Pensions Bill

Public Bill Committee, 11 March 2004.

Standing Committee B

Clause 20 - Freezing order

George Osborne (Conservative, Tatton)

I beg to move amendment No. 137, in

clause 20, page 12, line 14, leave out 'interests' and insert 'rights'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Amendment No. 138, in

clause 20, page 12, leave out lines 16 and 17.

Government amendments Nos. 19 to 22.

Amendment No. 139, in

clause 20, page 13, line 6, leave out paragraph (g).

Government amendment No. 23.

Amendment No. 140, in

clause 20, page 13, line 15, leave out subsection (6).

Amendment No. 141, in

clause 20, page 13, line 34, leave out paragraph (b).

Amendment No. 142, in

clause 21, page 13, line 42, leave out subsection (2).

Amendment No. 143, in

clause 21, page 14, line 40, leave out subsection (8).

Amendment No. 144, in

clause 22, page 15, line 4, leave out subsection (3).

Amendment No. 145, in

clause 22, page 15, line 6, leave out subsection (4).

Government amendments Nos. 24 and 25.

Amendment No. 146, in

clause 24, page 15, line 34, leave out subsection (4).

Government amendments Nos. 26 and 27.

Amendment No. 147, in

clause 27, page 17, line 20, leave out

'as soon as reasonably practicable'

and insert 'within 48 hours'.

Amendment No. 148, in

clause 27, page 17, line 33, leave out subsection (5).

Government amendment No. 28.

Amendment No. 149, in

clause 28, page 17, line 40, leave out

'any enactment or rule of law, or any'.

Government amendment No. 90.

Government new clause 2—Effect of determination to wind up scheme on freezing order.

George Osborne (Conservative, Tatton)

I welcome you to the Chair, Mr. Griffiths. I shall speak to the amendments that

deal with clause 20 and the new freezing order power that the Government propose to give to the regulator. In your wisdom, Mr. Griffiths, you have also selected amendments to later clauses, which deal with the consequences of the freezing order, its period of effect, the validation of actions in contravention of such an order and so on. If possible, I would also like a brief stand part debate so that we can talk about the effect of the new order and whether it is necessary—but first I shall speak to the amendments tabled in my name.

Amendment No. 137 would substitute the word ''rights'' for the word ''interests''. The point of a freezing order is so that the regulator can act when, in the words of the clause, there is

''(i) an immediate risk to the interests of members under the scheme or the assets of the scheme, and

(ii) it is necessary to make the freezing order in order to protect the interests of the generality of the members of the scheme.''

I felt, as did my hon. Friend the Member for Eastbourne (Mr. Waterson), who is not with us this morning, that the word ''interests'' was rather vague and woolly, particularly when it is further diluted by the phrase,

''the generality of the members of the scheme'',

which could be taken to mean almost anything. It could be used to justify things that are to the detriment of a minority of members. One would assume and hope that the regulator would not do that, but it is possible.

We thought that the word ''rights'' in this context was more specific, and a more familiar term in the pensions world. Presumably, rights are what the regulator would be trying to protect when it stepped in with a freezing order to help members.

Amendments Nos. 138, 139 and 140 are all probing amendments. Amendment No. 138 also relates to subsection (2), and would remove its last two lines, which state:

''no freezing order may be made in relation to a scheme during an assessment period''—

that is the period when the pension protection fund is considering the scheme and whether to act. Why is it necessary to say that the power to issue a freezing order should not be removed from the regulator in those circumstances? Is it because, under clauses 104 and 105, the PPF has equivalent freezing order powers? Can the Under-Secretary explain why the Government are restricting the scope of a freezing order?

Amendment No. 139 would delete subsection (4)(g). We tabled the amendment because we were not clear why statements of entitlements should not be sent to members. I would have thought that when a scheme is frozen, that is, or could be, a period of enormous uncertainty and anxiety for members. They may be keen to know what their entitlements are under the scheme. It therefore seems curious that there could be a direction that no statement of entitlements is to be provided. Will the Under-Secretary explain that?

Amendment No. 140 would remove subsection (6), which says that a freezing order may not reduce benefits payable to a member

''below the level to which the trustees or managers of the scheme would have power to reduce them''

if there had been a winding-up order. When I was reading the Bill, it was not clear to me what was envisaged. I should have thought that the point of the freezing order was to give the regulator the power to intervene immediately when there is

''an immediate risk to the interests of members''.

In other words, it is an emergency power.

When we come to later clauses, we shall discuss how the effect of the order is time limited. The power is envisaged only as a short-stop, while a longer-term solution is sought, which could include winding up the scheme. Subsection (6) may suggest that the scheme can stop paying out reduced benefits during the time of the freezing order. Surely it would be better to wait until the future of the scheme is clear before making such a decision.

Amendment No. 141 would prize the tentacles of the Secretary of State off at least a small part of the Bill. Subsection (7) states that a

''freezing order may also require the trustees or managers of the scheme to obtain an actuarial valuation within a specified period.''

That is a perfectly reasonable proposal. We do not dispute that. However, subsection (9) defines an actuary by saying that it is either the scheme actuary or, if there is no scheme actuary,

''a person with prescribed qualifications or experience''—

that is reasonable—

''or—a person approved by the Secretary of State.''

That could be anyone. It could be you, Mr. Griffiths. It could be me. It could be the Secretary of State's crony. As I understand it, there is no requirement for that person to have any qualifications or experience. We assume that, being a wise man, the Secretary of State would not appoint someone without the necessary qualifications, but that is not in the Bill. There is no requirement for the person who may be required to provide an actuarial valuation under subsection (7) to be an actuary.

We are familiar with the tendency at the highest levels of the Government to appoint people with little experience and qualifications to important posts, but surely at the coal face—the junior ministerial level, say—where there is much more experience and more qualifications, they should be more tempted to insist that people have the necessary qualifications and experience.

Amendment No. 142 is a probing amendment. What is the point of subsection (2) of clause 21, which is about the consequences of a freezing order? It states that a freezing order does not prevent an increase in accrued benefit, yet subsection (3)(a) of clause 20 states that

''no benefits are to accrue''

when there is a freezing order. I am sure that there is a sensible explanation for that, and it would be interesting to hear the Under-Secretary explain it.

Amendment No. 143 is similar to amendments Nos. 146 and 148, which I shall deal with as a group. They refer to the penalties that will be put in place if someone fails to comply with the orders of the regulator, be they about the freezing order in general, the process of winding up a scheme or the notification requirements under clause 27. The penalties follow the powers under the Pensions Act 1995. They include hefty fines, and before we give the regulator to power to levy them, we should ask whether they are necessary, whether the Government considered reviewing the powers in section 10 of the 1995 Act, what is the maximum fine, and whether it has been uprated since the Act was passed. The maximum fine under the Act was £5,000 for an individual and £50,000 for a company.

Amendments Nos. 144 and 145 are more substantial than the three previous amendments, and relate to clause 22, which deals with the period of effect of a freezing order. Should the Committee agree my amendments—I am always an optimist, Mr. Griffiths—they would prevent the regulator from extending the freezing order beyond three months, thereby restricting the total period in which a freezing order can be put in place to three months instead of six months. One has to remember that the freezing order is an emergency power and is brought in only when there is an immediate risk to scheme members. A regulator should be able to decide after three months what to do with the scheme and how to proceed—whether to allow it to continue, wind it up, or do whatever it feels is necessary.

Anyone with constituency cases relating to the winding up of schemes will know how long they can take, how frustrating they can be for our constituents, and that they are a cause of great anxiety to them. One hopes that the whole point of having the regulator in place is to speed up some of the processes. That would be great for all of us. However, the six-month freezing order could add to the delay and add to the anxiety of the people whom we represent at a time when their scheme is in trouble. Three months is enough.

The Government implicitly accept that three months should be the normal period. Clause 22(2) says that the initial order cannot exceed three months, so why not limit the overall freezing order to three months?

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman will know that when schemes are wound up there is often a delay caused by delays in obtaining information from the Department for Work and Pensions. In some cases it takes a long time to get information about guaranteed minimum pensions, and so on. Does he think that this is an escape clause, in case the Department cannot obtain the information in time? What would happen if the period were restricted to three months and the Government could not provide the information in time?

George Osborne (Conservative, Tatton)

The hon. Gentleman makes a fair point. I suspect that the Government would provide the information. Departments are like schoolboys with their homework—it all depends how much time they have to do a job. If they are told to do something in 24 hours, they do it; if they are told that they have

six months, they do it five months and 28 days later. It is reasonable to put the discipline of a three-month limit on the regulator and the Department.

Amendment No. 147 is similar and would amend the clause dealing with the notification of trustees, managers, and so on, when a freezing order is applied. The regulator must, under subsection (2),

''as soon as reasonably practicable after the order has been made, notify . . . the trustees or managers of the scheme, and the employer''

about the fact that a freezing order exists. I will deal with when the members of the scheme should be informed when we discuss clause 27. The words ''reasonably practicable'' are a bit woolly. Given that a freezing order is imposed when there is an immediate risk to a scheme, and given the draconian powers over trustees and others who do not comply with the freezing order, those people need to be told immediately, not least to stop them doing something that may turn out to be illegal and jeopardise the benefits in the scheme.

I suggest changing

''as soon as reasonably practicable''

to ''within 48 hours''. I would have thought that once the regulator had proposed the freezing order, it would be possible to inform the trustees, the managers and the employer within 48 hours.

Finally, I turn to amendment No. 149. It relates to clause 28, which is innocently entitled ''Supplementary provision relating to orders under sections 20 to 27''. Subsection (1)(a) seems extraordinarily broad in its sweep—almost Cromwellian, one might say. It states that the regulator may make an order

''in spite of any enactment or rule of law . . . which would otherwise operate to prevent the order being made''.

That is quite a power; it allows the regulator to do anything, even if there are other enactments and rules of law to prevent it from doing so. That is a very wide-ranging power. Will the Under-Secretary explain why it is necessary and give some examples of how it might work in practice?

Chris Pond (Labour, Gravesham)

Good morning, Mr. Griffiths. This morning we are discussing an important new regulatory power, which the Occupational Pensions Regulatory Authority has identified as one that would be a useful additional tool, and which has been welcomed by the industry overall. It is the power to issue a freezing order. I will first run briefly through the points raised by the hon. Member for Tatton (Mr. Osborne). If hon. Members would like further clarification afterwards, I will be happy to give it.

On amendment No. 137, the hon. Gentleman asked why we are talking about preserving scheme members' generality of interest rather than their rights, as the amendment proposes. The proposed wording is much narrower than the question of interests, which could cover not only the actuarial rights of scheme members but their wider rights related to their employment status, employment security and so on. We believe that it is important to take those into account and to ensure

that the generality of interests of all scheme members is observed. The hon. Gentleman suggested that the term ''rights'' was more familiar to the pensions world. Neither my hon. Friend the Minister for Pensions nor I wish to continue repeating this, but I must tell the hon. Gentleman that ''interests'' is the term used in the Pensions Act 1995, and that is why we have carried it across into this legislation.

On amendment No. 138, the hon. Gentleman asked why a freezing order could not be imposed during an assessment period. It is simply because that would largely duplicate the powers and arrangements. An assessment period provides somewhat wider powers, but those would subsume the powers provided under a freezing order.

George Osborne (Conservative, Tatton)

Is the Under-Secretary saying that the powers during an assessment period include all the powers that exist with a freezing order, but with some additions?

Chris Pond (Labour, Gravesham)

Yes, that is generally right. Of course, the circumstances are different in each case. A freezing order is there as an additional power for the regulator to try to sort matters out before they get to a stage at which there might be an assessment period, in which the PPF would have to consider whether to intervene on a scheme or a winding-up order. A freezing order is one section further back from that process. So there would be slightly different powers, but there would be general duplication if one had a freezing order during an assessment period.

Amendment No. 139 understandably raises the question why scheme members should not be issued with a guaranteed statement during a freezing order. Schemes going through a freezing order may well subsequently go into wind-up. In those circumstances the trustees, having already issued a statement of members' entitlements, would have a legitimate right to reduce those entitlements and issue a new statement, and that would of course create confusion and raise expectations that might quickly be dashed. During the period of a freezing order, that would not be a sensible way forward.

Amendment No. 140 probes the issue of why the Bill limits the regulator's power to reduce benefits to the level that they would be at during wind-up. That is simply to ensure that there is some limit to the regulator's powers; I suspect that the Committee will think that appropriate. We have to ensure that, during wind-up, things are no worse for members' interests than they would otherwise be.

On amendment No. 141, the hon. Member for Tatton was worried about the definition of ''the actuary'' and the role of the Secretary of State. He will understand that normally the scheme actuary would be required to evaluate the scheme during the process of freezing or wind-up, but that there may be times when he is unavailable. He may be sick, on holiday or on sabbatical, for example. Of course, it is necessary to get a speedy valuation when that happens. Therefore, we need an alternative, someone with the qualifications and experience to fulfil that role; there is no argument about that.

Also, the Secretary of State can approve a person to act as a scheme actuary. That is not an unfettered power by which he can impose anyone that he thinks fit whom he passes in the street. In approving a person to work as a scheme actuary, the Secretary of State will, of course, look with rigour at members' qualifications in that sphere. Only those people with sufficient training and professional qualifications would be considered to be professional.

On amendment No. 142, a question was asked about preventing accrual during the period of a freezing order. Although a freezing order effectively means pressing the pause button on the scheme, the intention is not to make the circumstances of members better or worse during that period. Clause 21(2) is intended to ensure that neither happens.

I come to amendment No. 143 and the other amendments relating to the penalties under section 10 of the 1995 Act. Although the penalties rise to punitive levels, especially where it seems that an individual or employer is acting wilfully and inappropriately—then, the penalties can be quite fierce—OPRA believes that the penalties are appropriate, and does not think that they need to be reviewed. We have taken that advice.

George Osborne (Conservative, Tatton)

I asked the Under-Secretary, on a point of information, whether the maximum amount was still £5,000 in the case of an individual and £50,000 in any other case. Those were the amounts in the 1995 Act, but there was a power for the Secretary of State to amend the provision and substitute higher amounts.

Chris Pond (Labour, Gravesham)

Yes, those figures are still in operation. However, as the hon. Gentleman says, there is opportunity for the Secretary of State to amend those as appropriate. Amendments Nos. 144 and 145 concern the extension of freezing beyond the three-month period. That is a legitimate point for the hon. Gentleman to raise, because a freezing order is intended to be pretty immediate. It is intended to deal with the situation within hours or days to protect members' interests if it appears that a scheme is running into trouble, and it is intended to be temporary. That is why we have said that although we expect that a freezing period of three months will normally be long enough for the regulator to make the appropriate judgment, it will have the power to extend the period, but to no more than six months. It needs that extra flexibility because circumstances could arise in which scheme records are not up to date or the regulator needs further information to make the appropriate judgments. We do not expect that the extension will be used in many cases but the regulator needs that flexibility. This is a new kind of regulator—one that is flexible and interactive—and we want to ensure that there is as much flexibility as possible.

Amendment No. 147 deals with the notifying of freezing orders and the circumstances of them to members and trustees within 48 hours. We agree that these measures must be taken as quickly as possible. We do not want there to be any delay in information getting through to members, but that might not always be possible within 48 hours. We must recognise that

many schemes will have increasing numbers of non-UK members, and the structures of the firms may be complex. Therefore, 48 hours is an artificial limit with which to constrain the regulator.

George Osborne (Conservative, Tatton)

Is it the case that a trustee or employer who acted in good faith and was unaware that a freezing order was in place on their scheme would not suffer a punishment?

Chris Pond (Labour, Gravesham)

I think that that is dealt with elsewhere in the clauses that we are considering this morning. If a trustee acted in good faith and without the necessary information, the regulator would take account of that. The question implies that a trustee could be subject to penalties because the regulator had failed to give him or her the necessary information in time. That is clearly not the case. Whether trustees acted in good faith is relevant. It is for the determinations panel to judge whether they did so.

I turn to amendment No. 149. Why does a freezing order override any other enactment or scheme rules? As its name implies, the purpose of a freezing order is to freeze the circumstances of a scheme to ensure that the members' interests are not artificially enhanced or deteriorated during the relevant period. Many forms of enactment or scheme rules might impinge on the scheme during that period. If they were to be allowed to override the freezing order, there would be no point in this Committee deciding that the Bill should include the freezing order power for the regulator. The freezing order lasts for a short period—normally three months and never more than six months, except in the special circumstances when the case goes to a tribunal. Therefore, the freezing order should have a full effect.

The Government amendments are all technical amendments; they are intended to aid interpretation of the Bill, to erase any possible ambiguity or to correct oversights in the original drafting. None of them significantly changes the nature of the Bill.

George Osborne (Conservative, Tatton)

I take the Minister's point that the amendments are technical, but perhaps he would tell us something about new clause 2.

Chris Pond (Labour, Gravesham)

The hon. Gentleman is right. It is important to explain that new clause 2 will ensure that when the regulator determines to wind up the scheme, the freezing period will extend to the conclusion of any reference to the pensions regulator tribunal, or any subsequent appeal from that tribunal, should it or the court think that the freezing order should continue until a final decision is made. That is something to which I referred briefly earlier. This is a technical arrangement, which is necessary to ensure that the tribunal can consider an appeal properly without any significant change in the circumstances of members' interests or the generality of those interests. I ask the hon. Gentleman to withdraw his amendment.

