bill, we have tried to get the right balance between imposing new duties and introducing easements to lighten the load. We have been in discussion with the industry about the kind of information that will need to be given to the regulator. We fully take on board the hon. Gentleman's point about the need to get that balance right.

On costs, the hon. Member for Eastbourne found himself in the interesting position of not accusing—that would be too pejorative a word—but suggesting that we may be being too conservative—not a charge that we normally face. We have costed the proposals thoroughly from the bottom up. Given the new powers, we have asked what is needed, and we are convinced that the costings are right.

For the most part, schemes will be required to provide to the regulator information that is already readily available. People from a sample of schemes have been asked to provide the information that is likely to be part of the scheme return, and they have been broadly supportive of that, and what it requires. They have expressed no significant concerns about possible costs to them. We are keeping that under review, not only in the early days.

I thank the hon. Member for Northavon for his broad support—although I expect that his remarks

will quickly disintegrate into devastating technical criticism and proper scrutiny, which we will do our best to cope with. During our deliberations, we will be able to tease out the respective roles of the new regulator and the FSA. I can see why many in the outside world might ask proper questions about them, but we are convinced that there is a distinction to be made between the work of the FSA and that of the regulator. We obviously want to ensure that those distinctions are clear, but that the two organisations work closely together where necessary.

The hon. Member for Northavon made a useful point by noting how many different organisations there are in the pensions world. At first sight, questions may well be asked about whether we really need all those organisations. We are not in the business of inflating the number of organisations for the sake of it. However, we will be able to demonstrate to the Committee why the tribunal has to be at some distance from the body that it adjudicates, and I know that the hon. Gentleman will take that factor on board straight away.

During our discussions, we will also be able to demonstrate why the regulator and the pension protection fund have different functions, but nevertheless need to work very closely together. They need to work closely together because the more effective the regulator is in regulating company pension schemes, especially those at risk, the less demand there will be on the resources of the pension protection fund. Furthermore, for the pension protection fund to do its job properly, it needs first-class information and intelligence about the state of health of company pension schemes. In large part, that information will come from the regulator. This is an important question, and there will be different detailed opportunities to return to it.

Steve Webb (Liberal Democrat, Northavon)

Will the Minister try to clarify the relationship between the roles of the pensions ombudsman and the regulator? Will there be circumstances in which people could go to either of them, or both?

Malcolm Wicks (Labour, Croydon North)

There will be separate discussions about the ombudsman. However, the role of the regulator is to keep a close watchful eye on the range of schemes, particularly on the basis of information and intelligence, so that it can scrutinise using the new powers, and some existing powers that it will take over from OPRA, which we will discuss later today, or perhaps on Thursday. There is also OPAS, the Office of the Pensions Advisory Service, which members of pension schemes with concerns can ask to consider the issues and reach agreements with company pension schemes wherever possible. Failing that, there is the right to go to the ombudsman in more serious cases. As we will see later, in addition to the existing functions of the pensions ombudsman, the PPF needs an ombudsman's function and we shall make proposals about that. The hon. Member for Northavon can add that to his list of complexities to make important debating points about, but we shall seek to justify why that new office is important.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2 - Membership of the Regulator

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 104, in

clause 2, page 1, line 11, leave out from 'the' to end of line 12 and insert

'chairman and approved by the Secretary of State.'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following amendments:

No. 105, in

clause 2, page 1, line 15, leave out subsection (3).

No. 106, in

clause 2, page 2, line 9, at end add—

'(7) At least one of the non-executive members of the Regulator shall be a representative of an occupational pension scheme subject to the pension protection levies under this Act.'.

No. 107, in

schedule 1, page 164, line 24, leave out paragraph 3.

No. 108, in

schedule 1, page 164, line 32, leave out 'Secretary of State' and insert 'Regulator'.

No. 109, in

schedule 1, page 165, line 1, leave out 'Secretary of State' and insert 'Regulator'.

No. 110, in

schedule 1, page 165, line 4, leave out paragraph 6.

No. 111, in

schedule 1, page 165, line 18, leave out paragraph (c).

No. 113, in

schedule 1, page 166, line 2, leave out

'with the approval of the Secretary of State'.

No. 112, in

schedule 1, page 166, line 5, leave out paragraph 10.

No. 114, in

schedule 1, page 167, line 6, leave out 'Secretary of State' and insert 'Regulator'.

No. 115, in

schedule 1, page 167, line 10, leave out 'Secretary of State' and insert 'Regulator'.

No. 116, in

schedule 1, page 167, line 12, leave out 'Secretary of State' and insert 'Regulator'.

No. 117, in

schedule 1, page 167, line 18, leave out 'Secretary of State' and insert 'Regulator'.

No. 118, in

schedule 1, page 167, line 21, leave out 'Secretary of State' and insert 'Regulator'.

No. 120, in

schedule 1, page 171, line 30, leave out

'with the approval of the Treasury'.

Nigel Waterson (Conservative, Eastbourne)

This is a slightly disparate group of amendments. Amendment No. 104 would take away

from the Secretary of State the power under 2(1)(c) to appoint the five other members of the board of the regulator and give it to the chairman with the final approval of the Secretary of State. This is a small but important shift in the balance. A similar point is made in amendments Nos. 108 and 109 and Nos. 113 to 118, and a slightly different point is made in amendment No. 120, to which I shall return.

We argue that the Government cannot have it both ways. We support the setting up of the regulator, as I have already made clear. We can all agree that the regulator and the role of the PPF should be entirely independent. The regulator should be free to roam widely, with its powers and its duties to do its best for the resources that it is given, without fear of political interference at any level. The Government are presumably making a virtue of the fact that the PPF—and, I suspect, the regulator—will be watchdogs with teeth, which they will be willing to use, and will be free from any Government influence. That is as it should be. It has been made abundantly clear by Ministers that the Government are not standing behind the new fund—the PPF—we shall talk about that in much more detail, and at some length, in due course. Those organisations, including the regulator, are free-standing.

In the Government of which the Minister is a member, there is a trend for people to be control freaks, and not be able to let go—although I except the Minister from that accusation. Not only does the Secretary of State have his fingerprints all over the Bill, so does the Treasury. I have made the point before, but it is no less valid for that: the Department for Work and Pensions is a wholly owned subsidiary of the Treasury. The Chancellor likes to indulge in micro-management of almost everything in our daily lives; this matter, I fear, is no exception.

No doubt there will be an exhaustive and high-level procedure to recruit the best possible chairman for the new regulator—someone with exceptional qualities. The same goes for the chief executive. The chairman is to be appointed by the Secretary of State. We are content with that; like the creation of the world, the process has to start somewhere; the regulator cannot just appear out of the clouds.

Steve Webb (Liberal Democrat, Northavon)

It is not quite the same thing.

Nigel Waterson (Conservative, Eastbourne)

I am not suggesting that, nor that we turn the Bill into some sort of religious movement. However, I think that the chairman and chief executive should work together, with the sort of people with whom they will be comfortable working, who will add value to their role. That is not to say that we would completely take away the role of the Secretary of State. As amendment No. 104 says, the appointment of the chairman should be

''approved by the Secretary of State.''

If someone wholly inappropriate were appointed to any of these jobs, the Secretary of State should certainly have a role. However, at the end of the day, my view is that the regulator should be master in its own house.

There is a separate point in amendment No. 120, which would withdraw the words

''with the approval of the Treasury''

from the Bill. That magic little phrase comes up quite often, and the Committee should wish to discourage it. We are certainly trying to discourage political interference from the Department responsible for the legislation; why should we encourage interference from the Treasury? In different parts of the Bill, we will try to strike out the words ''with the approval of the Treasury'', and I hope that it will be useful if at this stage, I explain precisely why.

Amendment No. 105 would take out subsection (3), which was a puzzle to us. It states:

''At least two of the members appointed under subsection (1)(c) must be appointed from the staff of the Regulator.''

I do not know whether that is a good thing or not, but I have tabled a typically probing amendment—although with a majority such as the Government's, every amendment is really a probing amendment—to find out the thinking behind it. Why should it necessarily be a good thing to have members of the regulator's staff among the other people? Subsidiary to that, does the provision have to be spelled out so rigidly? An alternative would be to table an amendment stating that the staff of the regulator would not be disqualified; if someone were clearly the right person, they could be appointed. I only throw the idea out; I have no intention of pressing this amendment, or any of this group, to a Division. However, I would be interested to hear the reasoning behind subsection (3).

Amendment No. 106 concerns a different issue. It would add a new subsection at the end of clause 2:

''(7) At least one of the non-executive members of the Regulator shall be a representative of an occupational pension scheme subject to the pension protection levies under the Act.''

The National Association of Pension Funds raised the point that amendment No. 106 addresses. It is rightly concerned that in its operations the regulator—and other bodies, including, or perhaps especially, the PPF—should have in mind the needs and problems of the industry, such as excessive regulation and the invasive regulatory concern that I mentioned earlier, and the cost, which it will ultimately bear, of the various layers of supervision and regulation.

Therefore, I propose that at least one of the non-executive members of the regulator should be a representative of an occupational pension scheme covered by the Bill. Who else has a more immediate and day-to-day appreciation of the role of the regulator vis-à-vis the industry? I would be a surprised if there were a serious objection to that. It would be interesting to learn what argument the Minister could have against that.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

When the hon. Gentleman talks about a representative, does he mean a representative of the members of the scheme, the sponsoring employer or the trustees of the scheme? The TUC has called for a members' representative to be included in the new regulator.

Nigel Waterson (Conservative, Eastbourne)

Yes, I noticed that in the TUC briefing. I am entirely agnostic about this. The representative could be a member of any of those three groups; he or she need only be someone involved with a scheme whose day-to-day operation would be intimately affected by the Bill. I suspect that that would usually be a trustee or a representative of the sponsoring employer, but I have not spelt that out in the amendment and I do not see why it is necessary to do so.

Amendment No. 107 is intended to clarify matters. It proposes to leave out paragraph 3 of schedule 1, which states:

''No person is to be prevented from being a member of the Regulator (whether as chairman or otherwise) merely because he has previously been such a member.''

We could not work out what that was getting at. Is there a regulation somewhere else—perhaps in another piece of legislation—that I have failed to pick up that would bar people from standing again after serving for a certain period? What sort of situation is that paragraph meant to cover? This is a probing amendment; we are not wedded to it—but I would be interested to hear the Minister's comments on the subject.

Amendment No. 110 raises a similar point. Paragraph 6 refers to matters such as non-executive members ceasing to be members otherwise than on the expiry of their term of office. What kind of situation is envisaged there? Is it illness? I suppose it is not death, unless the compensation is to be payable to people's families. If the Minister were to talk us through what kind of situation he has in mind I am sure that we would be content.

Amendment No. 111 would delete the reference to ''additional staff'' being

''made available by the Secretary of State under paragraph 10.''

We are not necessarily set against that, but to question it is part of the business of insulating the new regulatory set-up from Government—from any Government. Governments have a habit of interfering, and none more so than this one. What is envisaged here? Is it seconding people with particular skills on a short-term basis, or on a long-term basis? We would like to know whether wholesale shifts of officials from the Department to the regulator are envisaged.

I have dealt with amendment No. 113, which makes the point about approval. Amendment No. 112 makes the same point—it is about additional staff. I have dealt with amendment No. 114 as well as amendment No. 115 and so on. Unless someone is prepared to challenge me, I think that I have dealt with all the amendments. I hope that it is clear what we are trying to achieve, which, in some cases, is merely to draw out information from the Minister.

John Robertson (Labour, Glasgow Anniesland)

On a point of order, Mr. Griffiths. In view of the coverage that the clause has already had, will you be allowing a clause stand part debate, or will that be part of the discussion on the amendments?

Win Griffiths (Labour, Bridgend)

That will depend upon how the debate on the amendments ensues. If there is a wide-ranging debate, we will not need a clause stand part debate, but if the debate is relatively brief, we can have one.

Nigel Waterson (Conservative, Eastbourne)

Further to that point of order, Mr. Griffiths. It was a helpful point to raise this early in our proceedings. I know that it is not my decision—far from it—but it might be helpful for you and your co-Chairman if I say that our broad approach throughout our discussions will be that when we have detailed debates on a series of amendments, Conservative Members will not seek a stand part debate unless there is a particular reason for doing so—and in that case, I would flag the fact up at the start of my remarks on the amendments, leaving the decision, as always, up to the Chair.

Steve Webb (Liberal Democrat, Northavon)

I am intrigued that the amendments seek to set the regulator more at arm's length from the Secretary of State. I cannot help reflecting that yesterday in the House, a Minister was trying to put the regulator as much at arm's length as possible, so as to evade any responsibility. If I may say so without any disrespect, I would have thought that we wanted the Secretary of State's mucky paws all over the regulator so that he or she is accountable for its failings—or, we hope, its successes—and for the Bill's failure or success in achieving its aims.

I am not sure that we want to reduce the Secretary of State's power of appointment to the regulator, and thereby distance it and make it so independent that, as with many of those bodies, it is hard to lay a finger on it because it is nothing to do with the Government. While I understand the points that the hon. Gentleman has made, I do not feel sympathetic to such amendments.

However, I do have some sympathy with amendment No. 106, which is about representatives of the scheme being part of the regulator. The hon. Member for East Carmarthen and Dinefwr raised the important question of what we mean by a representative. Clearly, people subject to the PPF levy have an interest, but presumably they might legitimately be on the board of the PPF rather than on the regulator. Immediately we start to see the overlap between those two bodies. I do not mean that the representative needs to be an employer just because employers are levied—that is the reference in amendment no. 106—but rather that there should be some sort of representative of a scheme, to give that perspective. I suspect that that representative might need to be an employer, because of the nature of what the regulator does. However, it would be helpful to get the Minister's response to the idea of a worker representative as well.

One of the problems with regulation in the past has been that the regulator has known what was going on, but the members of the scheme have not. If the members had known what the regulator knew, they might have stopped contributing to a scheme. Therefore, the amendment raises a strong question about how the new system will ensure that members of schemes have access to the information that the regulator has collected. I do not think that that will

be achieved by having a token worker on the board. There may be a case for that, but it will not achieve the objective that I have just described. I hope that the Minister will tell us what would achieve it.

It seems sensible to raise one other query, as we are discussing amendments to clause 2. Subsection (1) says:

''The regulator is to consist of the following members''.

It does not say ''the board of the regulator'' is to consist of the following members, and I do not quite understand the choice of that language. The PPF has a board, and later, the Bill refers to membership of the board of the PPF, but not about membership of the board of the regulator. As I understand it, subsection (1) says that the regulator ''is'' those seven people. I do not follow that. It may be related to the idea of its being a body corporate, as is stated in clause 1.

Can the Minister explain the language of the clause? I have some sympathy with the need for representation, but I am less convinced about the need to distance it from the Secretary of State. We want him to be responsible for the success of the regulator.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

I add my support to the principle of having a members' representative on the board—or on the regulator—in line with amendment No. 106, although there is an argument to be had about what precisely we mean by representation.

The lay members—the non-executive members—have an important and distinct function under the terms of the Bill. It would be useful if the Minister could give us a flavour of the recommendation and the guidance that would be given on the profile of those members, regardless of whether, according to the Opposition amendment, they are appointed by the regulator having given due regard to the recommendation of the Secretary of State, or the other way round. It would be useful to have a greater sense of the nature of that representation.

I support the TUC's call for member representation. It is important in relation to the principles that underlie the Bill—transparency, greater accountability and greater security. Having a voice for the membership of schemes is essential in achieving those aims. The current proposals retreat from the present position, whereby OPRA has a members' representative. There is a requirement for that—I stand to be corrected if that is not the case. If we look across Europe, we see that most regulators have representation for social partners. Can the Minister tell us how we can guarantee that the interests of members are represented by the five non-executive members of the board of the regulator?

John Robertson (Labour, Glasgow Anniesland)

I, too, welcome you to the Chair, Mr. Griffiths. I hope that we will have a pleasant time in the coming weeks.

I do not often support Liberal Democrat or Plaid Cymru members, but I have sympathy with what the hon. Gentlemen are saying. I have been approached by Amicus, which asked how the board would be made up. How does the Minister envisage that that will be done? It is important that employees be represented,

particularly in the light of the problems that we have seen recently involving pension schemes that were wound up with little or no compensation for those affected.

When considering the amendments tabled by the Conservatives, I find it laughable, after what happened to Equitable Life, that we are talking about standing back and not allowing the Secretary of State to have an influence. It was all too obvious yesterday that the Opposition were trying to pin the blame on Labour Ministers, because those people were not there at the time. The Government take collective responsibility. That was shown by the contributions that were made.

Nigel Waterson (Conservative, Eastbourne)

Does the hon. Gentleman see a parallel between the desire to compensate those who lost out in the Equitable Life saga—a claim rejected by the Government yesterday—and the desire for compensation for the estimated 60,000 people who have lost their pension rights and will not be compensated retrospectively under the Bill?

John Robertson (Labour, Glasgow Anniesland)

The short answer is no. That was explained well by the Financial Secretary to the Treasury in the House yesterday, and I refer the hon. Gentleman to Hansard if he does not recall what was said.

There must also be some kind of scrutiny of the regulator and its body. The best person to do that is the Secretary of State.

Amendment No. 120 refers to the Treasury. The idea that the Treasury would not be involved when money is involved is laughable. The provision is about the accounts. If my right hon. Friend the Chancellor did not want to look at them, there would be something wrong. The amendments are mistaken, so I urge my hon. Friends not to support them if they are pressed to a Division. None the less, I ask the Minister to examine the make-up of the board. Perhaps he could tell us what the chances are of employees being represented on it.

Malcolm Wicks (Labour, Croydon North)

We have had a useful mini-debate on the important issues relating to the amendments. I will not respond to the slightly gratuitous remark that my Department is a wholly owned subsidiary of Her Majesty's Treasury. I have been checking my pager to see how to respond to that devastating criticism, but for some reason the Treasury has not yet been in contact, so I will struggle on with the excellent notes provided by my colleagues in the Department for Work and Pensions, with my own gloss on them. I take on board the spirit in which the hon. Member for Eastbourne moved the amendments. I think that he was saying that they are essentially probing amendments, and they certainly raise some interesting questions, which I hope to address.

Amendment No. 104 would move the primary responsibility for the appointment of members of the regulator from the Secretary of State to the chairman of the regulator. It would not allow members to be staff of the regulator. That raises significant accountability issues. I noted that the hon. Member for Northavon was rather keen to ensure that my

Secretary of State's DNA was on the regulator. When it is a success—which it will be—I hope that my own DNA, too, will be found on the site.

With appointments to the board, we are, at a technical level, simply replicating the way in which members were appointed to the board of the Occupational Pensions Regulatory Authority by the then Secretary of State under the Pensions Act 1995. I am advised that our drafting merely follows the precedent used to establish appointment to the board of OPRA. Although we think that there are good reasons for following that precedent, the Conservative spokesman might once again accuse us of leaning towards the conservative side.

Kevin Brennan (Labour, Cardiff West)

Is there not additional reassurance that my hon. Friend the Minister can give the Opposition Front Bench, in that since 1995, public appointments have come under much greater scrutiny to ensure that they are made on merit, rather than for political reasons? Those appointments will be subject to scrutiny by the Commissioner for Public Appointments, as they were not in the past.

Malcolm Wicks (Labour, Croydon North)

I take that point.

Let me make some more progress. Clause 2 as it stands ensures that the Secretary of State is responsible for ensuring that the chairman is fully consulted and involved in selecting the members of the regulator. It also ensures that the members of the regulator fully reflect the skills, knowledge and experience needed to run the organisation. I think that we have got the balance right: appointments are made by the Secretary of State, but obviously the chairman of the organisation is fully consulted.

I should say to the hon. Member for Northavon that when we refer to the regulator, we are often talking about the corporate body, rather than an individual. The way in which we describe the regulator equates to how we describe the pension protection fund. However, I understand his puzzlement about such terminology.

Amendment No. 104 would ensure that the responsibilities that I mentioned fell primarily to the chairman. I believe it more appropriate for such key responsibilities to be carried out by the Secretary of State—albeit consulting the chairman in due course, once the body has established itself—as he is answerable to Parliament. We need to establish that accountability.

Amendment No. 105 would remove from the clause the provision that at least two members of the regulator, as well as the chief executive, should be members of staff of the regulator. I can understand that point, and it is perfectly proper to debate whether staff should be on the board.

We were influenced in our approach by the recommendations of Derek Higgs's report on corporate governance, submitted to the Chancellor of the Exchequer and the Secretary of State for Trade and Industry in January 2003. Annex A, item 3 on board balance and independence states:

''The board should include a balance of executive and non-executive directors (including independent non-executives) such that no individual or small group of individuals can dominate the board's decision taking.''

Although Higgs obviously had in mind private companies, we considered it appropriate to follow that advice.

Amendment No. 106 would provide for the regulator to have a member who is a representative of an occupational pension scheme subject to the pension protection levies. Some members of the Committee have raised that issue. I understand where they are coming from, but we believe that the amendment would put an undesirable limitation on flexibility, which, as I have said, is designed to ensure that appointments to the regulator are based purely on the skills and knowledge required and the relative merits of each candidate. One of our difficulties, which relates also to the pension protection fund, is that we would be wary of different representative interests, albeit some important ones have been highlighted, and feel that their interests would be taken into account only if they have a member on the board.

We want the flexibility to choose the right people. I assure the Committee that, in terms of a range of skills, knowledge and experience, not all members of the board will be the same customers with the same interests. Although the regulator will have a role in respect of the pension protection fund, its primary objective is to protect members' benefits. As I am sure the Committee will agree, that is best served by an ongoing properly funded scheme and a solvent employer. It is worth noting, of course, that the regulator has responsibility for many types of scheme. Although a good point can be made about one interest being represented on the board, we are talking about defined contribution occupational pension schemes, personal pensions and stakeholder schemes, as well as defined benefit schemes, which will be subject to the pension protection levies.

Steve Webb (Liberal Democrat, Northavon)

The Minister mentioned stakeholder schemes. Will he explain whether the regulator's role in respect of such schemes does or does not overlap with the FSA's role on stakeholder schemes? Is that not an individual purchase?

Malcolm Wicks (Labour, Croydon North)

A major issue would be that of contributions to stakeholder pensions. The regulator must ensure that the contributions of the employer and the employee, when collected by an employer, are paid into a scheme. That is one way in which the stakeholder would be relevant. If the hon. Gentleman wants more detail in writing, I shall consider his question to see whether I have fully answered it.

It is true that the board of OPRA consists of specified representatives of different groups within the pension community. However, we take the view that such a mechanistic approach is out of step with what is required for a modern and proactive regulatory body. I am confident that sufficient consultation procedures are built into the pension protection fund to make the amendment unnecessary.

Amendment No. 107 would remove the express provision in the Bill that allows a person to serve more

than one term as a member of the regulator. That would be undesirable as it would limit the pool of people who could be called on to serve as ordinary members of the regulator. It would also prevent someone who had previously served as a member from being promoted to chairman. Amendment No. 110 would remove the Secretary of State's discretionary power to authorise compensation to members whose term of office is cut short for any reason. The provision replicates existing powers in the 95 Act. In a changing environment, where the need for knowledge and skills may shift over time, it may be appropriate to appoint a new member and remove an existing one at short notice. It would be inappropriate to rule out even the possibility of compensating a member whose expectation of serving a full term is not met.

Amendments Nos. 111 and 112 would remove the possibility for the Secretary of State to make staff available to the regulator in the way that he currently does for OPRA. The 1995 Act enables the Secretary of State to make additional staff available to OPRA. That power to enable secondments of staff from my Department has proven useful for both OPRA and the Department. OPRA has benefited from the availability of experienced pensions officials, and the Department has gained invaluable experience of the realities at the front line of pensions regulation. I know from dealing with colleagues in OPRA who are working on these measures just how useful such cross-fertilisation can be.

The effect of amendments Nos. 108 and 109 would be to remove from the Secretary of State the power to authorise the regulator to make payments for pensions, allowances or gratuities to, or in respect of, non-executive members of the regulator. The power would be transferred instead to the regulator.

Amendment No. 113 would remove a provision for the Secretary of State to approve the terms, conditions and remuneration of regulator staff. The effect of that would be to remove Government control over those matters, including those relating to the members of the regulator.

Amendments Nos. 114 to 118 would remove the Secretary of State's right to determine the scale and nature of pay, allowances, pensions and compensation payments to members of the determinations panel of the regulator. They would leave those matters to the discretion of the regulator.

We wish to put in place sensible and appropriate working arrangements that help to ensure that the chairman and chief executive can operate effectively and at arm's length from the Government, while being supported by the Department. That is why pay, terms, conditions and so on are for the regulator to determine and the Secretary of State to approve. That is in line with Cabinet Office guidance to Departments on setting up non-departmental public bodies, which recommends that key decisions such as the remuneration, allowances and pensions of chairs and senior members are matters for Departments, not the body itself. Furthermore, I do not believe that those who will be funding the regulator through the general levy would want to see the regulator itself controlling

the level of salaries and wider terms and conditions without reference to external scrutiny.

Amendment No. 120 is designed to remove the statement that the regulator's accounts must comply with any directions given by the Secretary of State with the approval of the Treasury. That covers issues such as accounting methods and the detail of the information to be provided in the accounts when they are presented to Parliament. The provision in clause 2 is common to the accounts of non-departmental public bodies. It allows the Treasury, which leads both on accounting matters in general, and on the presentation of accounts of public or quasi-public bodies to Parliament in particular, to provide input to the Secretary of State of the relevant sponsoring Department, in this case the DWP. That provision replicates the provision for OPRA in paragraph 16(2) of schedule 1 to the Pensions Act 1995.

I hear the suspicion of the hon. Member for Eastbourne, but I hope that I have assured him that what we are proposing is routine practice, which has been practised by previous Administrations. I ask the hon. Gentleman to withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

I am grateful to the Minister for that comprehensive explanation of most of the points that I raised. I remain deeply suspicious of the Treasury, but he has reassured me that this particular provision relating to Treasury approval is common and routine.

I accept the Minister's arguments about the role of the Secretary of State and keeping the regulator at arm's length. It is just that we do not agree philosophically on the meaning of keeping the regulator at arm's length. However, for the moment I shall not press those amendments.

I see the point about flexibility regarding the membership of the board, but I think that the industry would be surprised if—other things being equal—there would not normally be at least one representative of an active pension scheme on the board giving their day-to-day experience from that perspective. I can put it no higher.

I thought that I was careful in moving the amendment to say that it was not necessarily a bad thing for people to be reappointed. I was trying to puzzle out, through the Minister, what provision said that they could not be appointed again and what provision we were trying to tackle. I am neutral on whether reappointment is a good thing. It depends entirely on the individual.

I was slightly puzzled about compensation and the removal of existing members at short notice when their skills are no longer required. I should like to draw an assurance from the Minister—a nod of the head would do—that we are not talking about people being removed for incompetence, inability or non-attendance; that we are talking about those who had a legitimate expectation of continuing for a period; that people would be appointed in the first instance for a set period that would possibly be renewable and then, for reasons that were outwith their own

inadequacy or incompetence, would be compensated. There is nodding of heads, so I shall quit while I am ahead.

On the secondment of staff, I was just trying to ascertain that there would not be great shoals of double agents, as it were, coming in from the DWP or the Treasury, trying to subvert the independence and rigour of the new regulator. The Minister assures us that that practice has produced value on both sides when used in respect of OPRA and I am happy to accept that. On the basis of those explanations I am happy not to press these amendments to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2 ordered to stand part of the Bill.

Clause 3 - Further provision about the Regulator

Malcolm Wicks (Labour, Croydon North)

Clause 3 should be read in conjunction with schedule 1, and with clause 1, which establishes the new regulatory body. The regulator will be in place, subject to the passage of the Bill, from April 2005. Clause 3 and schedule 1 make provision about the terms of appointment and remuneration of members, the appointment of the chief executive and other staff, the proceedings of the regulator and its funding and accounts, and its status, liability, members and staff.

I shall deal with each part of schedule 1 in turn. Part 1 allows that the Secretary of State will determine the terms and conditions, and remuneration, of the members of the board. No member of the pension protection fund staff is eligible for appointment as a member of the regulator. References in the relevant clauses to executive members of the regulator's board mean the chief executive and those members appointed from the staff of the regulator. Accordingly, any reference to non-executive members is to the remaining members, including the chairman. We shall discuss the purpose and function of the non-executive members later.

It is worth pointing out that we chose this structure for the regulator to ensure consistency with the recommendation of the Higgs report on the role and effectiveness of non-executive directors. It is worth emphasising that Higgs's recommendation applies to corporate bodies of publicly listed companies, but we believe that his principles of good governance extend equally to Government bodies, such as the pensions regulator. Therefore, we propose to adopt the recommendations where they are appropriate.

Part 2 of schedule 1 defines the staff of the regulator and makes detailed provisions for the proper appointment of the chief executive by the Secretary of State. Part 3 covers the details of the membership of the determinations panel of the regulator. We shall discuss that in more detail when we consider clauses 10 and 11, which relate to the panel.

Part 4 is concerned with the regulator's ability to set up committees and sub-committees for any purpose connected with its functions. In most cases, those sub-committees may include individuals who are not members of the committee, but that does not apply to either the non-executive committee or the determinations panel. The regulator can also authorise any member of its staff or any committee to carry out any of its functions; part 4 of schedule 1 covers that. Again, that provision does not extend to the determinations panel or to the functions of either the panel or the non-executive committee.

The ability to form sub-committees and to delegate functions will ensure that tasks can be carried out at the appropriate level. That will ensure the operational effectiveness and efficiency of the regulator. The regulator's power to delegate can be altered by regulations if necessary; again, part 4 covers that. Part 5 is concerned with the regulator's funding and accounts and the appointment of the Comptroller and Auditor General as auditor. Part 6 establishes the status and liability of the new body.

Each of these provisions is an important building block, forming part of a sound administrative and financial structure for the regulator, and establishing the appropriate relationship to a non-departmental public body between the regulator and the Secretary of State. I beg to move that clause 3 and the associated schedule 1 stand part of the Bill.

Steve Webb (Liberal Democrat, Northavon)

On a point of order, Mr. Griffiths. I apologise for being rusty about procedure, but is it in order to move that clause 3 and schedule 1 stand part of the Bill together? It is my understanding that as we are debating amendments to schedule 1, we cannot move that it stands part of the Bill at this point.

Win Griffiths (Labour, Bridgend)

That is correct.

Question put and agreed to.

Clause 3 ordered to stand part of the Bill.

Schedule 1 - The Pensions Regulator

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 72, in

schedule 1, page 166, line 22, leave out sub-paragraph (4).

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss Government amendment No. 73.

Malcolm Wicks (Labour, Croydon North)

Amendment No. 72 is a technical amendment that removes a superfluous sub-paragraph. Paragraph 11(3) requires that at least one person on the appointments committee

''must be a person who is not a member of the Regulator.''

Sub-paragraph (4) allows that a person on the appointments committee

''may be a person who is not a member of the Regulator.''

Allowing on that committee people who are not members of the regulator is already achieved by sub-paragraph (3), so sub-paragraph (4) is unnecessary.

Amendment No. 73 is a similar technical amendment. It ensures that it is clear that where the

regulator delegates any functions to any member of staff or committee—save the determinations panel and the appointments committee—they are none the less exercised on behalf of the regulator.

Amendment agreed to.

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 74—

Win Griffiths (Labour, Bridgend)

Order. I have just learned that we have got the groupings in the wrong order.

Kevin Brennan (Labour, Cardiff West)

I beg to move amendment No. 172, in

schedule 1, page 168, line 14, leave out

'and any corresponding provisions in force in Northern Ireland'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Amendment No. 173, in

schedule 1, page 168, line 34, leave out from 'function' to 'or' in line 36.

Amendment No. 174, in

schedule 1, page 169, line 17, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 175, in

schedule 1, page 169, line 20, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 176, in

schedule 1, page 173, line 38, leave out from 'Act' to end of line 39.

Amendment No. 177, in

schedule 1, page 174, line 1, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 178, in

schedule 1, page 174, line 4, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 160, in

clause 4, page 2, line 21, leave out from 'Act' to 'and' in line 22.

Amendment No. 161, in

clause 9, page 4, line 36, leave out from

'or in any corresponding provision in force in Northern Ireland'.

Amendment No. 162, in

clause 34, page 21, line 12, leave out from sub-paragraph (iii).

Amendment No. 163, in

clause 34, page 21, line 27, leave out from '(c.49)' to end of line 32.

Amendment No. 164, in

clause 52, page 33, line 24, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 165, in

clause 52, page 34, line 6, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 166, in

clause 76, page 49, line 17, leave out

'or any provision in force in Northern Ireland corresponding to this Act'.

Amendment No. 179, in

schedule 4, page 181, line 37, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 180, in

schedule 4, page 182, line 16, leave out from first 'function' to end of line 17.

Amendment No. 181, in

schedule 5, page 191, line 10, leave out

'or any provisions in force in Northern Ireland corresponding to this Act'.

Amendment No. 167, in

clause 87, page 54, line 28, leave out from 'Fund)' to end of line 29.

Amendment No. 168, in

clause 156, page 98, line 2, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 169, in

clause 156, page 98, line 18, leave out

'or any corresponding provision in force in Northern Ireland'.

Amendment No. 170, in

clause 170, page 108, line 15, leave out

'and any corresponding provisions in force in Northern Ireland'.

Amendment No. 171, in

clause 233, page 156, line 35, leave out paragraph (e).

Amendment No. 3, in

clause 246, page 162, line 46, after 'England', insert 'Northern Ireland'.

Amendment No. 4, in

clause 246, page 163, line 1, leave out from beginning to end of line 22.

Kevin Brennan (Labour, Cardiff West)

The amendments have been tabled by my hon. Friend the Member for North-East Derbyshire (Mr. Barnes) because of his concern that the Bill refers specifically to England, Scotland and Wales but not to Northern Ireland. I move the amendment on behalf of my hon. Friend to hear the Government's explanation as to why the Bill is set out in that way and does not apply in full to Northern Ireland.

Malcolm Wicks (Labour, Croydon North)

Despite my initial confusion I was grateful for the rest, Mr. Griffiths, but here we go again. My hon. Friend, on behalf of a colleague, has raised an important point about how the Bill relates to Northern Ireland. It might help if I set out the constitutional situation as it applies in Northern Ireland because, in essence, that is what the Bill follows.

Social security and pensions are transferred matters under the Northern Ireland Act 1998. Northern Ireland has its own body of social security and pensions law. If the Northern Ireland Assembly were not suspended, provision in relation to Northern Ireland would be a matter for the Northern Ireland Executive and the Assembly. While the Assembly is suspended, provision for Northern Ireland is by way of Order in Council under the Northern Ireland Act 2000. The intention is that an Order in Council will replicate the provisions of the Pensions Bill for Northern Ireland. That will maintain the long-standing policy of parity in that area, but at the same time maintain the integrity of the separate Northern Ireland body of law.