George Osborne (Conservative, Tatton)

I shall not detain the Committee much further. I take the Under-Secretary's explanation of the amendments, and of things such as penalties. I am a little concerned, however, especially as the phrase ''as soon as reasonably

practicable'' will remain in the Bill and there are no specific time limits to ensure that the regulator gets on and informs people that a freezing order is in effect. I am also concerned about the fact that the freezing order can last for six months rather than three. None the less, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendments made: No. 19, in

clause 20, page 12, line 17, after 'section 104)' insert

'in relation to the scheme'.

No. 20, in

clause 20, page 12, line 30, after 'behalf of' insert 'the employer,'.

No. 21, in

clause 20, page 13, line 3, leave out 'they' and insert

'the amounts paid out from the scheme in respect of the transfers or transfer payments'.

No. 22, in

clause 20, page 13, line 4, after 'and' insert

'the transfers or transfer payments'.

No. 23, in

clause 20, page 13, line 9, leave out 'For the purposes of' and insert 'In'.—[Mr. Pond.]

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

George Osborne (Conservative, Tatton)

I would like a brief discussion on the new power of the freezing order. It is always a little unsatisfactory, although I know why we do things this way, to have to discuss the amendments before we discuss the generality of the clause.

As the Under-Secretary has acknowledged, the freezing order is an important new power for the regulator. It is somewhat draconian, and quite an extension of the powers now available to OPRA. It is therefore fair to ask why the Government felt it necessary to introduce the new power. Where was the gap in OPRA's powers that the new power fills? It will be administratively complex and may be fairly costly. Perhaps the Under-Secretary can give us some practical illustrations of where the power might be needed because existing powers are not sufficient. An example—example B—is given in the factsheet that the Minister for Pensions sent Committee members: a pensions scheme is underfunded and the employer is not paying in sufficient contributions. Although that would be serious, would it be an immediate risk to the interests of members, as set out in clause 20? Perhaps the Under-Secretary could explain how a freezing power would add to the regulator's ability to deal with that.

The costs of the freezing order are likely to be great. Who will be required to cover them? Does the Under-Secretary envisage that the regulator will use the freezing order for all sorts of schemes of different sizes? Does he envisage it being used primarily for small schemes, or could it be used for large schemes? When it is likely to be used? Would it apply to pensions schemes all of whose members are also trustees? Presumably, it would, but would it be useful in such cases? Is it expected that in all circumstances after the issue of a freezing order, the existing trustees

of the scheme will remain in place with unaltered powers?

If the freezing order specifies that no benefits are to be paid to pensioners, what are they expected to live on during the period for which it applies? They may not receive anything for up to six months, which could cause some hardship. Perhaps I have got that wrong and the Under-Secretary will clarify things. It is an important point to clarify, because that would be of great concern to scheme members.

Perhaps my most important point is that clause 20(1), which says,

''This section applies''

only

''to an occupational pension scheme which is not a money purchase scheme.''

The Under-Secretary should explain why that is so. The risks to members' interests or scheme assets can arise in money purchase schemes, too, and they may also need the regulator's protection. That reflects a more general point, into which I do not propose to go at great length, which is that this power—as in many other parts of the Bill—is focused largely on defined benefit schemes, although most people in the industry would accept, and most of us realise, that the future lies increasingly with defined contribution schemes. Surely we should be equipping the regulator with the powers to deal with the future.

Steve Webb (Liberal Democrat, Northavon)

I have some questions that were not raised under the amendments. Like the hon. Member for Tatton, I should be grateful for further clarification about when the powers in the clause would be invoked. One can understand that the assets of a fund might be doing well or badly, and that an employer might or might not be putting money in, but I am still slightly hazy about what is gained by freezing. What is it that these powers prevent from happening? I hope that the Under-Secretary will clarify that. I also echo the question that has just been asked about whether the examples that he will provide are the sort of thing that happens exclusively in final salary schemes. One imagines that the things that might go wrong with company schemes could be of a general nature, and would not apply only to final salary schemes. I am curious to know why the scope of the clause is restricted to those schemes.

I am unclear about whether the words

''no benefits are to accrue under the scheme''

in subsection (3)(a) mean that although my pension is dependent on my length of service, for those three months I am treated as if I were not a member of the scheme, and do not build up another three months of service. When the freezing has ended, does the scheme have the power and duty to say, ''Ah, but you did actually work for those three months, so those rights will now accrue to you,'' because the Bill says only that the benefits do not accrue? Are the benefits deferred, or are they lost for ever?

If we are worried about some sort of fraud, and things have to be frozen so that nothing can be touched, how do the provisions of the clause relate to the fraud compensation scheme and the fraud elements

in the Bill? Is this about fraud or mismanagement? I am not clear when the power would be invoked.

We got no answer about how the provision in subsection (3)(a) that

''no benefits are to accrue''

is consistent with clause 21(2), which says:

''A freezing order.. does not prevent any increase in a benefit which is an increase which would otherwise accrue''.

Will the Under-Secretary clarify that? I am sure that the clauses are consistent, but I cannot quite see how.

Chris Pond (Labour, Gravesham)

I shall respond first to the points made by the hon. Member for Tatton. He described the measure as draconian; frankly, it is quite the opposite. Most scheme members would consider that the draconian option would be pressing the nuclear button and winding up a scheme.

This is an additional power, which, as I said at the beginning, has been identified by OPRA as a power that would be valuable because it is one step short of winding up a scheme. When a scheme looks as if it might be running into trouble, the power gives the regulator an opportunity to move in and assess whether the scheme really is getting into trouble. When a scheme is frozen, it enables the regulator to go through a process, perhaps requiring trustees to take certain actions.

The hon. Gentleman repeated the example of a scenario in which insufficient contributions had been made to a scheme that was clearly underfunded. During that period, the regulator may well require an adjustment of contributions. There may be an opportunity for negotiation between the employer, the trustees and the members to resolve some of the difficulties that would otherwise arise.

This is a valuable new power, which would add to the regulator's ability to deal with such a situation, short of winding up. However, we have to recognise that in many cases it will be the step before winding up. If that is the outcome—it will not necessarily be the outcome—there will be more information available to the regulator, because of the pension protection fund, by the time the scheme gets to that stage. It is therefore a valuable process in itself.

Who will pay the costs of the freezing order? That will vary according to the circumstances of the case. In the main, the costs will be borne by the regulator and the scheme itself, and the proportions will vary from scheme to scheme. If a scheme is badly underfunded, adding the costs of a freezing order might be unwise. However, if the regulator decides to appoint a trustee, it may direct that the costs of that trustee should be met by the scheme, the employer or both.

George Osborne (Conservative, Tatton)

Presumably the scheme could appeal a decision on costs.

Chris Pond (Labour, Gravesham)

I will have to seek inspiration on that point. My assumption is that it could, but I will come back to the hon. Gentleman on that subject. [Interruption.] I have just had an inspired thought—yes, there will be an opportunity to seek an appeal.

The hon. Members for Tatton and for Northavon (Mr. Webb) asked why the power would apply only to final salary defined benefit schemes. We are talking about schemes with a funding requirement. In a money purchase scheme, also described as a defined contribution scheme, the employer and employee pay a fixed contribution and the proceeds are used to purchase an annuity, which provides the pension. No risk is borne by the employer, so no funding question is involved. However, with defined benefit schemes there is such a question. That is why we need to make sure that we have the additional power, to freeze circumstances in such schemes. Such a power would not assist defined contribution schemes at all.

The hon. Member for Tatton also asked whether that would apply to big schemes, small schemes or schemes in which all members are trustees. That would be a matter for the regulator to decide on the basis of the circumstances of the particular scheme. It would be wrong for us to try to put in the Bill any detailed definitions of which schemes could be treated to the opportunity of a freezing order—if that is the correct phrase.

The hon. Member for Tatton also asked whether it is appropriate to allow existing trustees to remain with unaltered powers. There are other measures within this group of clauses that allow the regulator to remove and prohibit trustees. In some circumstances, it might be other factors, not the trustees' actions, that are the problem, so it might be appropriate to leave them where they were.

I was asked about the important question of what would happen to the members of the scheme, and to the pensioners, if no benefits were to accrue during the period. I must emphasise that nothing would happen to their entitlement, and payments would continue to be made. The issue concerns the accrual.

George Osborne (Conservative, Tatton)

That is an important point to nail down. What happens to people who reach retirement during a freezing order?

Chris Pond (Labour, Gravesham)

That is one of the reasons why the freezing order is so important. We must ensure that while the assessment is being made, individual members of the scheme do not change their priority within the scheme and move from being active members of the scheme—employees—to being pensioners. In that process they would move up the priority order and their claim on the scheme would be increased, which would result in the generality of interests of the other scheme members being diminished during the freezing order.

George Osborne (Conservative, Tatton)

If someone retired because they had reached the age of 65 and their company required them to do so, and if their retirement were on the first day that the freezing order came into effect, they might not receive their pension for six months if the freezing order were for that duration. Such a person might have expectations, mortgages and so on that they were relying on those payments to cover, and they might face some hardship. Obviously, they would receive the state benefits, but those might not be enough to cover their financial obligations.

Chris Pond (Labour, Gravesham)

I should clarify the fact that people who reach retirement during the period will still get their pension, but it will be at the level that they would have received if they had retired as deferred members. The hon. Gentlemen mentioned a situation where someone reaches retirement age just as, or just before, the freezing order is imposed. I should explain that the regulator will have an opportunity within the freezing order to make a judgment that a particular action, such as the moving into retirement of that individual, does not reduce the overall generality of interests of the members—in other words, that this is a right that had already accrued. In those circumstances, the regulator could decide to validate that action. However, it would have to be positive validation, and whether that was allowed to happen would be for the regulator to judge.

The hon. Member for Northavon asked what is meant when the Bill says that no benefits would accrue under the scheme. Clause 26 gives the regulator the power to make directions to cover the period of the freeze when no wind-up order is made. For example, if the scheme and the employer are sufficiently healthy, the regulator can order benefits to have accrued for the freezing period. The regulator's objective is to protect members' benefits. If the circumstances make it right to order an accrual of benefits during the freezing period, the regulator can do that. If it is not in the interests of the generality of the members, the judgment might be that that is not the right thing to do. I think that I have answered most of the points that have been raised by hon. Members, and on that basis I commend clause 20 to the Committee.

Question put and agreed to.

Clause 20, as amended, ordered to stand part of the Bill.

Clause 21 - Consequences of freezing order

Steve Webb (Liberal Democrat, Northavon)

I seek your guidance on your procedural custom, Mr. Griffiths. The Committee would value brief presentations on clauses that contain very technical material. We do not want to protract proceedings; we just want to be given a clue about what some of the clauses mean. We would rather be told what they mean than waste time speculating about it.

Win Griffiths (Labour, Bridgend)

You are appealing to the Under-Secretary to say a few words, I believe, Mr. Webb.

Chris Pond (Labour, Gravesham)

I am happy to give a quick clarification—I am sure that the Committee will be pleased if it is quick.

The clause sets out the consequences of a freezing order on a scheme. The power to freeze a scheme will be a new situation for schemes, so we want to set out the consequences clearly in the Bill. Trustees need to be certain about the effect of freezing orders on consequential matters such as accrual of increases, and whether they can comply with a pension sharing order.

It is necessary to make any action in contravention of the freezing order automatically void, to ensure that it has sufficient effect, but the regulator has discretion to validate actions because we must also ensure that we have a flexible and responsive regulator. The clause determines that any action in contravention of a freezing order will be void unless the regulator chooses to validate it, as permitted by clause 23, and it gives the regulator the power to impose a penalty on the trustees or managers of a scheme if they fail to take all reasonable steps to comply with a freezing order.

Win Griffiths (Labour, Bridgend)

Before we proceed, it might be helpful if I say that if any Committee member would like a Government Minister to explain something about a clause to which no amendments have been selected for debate, they can stand up and ask about it; they do not have to rely on me to call the Minister.

Question put and agreed to.

Clause 21 ordered to stand part of the Bill.

Clause 22 - Period of effect etc of freezing order

Clause 23 - Validation of action in contravention of freezing order

George Osborne (Conservative, Tatton)

I want to ask the Under-Secretary about something; he touched on it when he gave his explanation of clause 21, but as the power of validation is given in clause 23 I thought that I would wait until now to raise the point. Clause 21 addresses the consequences of the freezing order. As the Under-Secretary said, it states that

''any action taken in contravention of the order is void''.

That is reasonable. The whole point of the freezing order is to freeze things and to stop trustees and managers doing things that they should not do.

However, there is a get-out clause in clause 23. Subsection (1) states:

''If a freezing order is made in relation to a scheme, the Regulator may by order validate action taken in contravention of the order.''

In other words, someone could, in effect, break the law; they could break the terms of the freezing order but have their action made legal retrospectively. Will that not run the risk of encouraging some trustees and managers to break those terms in the hope that the regulator will subsequently validate their actions? That may be a false expectation; they may be over-confident of their abilities—or they may be genuinely concerned, because these provisions deal with schemes that are in a mess. However, will not clause 23 give them an

excuse to break the terms, and therefore undermine the whole point of the new power?

Chris Pond (Labour, Gravesham)

That is a valid point—no pun intended. As I have explained on several occasions, the purpose of the freezing order is to make sure that the members' interests overall are neither enhanced nor diminished during the period for which it is in force. That is why any action is treated as void unless validated by the regulator. The purpose of the clause is to allow the regulator to provide a proportionate and flexible response to circumstances as they arise. Therefore, there may be actions that, as I have explained, do not affect the generality of interests of members of the scheme. In those circumstances, it is sensible for the regulator to have the power to validate those actions.

This is a positive power, whereby the regulator must decide whether the actions would be validated. The hon. Gentleman's anxiety about the provision simply defusing the whole purpose of the freezing order is probably unjustified. The regulator will have a keen eye to see whether the trustees, or anyone else involved in the scheme, are trying to pull a fast one in that way, or are acting unwisely by arguing that certain actions should be validated. We must look to the expertise of the regulator to make sure that that danger is minimised.

Question put and agreed to.

Clause 23 ordered to stand part of the Bill.

Clause 24 - Effect of winding up of

Clause 26 - Power to give a direction where freezing

Steve Webb (Liberal Democrat, Northavon)

A little steer from the Under-Secretary might be helpful.

Chris Pond (Labour, Gravesham)

The clause introduces the regulator's powers to give directions when no winding-up order

has been made, but the freezing order has ceased to have effect. That will happen when the period for which it was made expires, or when the regulator revokes the order using its powers under clause 75. When a freezing order is lifted, the regulator can direct what benefits, if any, accrued to the members during the freezing period, make accruals subject to the member making contributions, and direct the employer, too, to contribute to cover the cost of those benefits—a matter that the hon. Gentleman raised a few moments ago. The clause gives the regulator the power to make those adjustments, and the regulator will be in an excellent position to know and understand the scheme, having monitored it closely during the freezing period.

Question put and agreed to.

Clause 26, as amended, ordered to stand part of the Bill.

Clause 27 - Notification of trustees, managers,

George Osborne (Conservative, Tatton)

The clause requires the regulator to inform

''trustees or managers of the scheme, and . . . the employer in relation to the scheme, of the fact that the''

freezing

''order has been made''.

We debated whether the regulator should do that within 24 hours or as soon as was reasonably practicable. I do not propose to rerun that debate even if you allowed me to, Mr. Griffiths.

However, there is a difference between the treatment of the provision of information to trustees, managers and employers, and the treatment of provision of information to members of a scheme. Under subsection (2), the regulator ''must'' inform the trustees, the manager and the employer. However, under subsection (3),

''The Regulator may . . . direct the trustees or managers . . . to notify''

scheme members. Presumably, he may not. In other words, a regulator might know that there is an immediate risk to a scheme and impose a freezing order, and then tell the managers and employer, but not the scheme members, who would be the only people kept in the dark. Certainly, I would want to know if my scheme—the parliamentary scheme—were subject to a freezing order and would expect someone to tell me that.

Malcolm Wicks (Labour, Croydon North)

Has the hon. Gentleman not heard?

George Osborne (Conservative, Tatton)

Thankfully, I will be here for a very long time, so I could easily wait six months.

There is a serious point to be made. Surely we want members to know about a freezing order and to be given all the information necessary. If it is in place for only a day, it might be impractical to try to inform all the members, so perhaps there should be a requirement to inform members of the scheme only if the freezing order is for longer than a month or two months. Perhaps the regulator would inform the members in those circumstances anyway, but it would be useful to the Committee if the Under-Secretary gave us an idea as to why the Government felt that it was not necessary to require schemes to inform their members. Perhaps he could also set out how the Government hope the regulator will act in such situations and how he or she will exercise the discretion provided for in subsection (3).

Chris Pond (Labour, Gravesham)

I agree wholeheartedly that we want members to know about the circumstances and requirements of freezing orders. Although the regulator will have relatively easy access to trustees, managers and employers, we are talking about a wide variety of schemes. Some are large, some are small, some are spread across different sections of a company and some are spread across borders. Therefore, ensuring the regulator's quick access to members is much more difficult. It is for that reason that the Bill requires the trustees, managers and employers to be informed by the regulator, and the regulator may inform members. Indeed, where there is easy access to the membership, the regulator will probably decide to do that.

Kevin Brennan (Labour, Cardiff West)

I understand the Under-Secretary's explanation, but would it not be possible for the regulator to direct the managers and trustees to inform the members as soon as is practicably possible?

Chris Pond (Labour, Gravesham)

I welcome that point and reassure my hon. Friend that the regulator will have the right to instruct the trustees and employers to inform the membership. That recognises that it will be much easier for trustees and employers to inform the membership than it would be for the regulator, as trustees and employers can do so through notice-boards, newsletters and normal correspondence with their employees. That right will exist and the regulator will use it when appropriate.

Steve Webb (Liberal Democrat, Northavon)

The Under-Secretary touches on the important issue of the quality of information that schemes keep on their members, such as where their members are and their rights. Recently, in one appalling example, the Government wanted to introduce a change of priority and a winding-up order, but could not because the scheme's records were so bad that they did not know how long people had been in it. The clause has been framed in such a way because the data on members can be awful. Do the Government have plans to ensure that the information that schemes keep on members is much better than it has been?

Chris Pond (Labour, Gravesham)

The hon. Gentleman raises an important point. I hope that we will deal with the information requirements of the Bill very soon. Those requirements will explicitly address his concerns.

George Osborne (Conservative, Tatton)

May I take the Under-Secretary back to his exchange with the hon. Member for Cardiff, West (Kevin Brennan)? Subsection (3) states:

''The Regulator may . . . direct the trustees or managers of the scheme to notify . . . the members''.

I am not sure why that should not be a requirement rather than a right. It should be a requirement of trustees and managers to inform scheme members that their scheme is subject to a freezing order. Why is there not that mandatory requirement? Even where there are poor scheme records, the trustees could place an advert in a newspaper if they had to. That might be a blunt instrument, but at least they could make an attempt to inform scheme members.

Chris Pond (Labour, Gravesham)

That goes to the heart of the nature of the regulator. It is a new kind of regulator, which is intended, as I said the other day, to be light on its feet, flexible and responsive, and able to use evidence-based decision making. It is not sensible to include in the Bill how the regulator will ensure that members receive the appropriate information. That would tie the regulator and perhaps impose additional administrative burdens on employers and the regulator itself.

In circumstances in which the regulator has easy access to the membership—perhaps in a small scheme—it is sensible that it informs members. In other circumstances, the regulator may have to require the trustees and employer to inform members. In yet more circumstances, the trustees and the employer may be fully co-operative with the regulator and will automatically inform their members of the new circumstances and the freezing-order requirement. The Bill provides for that flexibility.

Kevin Brennan (Labour, Cardiff West)

I am grateful for the Under-Secretary's explanation. Is he saying that, in practice, members will be informed as soon as practicably possible by one or other of the means that we have debated?

Chris Pond (Labour, Gravesham)

That certainly is the intention. We want to ensure that members are fully informed as quickly as possible and with as much accuracy as possible.

Question put and agreed to.

Clause 27, as amended, ordered to stand part of the Bill.

Clause 28 - Supplementary provision relating to

Kevin Brennan (Labour, Cardiff West)

I just wanted to raise a further point about consultation. I am not sure whether now is the appropriate moment, but it relates to clause 28 and some worries that have been raised by the trade union, Amicus, about consultation and freezing orders.

As clause 28 will allow the regulator to make freezing or winding-up orders without reference to

anyone, Amicus is concerned that there should be some requirement to consult members of a scheme before an order is made. That might not be a practical position, but that is the issue that the trade union wants to probe. Perhaps the Under-Secretary will comment on the possibility of scheme members being consulted before any major changes—in particular, freezing orders—are made and on consultation more generally as it relates to the Bill.

Chris Pond (Labour, Gravesham)

My hon. Friend raises an important point. The purpose of the freezing order is to take swift action when it looks as if a scheme is getting into trouble. If action is to be taken in a matter of hours or days, the consultation process is not possible. As I have said several times, the purpose of a freezing order is to ensure that the interests of members are neither enhanced nor diminished during that period. Even when it is not possible to consult and quick action has to be taken—I am sure that the regulator would wish to consult whenever feasible—the members can be reassured that the purpose of that action is explicitly to protect their interests and is not intended to damage them. I hope that Amicus will understand that there will be circumstances in which the regulator just has to act.

Bill Tynan (Labour, Hamilton South)

If a scheme is in trouble and the trustees decide to wind it up, will they have to notify the regulator of their intention and will there be an opportunity for the regulator to impose a freeze on that scheme before it is wound up?

Chris Pond (Labour, Gravesham)

No, in those circumstances the trustees would not have to inform the regulator that they had decided to wind up the scheme. I am sure that the regulator would take an interest in whether the circumstances were appropriate and would want to ensure that members' interests were protected, but I do not think that there would be any formal requirement for the trustees to inform the regulator that they would be taking that action.

Question put and agreed to.

Clause 28 ordered to stand part of the Bill.

Clause 29 - Prohibition orders

George Osborne (Conservative, Tatton)

I beg to move amendment No. 151, in

clause 29, page 18, line 17, at end insert 'forthwith.'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Amendment No. 152, in

clause 29, page 18, line 20, at end insert—

'( ) Alternatively, any person prohibited under this section may apply to the high court for judicial review of the decision.'.

Amendment No. 150, in

clause 29, page 18, line 29, leave out subsection (5).

George Osborne (Conservative, Tatton)

Let me say from the outset that I would appreciate a stand part debate on this clause.

The clause prohibits a person from being a trustee of any scheme on the grounds that they are not a fit

and proper person. It contains a significant extension of the powers in the Pensions Act 1995, which restricts prohibition to serious and persistent breaches of specific parts of pensions law. The clause contains a much broader power to prohibit people who are not, in the view of the regulator, fit and proper persons.

Amendment No. 151 is intended to add urgency to subsection (2), the effect of which is to remove a trustee from a scheme. I want to add the word ''forthwith'' to make it clear that that should happen immediately. Perhaps the Minister could clarify whether that would be the case and whether it would happen the moment the decision to issue a prohibition order was made by the regulator or when the information was passed on to the trustee. When would removal take place?

Amendment No. 152 is slightly lengthier and would insert a new sentence. If a person were prohibited from being a trustee because they were not a fit and proper person, that could have an enormous impact on their professional, and possibly their private, life. If they were, for example, a finance director, being deemed not to be a fit and proper person to be a trustee could finish their career. One hopes that a prohibition order would only be issued when it was justified. However, given that it is likely to have such a serious impact on someone's life, surely people must be given the chance to appeal.

As I understand it, under subsection (3) the appeal can only be made, in effect, to the regulator. Perhaps the Under-Secretary will tell me that the determinations panel makes the decision and that the regulator hears the appeal, or that the tribunal, which we will come to, hears the appeal. However, given the seriousness of a prohibition order's effect, a person should be given the option to get outside the system and to appeal beyond the organisation in its totality which is imposing the prohibition order.

That organisation might be prejudiced by the fact that it felt it necessary to issue the prohibition order in the first place. Amendment No. 152 would give the prohibited person the power to apply to the High Court to get a judicial review of the decision. The Under-Secretary may tell me that that can happen in any case and that a person has the right to apply to the High Court for a judicial review. However, I am not a lawyer so I thought that I would get him—or rather the lawyers who advise him—to explain that that is the case. It is important that someone in extremis should have the right to appeal against a decision to an organisation outside the structure of the regulator, its determinations panel and the tribunal.

Finally, amendment No. 150, which is a probing amendment, would remove subsection (5). It seems a strange and blanket provision that a revocation of a prohibition order

''cannot affect anything done before that time.''

What is meant by that?

Chris Pond (Labour, Gravesham)

The hon. Gentleman is correct in saying that the clause extends powers in the 1995 Act. I am sure that he and other hon. Members will be pleased to

know that it imposes the same standards on trustees as exist in legislation on other groups that look after money, such as insolvency practitioners, bookmakers and auditors, as well as, I am advised, slaughtermen and taxi drivers. It is appropriate that trustees should at least match the standards required of those groups.

Win Griffiths (Labour, Bridgend)

Bookies.

Chris Pond (Labour, Gravesham)

Yes, if you like—bookies.

Clause 29 concerns the prohibition of people from being trustees of pension schemes. Amendment No. 151 suggests an additional word: that prohibition should take place ''forthwith''. The amendment would have no effect, as the intention is that such orders would take force immediately.

George Osborne (Conservative, Tatton)

When the Under-Secretary says ''immediately'', does he mean that the orders will take effect from the moment at which the regulator makes the decision, or from the moment at which the individual is informed of it?

Chris Pond (Labour, Gravesham)

I am advised that the order will take effect from the moment at which the decision is taken.

Amendment No. 151 appears to seek an alternative route of appeal for those prohibited as trustees of pension schemes. However, that is misconceived, as the remedy of judicial review is always available if there has been procedural unfairness. That does not need to be specified in the Bill. It is also important to note that judicial review is concerned with reviewing not the merits of the decision in respect of which the application for judicial review has been made, but the decision-making process itself.

Trustees who are prohibited will be able to make a reference to the pensions regulator tribunal and seek to have the decision overturned. At a later stage, they may ask the regulator to revoke the prohibition order. They may have been deemed an unfit person to fulfil the role of trustee because they have insufficient understanding of pensions law. If they are prepared to go on a crash course in pensions law and are then deemed to understand their responsibilities properly, the regulator may decide to revoke the prohibition order. The amendment would add nothing to the rights of prohibited trustees, but might add to their and the regulator's costs if an application for a judicial review were made without merit.

Amendment No. 150 removes the subsection that provides that anything done by the trustees during the period between the making and revocation of a prohibition order is valid. That is the same provision as in section 3(4) of the 1995 Act. It protects trustees and scheme members from the consequences of any revocation. Many schemes and some legislative exemptions require trustees to make decisions unanimously. If the subsection is removed, decisions made during the revocation might be deemed to have been invalid. That would leave trustees in a difficult position. For example, allowing ill-health or early retirement pension payments would be void and subject to challenge, as would investment decisions and statutory appointments.

The hon. Member for Tatton said that it could have serious consequences for an individual's professional

advancement if they were deemed not to be a fit and proper person to act. The Bill does not refer to the details of the regulator's judgments or the basis of them, but the following issues would be considered: the trustees' probity, competence and soundness of judgment; the diligence with which they fulfil their responsibilities; whether the interests of members of the scheme or schemes in question are in the opinion of the regulator prejudiced by their acting as trustees; and whether they have contravened any provision of the pensions legislation relating to the provision or management of pensions in a country or territory outside Great Britain.

George Osborne (Conservative, Tatton)

As I said, I hope that there will be a stand part debate on the clause. However, I am satisfied with the Minister's comments on my amendments, in particular the confirmation that there will be a power to seek a judicial review of a decision, albeit in terms of whether the process was properly carried out. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

George Osborne (Conservative, Tatton)

I want to make a more general point about the prohibition orders and the role of trustees. An important principle that underlies all pensions legislation is that the people who are primarily responsible for the good governance of occupational pension schemes are the trustees. As a member of the Public Accounts Committee, I read the reports of the National Audit Office very carefully, and I think that it was that organisation which stated that trustees are an initial defence in the sound operation of occupational pension schemes. It is their job to preserve trust assets and deal with them in the best interests of beneficiaries, to ensure that there are sufficient assets to cover scheme liabilities and to act if there are not, to ensure that the employer is fulfilling its obligations, to appoint the professionals, and so forth. It is an important job, and it is important that the regulator has the power to remove trustees who are not doing their job.

The Under-Secretary referred to the fact that a trustee may not be up to the job. There are two possible reasons for that. All of us readily understand the first. A trustee might be a crooked or bad person. At present, OPRA can undertake a few checks on the suitability of a trustee, but there are restrictions. It can investigate whether a trustee is disqualified from being a trustee, but he might be a disqualified director or an undischarged bankrupt, or have a criminal record for financial fraud. As I understand it, there is no power for OPRA to check such things, even though trustees have to sign the form saying that they are a fit and proper person.

The clause gives the pensions regulator the power to prohibit a person from being a trustee if he is not a fit and proper person. Will the new regulator attempt a broader investigation of newly appointed trustees? Things have changed since the 1995 Act. We now have the Criminal Records Bureau and various new tools are available to the regulator. However, the knowledge

gap, if I may call it that, on the background of newly appointed trustees exists—it was identified in the NAO report into OPRA—and I am interested to know whether the regulator will run a check on every new trustee and how that process is envisaged to take place.

I said that two types of people might not be fit and proper persons. The first is a bad or crooked person, who should not be let loose near anyone else's money. Secondly—the Minister said this in a previous debate—a person might not be fit and proper if he does not have sufficient knowledge of pensions law. That is different; that might just be ignorance. One feature of the Myners report, for example, was his finding that trustees often had very little knowledge of some of the principles of asset investment or the specifics of pension law. He said:

''there should be a legal requirement that where trustees are taking a decision, they should be able to take it with the skill and care of someone familiar with the issue concerned.''

Later, we will debate whether there should be such a requirement that trustees have a knowledge of pensions, trust law, the principles of funding occupational pensions and the principles of investment management, but does the fact that a trustee not have such knowledge or understanding mean that they can be prohibited because they are not fit or proper? That could have serious consequences.

The pensions fund trustee survey attached to the Myners report found that of the 226 trustees questioned, 62 per cent. had no professional qualifications, 26 per cent. had less than one day's training and 79 per cent. had other full-time jobs. There was also a striking lack of knowledge about, for example, the benchmarks used by the schemes of which they were supposed to be trustees.

When the Bill is enacted, because of its proper requirement that trustees have a knowledge and understanding of all those matters, those people could suddenly find themselves prohibited because of provisions in the clause. There could be a raft of prohibition orders because people do not have the requisite knowledge. I assume that the regulator will act with some flexibility and will not come down like a ton of bricks on all the worthy volunteers who do this job across the country, by issuing prohibition orders left, right and centre.

The Minister said in an earlier debate that one of the definitions of why someone is not fit and proper is if they have no knowledge of pensions law. They could be prohibited while they were sent off on a course to learn about pensions law. I am not sure that we would want a large number of people prohibited and sent off on courses because even if a prohibition order is in force for a short time, that would still have an impact on their professional standing and career prospects.

We may come on to the register of prohibited people, which will contain information on trustees. We do not want its more general impact to be that the only people who are trustees of pension funds are, in effect, professional trustees. We could lose that large number of voluntary trustees who, by and large, do a good job

and represent members' interests, even if they are not professionals in the sense of being totally conversant in trustee law and the principles of assets investment.

Chris Pond (Labour, Gravesham)

The hon. Gentleman made some important points, but I feel that he spoiled some of them by over-egging the pudding and suggesting that swathes of trustees would be prohibited or sent on training courses.

We need to put the debate in context. The hon. Gentleman and other hon. Members may be reassured to learn that in 2002–03, OPRA prohibited only 11 trustees. A trustee who is prohibited will have the option of either taking the case to the tribunal or, having taken ameliorative action, asking for the prohibition to be lifted. The question is whether trustees are professional in going about their tasks. We do not in the Bill seek to ensure that all trustees are professional trustees, as the hon. Gentleman suggested, but we would wish all trustees to act in a professional manner. As he acknowledged, trustees have an important responsibility. They are the people who will in large part determine the interest of the members of a pension scheme. We would expect trustees to behave professionally and to undertake those responsibilities seriously, as would the members.

If a trustee is considered to be acting improperly or incompetently, they will face prohibition by the regulator. That must be an option. The reasons why a trustee is acting incompetently may be to do with a lack of understanding about pensions, their responsibilities or the additional skills that they require. All I would say is that we shall discuss the issue later. The hon. Gentleman mentioned the Myners report and the requirement to educate trustees. Since we shall discuss that in some depth when we come to part 5, I suggest that the Committee defer further discussion on the matter until we reach that point.

George Osborne (Conservative, Tatton)

Of course the Under-Secretary is right that the bigger discussion about the role of voluntary trustees versus professional trustees is best saved for later in the Bill. He mentioned that 12 had been prohibited.

Chris Pond (Labour, Gravesham)

Eleven.

George Osborne (Conservative, Tatton)

Eleven.

Chris Pond (Labour, Gravesham)

It may be 12 by now.

George Osborne (Conservative, Tatton)

It may indeed. That figure is partly because the 1995 Act is tightly drawn and provides for orders against people who have been in ''serious or persistent breach'' of specific parts of pension law. The clause, however, gives a much broader definition of a person against whom such orders may be issued, which is someone who is merely

''not a fit and proper person to be a trustee''.

In his discussions with OPRA and so on, has the Minister made any estimate of whether there will be a large increase in the number prohibited as a result of the clause, or does he expect the figure to remain at less than a dozen a year?

Chris Pond (Labour, Gravesham)

I would not like to put figures on that. We are not expecting that huge numbers of trustees will be deemed unfit to carry out that responsibility. I am sure that the Committee would want to join me in paying tribute to the great majority of trustees who do an excellent job on behalf of the members of those schemes. In our discussions, we in no way want to undermine the commitment or professionalism that most trustees bring to their work.

As the hon. Gentleman indicated, however, some individuals may well be deemed to be neither fit nor proper to have such considerable responsibility for the pension interests of members, because of their activities outside their roles as trustees. In other financial walks of life, trustees may have been considered to have acted improperly. I am sure that the Committee would agree that it is important that the regulator takes that into account.

I do not wish to detain the Committee by talking about the way in which OPRA will identify those circumstances. With your permission, Mr. Griffiths, and that of the Committee, we will write in detail to members of the Committee about the sort of checks that the regulator will carry out. That might give the hon. Gentleman a better idea of the number of people who will be affected.