Clause 247 sets out the detail of how the Order in Council is introduced. In the event of a return to devolved government, provisions for Northern Ireland will be a matter for the Assembly. In line with established practice in the pensions field, some of the provisions of the Bill extend directly to Northern Ireland. That includes, for example, those relating to the establishment of the pensions regulator, which will operate throughout the United Kingdom. The same is true of the pension protection fund, OPRA and the Pensions Compensation Board. Those bodies are established on a UK-wide basis, but their functions are bestowed by Westminster for Great Britain, and by Northern Ireland legislation in the Province. I understand the reason for tabling the amendment but, in the light of my explanation, I hope that my hon. Friend will withdraw it.

Kevin Brennan (Labour, Cardiff West)

I thank my hon. Friend for that explanation, which has helped to clarify the point. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 73, in

schedule 1, page 169, line 3, leave out 'such of the Regulator's' and insert

', on behalf of the Regulator, such of its'.—[Malcolm Wicks.]

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 74, in

schedule 1, page 169, line 35, after 'power' insert 'by direction'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss Government amendments Nos. 75 and 76, 82, 46, 53 and 54, 91 to 93, 95, 97 and 98 and 100.

Malcolm Wicks (Labour, Croydon North)

The amendments ensure that it is clear in the Bill how the regulator should exercise the powers conferred on it by other pensions legislation, and that those powers should be exercisable by the normal or special procedure. The Pensions Act 1995 provides that powers can be exercised in three ways: by order, by direction, or by notice in writing. The amendments follow that same style.

The first set of amendments correct drafting errors and ensure that the regulator's powers will be exercised by direction. Amendments Nos. 53, 75 and 91 apply to the granting of an extension of the period under section 99(4) of the Pension Schemes Act 1993, within which the trustees or managers of a scheme are to carry out certain duties. Amendments Nos. 54, 76 and 92 apply to extending the period for compliance with a transfer notice under section 101J(2) of the 1993 Act. Amendments Nos. 46, 74, 82 and 100 concern refusing to register a scheme as a stakeholder scheme, or removing it from the register in accordance with section 2(3) of the Welfare Reform and Pensions Act 99.

Amendment No. 95 will ensure that the regulator's power will be exercised by order when the regulator is exercising its power to vest property in trustees and is removing or appointing trustees under section 9 of the 1995 Act. Amendment No. 97 will ensure that the regulator's power will be exercised by order when the regulator is exercising its power to vest property in

trustees and is disqualifying trustees under section 30 of the 1995 Act.

Amendment No. 93 provides that the regulator must exercise the power to require a person to pay a penalty for contravening regulations made under section 168(4) of the 1993 Act by a notice in writing. Amendment No. 98 will allow regulations to be made, so that applications under section 69 of the 1995 Act, which deals with applications to modify the scheme for specific purposes that are made by ''competent persons'' to the regulator, can be dealt with by standard procedure as set out in clause 70. There are inherent safeguards built into that procedure.

It is important to show by what method powers should be exercised, as any power exercised by order overrides any scheme rules if it is in conflict with them by virtue of clause 230. Therefore, orders are used in the case of a power that may affect scheme rules, such as vesting property in appropriate trustees, winding up a scheme or appointing a trustee.

George Osborne (Conservative, Tatton)

May I begin, as this is the first time that I have spoken in this Committee, by saying what a pleasure it is to serve under you, Mr. Griffiths? I hope that I will have only a minor part in the Committee; I am merely the understudy to my hon. Friend the Member for Eastbourne. However, I thought that I should say something to justify the time that I have spent here this morning.

I thought that it would be fair to make the following general observation. The Minister is moving various amendments, all of which seem perfectly reasonable; we do not have a problem with them. However, they raise the question of why they are being moved now. The Government have had a long time to prepare the legislation. That preparation has been one of the most drawn-out processes that I have been aware of under this Government. The Green Paper was published in December 2002 and the White Paper was published last June. The issues have been discussed for the last three or four years. It seems strange that the Government have managed both to make it a long drawn-out process and to produce a rushed job; that is quite a feat.

Why did the Government not get the Bill right when they first produced it, especially given that they have had so much time to prepare it, and why do they have to introduce the amendments now?

Malcolm Wicks (Labour, Croydon North)

The explanation has two parts. The first relates to the sheer complexity of the measures, and the need to relate the proposals to other legislation. The speech to which I have just treated the Committee illustrates that complexity. We are dealing with other areas of law relating to insolvency, and they are equally complex. Also, we are ambitious in our proposals; the new regulator is an ambitious project. The pension protection fund, as an innovation and a new institution, is even more ambitious. There is nothing like it in this country, and it is high time that there was. The hon. Gentleman raises a perfectly fair point, as we shall be subjecting colleagues to a range of Government amendments.

The second part of the explanation is that if all other things were equal we would have approached the legislation in a more timely manner. If all other things were equal, we might have published a draft Bill, or have taken more time on working on the fine print of the Bill, so that we would not be subject to the amendments. I sincerely apologise to the Committee for the fact that we are discussing a Bill—I had better not describe it as a work in progress—that needs substantial amendments. I genuinely apologise for that; the Committee will be detained, and that is not what I would have wanted.

I used the phrase, ''if all other things were equal''. All other things are not equal. Industry, our work forces and our communities demand the pension protection fund tomorrow, not in April 2005. I do not meet anyone who says, ''Take more time; let us have the protection in 2006 or 2007.'' The big debate is about whether the legislation could be retrospective; we do not feel that it could be. We are considering the arguments about workers who have already been disbenefited.

There is a great thirst for social justice out there. In particular, we should end the scandal—and it is a scandal—in which workers who have contributed to pension schemes all their working life can suddenly find that the company goes bust, despite their hard work and their reasonable expectation of a decent retirement with a decent occupational pension. Their hopes go bust along with the company. I have talked to workers affected; sadly, sometimes their health and family life are affected too.

Although I apologise for the amendments, I do not apologise for the fact that we are bringing forward a measure that needs amendment but that we have every opportunity of putting into operational practice by spring next year. If we delayed for a year, we might have had a more perfect text to present to the Committee. That would have made our lives easier, but by dealing with the matter now, we stand to make the lives of British people and workers easier from April next year.

George Osborne (Conservative, Tatton)

What the Minister says about the pension protection fund is perfectly reasonable. There is huge demand from the constituents of Government and Opposition Members to introduce that. It is a new institution and we are starting from scratch; the Minister is absolutely right.

However, at the moment we are not discussing that, but the pensions regulator. The idea of having such a regulator has been around for a considerable time. The Pickering report first proposed it in 2002. The Davis report, the Government's own quinquennial report, was also published in 2002. I do not want to detain the Committee; I simply want to make the point that the amendments are about a proposal that has been discussed in draft for a long time and that the valid points that the Minister makes about the pension protection fund do not apply to the first part of the Bill.

Malcolm Wicks (Labour, Croydon North)

I shall explain briefly. We have been working on the Bill as a whole. The concept of the pension protection fund came later to the agenda

than the concept of a regulator. There are cross-over points between the roles of the regulator and those of the pension protection fund. Again, I apologise for the inconvenience; no doubt I will express that sorrow on more than one occasion. However, that is the explanation that I can offer.

Kevin Brennan (Labour, Cardiff West)

I do not think that the Minister will have to express his sorrow on more than one occasion. The hon. Member for Tatton (Mr. Osborne) has made it clear that he perfectly understands the necessity for Government amendments to the pension protection fund. When we reach that stage of the Bill, the Minister will not have to apologise any further.

Nigel Waterson (Conservative, Eastbourne)

I was not intending to contribute on this point. However, it is important and we might as well deal with it now. The Occupational Pensions Regulatory Authority was set up under 1995 Act; it was established on 1 April 1996, but it only became operational on 6 April 1997. One cannot say that that era was more leisurely than ours. There were probably good reasons for that delay. Setting up a regulator from scratch is quite complicated. This is the first question—has the Minister reflected on whether, having taken a long time to produce the Bill, the Government are trying to do everything in too much of a hurry? The second point is about compensation, which he mentioned. The then Government bought themselves time by working out a pragmatic way of dealing with the immediate problems of Maxwell pensioners who faced destitution, so that the big issues could be examined more carefully in a longer time scale.

Amendment agreed to.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 121, in

schedule 1, page 172, line 25, leave out paragraph 30.

The amendment deals with a small point but one on which I should be grateful for the Minister's help. I can understand the need to provide that the validity of any of the regulator's proceedings will not be affected by a vacancy among its members. Vacancies will occur

for whatever reason—death, serious illness or someone's removal along the lines that we discussed a few minutes ago. However, how can it be right to legislate for the validity of proceedings when there has been a defect, as covered in paragraph 30(b) and (c),

''in the appointment of any member of the Regulator or of any of its committees, or . . . in the appointment of the Chief Executive''?

Does that not provide something of a blank cheque and potentially prejudice the rights of those who are subject to proceedings that would be invalid but for the paragraph? It is a small but important point.

Malcolm Wicks (Labour, Croydon North)

The amendment would withdraw a provision relating to the validity of the regulator's proceedings. The paragraph in question states that the validity of proceedings is not to be affected by vacancies on the board of the regulator or its committees or by any defect in the appointment of members of the regulator or of the chief executive. The provision replicates paragraph 15 of schedule 1 to the 1995 Act, which has operated successfully for the Occupational Pensions Regulatory Authority. It is a standard legal safeguard to ensure that the regulator can continue to protect against members' interests, even if, for example, a member dies or a particular appointment had a technical defect.

With that explanation, I ask the hon. Gentleman to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am grateful for that explanation, but leaving aside the vacancy point, which I conceded at the outset, I am still concerned that the provision may encourage sloppiness on the part of the regulator. I am also concerned about how people may be affected by defects, which the paragraph says are all right. I will not pursue the amendment to a vote, but I still have concerns. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Further consideration adjourned.—[Margaret Moran.]

Adjourned accordingly at twenty-four minutes past Eleven o'clock till this day at half-past Two o'clock.

Standing Committee B

Pensions Bill

Win Griffiths (Labour, Bridgend)

We had a couple of interruptions this morning from inanimate objects. I remind hon. Members to switch off their mobile phones when in Committee.

Steve Webb (Liberal Democrat, Northavon)

On a point of order, Mr. Griffiths. I am sure that you want the Committee's deliberations to be as informed as possible. During our discussions this morning, the hon. Member for Eastbourne (Mr. Waterson), who had done his homework better than I had, referred to the regulatory impact assessment of the Bill. The Vote Office in the Members' Lobby told me that the Department had not supplied it with copies of the assessment. The Library told me that it had one copy, which was for reference only, but that I could visit the website and print off the 46 pages myself. The Vote Office has now asked the Department for copies of the assessment. May I, through you, Mr. Griffiths, ask the Department to assist the Committee in its deliberations by ensuring that the regulatory impact assessment is made available to hon. Members as a matter of urgency?

Win Griffiths (Labour, Bridgend)

The Minister will have heard those remarks, and I am sure that he will want to respond to them positively.Schedule 1 The Pensions Regulator

Schedule 1 - The Pensions Regulator

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 122, in

schedule 1, page 173, line 27, leave out subparagraph (1).

The amendment makes such obvious good sense that I hardly need to speak in its favour. However, as I tabled more than 500 amendments to a previous Bill and only one was eventually accepted by the Minister, perhaps the odds are against me today. The amendment would remove paragraph 35(1) of the schedule, which is obviously a blanket exclusion provision. It makes it clear that neither the regulator nor any person who works for the regulator can be held liable for damages caused to a third party

''in the exercise or purported exercise of the functions''

under the Bill. ''Purported'' is a wonderful lawyer's word. I am sure that that goes down well with the Treasury, but there is ample scope, even by inadvertence, for massive damage to be caused to third parties by the provision.

I shall cite one example. I refer to page 3 of the fact sheet, which the hon. Member for Northavon (Mr. Webb) did not have to go the trouble of printing out, although some of us did print out the regulatory impact assessment. It states:

''The Pensions Regulator will only share information with other bodies where it is permitted to do so by legislation.''

It is true that provisions in the Bill to which we shall refer in more detail at an appropriate time set out with some clarity the circumstances in which information on, say, particular registers can be disclosed to other people and when it cannot be disclosed. The notes that the Minister helpfully provided state boldly:

''Disclosure of restricted information is an offence.''

That is also true. It is set out in the Bill. No matter how well run the regulator is, there will always be the possibility of errors

''in the exercise or purported exercise of the functions of the Regulator''.

We can envisage situations in which people suffer considerable harm because the information has reached the public domain or people who would not usually be entitled to receive it. I am pressing the Minister to explain the reasoning behind such a blanket exclusion. Does he not accept the principle that, when the regulator makes a mistake—honest or otherwise—and damages are caused to a person, which in our legal system must be proved, there should be some recourse?

Steve Webb (Liberal Democrat, Northavon)

I am following the hon. Gentleman's reasoning with sympathy, but his amendment would remove only paragraph 35(1) of the schedule. Curiously, he did not want the whole of paragraph 35, which is entitled ''Exemption from liability in damages'', to be removed. Why does he want to remove only a particular part of it?

Nigel Waterson (Conservative, Eastbourne)

I must say that that was well spotted by the hon. Gentleman. The omission was pure idleness on my part. I wish to make it clear that, in leading for the official Opposition in Committee, I am not trying to win prizes for draftsmanship. The Government are the people with the clever draftsmen—they may be slow, but they are clever. If any of my points of principle are accepted—as I hope some of them will be—and if Ministers say, ''We accept the principle, we will take the proposals away and draft them properly'', I shall be happy to seek to withdraw amendments.

I apologise profusely to the hon. Gentleman for not following through the logic in paragraph 35. This is a probing amendment, and I have set out with total honesty what I am trying to achieve. I look forward to hearing the Minister's defence of the provision.

Malcolm Wicks (Labour, Croydon North)

Good afternoon, Mr. Griffiths.

May I apologise to the hon. Member for Northavon and other Committee members if they have had difficulty in getting copies of the regulatory impact assessment? I am told that copies will be available in the Vote Office tomorrow, and there will be a supply on the Table in Committee on Thursday. If anyone would like a copy of the assessment for bedtime reading, however, I can make copies available urgently.

This amendment would remove the regulator's exemption from liability for damages, as we have heard. We are not acting without precedent in

introducing the provision. The Occupational Pensions Regulatory Authority enjoys a similar immunity from damages, and the Bill seeks to replicate that arrangement while ensuring that the regulator will be liable for any contravention of the European convention on human rights or for acts of bad faith.

As we managed to proceed in a spirit of consensus this morning, I shall not labour my point. When we follow the precedent of OPRA, which was established by the Pensions Act 1995, we follow an Act of Parliament that predated the Labour Administration. I do not know to what extent Conservative colleagues objected to the exemption when that legislation was introduced. Labour did not invent the exemption. Indeed, I am advised that the exemption from damages is narrower than that contained in the 1995 Act, which provided a blanket exemption, although that is not a comfort blanket for the hon. Member for Eastbourne. The exemption is now rather more limited.

Without the protection that we are suggesting, the regulator would be liable for damages arising from its staff members' actions or failures to act. That is why I am asking the hon. Gentleman to withdraw the amendment. We believe that its effect would be to prevent the regulator from achieving its objectives, and particularly the objective of protecting members' benefits.

The exemption may raise eyebrows—it has raised one or two already—and questions may be asked about its necessity. Let me try to explain. Let us say, for example, that the regulator receives information from a scheme auditor that a particular trustee is about to remove scheme funds for his own purpose. If the regulator reasonably believes that to be the case, it should act via the special procedure to appoint a trustee with exclusive powers to take control of the scheme's bank account and ensure that funds cannot be removed.

Paragraph 35(5)(a) provides for damages where the regulator has acted in bad faith. Damages are also available when the regulator has contravened the Human Rights Act 1998. I am sure that hon. Members will agree that it would be foolish to provide the regulator with powers to protect members' benefits, but then, when it thought it suitable, to prevent members from exercising them in extreme cases. That is the balance that we seek on behalf of scheme members. I understand that that may raise concerns. I emphasise that we are following the precedent of the 1995 Act, and I therefore ask the hon. Gentleman to withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

I am grateful to the Minister, but I do not accept his point about precedent.

As has been mentioned, the new regulator will have significantly wider functions and powers than OPRA, and it is therefore all the more likely that, even in good faith, it will cause damages to third parties. I take his point about the bad faith exception. As he rightly says, it would not matter if the Government tried to exclude the European convention on human rights and its

effects. It would still kick in in appropriate cases, and there is the possibility of significant damages being paid under the human rights exception. Why should British citizens have to bring cases under that provision when they might also have a straightforward civil action for damages because of a mistake made by the regulator—some information placed in the public domain contrary to the Act—in the absence of bad faith?

The Minister has conceded that there will be circumstances that are beyond either the drafting or the Government's control in which such damages could be payable. I do not think that he dealt with the point, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Schedule 1, as amended, agreed to.

Clause 4 - Regulator's functions

Malcolm Wicks (Labour, Croydon North)

Mr. Griffiths, both you and some of our colleagues in this Room have debated another clause 4 on numerous occasions. However, I am not proposing a new clause 4, but asking hon. Members to support the one that we already have.

Clause 4 makes provision for the regulator's functions. The Bill introduces a number of new functions for the regulator, but clause 4 provides for OPRA's existing functions to be transferred to it. Many of OPRA's functions work well and are still highly relevant, and it would be counter-productive if we did not transfer those powers to the new regulator. Where experience has shown OPRA's functions to be less effective than was originally intended, we propose to modify them with the Bill. Clause 4 also provides that specified functions of the regulator must be exercised on its behalf by the non-executive committee or by the determinations panel. We will discuss those modifications and the other matters during these proceedings.