Question put and agreed to.

Clause 29 ordered to stand part of the Bill.

Clause 30 - Suspension orders

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 29, in

clause 30, page 18, line 40, leave out paragraph (a) and insert—

'(a) after subsection (1)(a) insert—

''(aa) pending consideration being given to the institution of proceedings against him for an offence involving dishonesty or deception,'','.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss Government amendments Nos. 30, 94, 96 and 102.

Chris Pond (Labour, Gravesham)

As with most of the Government amendments, these are fairly technical amendments to make sure that the Bill is clear and easy to understand. Unless members of the Committee wish to raise particular issues, I suggest that they accept the amendments as an improvement to the Bill.

Amendment agreed to.

Amendment made: No. 30, in

clause 30, page 19, line 4, leave out sub-paragraph (i) and insert—

'(i) in paragraph (a) after ''paragraph (a)'' insert ''or (aa)'','.—[Mr. Pond.]

Clause 30, as amended, ordered to stand part of the Bill.

Clause 31 - Appointments by Regulator

George Osborne (Conservative, Tatton)

I beg to move amendment No. 185, in

clause 31, page 19, line 40, leave out—

'(a) by the employer'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss amendment No. 186, in

clause 31, page 19, line 42, leave out—

'(c) partly by the employer and partly out of those resources.'.

George Osborne (Conservative, Tatton)

These two probing amendments are designed to elicit information from the Government. They deal with the fees and costs of the trustee appointed by the regulator. I am sure that we shall have a broad debate later in our proceedings about where the cost of expert advice should fall and how we should deal with a situation in which professional fees are eating into the resources of a scheme, something that we have all come across.

Under subsection (2), the regulator can decide to charge an employer or a scheme—or both—for the costs of trustees. That is a change from the 1995 Act. Will the Under-Secretary explain the reason for that change? It could mean that considerable direct costs fall either on the scheme or on the employers, who may not be culpable for the problems of the scheme, yet may be required to pay significant costs. In the long run, the cumulative effect of that would be to discourage employers from offering final salary schemes, which we all accept is a trend and a problem. I tabled the amendments so that the Under-Secretary could explain how the expenses and fees of trustees appointed by the regulator will be paid, how the determinations of who should pay will be made and whether the decisions can be appealed against. What check will be made that the trustees are not charging unreasonable fees and that the regulator has not gone for the most expensive City firm to employ the most expensive trustees when they are not necessarily the people who are needed?

Steve Webb (Liberal Democrat, Northavon)

The amendments raise the important issue of who meets the costs of some of the regulatory burdens. The hon. Member for Tatton said that the employer might not be culpable, as indeed he might not; but he might be. The amendments would remove the power of the regulator to apply any cost, in whole or in part, to the employer. I think that essentially the hon. Gentleman was saying that it should not necessarily always be the employer who pays the whole amount; however, it does not follow that the employer should never pay any of it. For that reason I would not support amendments Nos. 185 and 186.

George Osborne (Conservative, Tatton)

I did point out that the amendments were probing amendments. Perhaps if the hon. Gentleman were to table some amendments to the Bill, he would know what it is like to table a probing amendment.

Steve Webb (Liberal Democrat, Northavon)

I assure the Committee that there are plenty in the pipeline.

The hon. Gentleman raised another, serious, issue; I may risk inducing another intervention when I say that I find it slightly startling to find a Conservative Member worrying about the ravages of the free market, and worrying about competition in trustees leading to a fiercely competitive market, where there was minimum cost but where trustees might somehow exploit schemes or employers.

It is not clear to me, with respect to the clause or the amendments, whether we are dealing with cases in which, for example, a trustee is prohibited or suspended and the regulator replaces him with someone else, or with cases in which a scheme is to be wound up and the regulator appoints an independent trustee to see to that.

That brings me back to the issue to which a satisfactory response was not received on Tuesday: the way in which trustees' costs mount up. A response that was mentioned on the Labour Benches on Tuesday was to nationalise the process. I have on occasion mooted the idea that there should at least be a not-for-profit option for the process of winding up a scheme or of acting as an independent trustee.

Very often, there is not enough money in the funds in question, and it seems immoral that that should be the chance for someone to make a fast buck. If there is a public sector body—the regulator—appointing a trustee, I cannot see why that should be an opportunity for someone to make a profit. The private sector having gone wrong, and the regulator having put in a trustee as a result, it would seem that the state should ensure that the process is properly undergone. The trustees should thus, for example, act on the regulator's behalf—perhaps even as employees of the regulator, although I do not know whether that is consistent with the spirit of the Bill.

Whoever were to pay in such a case—employer or scheme—I should be worried if they had to line the pockets of a trustee who was in it for the money. Once things have gone wrong with a scheme and there is not enough money for the pensioners and the workers anyway, everything possible should be done to minimise the call on the fund. I ask the Minister for reassurances that the regulator would adopt that approach.

Kevin Brennan (Labour, Cardiff West)

As I am sure the Under-Secretary knows, workers and pension scheme members really become irate when independent trustees charge exorbitant sums of money for answering proper letters from workers who simply want to find out what has happened to their pension, and when those trustees take huge chunks of money out of pension schemes that are in wind-up. The spectacle of such exorbitant fees being accepted has caused great and understandable anger among workers whose pensions are at risk.

I have always felt that there is a problem in the market for independent trustees. Very few firms offer that service and there seems to be little competition and a great deal of collusion between those companies. We are told that a high degree of specialism and expertise is necessary.

In cases of such market failure, the argument for Government action and state intervention arises. I used the term ''nationalise'', which is not very popular these days, but there is a case to be made for the regulator having some of the relevant expertise in-house and being able to offer the service in question. I invite the Under-Secretary to make observations on whether that would be possible

within the scope of the Bill. Does he anticipate—as a regular occurrence—that, in cases where the wind-up was straightforward and did not require scarce outside expertise, the pensions regulator could directly solve the problem?

I understand that the hon. Member for Tatton and his colleagues have tabled amendments that are probing in their nature. However, I would observe that although the hon. Member for Northavon was correct when he said that there are occasions when the employer could be at fault, there are never occasions when the employee is at fault in those matters. We must remember that from time to time, because they are the ones who pay the price.

Chris Pond (Labour, Gravesham)

My hon. Friend makes an important point and we must recognise that the purpose of the Opposition amendments is to remove the regulator's power to apportion the costs between the employer and the scheme, or to require that the employer pays them. That would be a significant change, because currently in the great majority of cases OPRA requires that the employer pays the trustees' costs. The amendment would increase the anger that would be felt by members and would have a considerable impact, in the ways that have been expressed so eloquently by my hon. Friend.

Bill Tynan (Labour, Hamilton South)

In a previous intervention, I asked a question about wind-ups and the regulator. This provision deals with the regulator appointing a trustee. My hon. Friend the Member for Cardiff, West made the point that where a scheme is wound up, huge sums are often deducted for answering letters. If, within the Bill, there is not the opportunity to have the regulator involved before a wind-up, the point that he made will continue to apply. How could we overcome that?

Chris Pond (Labour, Gravesham)

I can tell my hon. Friend that there will be many circumstances where the regulator becomes involved before wind-up. That is part of the reason why we have been discussing the freezing order process and, indeed, the other mechanisms that the regulator can use to intervene before a winding-up process takes place, such as the improvement and the third party notices. While we do not expect the regulator to run pension schemes—it would be quite wrong to expect it to do that—we want to ensure that where schemes start to run into trouble the regulator is there to ensure that, wherever possible, winding up can be avoided.

On the point made by my hon. Friend the Member for Cardiff, West and by the hon. Member for Northavon about the cost of trustees where they are appointed when schemes have run into trouble, I can tell them that there is concern about the level of fees charged by trustees in those circumstances. The Minister will be tabling a Government amendment to deal with that issue later.

I can give the Committee the reassurance that any trustee appointed by the regulator will either be a trustee appointed from a register held by the regulator or will be a member. In the case of schemes with no trustee, a member is often appointed to reduce the overall costs of the process. That might go part of the

way towards the suggestion made by my hon. Friend the Member for Cardiff, West about in-house expertise. Trustees will be eligible to be on that register only if they agree to a monitoring of fees by the regulator. That is in recognition of the fact that so many people are concerned about the level of fees charged at the moment, and that those fees can eat deeply into the scheme funds, which may already be diminishing.

Steve Webb (Liberal Democrat, Northavon)

What the Under-Secretary has said is extraordinarily welcome and potentially very significant, but does that not throw into even sharper relief the comment of the hon. Member for Hamilton, South (Mr. Tynan)? He said that, when the regulator was involved, there might be a not-for-profit situation in which money was not siphoned out of a fund, but if the regulator was not involved in a wind-up, people could be victims in just the same way. Will there be a mechanism whereby people can ask the regulator to get involved as soon as they know that their scheme is being wound up?

Chris Pond (Labour, Gravesham)

In response to my hon. Friend the Member for Hamilton, South, regulations require regular reports to OPRA, the current regulator, when schemes are winding up. Of course, the new regulator will continue to have that role. We are not suggesting that the regulator should take one step back from that.

On the point made by the hon. Member for Northavon, the clause gives an opportunity for trustees, employers and members to request that the regulator appoints a trustee, if trustees or employers feel that they do not have sufficient expertise, or if members feel anxiety about that. At the moment, they can only informally ask OPRA to do that. If OPRA ignores them, which I am sure it would never do, there is nothing that any of those groups can do to require the request to be treated seriously. With those reassurances, I hope that the amendments will be withdrawn.

George Osborne (Conservative, Tatton)

Sometimes one strikes gold with probing amendments. We have discovered that there is a whole new bit of the Bill to come. I was not aware of that. I am therefore delighted that I tabled the amendments, even if they attracted some sarcastic comments from the hon. Member for Cardiff, West—

Kevin Brennan (Labour, Cardiff West)

Not from me.

Mr. Osborne—and from the hon. Member for Northavon. Given that we have learned some important information, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 31 ordered to stand part of the Bill.

Clause 32 ordered to stand part of the Bill.

Clause 33 - Regulator's right to apply under

George Osborne (Conservative, Tatton)

I beg to move amendment No. 188, in

clause 33, page 20, line 31, leave out subsection (7).

This is another probing amendment. It would remove subsection (7), which says that the clause does not apply if the actuarial valuation that established that the assets were insufficient to meet protected liabilities took place before the Bill came into force. I understand that that is a way of commencing the clause, but presumably the clause cannot commence until the Bill becomes an Act.

Perhaps I am missing something—it was midnight when I was looking at the clause—but it seems that the actuarial valuation referred to in subsection (3) is obtained by the PPF board. As the board does not exist until the Bill comes into force, I am not clear as to how it can obtain an actuarial valuation, and so I am not sure that subsection (7) is relevant. However, I have probably missed something, and the Under-Secretary will probably explain.

Chris Pond (Labour, Gravesham)

Let me explain that the clause is designed to give the regulator the same standing as insolvency practitioners to pursue any debt due to a pension scheme by reason of transactions that it suspects were made at an undervalue—

It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at Two o'clock.

Standing Committee B

Clause 33 - Regulator's right to apply under section 423 of Insolvency Act 1986

Chris Pond (Labour, Gravesham)

Hon. Members will have been waiting anxiously to hear how the sentence that I began before lunch ends. I thank them for their patience. We are discussing amendment No. 188, which would remove the provisions that the regulator can apply under section 423 of the Insolvency Act 1986 only if the valuation of assets needed for such an application is done on a date before the section comes into force.

It may assist hon. Members if I explain that the clause is designed to give the regulator the same standing as an insolvency practitioner to pursue any debt due to a pension scheme by reason of transactions that it suspects were made at an undervalue. In those circumstances, the regulator may apply to the court under section 423. If the regulator can show that the transaction took place at an undervalue for the purpose of putting assets beyond the reach of the pension scheme, or of otherwise prejudicing the interests of the scheme, the court may make orders to restore the position of victims of the transaction. The application to the court can only be made if the pension protection fund, the trustees or managers have actuarial evidence that the fund's assets are less than its liabilities. The clause specifies in detail how that is defined.

As hon. Members will be aware, subsection (7) provides that the clause can apply only when the actuarial valuation is in respect of a date after the commencement of section 423. That is because an actuarial valuation can be made with reference to any date, although if it is made for statutory purpose it will have to be made within one year of that date.

Subsection (7) is designed to ensure that the regulator's powers to pursue a debt in respect of a deficit that arises before the provisions come into force are limited. If the debtor is bankrupt or is a corporate entity that is being wound up, the regulator must have leave of the court to make an application under section 423. An application made under that section is treated as being made on behalf of the victim of the transactions—the trustees, the members of the scheme or the PPF board. That power will enable

the regulator to fulfil its objectives of protecting members' benefits and reducing calls on the PPF.

The main objective is to recover debts owed to the scheme by the sponsoring employer where the employer's assets have been depleted in order to defraud creditors. That provides the regulator with the power, if necessary, to carry out its functions and a mechanism for recovery of funds to creditors.

George Osborne (Conservative, Tatton)

That was the convincing explanation that I was looking forward to over my lunch break. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 33, as amended, ordered to stand part of the Bill.

Clause 34 - Register of occupational and personal

Malcolm Wicks (Labour, Croydon North)

With your great help, Mr. Griffiths, my colleague and other hon. Friends steered us through this morning's discussions. I feel like one of those Arsenal substitutes running off the bench late in the game, although I may not look like one. I will not go any further or I will upset Manchester United supporters. The shadow spokesman, the hon. Member for Eastbourne (Mr. Waterson), who cannot be with us today, is probably a Manchester United supporter.

George Osborne (Conservative, Tatton)

I am the Member who represents virtually all the Manchester United players. Although I am not a Manchester United supporter, I do take an interest.

Malcolm Wicks (Labour, Croydon North)

Most of its supporters are in the home counties, so the hon. Gentleman does not represent them. However, that is enough about football, Mr. Griffiths, as I suspect that yours is another game.

Let me deal with the first of the provisions that will be at the heart of the regulator's new proportionate and targeted approach to pensions regulation—its power to collect and analyse information about schemes. We touched on that this morning. The clause provides that the regulator must set up and maintain a register of pension schemes. The Occupational Pensions Regulatory Authority is currently under a similar duty to hold such a register in its capacity as registrar of occupational and personal pension schemes under the Pension Schemes Act 1993. To prevent there being any extra burden on schemes that are currently registered, their registrations will simply be transferred to the new register. There is unlikely to be any change in the type of schemes that are required to register and schemes with only one member will continue to be exempt from registration.

As well as fulfilling the requirement that the regulator must hold a register of pension schemes to comply with article 9 of the occupational pensions

directive, the register will be used to assist members of the public to trace their pensions. That is an existing service, which last year provided contact names and addresses for more than 25,000 requests. Lost pensions are a significant issue which we will address later.

Clauses 35, 36, 37 and 55 set out additional details on the information to be provided by schemes for the purposes of the register, the regulator's powers to make use of the information including the provision of reports to the Secretary of State, and the duties of trustees and managers in respect of the register. The Committee may wish to discuss those powers and functions when we deal with those clauses, but it might also be helpful to do so now.

We addressed important concerns this morning. Many issues have been raised about accurate data, to which the hon. Member for Northavon (Mr. Webb) and Labour Members referred. We want to turn the position around. The information and register powers that we will discuss when we deal with these clauses will address that. At the heart will be the scheme return, which has been trialled with the industry in draft form, and which it welcomes. The scheme return will allow us to start to compile the accurate data that we need for the future. The regulator will be able to require the information covered in the scheme return, as the usual section 10 penalties referred to earlier will apply in the event of any default.

It will not be for the regulator as an institution to keep a record of every last member of every last pension scheme. That would not be sensible; there are many hundreds of schemes and at least 10 million scheme members. However, it is for the regulator to find out if a scheme's records are bad. For example, it can issue an improvement notice if a scheme cannot provide members with information. Whistleblowers will often be important in that. The regulator also has an objective to promote good administration.

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

Will the Financial Services Authority have to provide details of its pension scheme in the register? Will it come under the ambit of the regulator?

Malcolm Wicks (Labour, Croydon North)

Its own pension scheme?

Adam Price (Plaid Cymru, Carmarthen East and Dinefwr)

Yes.

Malcolm Wicks (Labour, Croydon North)

It is a public body. My understanding is that the provision will apply to private sector schemes and I suspect that the FSA does not come under that banner. However, it might be best if I deal with that by correspondence.

Kevin Brennan (Labour, Cardiff West)

Will my hon. Friend give way?

Malcolm Wicks (Labour, Croydon North)

Yes, I will sit down and then stand up again.

Kevin Brennan (Labour, Cardiff West)

I am sorry to tax my hon. Friend's knees, which have obviously seized up on the substitutes' bench this morning. Does he anticipate that the regulator will instantly be able to say how many members of occupational pension schemes are in wind-up, for example, if it is asked that question?

Malcolm Wicks (Labour, Croydon North)

Yes, we need to move towards that. It will be one of the purposes of the regulator, which will, with the PPF, sometimes be actively involved in that process.

Steve Webb (Liberal Democrat, Northavon)

As the Committee will have gathered, I welcome the provision of better information about schemes for the purpose of policy making and of better information to individual scheme members. As such, I welcome the group of clauses.

Information received from OPRA on the previous register always felt like a little slice of history because it was about schemes that had come to the end of the winding-up process. OPRA would not be the place to go if one were trying to work out what was happening and what would be likely to happen next year. Am I right in thinking that this register will not just be about what has happened to dying schemes, but will have a lot of information about current schemes, funding levels, and so on, thereby enabling us to get a better snapshot of what is happening now for the purposes of policy making?

Can the Minister reassure us that if we were to table questions in Parliament about the current state of occupational schemes, he would have access to such information? Clause 55 suggests that the regulator can make available information that is tangential to what the schemes are principally about. Will the register enable us to find out more about what is happening in occupational pensions and tell us more about now and the future, not just about the past?

Malcolm Wicks (Labour, Croydon North)

While that is in my head, let me say that the brief answer to both questions is yes. We need more up-to-date information. That is one of the purposes of the regulator. Ministers will be able to answer those questions. I often sit at my desk hoping that the hon. Member for Northavon will ask me a few more questions so that I can justify my existence. I look forward to the questions that I am sure he is drafting even as he thinks.

Steve Webb (Liberal Democrat, Northavon)

I am slightly disappointed that my words stay for so short a time in the Minister's mind that he has to answer them the second he hears them. I shall persevere anyway.

The schemes must provide the regulator with information. Will the Minister say a bit more about where the Bill states that the regulator can require the scheme to keep better records? As he said, the regulator will not know the nitty-gritty about individual scheme members. However, those members need to know that there is good record keeping. Is that power explicit, clear and strong enough? I want to be clear about that. Perhaps the power is included in the Bill, but we have not got to it yet.

We welcome the collection of additional information. The only real concern, however, is how that feeds through to the individual scheme member. It was quite shocking to hear some of the information the Minister provided about schemes not knowing for how long people had been members. That is basic information. It is rather surprising that the previous regulator did not have that power. Perhaps the

Minister could assure us that the Bill explicitly says that the new regulator will actively pursue that kind of thing.

George Osborne (Conservative, Tatton)

I, too, have a few questions that the Minister could answer in a bunch with those asked by the hon. Member for Northavon.

We welcome this improvement of the pension scheme registry, which was designed to help people trace pension schemes and help collect the levy. It was not supposed to support the supervision or regulatory functions that we all agree are necessary. I refer hon. Members to the Public Accounts Committee's report on the matter. In many ways, the former system restricted OPRA's ability to cross-reference schemes and consider them if a trustee in one was found to be doing something improper. It could not cross-reference and see what other schemes that same trustee was involved in. The PAC goes so far as to say that in practice the pension scheme registry gave little assistance to OPRA.

We welcome the change. I suppose that both the Conservatives, who introduced the 1995 Act, and the Government, who have been sitting on that Act for six years, have to take some responsibility for not improving things a bit earlier. That was a finding of the all-party PAC. It felt that the gap in knowledge should have been addressed earlier, but we are where we are.

I have some specific questions. Under subsection (1), the regulator must compile and maintain a register. I suppose that the straightforward question is: where will the register be compiled? At the moment, the registry is in Newcastle, which is a fine place for it. We should put on record the fact that the Davis report—the quinquennial report commissioned by the Government—said that the pensions scheme registry was

''well run and efficient, with a motivated team of staff providing excellent customer service.''{**W4**}

That is very good news, and the registry should be given proper credit.

Davis goes on to say:

''However, their location in Newcastle, when the rest of the organisation is based in Brighton, means that they sometimes feel isolated from their colleagues and are seen as an 'outpost of empire'.''{**W4**}

That is a problem that Davis identified. I would be interested to know whether the Minister agrees with the quinquennial review. Are there any plans to move one operation from Brighton to Newcastle, or to move the operation in Newcastle down to Brighton? There are lots of marginal seats in Brighton, so perhaps the organisation will be staying there.

It would be interesting to know whether there will be any relocation, and if so, what will be done to help the staff relocate. If the register is to be much more actively used by the regulator, it might be difficult having registry staff at different ends of the country, even with today's modern technology. That point occurred not to me, but to the Government's own

quinquennial review of OPRA, so it might be worth the Minister's while to clarify the issue.

May I also ask about the cost of compiling and maintaining the register? When I looked through the regulatory impact assessment, there was very little detail. In fact, I could hardly find any reference to the register at all, although there is, of course, reference to the regulator. The regulatory impact assessment tells us that there will be a 25 per cent. increase in the cost of running the regulator. That means that the cost will go up by £6 million to £23 million. According to the assessment, that increase is due to increased staff numbers and accommodation costs, codes of practice, printing and IT.

There will also be one-off start-up costs of about £6 million, and a further £20 million will be needed for IT development. Those are considerable sums. I am assuming, and am asking the Minister to confirm, that the costs of compiling the register come within those costs. Perhaps he could give us an idea of what proportion of the extra costs the setting up and maintaining of the register account for. We would all be interested to know that.

It is worth asking the Minister whether he is satisfied with the IT that will be used. I am asking him that because one of my other functions is shadowing one of his Treasury Minister colleagues, and we regularly ask Treasury Ministers about their IT projects, because they are all hopeless—not the Ministers, I hasten to add, but the IT projects that the Inland Revenue commissions. The Department for Work and Pensions will, of course, be familiar with projects such as the NIRS2 project. I would be interested to know whether the Minister is satisfied that the IT scheme, which is not nearly as large as NIRS2, but is nevertheless a fairly extensive project, will be delivered on time and on budget. Does he, unlike his colleague the Paymaster General, regularly meet the people who provide IT for his Department?

Finally, subsection (4) requires the regulator to maintain a list of schemes that have ceased to be registrable or have been wound up. Will the Minister confirm that they will be recorded in perpetuity? A list of schemes that had been wound up would make great reading in a couple of hundred years' time. Subsection (6) says that

''the register may consist of more than one part.''{**W4**}

What does that mean?

Malcolm Wicks (Labour, Croydon North)

It would help me if I dealt with the questions in reverse order. I hope that the Committee will not be too confused by that approach. I am still thinking through the last question. I may not have fully grasped it, although if I can grasp the answer to it, that will be good enough. Yes, records will be kept in perpetuity. Whether I can talk with any weight about the intergalactic authority of the fifth millennium, I am not certain, but I am sure that in some way they will imbibe Hansard, and these proceedings, and understand the meaning of my pledge. I must add that that was not a pledge to expand the European Union—I accept that such matters are controversial to some people.

At present, there are six members of staff at the registry in Newcastle, but in future the registry will be based in Brighton, despite the fact that, notwithstanding what the hon. Gentleman said, Newcastle thinks of itself as the centre of the empire. However, we will not dwell on that. It is a minor slur—if that is not an unparliamentary term—to suggest that we are basing the registry in Brighton because of the marginal seats. That is not the reason. [Interruption.] We thought about Tatton, but because electoral considerations are not a criterion, we are not basing it there.

The Committee knows about the increasing costs of the regulator vis-à-vis OPRA. That is the best cost figure we have. When I recently visited OPRA—not that it can take parliamentary judgments about the Bill for granted—it was beginning seriously to think through the IT implications of the move. I understand the hon. Gentleman's caution about IT. Some projects are not as good as others, although that is not always true of my Department. We have many success stories.

To make sure that I get things absolutely correct, I shall write to the hon. Member for East Carmarthen and Dinefwr (Adam Price) about the Financial Services Authority. My understanding is that, as it is a public body, the FSA's pension scheme would not come under the ambit of the regulator. I shall clarify that, however, although I think that the answer will be no. We certainly want the regulator to work closely with the FSA on a range of issues in the future. Although it would be mildly amusing for it to be regulating the FSA's pension scheme, that will not be the case. If I have got that wrong, I shall clarify matters later.

Steve Webb (Liberal Democrat, Northavon)

I am grateful to the Minister. The FSA was a specific example, but there is a wider issue about the security of pension rights of public sector workers in general. I am sure that there is a cross-reference—although I cannot find one—about the register relating to schemes outside the public sector. Surely members of public sector schemes might want to track down what happened to their pensions and want reassurance about whether their schemes are adequately funded. Such considerations stray into the public sector, and I hope that the hon. Gentleman can enlighten us about them.

Malcolm Wicks (Labour, Croydon North)

May I do that in writing? I take the point that people might be members of different public sector schemes and that tracing is of some importance. As I said in my opening remarks, the regulator will identify bad records via whistleblowing reports and scheme returns. It can then issue improvement notices.

I will be able to say more about where information issues are in the Bill, and how we will gather information, soon, when we get to clause 35. If the hon. Member for Tatton (Mr. Osborne) or any Committee member would like to visit the Occupational Pensions Regulatory Authority, that could be arranged. I hope that I have covered most of the questions to the satisfaction of Committee members, and I ask them to support the clause.

Question put and agreed to.

Clause 34 ordered to stand part of the Bill.

Clause 35 - Registrable information

Malcolm Wicks (Labour, Croydon North)

The clause defines the term ''registrable information''. I touched on that in my opening remarks. The clause sets out what information must be provided to and stored by the regulator in the register set up under clause 34. Much of it is common sense: names and addresses, the status of the scheme and the categories of benefits provided by the scheme.

In the case of an occupational pension scheme, the name and address of any previous relevant employer must be provided, which will be helpful, and the number of members of the scheme must be provided. Much of the clause is common sense. I touched earlier on the fact that the regulator will not have every member's details, but we are taking steps to make sure that that is in order.

George Osborne (Conservative, Tatton)

This, obviously, is one of the crucial clauses about the register. The information that the Government are asking to be registered is much greater than that required by the pension scheme registry, and we welcome that. I do not mind saying that it has been good that the Government have consulted with the industry on the scheme return and that the industry—as I understand it, anyway—is broadly happy with what is being provided.

I just want to make sure that there are not any nasty surprises—but I know that the Minister is a good man and that he could not possibly be thinking of any. Subsection (2)(h) comes at the end of a long list of information that will be required, such as names, addresses, whether new members may be admitted, the categories of benefits and so on. At the very end of that list, we read:

''such other information as may be prescribed.''

That is carte blanche to ask for anything. Will the Minister explain why he needs to put it into the Bill, and who will do the prescribing? Will the regulator be able to determine what information it wants, or will it have to go to the Department for ministerial approval? Will Ministers have to get the approval of Parliament? In other words, will the issue go before Committees on delegated legislation, which provide such a rigorous check on the Executive? Subsection 2(h) caught my attention, and I wanted to flag it up.

Malcolm Wicks (Labour, Croydon North)

The best thing I can do is to reassure the hon. Gentleman that our intentions are sound and sensible. It is not always easy in primary legislation to specify every piece of information that might be required in the foreseeable future. Essentially, we want to enable the regulator to analyse the information and to inform its risk-based approach so that it can target resources effectively. We want to allow flexibility as circumstances change.

The type of information that the regulator needs may change. None of us can quite anticipate the nature and details of occupational pension schemes in 10 years' time. As I say, our intentions on the matter are honourable and sensible, and I hope that the hon. Gentleman will accept that.

George Osborne (Conservative, Tatton)

There are two questions that the Minister did not answer—or rather, one question that he did not answer and one point that I have just thought of. The question that he did not answer was: who will decide what extra information can be prescribed under the subsection that I referred to? Will it be the regulator, or will the regulator have to get Ministers' permission? In addition, will Ministers have to get Parliament's approval? In other words, will such measures be submitted as regulations to Committees on statutory instruments?

The point that I have just thought of is as follows. Given that I have congratulated the Government on their consultation exercise, will the Minister give an assurance to the Committee—and through the Committee, to the industry—that if there were to be any material changes to the requirements of the scheme return, the Government would consult with the industry?

Malcolm Wicks (Labour, Croydon North)

I can give the assurance that we would want to consult with the industry and with other obvious interested parties. Will the details of the information be subject to parliamentary scrutiny? Yes, they will. They will be brought forward as regulations.

Question put and agreed to.

Clause 35 ordered to stand part of the Bill.

Clause 36 - The register: inspection, provision of information and reports etc

George Osborne (Conservative, Tatton)

I beg to move amendment No. 189, in

clause 36, page 22, line 34, at end insert

'save that the register will be open to members of the public during normal working hours, but with the home addresses of individual scheme trustees deleted.'.

The clause is about who may inspect the information collected on the register from all those schemes. As I understand it, subsection (2) basically leaves it entirely up to the Secretary of State to decide who can inspect the scheme and who will be able to check up on the information. First, I would appreciate it if the Minister clarified who will be able to look at it. Will it just be the regulator's staff? Will it be staff in the Department for Work and Pensions? Will it be staff in the Inland Revenue and other Departments? Will it be other organisations, such as credit rating agencies, because there are certain provisions whereby financial institutions can get hold of information that is not generally available to the public?

That issue leads me on to my amendment, and the question: why should the register not be public? Amendment No. 189 says that

''the register will be open to members of the public during normal working hours, but with the home addresses of individual scheme trustees deleted.''

That last detail is included to protect their privacy. Why should not we be able to see a register of pension schemes in this country? I am sure that the members of such schemes would be interested in some of the information provided on their behalf. That gives rise to the question whether members will be even aware of the returns that are being made to the register on their behalf by schemes. If the register were public, an interested member of the scheme could check up on it and see what state it was in.

We are coming on to discuss some of the whistleblowing provisions, but obviously a large part of the enforcement of pension law depends on whistleblowing. That has been the case with OPRA and it is envisaged that that situation will continue with the new regulator. Whistleblowing depends on someone knowing that there is something wrong. If they cannot view the register, they will not necessarily know that the information provided in it is incorrect. Therefore, I would have thought that an open scheme would help whistleblowing.

That is hardly an unprecedented thing to ask for. After this sitting finishes—if it finishes in time—we could all go to Companies House and look up the details of companies and directors. I believe that the home addresses of directors are also registered there. Certainly, significant details about companies are registered. I am unable to see why the register needs to be, in effect, private, rather than an open register that all members, and all members of the public, could check.

Scheme tracing was the original function of the current registry. I assume that that the scheme-tracing facility remains and will, perhaps, be improved. One of the complaints is that a scheme can be traced only by sending and receiving letters; there is no provision to do so over the telephone or internet. It would be interesting to find out whether there are any plans to improve that. However, that is secondary to my principal point. Why will the register not be open to members of the public and members of schemes?

Malcolm Wicks (Labour, Croydon North)

The Opposition amendment would make the register of schemes available to members of the public, although the names of individual trustees and some of the details would be deleted. Hon. Members have heard me say that the register serves a number of purposes, one of which is to provide a pension-tracing service for members of the public who have lost touch with old pension schemes. That service is currently carried out by OPRA in its role as registrar. Last year it successfully provided contact in response to 25,000 requests.

The quinquennial review of OPRA suggested that tracing should be dealt with by central Government. That is what subsection (2) seeks to allow. As the hon. Gentleman knows, the tracing service is a part of the Government's core strategy to inform people about their pension provision and will in future be undertaken by the Department, rather than the new regulator. We will be able to improve the service offered. The points that the hon. Gentleman made about the use of IT, the net, and so on, are well taken. We will try to ensure that that happens.

The reason why we are resisting what seems, at first sight, to be a reasonable amendment—and why I am asking the hon. Gentleman to consider withdrawing it—is because we are sensitive to human rights issues. Disclosure to the public at large of information on the register could interfere with the right to respect for private and family life. There is also the further consideration that some of the information provided on the register could be regarded as commercial in confidence and could be of value to other companies, which is another reason why we are reluctant to accept the amendment. Restricted information may be disclosed by the regulator only to specific bodies for specific functions, which are detailed later in the Bill. For example, the Inland Revenue is the most obvious body in terms of its regulatory functions; the pensions ombudsman is another.

In asking the hon. Gentleman to consider withdrawing the amendment, I undertake to reflect on the strong points that he has made and consider whether there is any possibility of wider usage, notwithstanding the difficulties that I have mentioned.

George Osborne (Conservative, Tatton)

I welcome what the Minister said about considering the idea. I take his points about the rights to privacy, but people can look up the names of directors in Companies House. Indeed, there are provisions to safeguard directors if they are in a company that is being targeted. For example, there is an unfortunate case in my constituency where a company is being targeted by animal rights extremists, and all the people who work for the company, including the tea lady, have had their houses and cars damaged. As a result, that company has been able to blank out its records at Companies House. For companies in extreme circumstances therefore, it is possible to protect privacy where necessary. Will the Minister think about that?

On commercial confidentiality, on first reading of the clause a lot of the information does not strikes me as particularly commercially sensitive. It is broad information about the status of the scheme and the names and addresses of the trustees. Obviously, if there were an overriding reason of commercial sensitivity why our amendment would not be possible, we would listen to that. However, a lot of this information is regularly disclosed in the accounts of companies that publish their accounts, and I welcome the Minister's indication that he will look into that. That would help convince people that we are trying to create a more open environment, and reassure scheme members in particular that they will be able to see the information that is relevant to their pension and retirement. Given the assurance that the Minister has provided, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 36 ordered to stand part of the Bill.

Clause 37 - The register: duties of trustees or managers

George Osborne (Conservative, Tatton)

I beg to move amendment No. 190, in

clause 37, page 23, line 23, leave out

'as soon as reasonably practicable'

and insert 'within 28 days'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss amendment No. 191, in

clause 37, page 23, line 31, leave out

'as soon as reasonably practicable'

, and insert 'within 28 days'.