Nigel Waterson (Conservative, Eastbourne)

I have not tabled any amendments to clause 4 because it is fairly straightforward; it mechanistically moves functions from OPRA to the new regulator. Nevertheless, an important issue that is exercising the thoughts of organisations such as the National Association of Pension Funds is how those functions should be carried out.

With your usual attention to detail, Mr. Griffiths, you will have noticed that I tabled new clause 4, which relates to the exercise of the regulator's functions. No doubt, if the new clause had not had a star next to it, we would have debated it today. As we will not do so, and because I think that it is inconvenient to wait until the end of the Committee stage, I beg your indulgence in allowing me to draw on some of the principles behind it in discussing how clause 4 will operate.

In a moment, we will discuss clause 5, which deals with the regulator's objectives. We wanted to propose some additional objectives. There is significant

concern about how the functions will be carried out. The NAPF makes it clear that it is worried about

''the potential lack of transparency, proportionality and accountability in the way in which the . . . Regulator carries out''

those functions. It draws a parallel from the Financial Services and Markets Act 2000, and it believes that, as I have set out in new clause 4, in carrying out those functions the regulator should have regard to three things. First, it should have regard to the need to use its resources efficiently and effectively. I do not think that anyone could quarrel with that. Secondly, it should have regard to the principle that any burden or restriction imposed should be proportionate to the benefits thereof. There are other examples of that principle in amendments that we will discuss later. Thirdly, there is a need to be open and transparent at all times, and to consult those with an interest when developing policies, procedures and practices.

Those aims are all pretty unexceptionable; I cannot imagine that anyone debating the Bill would disagree with them. We would prefer them to be set out in the Bill, and we may return to that issue on Report. The point about use of resources is pretty clear. The need to be open and transparent and to consult those with an interest is obvious, because if the regulator is to be a success, it will clearly need to carry the whole sector with it.

I shall focus for a moment on the third principle that I mentioned: the need for any burden or restriction that is imposed to be proportionate to the benefits. One could say that that is part of the philosophy behind the new regulator, because one of the criticisms of the old regulator was that it took a kind of scattergun approach. It tried to cover an awful lot of schemes and was often dealing with relatively minor or trivial issues. As I understand it, the aim of the new regulator it is to focus firepower on the areas where it will make a significant difference. To that extent, the principle ought to chime in with the Government's stated intentions.

Whatever burdens are being imposed, either through the regulator or the pension protection fund—we will come to that later—it is important that they should be proportionate; there should be a real benefit to be shown as a result of the burdens imposed. There should be a real lead in terms of consulting the pensions industry, pension schemes and their representatives to ensure that those burdens are not disproportionate and produce the benefits that are claimed for them.

Functions are one thing and objectives are another, but there is a significant argument for some guidance on how the regulator carries out those functions, and even if it is not set out in the Bill, it should be set out elsewhere.

Malcolm Wicks (Labour, Croydon North)

I am pleased to say that I agree with every word the hon. Gentleman said. The regulator is about efficiency, effectiveness, proportionality and transparency. Of course, there will need to be some regulation of company pension schemes and other schemes that are running well, but we want to focus our firepower on those that are not

doing so. As ever, it will be important that when the regulator is established, it is referred to the views of members of this Committee and of the House on that subject; I am sure that it will accept them. It is also my understanding—my colleague the Under-Secretary will be speaking to the relevant clauses later—that a prime purpose of the non-executive committee is to ensure that the regulator undertakes his or her functions in that manner.

Question put and agreed to.

Clause 4 ordered to stand part of the Bill.

Clause 5 - Regulator's objectives

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 153, in

clause 5, page 3, line 8, at end insert—

'(e) to promote occupational pension provision by minimising regulatory burdens applying to well run schemes and their sponsoring employers.'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Amendment No. 154, in

clause 5, page 3, line 8, at end insert—

'(f) in conjunction with the Pension Protection Fund Board to take all reasonable steps to maintain the cost of the levy on occupational pension schemes to the minimum compatible with the Regulator's other duties under this Act.'.

Government amendment No. 9.

Nigel Waterson (Conservative, Eastbourne)

I shall speak first to amendment No. 154, because it leads on fairly naturally from the point that I was just making. Looking at the specifics, the amendment's aim is

''to maintain the cost of the levy on occupational pension schemes to the minimum compatible with the Regulator's other duties under this Act.''

The amendment is not an attempt to water down what the regulator does in appropriate cases. It arises from points made to me by the National Association of Pension Funds, which is concerned that the regulator should not get carried away in a rush of understandable enthusiasm, and should always bear in mind that it is there to regulate an industry in which the vast majority of pension schemes are run competently and honestly. Any excessive burdens will make matters worse, not better.

Along with amendment No. 153, amendment No. 154 goes to the heart of what the Bill is about. Before I leave amendment No. 154, I should say that of course we will in due course have lengthy and probably seemingly endless debates about the pension protection fund, the level of the levies and the element of risk built into them, including the initial levy and so on. We have all those discussions to look forward to. However, it is vital that we do not lose sight of the aim of protecting and maintaining the occupational final salary schemes that already exist and are surviving, as well as of encouraging new ones to open. We should at least aim to see that existing schemes do not close to new members.

Amendment No. 153 would insert an additional provision

''to promote occupational pension provision by minimising regulatory burdens applying to well run schemes and their sponsoring employers.''

I suspect that the Minister will agree with every word that I am saying. The stated objective is to have a light-touch regulatory regime in respect of the well-run, properly organised schemes, and for the regulator to reserve its attentions and enhanced powers for schemes that are in difficulties, for whatever reason. The resources must be used in that way as a step forward from the existing regulator. We really must press the Minister on the aim of the Bill.

When the Minister made his winding-up speech on Second Reading, I put to him the comments of the Government's pensions tsar, Mr. Adair Turner, who seems to take the view that of the 9 million or 10 million people currently in occupational final salary schemes, there will in 20 years' time be as few as 1.5 million workers in such schemes. If that is true, all the Bill will do when it becomes an Act is preside over a continuing trend of decline and closure. We all know that a large number of schemes have already closed to new members. On the basis of the most recent NAPF figures, which I am sure have been overtaken by events, a new worker joining a new company today will have less than a one-in-five chance of finding a final salary scheme that is open and that they may join. That trend continues.

Although I might be reading too much into the Minister's reply to my intervention on Second Reading, it appeared that he was saying that the Bill was about protecting the status quo and protecting those who are already in schemes, and those who will remain in them, to ensure that they get what they are entitled to. That is a laudable aim. However, we need to press the Government hard—[Interruption.]

Win Griffiths (Labour, Bridgend)

Order. I do not know where that noise is coming from, but it has continued for a bit too long. Can we make sure that it does not happen again? Or perhaps the Member involved would like to take the machine out of the Room and step on it.

Nigel Waterson (Conservative, Eastbourne)

Thank you, Mr. Griffiths. It is difficult to make a point against this barrage of electronic noise. I am not very technologically advanced, but in my experience most of these things have an off button, if only it can be found.

I was making an important point, to which we should return again and again, about whether there are two aims for the Government, and whether the second aim, which we would support wholeheartedly, is to encourage employers not only to keep these schemes open to new members, but to open new ones. There was a barrage of media interest and excitement the other day when Electricité de France opened a new final salary scheme.

Chris Pond (Labour, Gravesham)

It was open already.

Nigel Waterson (Conservative, Eastbourne)

In response to the Under-Secretary's sedentary comment, I can say that the scheme got such publicity because it was so unheard of. It was like a

Bateman cartoon: the man who opened a new final salary scheme. I understand that it is perhaps more a matter of two existing schemes being put together. However, in any event, all credit to EDF for opening one.

We Conservatives would love to see many more such schemes opened, but we do not think that the Bill will encourage that. We have progressed through the various burdens, costs, levies, regulations, codes of good practice and everything else—the layer upon layer of red tape that is to be imposed on schemes. We believe that employers will be even less likely to keep the schemes open or to open new ones. I am using the amendments not only on their own merits, but to press the Minister on whether, as I thought his remarks on Second Reading suggested, his aim is to preserve the situation—to put it in the deep freeze and protect the people already in the schemes—or whether there is a forward-looking aim to encourage the schemes to remain open or to encourage new ones to open. That is a key question for the Committee. Otherwise, we will spend a large chunk of our time just nailing the lid down on the coffin.

Kevin Brennan (Labour, Cardiff West)

Does the hon. Gentleman accept that without the regulation that he mentioned, there will be no point in opening final salary pension schemes, as the pension promise contained in them will be meaningless? That is why we need the regulation introduced by the Bill.

Nigel Waterson (Conservative, Eastbourne)

Yes; that is the dilemma at the centre of the Bill. We all accept that we need better and more focused regulation and a scheme—whether the proposed one is the right one is a matter for debate, but not yet—to protect people. As the hon. Gentleman and several Labour Members said on Second Reading, all that matters in all 248 clauses and the myriads of potential regulation is confidence. The issue is about trying to reinvest confidence in pension provision. The Bill should aim not so much at the people in existing schemes, although they are important, or even—there will be some debate about this, I am sure—at the 60,000 who have lost out and will not be covered by the legislation, as at the generation of young people who are completely turned off pensions in any shape or form.

Are those young people going to be attracted to private pension provision? There is not much in the Bill that will turn them on to pensions, and there is not a great deal to encourage hard-pressed employers to keep schemes open. We are already seeing a clear trend away from final salary, defined benefit schemes to other types of scheme, including defined contribution schemes in particular. That trend may be unstoppable; the Bill will certainly not stop it.

Steve Webb (Liberal Democrat, Northavon)

The two amendments tabled by the hon. Gentleman and Government amendment No. 9 raise the issue of the proportionality of regulation. At first glance, amendments Nos. 153 and 154 seem entirely sensible: we want a regulator who will minimise the impact of his actions on the schemes that he regulates and who will keep the cost of running the regulation as low as possible.

I was interested in the hon. Gentleman's discussion of the closure of final salary schemes and the impact of the Bill in that regard. Clearly, the regulator's scope covers both final salary and defined contribution schemes. With regard to defined contribution schemes, the regulator will presumably try to ensure that the money physically gets into the pension fund, and as no promise is attached to a money purchase scheme, that is where the regulator's interest will end.

However, a promise is attached to a final salary scheme, so the onerousness of the regulation will be greater. In a final salary scheme, the employer makes a promise to the worker that goes far beyond that involved in a money purchase scheme. Running a final salary scheme, which has that promise attached, will induce greater regulatory intervention, and that might be a reason for employers to decline to offer such a scheme. That is the case at present; the question is whether the new sort of regulator will make that distinction even more acute.

One hopes that if the guidelines for the new regulator say that it should go for high-risk schemes—the ones where the employer is close to the wall or the funding level is too low—the intention of amendment No. 153, which is that the regulator should not be a burden on well-run schemes with sponsoring employers, should be fulfilled. The Government might even accept the amendment because it is very much in the spirit of what the regulator will do; largely, it will leave well-run schemes alone and concentrate on the dodgy ones. Amendment No. 153 is in the spirit of what the Government think will happen anyway, so it will be interesting to see whether they object to it. It would certainly reinforce what they are trying to achieve.

I note that Government amendment No. 9 clarifies the reference in clause 5 to stakeholder schemes. I hinted at that issue when I made some general remarks under clause 1, but I now want to pin the Minister down. One of the concerns about regulatory burden, which is the subject of this group of amendments, is that the same issue gets covered by more than one regulator.

Amendment No. 9, which clarifies clause 5, says that the regulator deals with aspects of stakeholder pensions—but so does the Financial Services Authority. Where is the dividing line? Is it the case that if I buy a financial product I will be covered by the FSA, which will ensure that I was sold it properly, but if I access it through an employer rather than as an individual, the regulator will have oversight?

There might not be an employer contribution; I might be using payroll deductions through the employer for a stakeholder pension, although there was no requirement for the employer to put any money into it. I could therefore be simply putting in my own money by means of the employer's payroll deduction. Does that come under the pensions regulator because the money has passed through the employer's bank account? If I take out the same stakeholder pension, but put my money straight into

it, that would not be covered by the pensions regulator, because no employer would be involved.

It will be strange if the purchase of the product comes under one regulator, but the oversight of the money in the fund comes under another. I could work for an employer with many employees, and have a personal pension that, rather than being part of a group pension, is an individual stakeholder product. Will the regulator be concerned with that? When the Minister speaks to Government amendment No. 9, it will help if he says where the dividing lines will be. Is there a danger of having more regulation than is needed? Will two different regulators be dealing with stakeholder pensions, and different bits of the same products?

My other observation is about double regulation. With amendment No. 154, we keep coming up against references to the pension protection fund while reading about the regulator. The amendment says

''in conjunction with the Pension Protection Fund Board''—

I realise that that is not a Government amendment, but a lot in it relates to the Government amendments. The regulatory burden will be greater if the pensions regulator and the pension protection fund are both placing burdens on schemes. We know that the pensions regulator can ask schemes for information, and the guidance notes assure us that that will not be onerous, because schemes have had a trial and they did not mind the requirements.

We know that the pensions regulator can ask for information to pass on to the pension protection fund. Can the pension protection fund initiate its own inquiries with schemes directly, or will the pensions regulator act as a clearing house for requests, to avoid duplication? Could a scheme find itself with the regulatory burden of receiving requests from both the pension protection fund and the pensions regulator? The FSA could be involved as well. Would the regulatory burden of all that not be disproportionate?

We all accept the need for regulation in such areas, but I hope that the Minister can reassure us that there will not be duplication, overlap and confusion about where the responsibility lies.

Kevin Brennan (Labour, Cardiff West)

This group of amendments and the clause give me the opportunity to raise an issue that was raised with me by an employer who runs a large utility company. He is keen to maintain the final salary occupational pension scheme, and is keen on the Bill and its provisions, including the pension protection fund. He is also sympathetic to those who have lost out as a result of firms becoming insolvent.

The issue that that employer raised with me, which I had not come across before, was about the regulator of his industry—in this case, the gas and electricity regulators—and the role of the new pensions regulator. Under the responsibilities outlined in clause 5, and the additional responsibilities referred to in the Opposition amendments, will the pensions regulator have a role, and the responsibility and ability, to discuss help for occupational pension schemes with the regulators of other industries, that are making pricing decisions in those industries?

The point that the employer raised with me was that in the utilities industries, decisions on what to do about price—whether to pass costs on to the consumer or back to the company—are often thought of simply in terms of the cost to the consumer and the profit of the company. However, if companies wish to maintain their final salary pension schemes, that could be a material factor. Will the pensions regulator be able to act a little more widely than just inspecting the books of pensions schemes, and talk to other industry regulators about the necessity of keeping final salary occupational schemes healthy? Would that fall within the powers outlined in the clause?

Malcolm Wicks (Labour, Croydon North)

We have had another useful discussion. I thought that the comments of the hon. Member for Eastbourne occasionally had Second Reading tinges to them, but there is no doubt that the debate has been helpful. I might reflect on some of his remarks towards the end of my contribution, although I will not be drawn too much into a full Second Reading debate, because we have already had that, and we can no doubt have it again—on Third Reading, for example.

I was struck by the hon. Gentleman's remarks about regulation, and the fact that regulation is not generally liked by industries. Words such as red tape, burdens and intrusion come to mind, yet when there is a great scandal—and the House discussed the Penrose report on Equitable Life yesterday—everyone suddenly attacks the lack of regulation, the lack of intrusion and the lack of record keeping. They talk about the feebleness of the systems. Obviously, as with so many other things, we must get the balance right, but I am not sure that this is quite the week in which to talk about the regulation of pensions simply in terms of red tape and burdens. Indeed, the Penrose report itself said that the regulatory system

''failed policyholders in this case'',

although as we know, it also said that

''regulatory system failures were secondary''

to the failures of the company.

We have to learn lessons. When we think that regulation needs to strike a balance between proper record keeping for massive companies and a harder, tougher approach for companies that look risky, we should not be afraid of ensuring that that is what happens. Indeed, this Government established the FSA partly because we thought that toughening up was needed in that sphere. Lord Penrose recognised its importance when he said that the FSA's regulatory reform had

''sought to anticipate many of the lessons that might be drawn by this enquiry and it should come as no surprise that it has largely succeeded''.

No doubt there were people who thought at the time that the FSA approach was too tough.

Peter Atkinson (Conservative, Hexham)

The Minister slightly misunderstands our point, which is that burdensome regulation can be ineffective, whereas light regulation can be effective, and the other way

round; the one does not necessarily follow from the other. To be effective, regulation does not have to be burdensome. That was possibly the point that my hon. Friend the Member for Eastbourne was making.

Malcolm Wicks (Labour, Croydon North)

I was agreeing with the hon. Member for Eastbourne in his description of the criteria that should govern the new regulator. I do not think that there is a lot that we disagree on, but I felt that in this particular week, we needed to emphasise the point that sometimes, tougher regulation is needed.

Government amendment No. 9 corrects a drafting error. It ensures that the regulators' objectives include protecting benefits in respect of all pension schemes that are or have been registered as stakeholder pensions, whether or not they are trust-based.

The hon. Member for Northavon made some comments about stakeholder pensions; I hope that he will forgive me if I choose to say more about that later. However, I will say now that the regulator has a key role. It ensures that employers designate a stakeholder scheme appropriately. It checks that providers are charging only the 1 per cent. cap. It keeps a register of stakeholder schemes. If employers make contributions, it has the power to check, as for other pension providers, that the right amount is paid at the right time. The FSA's checks are much more focused on the selling by the provider of the stakeholder pension scheme. I will seek to find an opportunity in the discussion on an appropriate clause to say more about this, and/or I will write to the hon. Gentleman about the role of the regulator with regard to stakeholder pensions.