George Osborne (Conservative, Tatton)

The only point of having a register is if it is up to date. Clause 37 sets out the duties of trustees and managers to keep the scheme up to date. For example, subsection (3) requires them, within three months of a scheme becoming registrable, to provide the necessary information. Rather curiously, in subsections (4) and (5), there does not seem to be a similar urgency to provide information about a change in the information that is registrable. Subsection (4) states:

''Where there is a change in any registrable information in respect of a registrable scheme, the trustees or managers of the scheme must as soon as reasonably practicable, notify the Regulator—

(a) of the fact, and

(b) of the new registrable information.

Under subsection (5), they must inform the regulator that the scheme ceases to be a registrable scheme or is being wound up only ''as soon as reasonably practicable''. What is practicable for one person is not practicable for another.

Kevin Brennan (Labour, Cardiff West)

Does the hon. Gentleman acknowledge that ''as soon as reasonably practicable'' might be well within the 28 days that he refers to in his amendment?

George Osborne (Conservative, Tatton)

Of course. Within 28 days could mean one day, just as ''as soon as reasonably practicable'' could be less than 28 days. However, the Bill needs to be more specific. I would have thought that the hon. Gentleman, who is so assiduous in his defence of the interests of his constituents in Allied Steel and Wire and so forth, would want more protection for them. I would have thought that he would want a scheme to have to notify the regulator within a month—28 days—rather than a broad definition of ''as soon as reasonably practicable''. Someone could say to the regulator, ''I was too busy winding up my bank accounts and finding a house in the Costa del Sol to pass on this important information to you, Mr. Regulator.'' I have inserted ''28 days'', but I am happy to listen to the Government if they want to change it to another figure.

It is interesting that specific periods are set out in some clauses. Clause 37(3) refers to a period of three months. Later in the legislation, periods such as three years are referred to, and it is stated that the requirement to make a scheme return must be fulfilled within 28 days. The Government have specified time frames in other parts of the Bill, but they have not done so in this measure on providing information. We are trying to create a risk-based approach, and I should have thought that one of the red flags to a regulator would be changes in a scheme,

and that the regulator would want to be informed about that as quickly as possible.

Malcolm Wicks (Labour, Croydon North)

As you know, Mr. Griffiths—when you are not playing the role of the neutral Chairman—the workers' flag is deepest red. The hon. Gentleman mentioned the red flag, and this measure is about trying to make sensible arrangements, not least for working people whose pension schemes are at risk.

This amendment, like the last one that we addressed, appears to be sensible at first sight. When I first looked at it, I thought, ''Why not accept it?'' However, I took advice. First I was told that

''as soon as reasonably practicable''

is often used in pensions legislation—although that was not the strongest point. More importantly, there is a danger that the hon. Gentleman's amendment could create perverse incentives and lead to a situation that he would not want. Our phrase

''as soon as reasonably practicable''

means nothing more than the common-sense interpretation suggests—in this case that the information should be provided as soon as possible after the trustees become aware of the facts in question. In most cases, that will mean that the trustees should comply within a few days. I am advised that OPRA's experience is that where a specific time limit is imposed, people will tend not to comply until that time. Perhaps human nature dictates that that often happens. A rough analogy can be drawn with speed limits on the roads. Some people—my note says ''most people'' but I am more optimistic than that—interpret a 30 mph speed limit to mean that they should travel at 30 mph, rather than be more sensible and drive up to that limit, or way below it if conditions are bad. I am sure that no Committee members interpret the speed limits in that way.

The amendment is well-intentioned, but it could have perverse consequences. It is important that the information that the regulator holds about schemes is up to date. Those responsible for supplying that information should be required to do so as soon as is reasonably practicable. Committee members will note the provision in subsection (6) that enables the regulator to impose a civil penalty on any trustee or manager who fails to take all reasonable steps to secure compliance. That, coupled with the duty on trustees to comply within a reasonable time, means that, if the regulator is deciding whether to impose a penalty in this case, it would take into account the particular circumstances of the case, and any representations made by the trustees in their defence. If, on balance, the regulator decides that the trustees' actions were reasonable in the circumstances, it would have no grounds on which to impose the penalty.

I believe that the provisions as drafted provide sufficient protection for members, by seeking to ensure that the regulator's information is up to date. As I have explained, it also ensures protection and balance for those on whom the duty to comply falls.

George Osborne (Conservative, Tatton)

I am not entirely convinced by the Minister's explanation—and perhaps the Minister is not entirely convinced by it, given that there was a

brief ray of sunshine when he might have exercised some ministerial discretion before the clouds of official advice came overhead.

The Minister makes the transport analogy of a speeding limit, but there is also the transport analogy of a parking ticket. If someone gets a parking ticket and it says, ''Please pay as soon as is reasonably practicable'', they will never pay it, but if they get one that says, ''Pay within 28 days'', they tend to do so; otherwise, it goes up in value. It would be sensible to put a more specific time period in the Bill.

I am not entirely convinced as to why the obligations on trustees and managers in the provisions refer to ''reasonably practicable'' when other duties on trustees, managers and others elsewhere in this part of the Bill mention specific periods. However, there are more important battles to fight in Parliament, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 37 ordered to stand part of the Bill.

Clause 38 - Duty of the Regulator to issue scheme return notices

George Osborne (Conservative, Tatton)

I have a couple of minor queries about the issuing of scheme returns. I wanted to question the need for the long period mentioned in subsection (3)(a), which says that the regulator only has to issue the demand for information within three years of the regulator being informed that there is a new scheme. Three years strikes me as quite a long time; I should be interested to know why the Government chose that period.

There was some confusion in my mind when I was reading the Bill about the following: under clause 37(2), once the scheme is set up, the trustees and managers have to send in certain registrable information within three months. However, clause 38 seems to imply that the decision to comply with clause 37 is voluntary; clause 38(3)(b) says that

''if the trustees or managers have complied with paragraph (b) of section 37(2)''

they only have to provide information a year later. That seemed to imply that there was a voluntary element to complying with the previous clause and the request for information. I may have misunderstood, but that is how the matter seemed to me.

To reiterate my first point, why such a long period? Why three years? Why not one year, as might seem more reasonable?

Malcolm Wicks (Labour, Croydon North)

On the first point, the regulator will issue scheme return notices—that is, the requests for information—to each scheme. On the frequency of scheme returns, they will be not more than annual and not less than triennial. The frequency is to be determined by the regulator, but will be based on risk factors. Those schemes that are well run and well administered may be required to complete returns less

frequently than those schemes where risk factors are present, so the approach that we are suggesting is proportionate.

A scheme return notice will require provision of all registrable information in relation to the scheme, and any other information in relation to the scheme that is requested by the regulator to enable it to exercise its functions. The emphasis is, therefore, on proportionality. As in all things, we want to get the balance right between proper scrutiny of all schemes and more scrutiny of those schemes that might be at risk. That is our approach.

On the second question, which was the suggestion that the provisions could be voluntary, the hon. Gentleman has misunderstood. Would it be helpful if I wrote to him on the textual points? My understanding is that we are not talking about a voluntary provision, because that would undermine the whole purpose of the Bill.

George Osborne (Conservative, Tatton)

Well, it certainly would. I should be grateful if the Minister would write to me and explain it. I hear what he says about wanting some flexibility. Presumably, that means that well run schemes do not have to provide the same amount of returns.

Malcolm Wicks (Labour, Croydon North)

I apologise if I am not intervening at the appropriate time, but I want to give the hon. Gentleman more information on his substantive point. Scheme returns will also be issued. We often forget about the personal pension providers but, as a generality, they are likely to be issued every three years. However, defined benefit schemes—the core of the Bill—will have a scheme return each year. I am generalising, but they have a higher risk for members.

George Osborne (Conservative, Tatton)

The flexibility concerning annual returns has now evaporated. It was important for the Minister to clarify the position.

Question put and agreed to.

Clause 38 ordered to stand part of the Bill.

Clause 39 - Duty of trustees or managers to provide scheme return

Malcolm Wicks (Labour, Croydon North)

The clause is straightforward. As we noted, clause 38 established that the regulator will issue scheme return notices, which is a request for information that we have described. Clause 39 sets out the duty on trustees or managers to provide a scheme return to the regulator by the specified date. It is very much the other side of the coin to the clause to that we have just agreed.

Question put and agreed to.

Clause 39 ordered to stand part of the Bill.

Clause 40 - Scheme returns: supplementary

Malcolm Wicks (Labour, Croydon North)

The purpose of the clause is to make clear the duties of the regulator, trustees and managers in respect of scheme returns. As such, the clause has effect for the purposes of clauses 38 and 39 that have both been agreed, and specifies the meaning of such important technicalities as ''return date'' and ''scheme return''. It is straightforward.

George Osborne (Conservative, Tatton)

I have only one query for the Minister about what, as he said, is an otherwise fairly straightforward clause. Subsection (4)(a) states:

''A scheme return notice in respect of a registrable scheme . . . must require all registrable information in relation to the scheme''.

That is common sense. However, subsection (4)(b) states that the notice

''may require other information which the Regulator reasonably requires for the purposes of the exercise of its functions in relation to the scheme.''

In other words, it introduces not a get-out clause, but a wide-ranging power for the regulator to require other information. What is the point of devising a scheme return, consulting the industry about the information that should be on it and making a decision about what information is needed to do the job, but then suddenly deciding that the regulator can ask for any other information which it ''reasonably requires''? Presumably that is the regulator's own definition, provided of course that it was accepted. The provision seems clearly wide-ranging and I should be grateful if the Minister would explain why.

Malcolm Wicks (Labour, Croydon North)

In a sense, we discussed earlier what is reasonable information. I gave my assurance then that the regulator will act honourably in relation to such matters. There will be broad parliamentary scrutiny of the regulator's work on an ongoing basis. A scheme return notice issued by the regulator must be in writing and must specify the details of the information that the regulator requires from the scheme. Such information must include all details of the registrable information and any other information required by the regulator to enable it to fulfil its functions. This is not a catch-all; we could not ask for any sort of information, but only anything that it might be sensible to ask for. During the next 10 years or so, who knows how pension schemes might change and what sort of information might need to be captured?

In line with the recommendations of the Better Regulation Task Force and the National Audit Office report, it is essential for the regulator—I wish it would regulate these notes a bit—to collect and hold up-to-date information on schemes in order to enable it to develop the risk-based approach. I hope that the hon. Gentleman will accept those assurances.

Question put and agreed to.

Clause 40 ordered to stand part of the Bill.

Clause 41 - Register of prohibited trustees

George Osborne (Conservative, Tatton)

I was wondering whether the Under-Secretary or the Minister would stand up. I detect a little ministerial confusion. As we have moved on to an important new concept—the register of prohibited trustees—will the Minister or the Under-Secretary set out exactly what is envisaged with that register and how it will operate?

Chris Pond (Labour, Gravesham)

I am happy to do so. As we will discuss the issue further when we come to the next clause, I thought that the Committee would like to move on, and I was giving it the opportunity to do so.

Having discussed the register of schemes, we move to the register of all persons whom the regulator has prohibited from acting as trustees. OPRA already has a register of the trustees it has disqualified. I have a copy of it here and it is readily available on the internet. That register only includes details of trustees disqualified by OPRA, not those people automatically disqualified from serving as trustees. We think that that might mislead those using the register to check on trustees.

Those people are not automatically included because it is not possible for the regulator to know who should be included as everyone with a criminal conviction for dishonesty, everyone who is bankrupt and everyone in a voluntary arrangement is automatically disqualified. There would, of course, be human rights implications in publishing such a list, given that the majority of people on it would not be and never would have been trustees of a pension scheme.

To make clearer the distinction between prohibition and disqualification, the register will not list all automatically disqualified trustees, merely those prohibited, as detailed in clause 29. The names of the trustees and those already disqualified by OPRA will appear on the register. Further provision on the accessibility of the register is provided in clause 42.

Question put and agreed to.

Clause 41 ordered to stand part of the Bill.

Clause 42 - Accessibility of register of prohibited trustees

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 32, in

clause 42, page 25, line 24, leave out 'a' and insert 'an occupational trust'.

This is a drafting amendment, which merely clarifies that the provisions relative to the register of prohibited trustees, to which we just referred, apply to occupational trust schemes.

Jim Cunningham (Labour, Coventry South)

On a point of order, Mr. Griffiths. There is a gale blowing through the window. Will somebody do something about it?

Win Griffiths (Labour, Bridgend)

I think that something is being done about it. I wondered why everybody had their coats on

at the back. I was feeling quite warm down this end.

Chris Pond (Labour, Gravesham)

Thank you, Mr. Griffiths. The cold winds of change are blowing through the Committee.

Subsection (2)(a) refers to a scheme, and subsections (b) and (c) to occupational trust schemes. The amendment brings all three in line so that all the references are to an ''occupational trust'' scheme.

Amendment agreed to.

Clause 42, as amended, ordered to stand part of the Bill.

Clause 43 - Information relevant to the Board

George Osborne (Conservative, Tatton)

I beg to move amendment No. 193, in

clause 43, page 27, line 6, at end insert

'but only to the extent that the collection of such information appears to the Regulator proportionate to the benefits to be obtained from collecting that information.'.

The point of the amendment is to produce an element of proportionality. The clause is short but states:

''The Regulator may collect any information which appears to it to be relevant to the exercise of the functions of the Board of the Pension Protection Fund.''

The whole point of the pension protection fund is to safeguard the interests of members. We want it to have the information that it needs to do that job. However, the clause introduces a wide-ranging power, which seems to be a bit of a theme. Although we will discuss powers to enter premises, we are currently discussing powers to request and collect information from people. When Governments of any political persuasion seek to take new powers on themselves, it is important for Opposition MPs to at least ask them to justify it. The amendment that I have tabled is commonsensical and I look forward to the Minister accepting it.

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman's amendment relates to the information that the regulator will seek and pass on to the pension protection fund. Will the Minister clarify one important thing for me? The more I think about the Bill, the more it seems that the regulator and the pension protection fund are the same thing. That is not quite the way that the Department sees it, but they closely overlap. Both monitor what is going on in schemes, both worry about funding levels, and both obtain information.

I have not yet tabled the merger amendment—the mega-amendment—and I see the Minister's officials fainting at the suggestion. Will he assure us that we will not have a situation in which the regulator asks for information from schemes for its own sake and for information from schemes on behalf of the pension protection fund while, at the same time, the pension protection fund asks schemes for information for its own purposes? Will there be a mechanism whereby the pension protection fund does everything through the regulator? It is not apparent now, but perhaps we will reach that provision later in our proceedings. Will the Minister clarify that? Clearly much common information is needed, which is what the clause is

about, but in terms of burdens on schemes and duplication, will he assure us that a mechanism will be in place to ensure that there is no duplication and that there is as much pooling of information as possible to enable both organisations to fulfil their functions effectively?

Malcolm Wicks (Labour, Croydon North)

The amendment would require the regulator to assess the benefit of each piece of information that it collects that is relevant to the functions of the PPF. That is not unreasonable. The clause exists for a number of reasons, not least to ensure that the two organisations—the PPF and the regulator—do not seek the same information with the additional cost burdens that that would impose on schemes. Those two bodies will work closely together, but they do not have the same functions. Given the closeness of the relationship between the two, it would be wrong if they both had to seek the same information.

Hon. Members will realise that the gathering and analysis of information is fundamental to the risk-based approach of the regulator and the protection fund. The regulator needs to gather information for its own functions, some of which will be directly relevant to the PPF. It is sensible to put in place arrangements so that the two bodies will not have to ask schemes to provide the same information twice.

To reduce even further the burdens on schemes, the regulator will be able to ask for information that it may not need for its regulatory functions, but which it believes the pension protection fund needs for its functions. Information collected in that way must appear to the regulator to be relevant to the exercise of the functions of the board. An example of that type of information is the data required to apply the risk-based element of the pension protection levy. Of course, the information collected by the regulator may be of use in the exercise of its functions, thus enabling it to take early action when problems appear to be imminent and step in as early as possible to try to get things put right. In doing so, it may be able to prevent scheme members from losing out financially. It may also be able to prevent a scheme from having to become a customer, as it were, of the pension protection fund when it would otherwise have done so, which in turn will protect the members of all pension schemes that are liable to pay the PPF levies.

In the unfortunate circumstances when the PPF—a term that we will, perhaps, get used to—becomes involved with a scheme, the regulator will be able to disclose to the board any relevant information that it has collected using the power. That means that the PPF will immediately have a large part of the information that it needs to fulfil its functions and will be able to act quickly if necessary to protect the scheme members and prevent the scheme funding level from deteriorating further. That is important.

There will, of course, be circumstances in which the PPF will need to gather information itself to carry out its functions. If that were so, the regulator and PPF would work together to reduce any possible duplication. Although I do not think that we should

tempt Committee members to discuss the pension protection fund per se, the interface is important.

There are differences. Although the regulator will gather information on behalf of the PPF, there will also be circumstances in which the PPF will need to gather information to carry out its functions. At that point it would be normal for the regulator to step back and allow the protection fund to take the lead in gathering information about a scheme—this is the crucial part—once the sponsoring employer has entered insolvency proceedings. If that happens the two bodies will work together, but the PPF will mainly take the lead.

Let me give two examples. The protection fund will normally become involved with a scheme because its sponsoring employer has entered insolvency proceedings. As soon as the PPF is notified of those proceedings, it will carry out a detailed valuation of the assets and liabilities of the scheme to help it assess whether it should enter the protection fund. The regulator will not have gathered all the information needed for that valuation, therefore the actuary working for the protection fund will need to gather and analyse data that is fully up to date. Similarly, a scheme with an insolvent employer may apply for fraud compensation. That is another aspect that we should not forget. At that point it would be appropriate for the PPF to collect data relevant to the fraud application. The regulator will not play a part in the payment of fraud compensation.