The Welfare Reform and Pensions Act 1999 requires that when a personal pension scheme that was registered as a stakeholder scheme is no longer registered as such, it must be wound up, in order to protect members who may be misled into thinking that they are continuing to pay the maximum of only 1 per cent., which I mentioned earlier.

Amendment No. 153 would add an objective to those specified for the regulator in clause 5. In developing the new regulator, we have been mindful of the criteria set out by the Better Regulation Task Force, which suggest that the regulator's approach should be proportionate, targeted, accountable, consistent and transparent; we had a dialogue about the importance of those qualities. If that approach is followed, that will minimise burdens on well run schemes, because regulatory resources will be targeted on the schemes that are most at risk or most in need of help and support.

A key recommendation of the National Audit Office's review of OPRA was that the pensions regulator should have statutory objectives, which OPRA does not have. Building on that, we identified the appropriate objectives as protecting the benefits of members of work-based pension schemes, reducing the risk of situations arising that may lead to calls for compensation from the new pension protection fund, and promoting the good administration of the regulated schemes.

We believe that amendment No. 153 has worthy aims, but it is unnecessary. The objectives and

functions that the Bill provides for give the regulator the flexibility to operate a risk-based approach. That will minimise the regulatory burdens on the well run schemes to which the amendment refers.

Amendment No. 154 would add an additional objective to those specified for the regulator in clause 5. It would oblige the regulator to work with the board of the new pension protection fund to minimise the levy payable by occupational pension schemes. It is right for the partnership between the PPF and the regulator to be a key element in our new regulatory structures. The board of the PPF will be responsible for setting future PPF levy rates and structures. It will be the responsibility of the board to understand the implications that the levy structure will have for pension schemes and the overall funding position of the PPF. Before altering the levy rate or structure, the board will be required to consult its stakeholders and publish any determinations it makes on the levies. I therefore believe that there are already appropriate measures in the Bill to check the cost of the levies payable by schemes. The regulator, like OPRA, will be funded indirectly through a levy on pension schemes. The regulator will collect that levy on behalf of the Secretary of State; he will set the rate, as he does for OPRA.

In the light of what I have said, in order to make progress without being drawn back into the important discussions that we had on Second Reading, I hope that the hon. Gentleman will withdraw amendment No. 153. I am not asking him to do as one might with the electronic device, and take it outside and stamp on it, but I ask him politely to withdraw it.

Nigel Waterson (Conservative, Eastbourne)

I have nothing to say about Government amendment No 9. As the Minister said, there seems to be a drafting error, and the amendment makes sense in itself.

I am sorry that that Minister chose to categorise an important issue that I touched on as a matter for Second Reading. It is a theme that should run through the Committee stage as the word ''Blackpool'' runs through a stick of rock. Otherwise, there is a danger of the Bill becoming irrelevant nonsense.

It is important to ensure, as we launch ourselves on this voyage of discovery, that the Minister, our captain, has a compass—by which I mean some idea of what he is trying to achieve and where he is trying to get to. I will not pursue the maritime analogy to destruction, but it is slightly odd—those who watch and read our deliberations may also think it odd—that he did not want to be drawn on that crucial point. He may like to reflect on the comments that he made on my specific intervention on Second Reading asking what his aims were. To some extent, we are in his hands.

Malcolm Wicks (Labour, Croydon North)

I think that our objectives are clear. There are at least 10 million people—we think rather more—in occupational defined benefit, so-called final salary schemes. If not today then in the next few years, or in 10, 20 or 30 years' time, there is the possibility that their company could go bust and they could lose their pension rights. We see that at the

moment. Our objective, our goal and our ambition is clear. We want to build confidence in the system by protecting those people's pension rights. That is a clear objective, and when we pass the legislation to set up the fund to achieve that objective, with the regulator's help, it will be a major social policy achievement.

Nigel Waterson (Conservative, Eastbourne)

Ah, that is more like it. There was common agreement on that aim. I could not have put it better myself. Yes, that is the aim—but is it the only aim? Does the Minister accept that the background against which that laudable aim will be pursued by the regulator, the PPF and the other panoply of agencies, will be a reduction from 10 million to, say, 1.5 million people in those schemes in the next 10 or 20 years? That is what the Government's pensions tsar says. Or does the Minister hope, as part of a second or subsidiary aim, to slow that rate of shrinkage in final salary schemes, or even to reverse it? That is the point that I raised. It is not a Second Reading point, it is a ''What are we all doing here?'' point.

I can see the Minister's argument. The Government have decided to list some statutory objectives in the Bill, as did not happen with the previous legislation. Once they have decided to do that, the teasing question arises: where do they stop? It is reasonable for people to take different views on that. It is evident that no one could object to those two objectives in themselves. That was the point made by the hon. Member for Cardiff, West (Kevin Brennan).

Whether those objectives should be added to the existing four objectives is a point for debate. They are every bit as important in their own way as objectives (a) to (d), which are set out in the Bill. It is disappointing that the Minister is not prepared to accept them as objectives in Bill. It is inherent in what he said that he accepts them as objectives, because they are part and parcel of the policy that drives the Bill forward. I accept that point. But if the Government are going to the trouble of listing their objectives—which is, I concede, a step forward from the 1995 Act—I do not understand why those objectives should not also appear in the Bill. However, I do not wish to pursue that point endlessly, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 9, in

clause 5, page 3, line 15, leave out from 'which' to end of line 19 and insert

'is or has been registered under section 2 of the Welfare Reform and Pensions Act 1999 (c.30) (register of stakeholder schemes);'.—[Malcolm Wicks.]

Question proposed, That the clause, as amended, stand part of the Bill.

Peter Atkinson (Conservative, Hexham)

I have one only short question for the Minister on the regulator's objectives under subsection (1)(c)—

''to reduce the risk of situations arising which may lead to compensation being payable from the Pension Protection Fund''.

I probably know the answer to my question, but I should like to clarify whether the actions that the regulator undertakes pre-empt anything listed in chapter 3 of part 2, where the circumstances in which the board assumes responsibility for eligible

schemes are listed. Does the regulator have any right to fish before any of the incidents listed there happen?

Malcolm Wicks (Labour, Croydon North)

We will be able to give fuller answers to that question as the discussion continues. We seek to arm the regulator with a range of powers. The tougher ones are at one end of the continuum and at the softer end there are powers to provide information and education, and in between there is a whole range, including powers to inspect premises to look at records. The answer is yes, we have the powers to intervene as appropriate.

Question put and agreed to.

Clause 5, as amended, ordered to stand part of the Bill.

Clause 6 - Supplementary powers

Steve Webb (Liberal Democrat, Northavon)

I have a brief observation and question on the supplementary powers of the regulator under clause 6. One of the biggest failings of OPRA, which may not have been its fault—it might only have been to do with its remit—was the lack of reliable information about pension schemes. When we consult the pensions scheme registry, which came under OPRA's remit, the information was always way out of date and incomplete. We will deal later with how many people have lost out, how much they have lost and how we will deal with them, but that issue has been bedevilled throughout by the fact that nobody knows how many people are affected, what they have lost, or how many of them have had their schemes wound up or underfunded.

I am seeking some assurance from the Minister about something that is not explicit in clauses 5 or 6. Although on one hand we are saying, ''You shouldn't overdo the regulation and put too much burden on the schemes,'' the pendulum could swing too far if we are not careful. Does he not accept that the regulator must ensure that there is reliable information, particularly on schemes winding up, underfunding and people who have been affected by such events? Presumably, there will have to be reliable information to feed into the pension protection fund. There has been a dearth of reliable information on such matters, and policy making has suffered as a result. Can the Minister assure us that, either specifically in the Bill or through guidance from the Secretary of State, the regulator will be required to ensure that there is damned good information about occupational pensions? Sadly, that has been all too lacking so far.

Nigel Waterson (Conservative, Eastbourne)

I was not sure whether the Minister was going to commend clause 6, pithy and short though it is. Evidently, he is not.

Malcolm Wicks (Labour, Croydon North)

I shall, at some stage.

Nigel Waterson (Conservative, Eastbourne)

Well, let me get my retaliation in first.

I am rather intrigued that, unlike the PPF, which will be allowed to borrow money—that raises a host of implications that we will deal with later in the Bill—the regulator will not be allowed to borrow. What is the reasoning behind that distinction? The Minister may be able to point me to a precedent. Perhaps, even more embarrassingly, it will be a Conservative precedent, but this is an amazingly open extension of powers. We go to all this trouble to examine the powers and functions line by line, and then, blow me, we find that under clause 6, the regulator can apparently do almost anything he wants, over and above those powers and functions.

Chris Pond (Labour, Gravesham)

Tory precedent.

Nigel Waterson (Conservative, Eastbourne)

Well, there you go; I walked right into that. However, in the interests of the democratic system, it would be good to know what the reasoning behind those provisions is.

Malcolm Wicks (Labour, Croydon North)

I am eager to justify clause 6, although it is not particularly exciting, whereas all the other clauses are. It suggests rather more for itself by way of supplementary powers than is the reality.

First, I will deal with the question posed by the hon. Member for Northavon. I hope that the brief answer is yes, but the more detailed responses and questions will no doubt come when we consider clauses 34 to 40. Those include provisions on registrable information and the powers of inspection. I take the point that in the past we have not been able to gather the necessary information, and we need the database and the intelligence. We seek to obtain them.

Clause 6, on supplementary powers, may appear to be rather wide and potentially overwhelming. However, let me explain which powers the clause confers on the regulator. First, any use of that provision is automatically limited by reference to the regulator's functions. Secondly, and rather more plainly, it enables the regulator, for example, to lease office space, print publications and purchase stationary. In other words, it enables it to do all those ancillary and administrative functions that support the organisation in its regulatory duties. I hope that hon. Members are reassured by that.

Nigel Waterson (Conservative, Eastbourne)

Is the Minister's understanding and advice that if someone were aggrieved by an action of the regulator that appeared to be outside the powers in the Act, there would be no basis on which the clause could later be used as a shield against any complaint by such a third party?

Malcolm Wicks (Labour, Croydon North)

No, this is more about post-it notes than the wider power. The hon. Gentleman must have known that this was coming—and he will learn his lesson—but that provision replicates paragraph 2 of schedule 1 to the Pensions Act 1995, which was passed in those dark days. It has operated successfully for OPRA's lifetime, and ask the Committee to allow clause 6 to stand part of the Bill.

Question put and agreed to.

Clause 6 ordered to stand part of the Bill.

Clause 7 - Transfer of OPRA's functions to the Regulator

Clause 8 - The Non-Executive Committee

Chris Pond (Labour, Gravesham)

As I have not yet had the opportunity to address you yet in this Committee, Mr. Griffiths, may I add my expression of delight to those of my hon. Friend the Minister for Pensions and of other hon. Members, that you and Mr. Cran will be shepherding us through the discussion of this important piece of legislation.

Clause 8 establishes that the regulator will have a non-executive committee, which will consist of the chairman and the other non-executive members of the regulator. The committee will have a number of specific functions that may not be delegated to any other part of the regulatory process. We have already made the point that the establishment of a non-executive committee for the regulator is consistent with the recommendations of the Higgs report, about which we have already heard much today.

As my hon. Friend the Minister of State explained earlier, we believe that the principle and purpose of a non-executive committee should apply equally to Government bodies such as the regulator.

The primary intention of having such a committee is to provide a degree of independence in overseeing the governance and strategy of the organisation. The creation of a non-executive committee, under clause 8(1), will ensure that the regulator remains efficient and accountable and makes the most appropriate use of the regulator's resources, which will be paid for by pension scheme members. That means not only that the regulation process will be designed to protect the benefits of pension scheme members, but that those responsible for the management and administration of pension schemes will be appropriately protected as well.

Nigel Waterson (Conservative, Eastbourne)

I do not want to dwell on clause 8, but I would like the Under-Secretary's confirmation of how the non-executive committee will operate. Presumably, it is expected that the Higgs recommendations on corporate governance will be carried out to the letter. All too often in the past we have seen corporate situations in which non-executives have been kept in the dark about crucial matters. Given the committee's likely profile, that would be disastrous.

Does the Under-Secretary have any thoughts about issues such as length of service, the reappointment of non-executives and how many other such posts individuals might hold? Part of the general Higgs

concern is that some people collect such posts like postage stamps.

Chris Pond (Labour, Gravesham)

We shall come to further details on that matter shortly. I reassure the hon. Gentleman that our purpose is to ensure that we maintain as much transparency and accountability as possible through the operation of the non-executives in the regulation process.

If we deferred discussion of the further details of the issues raised by the hon. Gentleman until later in our proceedings, we would make better use of our time.

Question put and agreed to.

Clause 8 ordered to stand part of the Bill.

Clause 9 - Functions exercisable by the

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 124, in

clause 9, page 5, line 2, at end insert—

'(g) the duty to monitor the costs of enforcement of this Act upon occupational pension schemes and their sponsoring employers.'.

This is an echo of a point that has been raised once or twice already. It was inspired by our friends at the National Association of Pension Funds, who take a close interest in our deliberations. The amendment seeks to impose an extra duty on top of the six already set out for the non-executive committee. Again, we enter the lists argument: once one starts to put lists in the Bill, there is a compulsion to keep adding to them. However, I do not think that the Under-Secretary can claim all wisdom on such matters. The people who will have to work with the regulator and with the non-executive committee would be thoroughly reassured to have this requirement in the Bill. There are real concerns about the likely burdens and costs involved in enforcing the Act, and they are not the creatures of my fevered Conservative imagination.

I should have thought that the non-executive members would be the ideal people to flag up that sort of thing. Hopefully, they would bring their own experience of the real world from outside—they might have actuarial, investment or other backgrounds—which would not only help to make the regulator successful and effective, but reflect back the concerns of the people whom they are used to working with in running the schemes.

I can almost hear the Under-Secretary telling me about the philosophy of this particular list. If we are to have a list with no fewer than six headings, why not have another heading?

Chris Pond (Labour, Gravesham)

In a moment, we shall discuss the little list to which the hon. Gentleman referred and we shall talk about the role and functions of the non-executive committee.

As the hon. Gentleman said, the amendment would give an additional duty to the non-executive committee of the regulator. The primary reason to have such a committee is to provide a degree of autonomy in overseeing the governance and strategy of the

organisation. That is one of the issues that he is concerned about. The creation of a non-executive committee will ensure that the regulator remains efficient and accountable; that is what it is there for. That makes the most appropriate use of the regulator's resources, which will be paid for by the levy and therefore by schemes.

A duty to monitor the costs of the legislation once it is in force would not sit well with the committee's other duties. It is also likely to be administratively costly, which would again feed through into the levy. We have discussed on points of order the regulatory impact assessment and my hon. Friend the Minister of State has given an assurance that we will get that to people as soon as possible. That is of course an important mechanism for considering the Bill's impact. With that assurance, we ask that the amendment be withdrawn.

Peter Atkinson (Conservative, Hexham)

If I heard the Under-Secretary correctly, he made an extraordinary comment. He said that my hon. Friend the Member for Eastbourne was proposing to add an extra duty, which is correct, but he also said that it would be too costly for the non-executive committee to monitor the financial and regulatory impact of its decisions. That is extraordinary. The amendment proposes a light-touch duty; it asks the committee to bear in mind the impact of its actions. To say that it will not do so on the grounds that it might be costly makes absolute nonsense of what the Minister of State said.

Chris Pond (Labour, Gravesham)

I think that the hon. Gentleman has misunderstood. I said that the purpose of the non-executive committee is to ensure that the regulator remains efficient and accountable. I think that that is his objective, too. I also said that giving the non-executive committee the responsibility to monitor the costs of the legislation once it is in force would not be a sensible use of its time given the other important roles and tasks that it has to fulfil. That is why I hope that when we discuss clause 9 he will feel reassured; it will become clear that the objectives that he is properly pursuing—that the resources of the regulator are appropriately used, properly targeted, and employed in an efficient, transparent and accountable way—will be fulfilled by the non-executive committee when we look at its range of functions.

Nigel Waterson (Conservative, Eastbourne)

The Under-Secretary has flagged up a wider discussion that we can perhaps have in a moment, so I will speak only briefly on this matter. I echo what my hon. Friend the Member for Hexham (Mr. Atkinson) said; it cannot be right that the main reason for not including this duty is that it will be administratively expensive. That makes my heart sink.

The Under-Secretary referred to the regulatory impact assessment, which is available at all good booksellers and on all good PCs. I have made it clear that Opposition Members find it difficult to accept the 25 per cent. extra cost conclusion. I fear that the overall costs of the new regulator could be considerably more than that, on top of what OPRA is currently costing. That makes it even more important that this amendment is agreed to.

However, I will leave the matter there. I may have to return to it, and we might pick up on some relevant points in the broader clause stand part debate. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the clause stand part of the Bill.

Chris Pond (Labour, Gravesham)

Now we come to the meat of the issue that we have been skirting around. As I am a vegetarian, perhaps I should not use such analogies; I do not do them terribly well. Clause 9 sets out the functions that must be exercised by the regulator's non-executive committee. The hon. Member for Eastbourne expressed his concern that the regulator should operate efficiently, effectively, proportionately and transparently. The proposed functions of the non-executive committee, as they are spelled out in clause 9(3), are

''to contribute to and keep under review the strategic direction of the Regulator . . . to scrutinise the performance of the Chief Executive in''

ensuring

''that the functions of the Regulator are exercised efficiently and effectively . . . to monitor the extent to which the Regulator is meeting its objectives and targets . . . to monitor the Regulator's reporting of its activities to the Secretary of State . . . to review . . . whether the Regulator's internal financial controls''

are in order, and,

''subject to the approval of the Secretary of State'',

to determine

''the terms and conditions''

and remuneration of the chief executive. Those functions are standard for any non-executive committee; I hope that hon. Members will agree that they will ensure that the regulator remains efficient and accountable.