There will be more to say on that when we deal with the protection fund clauses. Nevertheless, I hope that I have persuaded the hon. Member for Tatton that the information we are seeking is proportionate and that it makes sense for the regulator to play a leading role in collecting information just once—albeit on a regular basis—even if some of it is primarily for the purposes of the PPF.

George Osborne (Conservative, Tatton)

I am not sure that I am entirely convinced. Most of what the Minister said related to the inquiry by the hon. Member for Northavon about the relationship with the PPF. What he said about my amendment was that it was not unreasonable and would require the regulator to assess the value of the information that it requests. It is jolly good to know that one's amendments are not unreasonable. It is also good to know that the amendments would require the regulator to assess the value of the information that it requests. One would hope that a regulator would do that before requesting the information. However, I do not intend to die in a ditch over this amendment, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 43 ordered to stand part of the Bill.

Clause 44 - Duty to notify the Regulator of certain events

Malcolm Wicks (Labour, Croydon North)

Clause 44 provides for a new statutory obligation on trustees and managers of

occupational pension schemes to report to the regulator in writing any prescribed event in relation to the scheme. Those events must be reported as soon as reasonably practicable. Along with the regulator's power to collect information relevant to the functions of the PPF board, the clause provides the backbone of the early warning system for the PPF.

We are working with the Pension Benefit Guaranty Corporation of the United States of America and the pensions industry in the United Kingdom to determine precisely what the notifiable events should be. The events will be specified in regulation and will include, for example, corporate restructuring affecting an occupational pension scheme or a significant payment becoming due to an individual scheme member in certain circumstances.

The regulator's power to collect such information serves two purposes. First, it may alert the regulator to potential or actual problems, and enable it to step in as early as possible to put things right. In doing so, the regulator may be able to prevent scheme members from losing out financially. It may also prevent a scheme falling into the jurisdiction of the PPF when it would otherwise have done so, which, in turn, will protect the members of all pension schemes that are liable to pay PPF levies.

Secondly, the regulator will be able to gather and disclose to the PPF any information that is relevant to the fund's functions. That will enable the PPF board to fulfil those functions. For example, the information that the regulator collects will be used by the board when setting and calculating the levies. It also means that, where the PPF becomes involved with the scheme, it will be able to act quickly if necessary to protect scheme members and prevent the scheme funding level from deteriorating further.

George Osborne (Conservative, Tatton)

In general, clause 44 seems sensible. I want to pick up again on the use of the phrase ''as soon as reasonably practicable.'' The Minister says that the clause is the early warning system and the crucial trigger that will help protect scheme members who may be in danger of losing their pensions. However, ''as soon as reasonably practicable'' is broad and allows someone to plead that it was not reasonably practicable for them to do something for a considerable amount of time. I want the Minister's reassurance that the regulator will take a tough view of people who procrastinate in providing important information.

The Minister also told us something of what would be in the regulations, which will obviously be important. Perhaps he will tell us when we might see them. He says that he is consulting with the Americans and others. I understand the Government's desire to get on with the Bill and give our constituents the protection that we all want them to have, but there is a balance to be struck between that and proper parliamentary scrutiny, with access to the full facts as we investigate legislation on behalf of our constituents.

Malcolm Wicks (Labour, Croydon North)

On that last point, I can only say that we will bring forward the regulations when

reasonably practicable. We are the party that tries to be reasonably practical.

George Osborne (Conservative, Tatton)

The definition of new Labour!

Malcolm Wicks (Labour, Croydon North)

Well, the definition of new Labour is success, I think.

On whether we will take a tough view on the regulations, the answer is yes, of course we will. I hope that the hon. Gentleman is satisfied with that.

This is a key clause for the Bill, because when major restructuring takes place across companies, or when there is a danger that some people in smaller companies may, because of early retirement, take much of the fund with them, it is important that those events are reported to the regulator. That is the intention of clause 44.

Question put and agreed to.

Clause 44 ordered to stand part of the Bill.

Clause 45 - Duty to report breaches of the law

George Osborne (Conservative, Tatton)

I beg to move amendment No. 194, in

clause 45, page 28, line 9, leave out paragraph (e).

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss the following:

Amendment No. 195, in

clause 45, page 28, line 16, leave out paragraph (b).

Amendment No. 196, in

clause 46, page 28, line 36, leave out paragraph (b).

Amendment No. 197, in

clause 46, page 28, line 42, leave out paragraph (d).

George Osborne (Conservative, Tatton)

The clause imposes an obligation on people to report certain breaches of pensions law. This is one of the whistleblowing clauses. Such clauses were an important feature of the 1995 Act. However, as we all now accept, they led to the problem of a large number of fairly minor offences being reported to OPRA. The figures that I saw showed that 56,000 breaches were reported in the first five years. OPRA had a duty to investigate them, and that clogged it up, in a sense. It was not able to take a step back and adopt a more risk-based approach. That was certainly what the various reviews of the work of OPRA found.

It is worth reminding ourselves of what Alan Pickering told us in his report, which said:

''In fulfilling its regulatory role, the NKR''—

that is, the new kind of regulator—

''would, as Opra does at the moment, rely heavily on whistle blowing by professionals. However, the focus of both regulation and whistle blowing should be at a higher level than is currently the case. It should not be assumed that a minor error is symptomatic of a deeper malaise.''

Of course that is true, but it raises the question of how the new regulator will get the judgment right. I suppose that the issue comes under a stand part debate, if anything, and I shall shortly come back to my amendments, but I will first say that it will—or, rather, may—be difficult to determine what is, and what is not, of material significance. It may, for

example, be difficult for a voluntary—not professional—trustee to make such judgments.

Amendment No. 195 would leave out subsection (2)(b), which is probably crucial. It is a probing amendment to allow the Government to give us an understanding of how the risk-based approach will work. Will it be up to individuals to define the ''material significance'' of a breach? Will the definition be set out in regulations, or will the meaning of a ''material'' breach be made apparent to people such as trustees and advisers through education and training? How will the Minister deal with the fact that minor breaches are sometimes a symptom of a broader problem? There may be a danger of the pendulum swinging too far in the other direction. Whereas OPRA was too concerned with the large number of relatively minor breaches of the law, the regulator, because it is waiting for the big, material breaches, may miss some other symptoms of a malaise. Amendment No. 195 was my attempt to provoke a debate on that.

I turn to amendment No. 194. Why is subsection (1)(e) so broad? In subsection (1), the requirement of whistleblowing is placed on reasonable groups of people—trustees, managers, people involved in the administration of the scheme, employers, professional advisers—until the final broad category of

''a person who is otherwise involved in advising the trustees or managers of an occupational or personal pension scheme in relation to the scheme.''

That brings me to an important point that I will touch on as I address my other amendments—particularly amendment No. 197, which changes clause 46 on the provision of information to the regulator. That clause requires any person to produce a document that is relevant to the exercise of the regulator's functions. That person can be

''any other person appearing to the Regulator to be a person who holds, or is likely to hold, information relevant to the exercise of the Regulator's functions.''

That is also a very broad category and I want it to be removed.

I tabled these amendments because this part of the Bill set off an alarm bell in my head about the legal profession and legal professional privilege. The advisers to these schemes will often be lawyers, and even if they are not defined by other categories, someone who could hold

''information relevant to the exercise of the Regulator's functions''

could easily be a lawyer employed by the scheme. As I have said, clause 45(1)(e) refers to

''a person who is otherwise involved in advising the trustees or managers of an occupational or personal pension scheme''

and that person may also be a lawyer.

I am sure that the Minister is well aware of the scope of legal privilege. It is fairly extensive, and it is established in common law. Indeed, it has recently been emphasised by a series of decisions in the House of Lords. I will not go through those decisions, unless the Minister wants me to. I have with me my filibuster brief in case I need it, but I am not going to use it

because that would not go down well with the Committee, in which my party is outnumbered.

However, I will mention a point that was made by the Council of the Bars and Law Societies of the European Union. I am sure that we all read its publications assiduously. It stated:

''It is open to Parliament, if it considers it necessary, to make provision that legal professional privilege does not apply in specific instances—for instance when disclosure is required by a government department or agency. However, for any such derogation to be effective it must be enacted in clear and unambiguous terms. The only current specific statutory abrogation is in the Children Act 1989. In the Morgan Grenfell case''—

of 2001, I think—

''the House of Lords again emphasised that a statutory provision will not be construed as restricting legal professional privilege unless it does so expressly or by necessary implication.''

It goes on to state that there are also human rights implications. Under the Human Rights Act 1998,

''legal professional secrecy is a fundamental human right which can be invaded only in exceptional circumstances.''

I make those points because the scope of clauses 45 and 46 is very broad. Lawyers would be required to report breaches of the law to the regulator—which we hope they might do anyway. More seriously, under clause 46 they would be required to provide what may be confidential legal advice.

I am sure that I will be straying far beyond the bounds of the Committee if I make the following point, but I hope that you will bear with me, Mr. Griffiths. The Government are keen on the confidentiality of legal advice. Recently, we have heard much about it and about how Governments cannot disclose confidential legal advice. It seems that, if the Attorney-General advised a pension scheme, such advice would have to be published. It would be interesting to hear what the Minister has to say about that. The point of the amendments is to tease out such matters. On first reading, the Bill has some far-reaching implications that the Government may not have considered.

Malcolm Wicks (Labour, Croydon North)

The amendments are to clauses 45 and 46, which are concerned with who has a duty to report breaches of the law to the regulator. Clause 45 deals with the circumstances in which that applies and clause 46 deals with the provision of information to the regulator. Clause 45 is intended to expand the current statutory whistleblowing obligations that apply to schemes. Actuaries and auditors will place an obligation on employers, independent financial advisers, fund managers and scheme administrators to report to the regulator events that might put members' benefits at risk. Amendment No. 194 would remove from the specification of those who are required to report breaches persons involved in advising the trustees or managers of pension schemes. Such individuals may have access to information that is relevant to the work of the regulator and, as such, they should be required to report matters that are considered to be of material significance.

John Robertson (Labour, Glasgow Anniesland)

If money were given to a third party, even though it was known that the money was being transferred

illegally—for example, there had been no information about the winding up—would such action apply to the Proceeds of Crime Act 2002, under which the money could be reclaimed? Will my hon. Friend clarify the position?

Malcolm Wicks (Labour, Croydon North)

I shall write to my hon. Friend about that important, specific point. I do not have the answer at my fingertips.

The hon. Member for Tatton was worried about who would be included in the expansion. We are anxious that people such as independent financial advisers and investment advisers are also required to be whistleblowers. Perhaps I should have stopped him earlier, but legal advisers are exempt from the provisions. Although the hon. Gentleman did a good job representing the union of lawyers—the most powerful union in this country—lawyers will have read clause 234 to see that they are exempt. They are good at reading ahead on such matters but, for the rest of us, that is more difficult.

Amendment No. 195 would remove the qualifying provision that statutory reporters must consider whether a failure to comply with a duty or obligation is of material significance to the regulator. I cannot accept the amendment. The current regulator has been heavily criticised for a statutory regime of blanket whistleblowing of even the most trivial breaches. Clause 45 introduces a target link and a proportionate regime, which I think that the hon. Gentleman supports. His amendment would not bring that about, but he did say that it was a probing amendment.

We want a proportionate regime that allows professional managers and advisers to exercise their judgment about whether a report is needed. That would mean, for example, that an account that was one week late would not need to be reported by a whistleblower. Let us imagine that the accounts were two months late, and no schedule of contributions had been made. That would be materially significant. We are consulting on the precision of that, but that is a rough example.

George Osborne (Conservative, Tatton)

Does the Minister envisage producing a list of material breaches? We are talking about lay trustees who will want guidance on what is a material breach; they will not want to get into trouble by not reporting a material breach. If they do not have specific guidance, there is a risk that they will do what they do now—refer any breach just to cover their backs.

Malcolm Wicks (Labour, Croydon North)

The regulator will publish codes, and will consult on them before they are finalised. Those will explain more fully who needs to be a whistleblower and under what circumstances, so that there is clarity for those who need or want to take action. The regulator will operate, in many respects, via codes that will be consulted on. I hope that I have said enough to persuade the hon. Gentleman not to press what were essentially probing amendments.

George Osborne (Conservative, Tatton)

On the point about legal privilege I was, of course, testing the Minister. I knew the answer but wanted to ensure that the Minister had read his own Bill. If one reads clause 234, the situation is

crystal clear. I assure him the union of barristers is well represented in the Osborne household by my wife. I am glad that the Minister passed that test.

On the broader point about material breaches, I take what the Minister says. I want to see what he does: a more risk-based approach by the new regulator, which is not bogged down by the reporting of thousands of relatively minor breaches of the law. We will obviously have to see how the regulator defines material breaches; it is important that that is clearly stated, or else I suspect that people will err on the side of caution and the regulator will find itself swamped with reports. However, the Minister recognises that that goes to the heart of making the regulator succeed, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 45 ordered to stand part of the Bill.

Clause 46 ordered to stand part of the Bill.

Clause 47 - Inspection of premises

George Osborne (Conservative, Tatton)

I beg to move amendment No. 204, in

clause 47, page 30, line 21, at end insert—

'(8) Where such an inspection is carried out under this Act, and no further action is taken by the Regulator following such inspection, the owners or occupiers of the relevant premises are entitled to claim from the Regulator the reasonable costs of such inspection.'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss amendment No. 205, in

clause 48, page 31, line 19, at end insert—

'(7) Where such an inspection is carried out under this Act, and no further action is taken by the Regulator following such inspection, the owners or occupiers of the relevant premises are entitled to claim from the Regulator the reasonable costs of such inspection.'.

George Osborne (Conservative, Tatton)

We come now to the range of powers that the regulator will have to enter premises, get warrants and so on. I repeat what I said earlier that Parliament should rightly be concerned when Governments take upon themselves new powers to enter private property and compel individuals.

Just as those of us who have studied history know that debates about excise men created great interest in the 18th century, so debates about the powers of the pension regulator create great interest in today's society. Amendments Nos. 204 and 205, which relate to two different clauses but would achieve the same thing, put a bit of a check on the regulator. They state:

''Where such an inspection''

in the terms of these clauses

''is carried out . . . and no further action is taken by the Regulator following such inspection, the owners or occupiers of the relevant premises are entitled to claim from the Regulator the reasonable costs of such inspection.''

That is a reasonable duty to place on the regulator. The arrival of the inspectors, and their poring over files, could seriously disrupt the employer's business for a number of days. It is reasonable that the regulator should reimburse at least some of the costs incurred by the company if it turns out that there was

nothing for them to have covered up. That is also a useful check on the regulator; if it needs to inspect someone's property it should double-check and say, ''Hold on, are we absolutely sure that we need to do this?'' Over time we have put more restrictions on the ability of the police to inspect property. This is a small check on the regulator's powers.

Chris Pond (Labour, Gravesham)

Despite the hon. Gentleman's assumption that there is great interest in these issues outside this Room, I have to tell him that the west end play, ''An Inspector Calls'' is not based on the powers of the regulator.

The amendments seek to ensure that if the regulator exercises its powers to inspect premises and takes no subsequent action, the owner of the premises is entitled to claim compensation from the regulator. The amendments could have an adverse effect by hampering the regulator and adding to its costs in protecting scheme members' interests and the valuable assets of pension schemes. Premises are liable to inspection only if the inspector has reasonable grounds to believe that scheme members are employed there, documents relevant to the administration of the scheme are being kept there, or the administration of the scheme—or work connected with it—is being carried out there.

Information collecting and management are the key to the new risk-based approach to regulation. The regulator will need to have accurate, up-to-date information about schemes. It will only have powers to request information that is relevant to its functions. It will have procedures in place to ensure that all legal obligations are adhered to, including those imposed by the Data Protection Act 1998. If the regulator requires a scheme or other person to supply a document or piece of information, it would in the first instance request it under its power in clause 6. If that information were not forthcoming, the regulator might resort to its powers to enter and inspect premises. Robust measures are needed to ensure that when there is non-compliance with the request for information, decisive action can be taken to ensure that the regulator can fulfil its objective of protecting scheme members' benefits. That is what the powers to inspect premises are there for.

Hon. Members may wish to note that clauses 47 and 48, to which we shall come in a minute, each replicate powers that OPRA has under the Pensions Act 1995 and the Pension Schemes Act 1993. I cannot for the moment think who was in power when those two pieces of legislation were introduced. Hon. Members may also wish to note that OPRA carries out on average 12 unannounced visits per year. These powers are important, but they are exercised in moderation.

Given the strictures within which the regulator will have to operate when conducting investigations, the additional cost burdens that the amendments could place on those activities are unnecessary because they restrict the regulator's powers to acquire up-to-date information. They are also potentially harmful to the people and interests—the pension scheme members—

that the regulator is there to protect. I ask the hon. Gentleman to withdraw the amendment.

George Osborne (Conservative, Tatton)

The Under-Secretary is merely confirming that the present Government are as authoritarian as the previous Government. [Hon. Members: ''Oh!''] I hear howls of protest, but I am not sure whether they are trying to tell me that they are more authoritarian. Certainly, one comes to that conclusion on seeing some of the things that the Home Office is doing.