Nigel Waterson (Conservative, Eastbourne)

I shall now carry out an apparent volte-face on what I was saying earlier about amendment No. 124 and query whether we are heaping too many duties on these non-executives. Although the arithmetic is a bit tricky, I understand that as things are set up under clause 2 the chairman will be non-executive, and it is clear that at least two of the five other persons must be executive, rather than non-executive. We are talking about a maximum of three people plus the chairman, and possibly fewer than that. A relatively small group of people, who are not full-time employees, will have a broad range of duties, including keeping the chief executive up to scratch, considering the strategic direction, monitoring targets and objectives, monitoring reporting, looking at internal financial controls and so on, as well as dealing with remuneration for senior people, as is common for non-executives.

That leads me to ask what sort of people the Government and the regulator will be looking to appoint to undertake this task. We all know that jobs offered to people that are supposed to take one day a week take five—often in charitable activities. Does the Under-Secretary have some detailed ideas about what requirements will be placed on those people? We have debated this point already, so I will not cover the same

ground. However, we are making it clear that these people cannot be full-time employees of the regulator, so they will have another job too. There will possibly be two or three of them. I hope that they will not have an enormous number of duties, because their functions are, on looking at them on the printed page, totally central to the direction of the new regulator. Will they be able to fulfil that function, or will those doing the recruiting observe a series of requirements in terms of availability and time? Presumably, that will also have to be reflected in the package that they are offered to do the job. I do not know how far the Under-Secretary has gone down that path, but it would be interesting if he shared his progress with us.

Chris Pond (Labour, Gravesham)

The hon. Gentleman is right. The non-executive committee will fulfil a central oversight function within the regulator to ensure that it performs its role properly. That will be a serious responsibility for those who take on that role. He is also right in saying that there will not be armies of people. The non-executive committee will have a responsibility to report annually on its activities. Any of the functions that I have listed can be discharged to sub-committees of the non-executive committee, as under a normal arrangement. Although the non-executive committee provides the independent oversight of the way the regulator is operating and it has a list of important functions that it must carry out, it can decide to delegate those functions to sub-committees at any time.

The hon. Gentleman asked whether the non-executive committee structure is adequate. The corporate structure was set up in that way to be consistent with the Higgs report on corporate governance. One of the Higgs recommendations was that there should be a non-executive committee of this type led by a senior independent director, and that it should meet at least once a year. Clause 2 provides that at least five other members are appointed in addition to the chief executive and the chairman, and that extra people could be appointed. There will be sufficient resources to carry out the important functions of the non-executive committee, especially bearing in mind that it will have the opportunity to discharge some of its responsibilities to sub-committees.

Question put and agreed to.

Clause 9 ordered to stand part of the Bill.

Clause 10 - The Determinations Panel

Chris Pond (Labour, Gravesham)

Clause 10 provides that the regulator must establish a determinations panel. The panel's duty will be to exercise on behalf of the regulator the ''reserved regulatory functions'' set out in schedule 2. The decision whether to exercise any of those regulatory functions will also be reserved to the panel.

The determinations panel must consist of a chairman and at least six other members. The

chairman of the panel will be chosen by a special committee convened for that purpose and will be chaired by a non-executive member of the regulator. The remaining panel members will be appointed by the panel's chairman. None of the panel's members may be a member of the board or the staff of either the regulator or the pension protection fund, as spelled out in clause 10(5)(b). Those provisions will further ensure that the determinations panel is effectively independent from other parts of the regulator. In that way, the establishment of a determinations panel will mean that regulatory decision making will be kept separate from the setting of strategy and other functions of the board. It also separates the decision makers from investigatory staff. It therefore provides a degree of independence in the regulator's decision-making processes.

In itself, the existence of the determinations panel does not make the regulator's processes fully compliant with the Human Rights Act 1998. That comes from the right to refer any of the regulator's determinations to the pensions regulator tribunal, which we shall come to later. However, the panel's separation from the members and staff of the regulator enhances the impartiality of decision making. That is particularly important when it is decided that a regulatory function must be exercised immediately in order to protect members of a scheme.

The creation of the determinations panel will not only enable best use of the regulator's resources but ensure that the regulator remains efficient and accountable. It will also provide a comfortable degree of objectivity whenever evidence suggests that action should be taken against those with responsibilities for pension schemes.

Steve Webb (Liberal Democrat, Northavon)

When I first saw this provision, I admit that I was bewildered that there is another bit of this organisation and that the people who work on it, and who do what regulators do, cannot be the staff of the regulator. I am slightly enlightened by the Minister's explanation, but only slightly.

We could draw an analogy with the law. If the argument were that we do not want the police, the prosecution service and the court all being the same organisation, I would be able to see where the Government were coming from. However, given that there is a right of appeal anyway to someone who is independent, why is there a Chinese wall within the regulator? There are people who investigate problems with pension schemes, but the person who decides whether something must be done is not employed by the regulator. Who are they employed by? Who is paying these people's wages? We know that these people cannot be regulator staff. To whom are they accountable? If they are accountable to the regulator, where has the independence gone? There is an ability to make an independent appeal against independent people anyway. The Minister may say yes, but there is a good Conservative precedent. That does not wash with me. Such a statement would not reassure me. Before we allow the clause to stand part of the Bill, I hope that the Minister can hold our collective hand a little bit longer, because I am not with him yet.

Nigel Waterson (Conservative, Eastbourne)

I am not sure that I can match the hon. Gentleman for sustained scepticism, but let me chime in on some of his points. I was also struck by the provision. I have a series of questions to ask the Under-Secretary. Initially, the clause is a new entity. It does not build on anything, nor does it develop or slightly change something that was in the 1995 legislation. It is within, outwith or slightly separate from the new regulator. Clearly, the need for a separate sub-organisation has never been felt under OPRA, even though we have been living with the consequences of the human rights legislation for a few years. What is the purpose behind the provision? Is it just another layer of potentially expensive bureaucracy or will it serve a purpose?

Initially I turned, as one does in the early stages of the discussion of a Bill in Committee, to the explanatory notes but, with respect to the officials who drafted it, all that the notes do is to explain the Bill in English. I assumed that the clause was a way to demonstrate with some assurance that, as a country, we had complied with the requirements of the human rights legislation. The Under-Secretary was clear and open in his remarks that it was not sufficient in itself to have a determinations panel. What will it be for? As he said, we have the tribunal and the ombudsman. It seems that the tribunal gets us home in respect of human rights legislation.

Why do we need another layer of decision making? I apologise for paraphrasing but, as the hon. Member for Northavon said, the regulator itself is meant to be separate and impartial when undertaking such an important job. It is meant to look at matters from an independent perspective and take decisions about what action should take place. Other safeguards are built into the Bill, but the clause is gold plating gone mad, especially as it will not deliver a result along the lines of a challenge under the human rights legislation.

How will the panel operate? Again, I shall take up what the hon. Member for Northavon said. Will it have its own office? Will it be physically separate from the rest of the regulator? Will it have its own support staff? Will there be Chinese walls within the organisation? We know what it will not be. We know who will not serve on it. All those who are ineligible to do so are set out under subsection (5). It cannot be anyone who is a member of the regulator or any of the staff of the regulator. Members of the panel must be people who are nothing to do with the regulator. The same goes for the pension protection fund, the board of the fund and the staff of the board.

What sort of people will be members of the panel? During my everyday life, I have not come across a determinations panel. Will it be made up of lawyers, laymen, the great and the good or cronies of leading members of the Government? Will they be ex-flatmates of the Prime Minister? What qualifications will they have to have to be members of the determinations panel? Will the panel be a high-profile and prestigious body of which people will be clamouring to become members? How will it operate? [Hon. Members: ''Is that an application?''] Who knows what the future will bring? How will it operate? It sounds as though its members will be extremely well paid and its work will

not be overly onerous. Will the Under-Secretary give me answers to at least some of my questions? Within the estimates of extra cost, how much is the determinations panel likely to cost, with all its support staff, and do we really need it in what is already a fairly complicated structure?

Chris Pond (Labour, Gravesham)

I am sure that people will be clamouring to become members of the determinations panel. As I explained, the chairman of the panel will be appointed by the regulator, and the chairman will nominate the other members of the panel. The purpose is not to meet the requirements of the Human Rights Act 1998. We are not pretending; we have been very open about the fact that the provisions will not do that. However, we are providing a degree of separation between the investigatory powers and the decision-making powers of the regulator. The purpose of the determinations panel is to ensure that the procedures are fair.

Of course, the determinations panel will have the opportunity, when looking at schemes, to make decisions about various issues, dealt with under schedule 2, that I suspect we shall consider in a moment, such as whether fines should be imposed and whether questions should be raised about improvement notices for particular schemes. Those are the sorts of issues that the determinations panel will be concerned with.

The panel's set-up mirrors that of the FSA's regulatory decisions committee, which, as hon. Members are no doubt aware, was discussed at length during the consideration of the Financial Services and Markets Act 2000. As I said, the measures provide a degree of separation that is desirable under human rights legislation, although we are not pretending that they fulfil the requirements of that legislation. The panel means that the regulator can take decisions quickly; it will be light on its feet. Whenever those decisions impact on other rights, the determinations panel will make an independent and impartial decision.

Members of the panel are highly likely to be legal and pensions experts, as the hon. Member for Eastbourne suggested. That means that considerable expertise will be available to the regulator, which can be used in an independent way, in separation from the role of the regulator. When we come to schedule 2, some other details about the structure of the determinations panel might be discussed. Perhaps we can address those issues when we come to that part of our deliberations.

Question put, That the clause stand part of the Bill:—

The Committee divided: Ayes 13, Noes 1.

Clause 11 - Functions exercisable by the

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 126, in

clause 11, page 6, line 15, leave out subsection (5).

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Amendment No. 127, in

clause 11, page 6, line 39, leave out subsection (7).

Amendment No. 128, in

clause 11, page 6, line 41, leave out subsection (8).

Nigel Waterson (Conservative, Eastbourne)

Despite our abstention on the last vote, we on this side of the Committee are not great fans of the determinations panel. Each of the three amendments seek to remove extensions of functions of that slightly sinister body, which presumably will meet behind closed doors, probably wearing pointed hoods.

In subsection (5), we take exception to the proposed measure to extend the functions of the regulator by further regulations. That sort of extension should be in the Bill, and if that requires primary legislation then so be it.

Subsection (7) states:

''The Panel may be authorised . . . to exercise further functions of the Regulator on behalf of the Regulator.''

We have the prospect of a creeping increase in jurisdiction on the part of the determinations panel as time goes on. We are uneasy about that.

However, subsection (8) takes the biscuit. The Government propose setting up a marvellous structure, with many people moving across from OPRA, other people joining in and officials being seconded from the Department for Work and Pensions. On top of that, they propose setting up the determinations panel—for reasons that still do not fully convince me. Moreover, as soon as that panel—which would contain lots of clever lawyers and other people—gets going, it can delegate some of its powers and functions to other people.

Subsection (8) states:

''The Panel may authorise any of it members or any of its sub-committees to exercise on its behalf''

those functions. If—it is a large if—the panel is going to be set up, will it be so overwhelmed with work that it should be in a position to pass on or delegate functions to one of its members or sub-committees from day one? If it is going to be set up, the panel should take the decisions—however many or few they may be—and not delegate to a body within a body. The panel is a curious enough animal in the first place. The Government are pushing their luck if they expect Committee members to embrace the notion of its delegating some of its functions.

Those are the reasons behind the three amendments, and I commend them to the Committee.

Steve Webb (Liberal Democrat, Northavon)

I should like to make a brief observation. The amendments take out some of the powers under clause 11 to extend or amend the role of the determinations panel. Amendment No. 128 applies to subsection (8), which mentions members of the panel or its sub-committees. We are starting to get the sense that there may be a large number of people involved. In the previous debate, Committee members will have observed that the Under-Secretary did not tell us who will pay those people, how much they are likely to cost or how what they do will relate to what the regulator does.

The third amendment refers to the panel's sub-committees. We have heard that they are going to contain well qualified lawyers and experts; they do not come cheap. There will be sub-committees, so there will have to be lots of them. We still do not know who pays them. If the regulator pays them they are employees of the regulator: that cannot be right. Presumably the Department pays them. Was that expenditure included in the figure for the cost of the regulator that we were given earlier? Can the Under-Secretary clarify that matter, to help our assessment of the amendments?

Chris Pond (Labour, Gravesham)

Clause 11 and Schedule 2 outline the determinations panel's duties. The amendments that have just been presented to the Committee would introduce regrettable inflexibilities. The purpose is that the determinations panel should be light on its feet.

The determinations panel will exercise the reserved regulatory functions set out in schedule 2. Amendment No. 126 would remove the ability to add or remove reserved regulatory functions by regulations, but that facility is needed if we are to have a genuinely flexible and proactive regulator. Any additions to or removals from the list by regulation will provide for parliamentary scrutiny to ensure that functions are delegated only in a responsible and effective way. In addition to exercising these functions, the panel may act on behalf of the regulator in exercising non-reserved regulatory functions. That will enable the panel to issue an improvement notice, for example, to which I referred a few moments ago.

Amendment No. 127 would prevent the regulator from delegating any non-reserved functions to the panel, which again would introduce unwelcome rigidities. Amendment No. 128 would require the whole panel of seven members to sit before any of its functions could be exercised. That would create a slow and cumbersome process. It is recognised practice for sub-committees to determine matters. There also needs to be some flexibility for cases where a panel member faces a conflict of interest. Sufficient safeguards are built into the process to allow directly affected parties a right to seek a review of a decision by the pensions regulator tribunal.

The hon. Member for Northavon asked who pays for the determinations panel. The money will come from the levy, in the same way as all the other costs of the regulator are met. On the basis of that clarification, I ask for the amendment to be withdrawn.

Nigel Waterson (Conservative, Eastbourne)

All that the Under-Secretary is saying, with his customary charm, is that the Government cannot be bothered to change what they have already put in the Bill.

There is little point in having clever people deciding what reserved powers this mysterious and omnipotent panel will deal with and then saying, ''Actually, on reflection, we think that it should deal with non-reserved powers as well, because the poor old regulator will want to offload things.'' The members will be light on their feet. Their first task is to try to delegate the regulator's functions to someone else—a sub-committee or one of its number. That strikes me as absurd, but I am in a relatively good mood so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 11, in

clause 11, page 6, line 45, at beginning insert 'any of'.—[Malcolm Wicks.]

Clause 11, as amended, ordered to stand part of the Bill.

Schedule 2 - The reserved regulatory functions

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 77, in

schedule 2, page 174, line 24, leave out '3' and insert '3(1)'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss Government amendments Nos. 78 and 80.

Chris Pond (Labour, Gravesham)

These are technical amendments to ensure that the correct sections of the Pensions Act 1995 are referred to in each case. Schedule 2 sets out the reserved regulatory functions, the exercise of which is reserved exclusively to the determinations panel. As drafted, the schedule does not refer to the correct subsections in respect of the power to which it relates. These amendments correct those drafting errors.

Steve Webb (Liberal Democrat, Northavon)

I shall not detain the Committee by pulling up the Under-Secretary on drafting and technical amendments, but grouped among those is Government new clause 3. That is assuming that I am discussing the right group—[Hon. Members: ''That is later on.''] I apologise; I thought that there were plusses on the end of each line.

Amendment agreed to.

Amendment made: No. 78, in

schedule 2, page 174, line 27, leave out '4' and insert '4(1)'.—[Mr. Pond.]

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 79, in

schedule 2, page 174, line 27, at end insert—

'The power to make an order under section 4(2) extending the period for which an order under section 4(1) of that Act has effect.'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss Government amendments Nos. 81 and 83.

Chris Pond (Labour, Gravesham)

Amendment No. 79 ensures that the power to extend the period for which a trustee is suspended in cases where criminal proceedings have not yet been instituted rests solely with the determinations panel. That will ensure that when the regulator proposes to extend a period of suspension it must send a warning notice to those directly affected. Their representations will be considered by the determinations panel. There will also be a right to make a reference to the pensions regulator tribunal.

Amendments Nos. 81 and 83 are necessary to ensure that only the determinations panel may exercise the power contained in sections 9 and 32 of the Pensions Act 1995 to vest or transfer properties consequential to the appointment or removal of the trustee. That power may be exercised when, for example, a trustee is appointed to a scheme that previously had no trustees. It might be that some of the scheme's assets are held in the name of a past trustee. The power allows the regulator to transfer such property to the appointed trustee.

As the power is only exercisable by the determinations panel, directly affected parties will be able to make a reference to the pensions regulator tribunal.

Amendment agreed to.

Amendments made: No. 80, in

schedule 2, page 174, line 28, leave out 'such an order' and insert

'an order under section 4(1) of that Act suspending a trustee'.

No. 81, in

schedule 2, page 174, line 33, at end insert—

'The power under section 9 to exercise by order the same jurisdiction and powers as the High Court or the Court of Session for vesting property in, or transferring property to, trustees in consequence of the appointment or removal of a trustee.'.

No. 83, in

schedule 2, page 175, line 2, at end insert—

'The power under section 30(2) to exercise by order the same jurisdiction and powers as the High Court or the Court of Session for vesting property in, or transferring property to, the trustees where a trustee becomes disqualified under section 29 of that Act'.

No. 82, in

schedule 2, page 175, line 9, after 'power', insert 'by direction'.—[Mr. Pond.]