Unfortunately, I do not have teams of civil servants to go through the reports of the Committee stages of the 1993 and 1995 Acts and see what all the Labour spokesmen said when the Conservative Government of that time were taking those powers—[Hon. Members: ''Shame.''] Perhaps that is how I should spend my weekends—or perhaps not.

It is important that the regulator is cautious in the use of those foraging powers, and the Under-Secretary assures me that that will be the case. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.

Clause 48 - Inspection of premises in respect of employers' obligations

Chris Pond (Labour, Gravesham)

I beg to move amendment No 33, in

clause 48, page 30, line 46, after 'if' insert

'the inspector has reasonable grounds to believe that'.

There should not be an absolute power of entry. There should only be such a power where the inspector, on reasonable grounds, deems it appropriate. The clause is currently incomplete; for example, an inspector cannot know what documents or work connected with administration are present without undertaking an inspection. I hope that the Committee understands that this is a drafting amendment that merely makes usable the powers that we have just approved for the inspectors.

Amendment agreed to.

Clause 48, as amended, ordered to stand part of the Bill.

Clause 49 - Inspection of premises: powers of inspectors

George Osborne (Conservative, Tatton)

I beg to move amendment No. 206, in

clause 49, page 31, line 34, at end insert 'and'.

Win Griffiths (Labour, Bridgend)

With this it will be convenient to discuss amendment No. 207, in

clause 49, page 31, line 40, leave out from 'form' to end of line 45.

George Osborne (Conservative, Tatton)

Amendment No. 206 is consequential, so I will deal with amendment No. 207, which is the more substantive amendment, and would remove subsection (2)(f). I again want the Government to justify why they are taking certain powers. That subsection allows an inspector to examine

''either alone or in the presence of another person, any person on the premises whom he has reasonable cause to believe to be able to give information relevant to that matter.''

That the inspector can be alone set an alarm bell ringing in my head. I presume that someone who is being questioned would be able to have a lawyer present, so they would not necessarily be alone. I hope that that right will be protected, because civil or even criminal proceedings could follow.

John Robertson (Labour, Glasgow Anniesland)

Can the hon. Gentleman can answer a hypothetical question? If a person wanted to give information but did not want anybody to know that he was giving it, does the hon. Gentleman agree that if what he suggests happened, the person could not do it alone, because he would have to have somebody with him?

George Osborne (Conservative, Tatton)

I do not want to require people to have a lawyer with them; I just want them to have that option. The amendment was tabled to ensure that the Government know why they want to take upon themselves the power to inspect and cross-examine people—and, indeed, to ask who will be doing that examining. Will it be the inspectors who went in to look at documents, or would they call in a team of people who were better trained at questioning people? It will be interesting to hear what the Under-Secretary has to say about that.

Chris Pond (Labour, Gravesham)

The amendment would significantly reduce an inspector's ability to carry out his duties by denying him the right to

''examine, or require to be examined, either alone or in the presence of another person, any person on the premises whom he has reasonable cause to believe to be able to give information relevant to''

his investigation. Without encouraging the hon. Member for Tatton to spend his weekend reading the reports of Committee proceedings on earlier legislation, may I quietly and gently point out that the provision replicates those in section 99(1)(c) of the Pensions Act 1995?

Information collection and management are the key to the new risk-based approach to regulation, as both sides of the Committee agreed as recently as a few minutes ago. Robust measures need to be in place to ensure that, when there is non-compliance with a request for information, decisive action can be taken to ensure that the regulator can fulfil its objectives of protecting scheme members' benefits. The power to interview people when searching premises is proposed for that purpose.

If an inspector were to enter premises, for example to check whether employer contributions had been paid, he might wish to interview the employees from whose pay any deductions had been made, as well as the employer and the persons responsible for the company's accounts. That would, I believe, be the appropriate use of resources. The regulators and inspectors will carry out any interviews in accordance with the provisions of the Police and Criminal Evidence Act 1984. That means that, for example, anyone suspected of an offence will receive a caution advising them of their rights before being interviewed.

The provision that allows inspectors to examine someone either alone or in the presence of another person enables anyone being interviewed to have an adviser present, or to reject that right, as they see fit. It also allows for two interviewers, as is common practice and recommended under PACE code of practice C. The regulator will have the power to request only information relevant to its functions, and procedures will be in place to ensure that all obligations, including those imposed by the Data Protection Act 1998, are adhered to.

George Osborne (Conservative, Tatton)

The Under-Secretary mentioned the Police and Criminal Evidence Act and its codes. Will the interviews be recorded, either by tape or in the same way as interviews by the police are?

Chris Pond (Labour, Gravesham)

Interviews will be undertaken subject to the PACE code, which means that there will indeed be proper recording of everything that is said during them. I hope that that reassures the hon. Gentleman, and that he feels that, with those safeguards, it is appropriate for him to withdraw the amendment.

George Osborne (Conservative, Tatton)

The purpose of all the amendments that we are discussing is to get the Government to justify why they are taking upon themselves powers to cross-examine and interview people and inspect their property. The fact that some of those powers were in the 1995 Act is not a great defence; the Government should justify them again if they want to continue to include them. Of course, I have enormous respect for the Minister who took the 1995 Bill through Committee, my right hon. Friend the Member for Richmond, Yorks (Mr. Hague). He made his reputation by doing so—and I see that my speeches have been so eloquent that the person whom I must now call my hon. Friend the Member for Greenock and Inverclyde (David Cairns), who I know is, deep down, really a Tory, is now sitting on our Benches. As I have said for some time, there is a very fine line between ultra-new Labour and Tory. It is good to see him on my side of the Committee.

I hear what the Under-Secretary says. My purpose was to get him, and through him the civil service, to justify including the powers. As he has done that, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

George Osborne (Conservative, Tatton)

I beg to move amendment No. 208, in

clause 49, page 31, line 45, at end insert—

'(3) Where during an inspection the inspector obtains possession of any document or information stored in electronic form, and such document or information appears to be of no relevance to the original reason for the inspection, such document or information will be returned forthwith.'.

The amendment is eminently reasonable. Members of an inspection team may take away a large amount of information, and it seems reasonable that once they have sifted through it, they should return the information that they do not need—documents that are not relevant—as speedily as possible. That is a wholly reasonable request. Putting such a stipulation in the Bill might encourage them to speed that process up.

We all have constituents who are trying to obtain large volumes of correspondence that remain buried in

administrative vaults from courts and other such places. The point of the amendment is to require the regulator to return documents that are not relevant to its investigation.

Chris Pond (Labour, Gravesham)

The Committee will note the generosity of the Government. Not only are we offering briefings to Opposition spokespeople, but my hon. Friend the Minister for Pensions has lent his Parliamentary Private Secretary to the hon. Member for Tatton for this part of the proceedings.

The amendment rightly seeks reassurance about the regulator's investigative powers. The hon. Gentleman is right to probe us thoroughly on such issues. Clause 49 expands the powers of inspectors when inspecting premises that are contained in section 99 of the 1995 Act. It enables the inspector to examine documents and to question people relevant to the reason for inspection. The clause already provides that an inspector can seize only documents relevant to the purposes of their visit. Irrelevant material would not be seized in the first place. If it were seized in error, it would returned as soon as was practicable.

An overriding requirement of the Data Protection Act 1998 is that information may be retained only if it is relevant to the purposes for which it is gathered. The regulator will have powers to request only information relevant to its functions, and there will be procedures to ensure that all legal obligations, including those imposed by the Data Protection Act, are adhered to. Although the concerns that the hon. Gentleman expresses are understandable, I hope that he will feel reassured that there are sufficient safeguards to ensure that such powers are not abused, and that he will feel able to withdraw the amendment.

George Osborne (Conservative, Tatton)

Despite things such as the Data Protection Act, my personal experience as an MP is that some institutions do hold on to information of dubious or no relevance to their work. However, I have made my point. I hope that those who run the pensions regulator will read our debates and note what the Under-Secretary says about the importance of returning information that is not relevant as quickly as possible. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 49 ordered to stand part of the Bill.

Clause 50 ordered to stand part of the Bill.

Clause 51 - Penalties relating to sections 46 to 49

George Osborne (Conservative, Tatton)

I beg to move amendment No. 209, in

clause 51, page 33, line 3, at end insert

', save that it shall be a defence under this section if a person who neglects or refuses to produce any document, to answer a question or to provide information when so required, does so on the basis that he first wishes to take legal advice.'.

The clause deals with the penalties that can be imposed on people who fail to comply with the various requirements that we have been discussing. Under

subsection 2(c), a penalty could be imposed on someone who, without reasonable excuse,

''neglects to or refuses to answer a question or to provide information when so required''.

The excuse that my amendment provides may turn out to qualify as a reasonable excuse already—perhaps that is what the Under-Secretary will tell me, but I wanted to be sure. For someone to neglect or refuse to answer a question or provide information when so required because they wish to take legal advice first seems perfectly reasonable, and it may well be covered by the description in subsection (2)(c) of

''A person who without reasonable excuse . . . neglects or refuses to answer a question''.

I want to make sure that a wish to take legal advice is accepted as a reasonable excuse. Severe penalties can be imposed on individuals, and they may get themselves into trouble and incriminate themselves by answering such questions, so I wanted to ensure that they could take legal advice first. I also wanted to know whether the right to silence is a defence under the Bill.

Chris Pond (Labour, Gravesham)

I can give the hon. Gentleman the assurance that he wants. To seek legal advice before answering questions would not be considered an unreasonable excuse. Any failure to produce documents or answer questions without a reasonable excuse is a criminal offence, and the usual criminal law applies. Those involved would receive the usual warning that anything they said might be used in evidence, and that failure to answer might allow the court to draw adverse inferences. I trust that the hon. Gentleman feels assured on his first question. As for the second, if the excuse for failing to provide information or answer questions is perceived to be unreasonable, the normal criminal law would apply, and the courts would have to consider how they would judge a refusal to give information. I hope that the hon. Gentleman will feel able to withdraw his amendment.

George Osborne (Conservative, Tatton)

It is good to hear that reassurance. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 51 ordered to stand part of the Bill.

Clause 52 - Warrants

George Osborne (Conservative, Tatton)

I beg to move amendment No. 210, in

clause 52, page 34, line 44, at end insert

'unless there is a prior successful application to a justice of the peace to have the warrant revoked.'.

This is a probing amendment about the use of warrants that the regulator might obtain. It would amend subsection (5), which says:

''A warrant under this section continues in force until the end of the period of one month beginning with the day on which it is issued''

by stating the obvious, and merely adding:

''unless there is a prior successful application to a justice of the peace to have the warrant revoked.''

I assume that that is the case anyway, but I want to check with the Government.

Chris Pond (Labour, Gravesham)

The amendment seeks to make specific provision that the warrant issued by the justice of the peace could be revoked beyond the period conceived as appropriate. It is undesirable, for the reasons that I shall give once I have explained the overall effects of clause 52.

The clause replicates the powers in section 100 of the Pensions Act 1995, which allow the regulator to apply to the court for a warrant to be issued. The warrant enables an inspector to enter premises, with force if necessary, and search for and take copies of documents. Before issuing a warrant, a justice of the peace will have to be satisfied by the regulator that either there is a document on the premises that was requested by the regulator under clauses 46 and 49 and it has not been produced as required, or, if it were requested, it would not be produced or would be destroyed.

The regulator may also request a warrant when a criminal offence, such as theft, is suspected, or the power can be used to enforce compliance when a request for information has failed, or to prevent the documents from being altered or destroyed.

Enabling inspectors to search premises, and enabling the regulator to apply for a warrant to search for and copy documents—forcibly, if necessary—is vital. It ensures compliance with the power to request information, which otherwise schemes could wilfully ignore, depriving the regulator of the full picture of the scheme. That could mean that regulatory action that might need to be taken would not be taken, and members' benefits would be put at risk. Without the power to search forcibly for documents and copy them, which a warrant provides, vital evidence could be destroyed, altered or moved. That could deny the regulator vital proof of wrongdoing that could be used as justification of regulatory action or used in a court case as evidence, thus putting members' benefits at risk. It is unacceptable if regulatory action cannot be taken or for criminal behaviour to go unpunished.

However, the regulator will apply for a warrant only in the most severe of cases, where there is evidence to suggest that there is a considerable risk of documents being altered or destroyed. It is recognised that in the vast majority of cases, schemes will send the regulator the information requested. That means that the power will be used sparingly. Hon. Members might wish to note that OPRA applies for an average of only five warrants a year. None of its applications for a warrant has been refused.

I hope that it is apparent why the amendment is undesirable. The first that a person would know about a warrant being issued in respect of their premises would be when the regulator's inspector came knocking at the door with the warrant in hand. If that person had the power to apply for the revocation that the amendment would provide, he could reasonably refuse entry on the basis that he had reason to appeal the warrant. That would present the person with the opportunity—after the inspector had

been sent away—to destroy or remove the documents that the regulator sought. The amendment would make the power conferred by the warrant futile. I hope that with that understanding, the hon. Gentleman will feel able to withdraw the amendment.

George Osborne (Conservative, Tatton)

I did not want to render the whole clause futile, as the Under-Secretary alleged. Better drafting might have made it clear that some time might elapse in the process. For example, if the warrant had not been exercised for a couple of weeks but was hanging over the individual, they could apply for it to be revoked. However, I take the Under-Secretary's point about the use of warrants. It has been useful to have him set that out on the record, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 52 ordered to stand part of the Bill.

Clause 53 ordered to stand part of the Bill.

Clause 54 - Offences of providing false or misleading information

Malcolm Wicks (Labour, Croydon North)

I do not want to impede proceedings that are moving along briskly. However, perhaps I could just say that the clause replicates section 101(5) of the Pensions Act 1995 and ensures that the provision of false information to the regulator continues to be a criminal offence. It is useful to get that on record in Hansard. The regulator may issue a summons in respect of anyone providing false information and would have to prove to the court's satisfaction that that information was provided knowingly or recklessly. If someone is found guilty by a magistrates court, a fine of up to £5,000 can be imposed; if the matter is heard by the Crown court, imprisonment of up to two years, a fine of £5,000 or both may be imposed.

Question put and agreed to.

Clause 54 ordered to stand part of the Bill.

Clause 55 - Use of information

George Osborne (Conservative, Tatton)

I beg to move amendment No. 211, in

clause 55, page 36, line 8, leave out from 'register' to end of line 9.

The more I look at it, the more I suspect that this is a wrecking amendment, because it would render the clause meaningless. Nevertheless, it provides a good opportunity to debate this clause on the use of information. We have discussed many clauses on the use of information, and we will discuss many more. My attention was drawn to this one by paragraph (b), which says that information

''otherwise held by the Regulator in the exercise of any of its functions, may be used by the Regulator for the purposes of, or for any purpose connected with or incidental to, the exercise of its functions.''

I would be interested to hear the Government say what the point of this little clause is. If it were not included,

perhaps the regulator could not exercise any of its functions.

Malcolm Wicks (Labour, Croydon North)

I feel reassured to see that my PPS, my hon. Friend the Member for Greenock and Inverclyde—

David Cairns (Labour, Greenock and Inverclyde)

I have re-ratted.

Malcolm Wicks (Labour, Croydon North)

Yes, my hon. Friend has re-ratted, as Churchill would have said. My hon. Friend was on a mission for me on the Conservative Benches. The record should show that he did not briefly join the Conservative party.

The amendment seeks to limit the information that the regulator may use in exercising its functions to registrable information, as defined in clause 35. Judging by what he said earlier, the hon. Member for Tatton has guessed that that would be highly damaging to the work of the regulator, because registrable information is limited and consists of the name and address of a scheme, its sponsoring employer or institution, and its trustees. The clause provides the regulator with flexibility to use all the information that it collects for any purpose connected with its functions, rather than have artificial barriers in the organisation that would prohibit effective regulation and might jeopardise scheme members' benefits by hindering information sharing.

I shall give an example of the impact of the amendment, if it were agreed and not withdrawn. Let us say that the regulator receives a whistleblower's report saying that two trustees are about to empty the scheme's bank account and leave the country. What can it do? I can hear hon. Members thinking that it could appoint a trustee or get an injunction—but that would not be so. If the hon. Gentleman's amendment were agreed, that would be prevented and the regulator would be unable to use the whistleblower's information to protect the scheme members. The amendment would at least allow trustees' names and

addresses held on the register to be used, so the regulator could send them a bon voyage card.

George Osborne (Conservative, Tatton)

On closer examination, I did suspect that this was a wrecking amendment. However, it has provided the opportunity for a useful debate about the clause. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 55 ordered to stand part of the Bill.

Clause 56 - Restricted information

Malcolm Wicks (Labour, Croydon North)

This clause replicates section 104 of the Pensions Act 1995 in defining restricted information and ensuring that any unauthorised disclosure of such information is a criminal offence. It is straightforward. Before we discuss it—although this is for others to call—I would like to suggest that perhaps we will decide to adjourn when we have finished with this clause, having done brisk, good business—not that I could not ad lib on the next 50 clauses without any notes if I had to. Should our Whip decide to speak in a moment, may I thank you, Mr. Griffiths, for chairing our earlier sittings so ably and with such good humour, thus enabling us to make good progress with co-operation from all parties in the Committee?

Question put and agreed to.

Clause 56, as amended, ordered to stand part of the Bill.

Further consideration adjourned.—[Margaret Moran.]

Adjourned accordingly at sixteen minutes past Four o'clock till Tuesday 16 March at half-past Nine o'clock.