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 84, in

schedule 2, page 175, line 23, at end insert—

'The power under section [Reports by skilled persons] to issue a notice requiring a report to be provided to the Regulator.'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Government amendment No. 34.

Government new clause 3—Reports by skilled persons.

Chris Pond (Labour, Gravesham)

The new clause will give the regulator the power to obtain expert opinion and analysis to assist it to exercise its functions. It will be used to inform the regulator in the exercise of its functions in a particular case. For example, if the trustee and employer are unable to agree the schedule of contributions since the

employer contends it cannot make the payments, the regulator might require a report on the strength of the employer's business and ability to sustain the funding of the scheme. That would enable the regulator to determine what schedule of contributions was appropriate, and work with the employer and trustee to improve the funding situation. That is an important power to enable the regulator to allow it to act to protect members' interests.

Amendments Nos. 34 and 84 are necessary to give effect to new clause 3. A person who is required under subsection (9) of the new clause to co-operate with the person making the report will be able to disclose appropriate information to that person, even if it is classified as restricted information. The power to require a report will be reserved to the determinations panel. That ensures that those affected by the decision will have the chance to comment before the decision is made and, if they so wish, to refer the decision to the tribunal.

Steve Webb (Liberal Democrat, Northavon)

I am beginning to warm to recurring themes, and there are two prompted by new clause 3.

First, new clause 3 comes within the scope of schedule 2, which relates to the determinations panel. That panel is able to commission experts, who are presumably highly paid pension experts although they are not expert enough for this sort of thing. Those experts therefore pay somebody else to do expert work for them. We are talking about the determinations panel, which is independent of the regulator—it is not paid by the regulator, but out of the levy, which I suppose means that it is paid by the Department, although I am slightly hazy on that. Can panel members show the contents of the expert report to the people to the other side of the Chinese wall? Perhaps they cannot. If the regulator needs an expert opinion, there should be another new clause—perhaps the Government have yet to table one—which relates to the fact that the regulator will be able to commission expert advice. Alternatively, perhaps the regulator is an expert so it does not need to commission expert advice.

People will start to say, ''Come on, what's going on here?'' There are different bits of different organisations. Provisions apply to one bit, but not to the other bits. People can tell others about one bit, but not others. Things are becoming tortuous, and one wonders whether the new clause is designed to facilitate the smooth running of the regulator. I do not necessarily object to the regulator asking for expert reports, although I am surprised that we need an Act of Parliament to enable it to do that—I do not see why, if the regulator does not know the answer to something, it cannot ask someone and pay them for their advice. If we need a new clause, I do not understand why it has to be to schedule 2, which refers to the bit the other side of the wall. Why cannot the whole regulator benefit? I am concerned about the determinations panel and this artificial subdivision.

There is another issue, relating to the dreaded pension protection fund, which we have not yet reached. The example that the Under-Secretary gave when speaking to the new clause was that the Government might need to work out the state of

play of an industry and the viability of the company—which is, presumably, meat and drink to the pension protection fund. The fund will want to know whether a particular industry will have lots of people going to the wall and making claims on the PPF. Will it also be conducting expert research into the state of the steel industry or airline industry or whatever? Will the determinations panel be allowed to tell the PPF the contents of the report? Will it be required to? Will three different sets of people end up commissioning the same single expert because none of them are allowed to talk to one another?

I sense a lot of overlap between different bits of the system. I began as an enthusiast for this regulator, but within three hours my enthusiasm has waned. I hope that the Under-Secretary can reassure us on the points that I have raised.

George Osborne (Conservative, Tatton)

We are a little more consistent than the Liberal Democrats, so our enthusiasm for the regulator is not waning after just three hours of discussion. However, we have concerns about new clause 3 and the fact that it has been tabled at a late stage, and I agree with the hon. Member for Northavon about the confusion that that might give rise to. The Minister needs to clarify why he feels that the new clause is required.

I suggest that the Government needed the new clause to achieve their objective because there are elements of compulsion in clause 52, which require people to pay for the expert advice. They probably needed a legal basis on which to do that. However, later we shall debate many other clauses that require employers, trustees or other people to provide information to the regulator. Why is the additional requirement necessary? I did not feel that the Minister properly explained that.

Would it be entirely within the discretion of the trustee, the employer or anybody issued with a notice to employ any expert advice that they wanted, or would the regulator have to agree who that skilled person would be? As I read the clause—I may be wrong about this—the person issued with the notice could choose the person from whom to commission a report, and would not have to seek the regulator's approval. What would happen if the regulator said that that person's advice was not expert, or that it would not have liked that person to compile the report?

On my reading of the clause, there seems to be an element of compulsion. Under subsection (2),

''A report notice must require the person appointed to make the report to be a person''

and it then sets out who such a person would be. There is obviously an element of compulsion there. However, subsection (9) compels anyone else

''who is providing (or who at any time has provided) services to the notified person in relation to a matter on which the report is required''

to

''give the person appointed to make the report such assistance as he may reasonably require.''

That is a very wide-ranging power: under the new clause, all people who have provided advice to a

company may be required to provide certain sorts of information.

I pick up the point made by the hon. Member for Northavon: that information goes to the determinations panel. The same company may be in the process of being crawled over by the regulator, which may ask it for almost identical information. Not only will that make it more difficult for the company or trustees involved, but it will add to the cost. In many cases, the costs may ultimately be borne by pension scheme members.

There is plenty of scope for duplication, as the hon. Member for Northavon has pointed out. Before we allow the new clause to be added to the Bill, it would be good to hear from the Under-Secretary about why he thinks it so necessary.

Chris Pond (Labour, Gravesham)

Some important issues have been raised. Let me clarify. We did not seek these powers because we thought that it would be a good wheeze to have the expert reports carried out, or to insist that they were paid for. The purpose of the new clause emerged from the experience of OPRA itself. It found a weakness in its ability to carry out its regulatory powers effectively. Although there might have been a wealth of legal, pension and actuarial expertise readily available and on tap, there was not necessarily the sort of expertise necessary to make a judgment about the viability of a particular employer or the sector in which it operated, or about the ability of that employer to make the payments that the determinations panel might require.

I must also clarify that the determinations panel would exercise its functions on behalf of the regulator. In the circumstances that we are discussing, the regulator would tell those involved that it proposed to ask for a report, and whom it intended to pay for it. The determinations panel would decide how that would be implemented, to be fair and impartial. The regulator would direct who would prepare the report; subsection (2) makes it clear that that person would be nominated or approved by the regulator.

There is an issue about the exchange of information, to which the hon. Member for Northavon referred. We must be clear that the regulator requires that. There is a legal requirement to co-operate in the introduction of reports and enable the regulator to direct that the third party pays for the report. The hon. Member for Tatton (Mr. Osborne) was spot-on in his assumption about why we need legislation to make those powers available to the regulator. To answer the hon. Member for Northavon, the regulator will have the power to disclose the contents of the reports to the PPF when necessary.

I hope that hon. Members will recognise that although we will be considering a substantial piece of proposed legislation during the next few weeks, we are not adding to it for the sake of doing so. These are necessary powers that the regulator and a determinations panel will require in order to do the job that my hon. Friend the Minister of State said was necessary to provide for people the confidence and

protection in the operation of these types of pension scheme.

Amendment agreed to.

Schedule 2, as amended, agreed to.

Clause 12 - Annual reports to Secretary of State

Malcolm Wicks (Labour, Croydon North)

The clause proposes that the regulator should publish an annual report, which is a good, sensible idea.

Nigel Waterson (Conservative, Eastbourne)

I said earlier in a different context that I did not regard myself as being in a drafting competition, which is just as well because the amendments that I drafted were miserably inappropriate and were not selected. I suppose that they were out of order. I shall deal with those on stand part.

We agree that a report is a good idea. Every day every one of us gets lots of glossy reports from all manner of organisations, and we read them carefully before consigning them to the circular filing cabinet. I agree with the Minister that it is important, particularly in the early years, that what the regulator does is set out in an annual report. We have no quarrel with that. However, we want to make two changes. First, we want those reports made not to the Secretary of State, but to Parliament. They are so important that they should be made directly to Parliament. Secondly, we want the reports to be debatable. The Government should provide time every year for a debate on them so that we can all see how our new creation—not least the determinations panel—is getting on. I shall be following the panel's career with a closeness that defies belief.

George Osborne (Conservative, Tatton)

My hon. Friend will be on them.

Nigel Waterson (Conservative, Eastbourne)

Indeed, if there is a sufficiently good package, I might even apply.

We want to see how the system works in practice, our constituents will want to see, and the people out there who have to make it work in the industry will also need to see that. An annual report is an excellent idea, but I urge the Minister to make it a report to Parliament, rather than the Secretary of State, and to ensure—and at least to indicate—that in the early years there is a full debate on it at some point so that we can all see how it is developing and whether it is developing as we predicted in Committee. I am sure that hon. Members would be clamouring to speak in such a debate.

My amendments did not pass the test, but I have made my points.

Malcolm Wicks (Labour, Croydon North)

As for whether the annual report goes to the Secretary of State or Parliament, my instinct is to say ''same difference''. The clause provides for an annual report to the Secretary of State, but the Secretary of State will lay a copy of every report he receives under the clause before both Houses of Parliament—and will send one by special

courier to the hon. Members for Northavon and for Eastbourne. I need to move the amendments allowing that on Report, but that is our intention.

I do not want to go over the same overture, but the OPRA practice was to lay the report before the Secretary of State, and we are following that practice. However, Parliament will have ample opportunity to receive and discuss the report.

Question put and agreed to.

Clause 12 ordered to stand part of the Bill.

Clause 13 - Provision of information,

Chris Pond (Labour, Gravesham)

This is another short clause. It gives the regulator the power to provide information, education and assistance to those involved in the administration of work-based pension schemes. Those people include trustees, managers and employers, and those who advise the trustees and managers of such schemes. The clause also enables the regulator to help employers understand and comply with any responsibilities that they may have to provide their employees with access to pensions information and advice.

Empowering the regulator to assist trustees, managers and advisers in that way will implement one of the key recommendations of the quinquennial review of OPRA, which is that a proactive regulator should encourage compliance through the provision of educational and guidance material. The new regulator will operate a proactive regulatory approach, and the provision of information, education and assistance is a fundamental constituent of that approach. We believe that providing assistance at an early stage may help to prevent larger, more complex problems from occurring later, and in the long run, that will mean better protection for members.

Steve Webb (Liberal Democrat, Northavon)

It is hard to be against information, education and assistance, but we will have a go. An issue that the hon. Member for Havant (Mr. Willetts) often raises, to give him his due, is that of employers who are nervous about giving advice to their employees on pensions matters. Various rules about the giving of financial advice and about who can and cannot give it have scared them off.

Even if the employer runs a very good scheme and puts a lot of money into it, and even if he does so in a robust industry where everything is rosy, he cannot say to his workers, ''It's a good bet; you'd be well advised to go for it.'' The hon. Member for Cardiff, West is not with us, but if he were, he would already be on his feet to say, ''And look what happens when people do that.'' However, there is clearly a case for enabling employers to give their workers more advice about their occupational pension scheme. We know that even firms that run very good schemes with generous levels of employer contributions do not have 100 per cent. membership of those schemes. Life is never certain in pensions, but there are people working for such

employers in whose best interests it would almost certainly be to join the scheme, particularly in the world of the pension protection fund. At the moment, employers cannot even have a conversation with them about the matter.

How far will the clause enable the regulator—the bit on the open part of the wall—to support employers who want to say to their employees, ''We encourage you to join our occupational pension scheme''? To look back to an earlier discussion about the objectives of the regulator, one of those objectives is to promote schemes and occupational provisions. Surely one of the best ways to do that is to support employers who run good schemes in encouraging and informing their members about joining them. Will the Minister give the Committee a steer as to whether, under the clause, it is envisaged that the regulator will encourage and support employers who are currently frightened to talk to their workers about the company scheme for fear of being seen to give them advice, which they cannot do? Will that taboo be broken by the clause? If possible, we want employers to feel more confident about doing that. It is not clear to me whether that is something that the regulator would do under the clause.

Nigel Waterson (Conservative, Eastbourne)

I endorse the hon. Gentleman's important point; he kindly attributed the theme to my hon. Friend the Member for Havant. Certainly, even the best employers are nervous about the fact that they can end up being responsible for mis-selling by giving advice that turns out, through no fault of their own, to be duff. As the hon. Gentleman said, who can be against provision of information, education and assistance?

Apart from strongly endorsing that point, I wish to ask the Minister two or three questions. Subsection (1)(a) covers work-based pension schemes, so I presume that we are talking about the gamut of schemes and not only defined benefit, defined contribution, stakeholder, hybrid and corporate self-invested personal pension schemes. That is a good thing.

I wish to query—unusually from my perspective—subsection (4), which states that

'' 'assistance' does not include financial assistance''.

While I understand why the Treasury wants that provision to be part of the Bill, it seems that circumstances may arise in which it would be beneficial for the regulator to provide funding for training courses and so on. I am not talking about vast sums of money. One of the problems in the Bill that we shall come to later when we deal with trustees is that we are in danger of producing professional trustees. Ordinary folk, including even quite well-experienced and qualified people, may not be able or may not wish to take on the role of trustees with occupational pension schemes because of the onerous and complicated nature of such duties.

Various people in the industry have told me that there is a feeling that whether or not it is the Government's intention—it might be a matter of policy—they may end up with professional trustees being the norm. That is fine if a firm is running a big, corporate pension scheme, but not if it is a small

company with a few members, as paying a professional trustee or trustees to run a small scheme would be an aggravated cost. Is it not worth while to turn back as far as we can the trend that is set out in other parts of the Bill by trying to ensure that, when appropriate, existing trustees are given some financial assistance?

The hon. Member for Cardiff, West picked up on the point about conflicting desires. Many people wish to see more members of schemes acting as trustees. All things being equal, such action is valuable and should be encouraged when appropriate. However, will they feel outgunned and outclassed in a system that is becoming very complicated? Should they not be given the option, perhaps as a priority, of receiving effective training? My hon. Friend the Member for Bournemouth, West (Sir John Butterfill), who looks after our parliamentary pension fund, said that he and his fellow trustees were going on a training course or taking some exams. That is slightly rash, because what happens if they fail? But that is for another day.

On this occasion, however, the Government are being too modest. I do not see, as a matter of principle, why a system should not include financial assistance, particularly for training, and give people the wherewithal to continue undertaking such important tasks in what will become, with the best will in the world, an increasingly complex regulatory landscape.

Chris Pond (Labour, Gravesham)

I wish to disentangle the debate because some strands are running through it and some of the anxieties that have been expressed are not related to the clause. This provision is not about requiring employers to provide information on pensions to their employees or anyone else. We will be dealing with that later in the Bill, when we reach clause 195.

Under clause 13, the role of the regulator should be not only to investigate and to sanction, but to provide education and guidance. As my hon. Friend the Minister for Pensions said earlier, there is a spectrum of powers, from the hard-edge enforcement end to the softer end of education and guidance. That fulfils an important function running alongside the role of the Pensions Advisory Service in providing guidance to individuals on their position in relation to occupational pensions and their individual pensions plan.

The clause says that the regulator has a proper role to play in raising the pensions literacy not only of employers and trustees, but of the company community as a whole, to ensure that we have the sort of transparency and understanding that could provide protection against some of the tragedies of the recent past. I hope that hon. Members can accept that as an important role of the regulator.

Question put and agreed to.

Clause 13 ordered to stand part of the Bill.

Clause 14 - Improvement notices

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 12, in

clause 14, page 8, line 23, leave out 'in respect of ' and insert 'to'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss Government amendments Nos. 13 to 17.

Malcolm Wicks (Labour, Croydon North)

I should say by way of introduction that we are moving on in our debates to the new regulatory powers of the regulator, which include improvement notices, third party notices, injunctions, interdicts, restitution and the power of the regulator to recover unpaid contributions. In introducing the Government amendments, I should say that the clause introduces a new power for the regulator.

My hon. Friends will be aware that one of the criticisms levelled at OPRA is that although it has the power to punish breaches of the Pensions Act 1995, it is unable to make trustees or others put things right. We seek to remedy this mischief with the clause. In future, when there is a breach of pension legislation, we propose that the regulator should be able to issue an improvement notice to the person responsible instructing him or her to remedy the situation. That provision, which is contained in subsection (1), will be a powerful tool in the regulator's kit.

Amendments Nos. 12, 13 and 14 and the others are technical amendments. I am anxious to get on and consider the Opposition amendments, so I shall not speak to them any further.

Amendment agreed to.

Amendments made: No. 13, in

clause 14, page 8, line 24, leave out 'given' and insert 'issued'.

No. 14, in

clause 14, page 8, line 29, leave out 'in respect of' and insert 'to'.

No. 15, in

clause 14, page 8, line 40, after 'Part 1' insert 'or section 33'.—[Malcolm Wicks.]

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 131, in

clause 14, page 8, line 42, leave out subsection (8).

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following amendments:

No. 132, in

clause 15, page 9, line 29, leave out subsection (3).

No. 133, in

clause 15, page 9, line 38, leave out subsection (6).

Nigel Waterson (Conservative, Eastbourne)

Let me say by way of background that we endorse the idea of improvement notices and close relation third party notices as a more benign step along the way of regulation before pressing a nuclear button. There was an element of black and white about the 1995 Act, and I can see the point of trying to soften the regulatory framework, certainly in cases where there is an expectation that those notices will be complied with. I take that view because—I hope that one can make this assumption—such notices are more likely to be directed at the more responsible companies where there has been an infringement that is easily remediable and may not be dreadfully serious, but needs to be dealt with. I would assume that in the

egregious cases involving badly run schemes, one would go straight to the tougher options. However, that is a matter for the regulator in the future.

We broadly support amendments Nos. 131 and 133, which seek to remove similar wording from clauses 14 and 15 that stitches in the provisions in section 10 of the Pensions Act 1995 concerning the penalties that apply for people who fail to comply with the improvement notice or the third party notice. Our logic was that in the same way in which those remedies can be graded in terms of seriousness, such serious penalties should not apply to a failure to comply with those particular notices. As I understand them, they are designed to chide people into doing the right thing, rather than to produce a nuclear result.

Therefore, we would suggest removing those provisions. If the Government are prepared to do so, we would ask them to consider a lesser set of penalties or to take the view that such penalties are advisory, on the basis that there are tougher penalties in the armoury if the notices are not met in a very short space of time.

Amendment No. 132 aims to remove clause 15(3). It is an attempt to work out what the subsection means. The subsection states that where directions are given they can

''be framed so as to afford the third party a choice between different ways of remedying or preventing the recurrence of his failure.''

I badly need from the Minister some sort of example of what on earth the Government are talking about. I would have thought that offering a choice of ways of dealing with a particular breach made for regulatory confusion. I have thought about the matter quite a lot and I am hard pressed to think of a concrete example. Given the firepower of the officials who are advising Ministers on these issues, I am sure that they must have such examples at their fingertips. That is what I am craving from this probing amendment.

Steve Webb (Liberal Democrat, Northavon)

I want to ask a couple of brief questions. Amendments Nos. 131 and 133 would remove those civil penalties when an improvement notice or a third party notice is issued. That takes me back to the question whether the notice is issued by the regulator or by the determinations panel. If I read the provision correctly, it is issued by the regulator, because the Bill refers to

''New regulatory powers of the Regulator''

near the top of page 8. I am prepared to stop if I have got that wrong. The consequence of failing to observe an improvement notice is a civil penalty. I do not know what the powers under section 10 of the 1995 Act are, but they sound quite nasty.

The Minister said that an independent determinations panel is needed because when things get a bit nasty one wants someone who is independent from the investigator to bring in tough measures, such as suspending trustees or whatever else. However in those provisions, the regulator—the other side of the Chinese wall—issues one of the notices, and the penalty for failing to comply with it is a civil penalty. I can therefore understand why the amendments aim to remove those provisions from clauses 14 and 15.

Why is it okay for the regulator to issue notices with penalties attached for non-compliance, while the other things that the determinations panel, which is the other side of the wall, might do must be independent because they involve different sorts of penalties? Is there another artificial distinction in that approach? Why is that the situation for that side of the wall and not for the other side of the wall, given that penalties are attached for non-compliance? I hope that the Minister will clarify that point.

Malcolm Wicks (Labour, Croydon North)

Amendment No. 131 would remove the regulator's ability to apply a financial penalty for failure to comply with an improvement notice. That would seriously undermine an essential part of the regulator's approach.

Improvement notices will enable the regulator to deal with minor breaches of legislation, leaving punitive sanctions as a last resort. Improvement notices give the scheme the chance to put right problems while under the supervision of the regulator. While that is a lighter-touch approach to regulation—we have stronger approaches in the Bill—removing the power to sanction for failure to comply with the improvement notice will nevertheless mean that the regulator has no means to enforce compliance with the legislation and protect members' benefits. In simple terms, what is the point of asking for action if there is no sanction and no action is forthcoming? That is an essential part of regulation.

Amendment No. 132 would deny third parties a choice between different ways of remedying or preventing the recurrence of their failure, which has meant that those with responsibilities under pensions legislation have been unable to comply. I hope that the hon. Member for Eastbourne, who asked for examples, will be content if I provide him and other Committee members—I want to do this properly—with such examples in writing. I hope that that will be acceptable.

The regulator's power to frame directions to third parties to allow different ways of achieving compliance is designed to allow flexibility both for the regulator and the third parties. For example, if trustees were unable to prepare audited accounts because the provider had not supplied the necessary information, clause 15(3) would allow the regulator to direct the third party to take the necessary steps to provide the information by a certain date. It would not be appropriate to direct exactly in what form and manner that information should be produced, since that will depend on the circumstances of the case. The regulator is interested in a successful outcome.

Amendment No. 133 would remove the regulator's ability to enforce the terms of a third party notice. Third party notices are an important new regulatory tool that enable the regulator to issue directions to rectify actions that have led to a scheme breaching legislation. They can be issued to scheme administrators, insurers and providers. Many breaches of legislation caused by third parties cannot currently be corrected. Removing the power to sanction for failure to comply with a third party notice would mean that the regulator has no means to enforce compliance with the legislation and to protect.

I therefore ask the hon. Member for Eastbourne to withdraw the amendment.

My understanding is that the determinations panel would play a large part in that process. This issue is not just technical, and it is important. I understand the growing obsession of the hon. Member for Northavon with the determinations panel, and I hope that I can write to him on that point and any others that I have not picked up in the debate.

Nigel Waterson (Conservative, Eastbourne)

I agree with the Minister that there is a real danger that the faceless men of the determinations panel will become a subplot of the Committee stage, although they fascinate me, I must confess. Assuming that their deliberations are open to the public—I very much doubt that they are—it would be good to go and watch them in action in due course.

I am content to seek leave to withdraw the amendment. As I made clear, we are happy with the improvement notices and third party notices. They are practical methods for achieving a result without getting into a fraught situation, and they widen the armoury of the new regulator, which is good. Subject to the points that we made in our amendments, they are not likely to be overly burdensome for the people who will receive them. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 14, as amended, ordered to stand part of the Bill.

Clause 15 - Third party notices

Clause 16 - Injunctions and interdicts

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 134, in

clause 16, page 10, line 3, leave out 'a reasonable likelihood' and insert 'strong prima facie evidence'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following amendments:

No. 135, in

clause 16, page 10, line 6, leave out 'a reasonable likelihood' and insert 'strong prima facie evidence'.

No. 136, in

clause 17, page 10, line 19, leave out subsection (2).

Nigel Waterson (Conservative, Eastbourne)

We are now moving almost imperceptibly towards the more serious regulatory weapons that the regulator can deploy. This clause addresses injunctions and interdicts. I assume that an interdict is a creature of Scottish law. It sounds pretty horrendous, although I am unsure whether it involves torture or has any other physical manifestations; I

think that it is the equivalent in Scottish law of an injunction.

As we proceed through this part of the Bill, the official Opposition need to start getting more serious about the safeguards that we want to build into the legislation. Amendment No. 134, which is echoed by amendment No. 135, seeks to remove the phrase ''a reasonable likelihood''. I have not yet had the opportunity, probably because I was too busy printing the regulatory impact assessment, to go to the law section of the Library to check the legal definition of ''reasonable likelihood'', but I am sure that the Minister has it at his fingertips and will be able to give us some precedents and to explain what it means. What is the level and burden of proof that is needed for a person to be brought within what is quite a serious provision?

To be on the safe side, our amendments propose to remove those words and to replace them with ''strong prima facie evidence''. It seems to me that, on any view, that test must be higher than ''reasonable likelihood''—a phrase that I have not come across much in my legal career. [Interruption.] I am sure that it will turn out to be some ghastly Tory wording from the Pensions Act 1995, but that does not make it right. If there is a risk of an injunction, or an interdict north of the border, a fairly high standard of proof is needed. Lawyers are comfortable with the formula ''strong prima facie evidence''. I am sure that there are other ways of setting out the burden of proof that is required, but this is a serious issue, and there should be a defensible and significant threshold that the prosecution, whether north or south of the border, has to reach in terms of evidence.

Despite the possible origins of the phrase ''reasonable likelihood'', it does not strike me as enough. There are gradations of regulatory tools in the Bill, and this is quite a serious one. If people can be dragged into court on the basis of such an application, there should be a pretty stiff test not only in terms of the case itself but in order to make it clear to the regulator, as much as to anyone else, that he will rarely be expected to reach for this weapon in his armoury.

Malcolm Wicks (Labour, Croydon North)

The effect of amendments Nos. 134 and 135 would again be to inhibit seriously the regulator's power to apply for an injunction to prevent the misuse or misappropriation of scheme assets. ''Reasonable likelihood'' is the same standard of proof contained in the power to apply for injunctions under the Pensions Act 1995, although that protection was extended only to members of occupational pension schemes. The Bill extends it to personal pension schemes, so it is an advance. It means that the regulator has to prove to the court that there has been a reasonable likelihood that there has been or will be a misuse or misappropriation of scheme assets.

That is a standard well known to the courts and commonly used for regulatory intervention via injunctions. For example, it is the same standard to which a court must be satisfied to grant applications to the Financial Services Authority. Of course, the courts will exercise the usual safeguards to protect the rights of any directly affected parties, and they have held that what is required for reasonable likelihood is a ''good

and arguable'' case. The power to apply for an injunction is a vital tool in the regulator's armoury.

Nigel Waterson (Conservative, Eastbourne)

I do not know whether the Minister has this information at his fingertips; if not, he is welcome to write to me. I am curious: since the 1995 legislation came into effect—in April 1996, I think—how many injunctions have been applied for, and how many have been granted?

Malcolm Wicks (Labour, Croydon North)

My understanding is that OPRA has only used the power once. Nevertheless, we believe that now is not the time to remove it from new legislation.

The power to apply for an injunction is a vital tool. Changing the standard of proof to one not recognised by the courts would mean that it would be less useful and that the regulator would not be able to act quickly to protect members' benefits. Clause 17 would extend to members of private pensions the protection currently afforded to occupational scheme members under section 14 of the Pensions Act 1995. That protection stems from the restitution of assets, in a case in which there has been misappropriation, to restore the parties concerned to the position in which they were before the misuse or misappropriation occurred.

Subsection (2), which the amendment seeks to remove, defines who can be considered to have been involved in the misappropriation. Removing the subsection would render clause 17 invalid and unworkable, and deprive those in receipt of private pensions of that extended protection. I ask the hon. Gentleman to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am still a bit bemused about why this is meant to be a vital or useful tool if it has only ever been used once by OPRA.

Malcolm Wicks (Labour, Croydon North)

It is a deterrent.

Nigel Waterson (Conservative, Eastbourne)

The Minister says that it is a deterrent. I suppose that the fact that we have not had a thermo-nuclear war means that that deterrent must have worked, so presumably this one has. Having said that, what the Minister said confirms my earlier comments: the remedy will be used sparingly by the regulator, certainly if it is anything like the old regulator. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 ordered to stand part of the Bill.

Clause 17 ordered to stand part of the Bill.

Clause 18 - Power of the Regulator

Win Griffiths (Labour, Bridgend)

We now come to Government amendment No. 18.

Steve Webb (Liberal Democrat, Northavon)

On a point of order, Mr. Griffiths. Did I miss the clause 18 stand part debate?

Win Griffiths (Labour, Bridgend)

Yes, you did, because Government amendment No. 17 was moved formally, and then clause 18, as amended, was ordered to stand part of the Bill. Sorry about that.Clause 19 Powers to wind up occupational pension schemes

Clause 19 - Powers to wind up occupational pension schemes

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 18, in

clause 19, page 11, line 38, leave out 'and 107' and insert ', 107 and 177'.

We are making rapid progress. This clause deals with the regulator's powers to wind up occupational pension schemes, and the amendment addresses a drafting omission. It adds a cross-reference to clause 177. That has the effect of making the regulator's power to wind up a pension scheme subject to the provision on backdating the wind-up. That would apply when the scheme was subject to a pension protection fund assessment. It would also apply when the scheme was subject to such an assessment but the assessment had ceased because the PPF board had withdrawn it and refused to accept responsibility for the scheme because of that, or when the sponsoring employer had abused PPF rules.

Amendment agreed to.

Question proposed, That the clause, as amended, stand part of the Bill.

Nigel Waterson (Conservative, Eastbourne)

As I understand it, this part of the Bill envisages, in very specific circumstances, some retrospectivity in terms of wind-ups, for example in the case of schemes in wind-up before the Bill comes into force. If I am wrong about that, I should be grateful for an explanation as to why I am wrong. However, if I am right, is there a point of principle that can be read across, in terms of the estimated 60,000 people who lost out on their pension rights before today? We do not know how many more will be put in that unfortunate situation by April next year.

As the issue arises naturally under clause 19, I should also like to ask where we are on the priority order. The Government have moved to bring in full fund wind-ups, which is welcome, but we were promised, soon or very soon, some changes on the priority order. I suppose that it is possible to deal with that under the Bill, or perhaps simply via a statutory instrument, but could the Minister say, if that is to be done through a statutory instrument, when that is likely to be debated in the House? If the changes will be made by amendments to the Bill, when are those amendments likely to be tabled?

Steve Webb (Liberal Democrat, Northavon)

The explanatory note on this clause is a good deal shorter than the clause itself, and simply suggests that the regulator can wind up the scheme

''in order to minimise the value of claims on the PPF.''

What worries me about that is the implication that what the regulator will be interested in is the potential burden on the PPF, and not necessarily the interests of the scheme members. I am suggesting that those two may be in conflict. Clearly, allowing a scheme to continue unwound-up may have different consequences from winding it up at a particular point, depending, as the hon. Member for Eastbourne said, on the rules for priority order on wind-up, but also on what would happen to the assets if they were retained in a non-wound-up fund, as compared with being transferred to the PPF.

In other words, I am trying to establish in my mind the motivation for the regulator's action. It says in the explanatory notes that it is to look after the PPF's interests. Are those synonymous with the interests of the scheme members? I am slightly worried as to whether they are. When schemes are wound up, we must bear in mind the cost and the time that it takes to wind up. We have all come across instances—obviously, Allied Steel and Wire is one—in which those doing the winding up charge exorbitant amounts for dealing with media inquiries or whatever. The costs of the wind-up come out of the fund, as a result of which the scheme members suffer. The wind-up can also be protracted.

Clause 19 gives the regulator power to wind up a scheme. Does it do it in-house and, thus, on a not-for-profit basis as quickly as possible or does it commission commercial independent trustees to wind up the scheme? If so, can those independent trustees make a mint as certain independent trustees have done? I am worried about the welfare of the scheme members. Will they be ripped off by the people winding up? Will they suffer because the primary concern of the clause is the welfare of the PPF? Will that ever be in conflict with the interests of the scheme members?

Kevin Brennan (Labour, Cardiff West)

May I, too, seek clarification about clause 19? I make particular reference to the process of winding up when initiated by the pensions regulator and wish to reinforce the points made by the hon. Member for Northavon. In the case of Allied Steel and Wire and many other instances, the workers were horrified to find that, when the pension scheme was in wind-up, if they wrote to the independent trustee charged with winding up the pension scheme with queries about their pension, the pension fund was charged for replying to their inquiries. That abuse is inherent in the current system. Will the clause remove it? It should effectively nationalise the winding-up service of occupational pensions. There will then not be a scam between a small number of experts who control such matters and make huge sums out of winding-up schemes. In smaller schemes, they often eat up a large proportion of the assets in the pension fund, which is already insufficient to meet its liabilities. Any reassurances that the Minister can give will be welcomed by workers who have suffered and consider that they have been ripped off.

Malcolm Wicks (Labour, Croydon North)

The purpose of the clause is to allow the regulator to wind up a scheme during the

assessment period. No winding up of a scheme may commence during an assessment period, which is set out explicitly under clause 107, to prevent the scheme from commencing wind-up due to automatic triggers in the scheme rules or by a resolution of the employer or trustees. However, if the scheme is wound up, that may be more beneficial for the members, for example, when the scheme is funded sufficiently to buy out pension benefits at 100 per cent., but non-pensioner members at only 95 per cent. To protect that funding level, the regulator may wind up the scheme.

If the scheme were allowed to continue, the funding level might decrease further, resulting in the non-pension members receiving 90 per cent. benefits under the new pension protection fund. The purpose of the clause is to allow the regulator to make a judgment in the interests of scheme members. I am sure that members of the Committee will support that position.

As for the priority order regulations, the hon. Member for Eastbourne will have to be a little more patient, but we shall soon be reporting to Parliament on progress. Despite his question, our proposal is not very much linked to the important issue of ASW and other workers in respect of retrospection. That is a different matter. The hon. Member for Northavon asked who would carry out the wind-up. Officially, the regulator would take such action. At this stage, the regulator does not exist so I cannot talk in detail about exactly which people inside or outside would be responsible for the winding up. It is an important question and is based on more than detail; nevertheless it is not something that we can state with great clarity at present. However, if I am wrong about that and I can let the hon. Gentleman have more information, I shall be happy to do so.

Steve Webb (Liberal Democrat, Northavon)

I am grateful for that, and I have no desire to protract this discussion, but can the Minister confirm that his intention is that this will be run on a non-profit basis—that no one will profit from the winding-up of these schemes?

Malcolm Wicks (Labour, Croydon North)

This is certainly not meant to be a profit-making exercise, but I am not sure that I can give the hon. Gentleman that undertaking in a strict sense, because people will no doubt be employed to do this work and salaries and/or fees will be paid. Therefore, I cannot give a blanket assurance, but the principle is right that this is part of a public service for scheme members and we do not want to turn it into a profit-making exercise, in the pejorative sense of that phrase.

I will not respond in detail today to what is troubling my hon. Friend the Member for Cardiff, West, but we have all been concerned in the past that in moments of distress, when people are facing near destitution in terms of their pension rights, some people—clearly totally wrongly—profited. We need to remedy that in different ways so that it does not happen in future.

Question put and agreed to.

Clause 19, as amended, ordered to stand part of the Bill.

Further consideration adjourned.—[Margaret Moran.]

Adjourned accordingly at sixteen minutes past Five o'clock till Thursday 11 March at half-past Nine o'clock.