Pensions Bill

Public Bill Committee, 25 March 2004.

Standing Committee B

Clause 90 - Grants

Kevin Brennan (Labour, Cardiff West)

I beg to move amendment No. 272, in

clause 90, page 55, line 36, leave out 'other than', and insert 'and'.

James Cran (Conservative, Beverley and Holderness)

With this it will be convenient to discuss the following:

Amendment No. 275, in

clause 135, page 83, line 8, leave out 'other than' and insert 'including'.

Kevin Brennan (Labour, Cardiff West)

This is an innocuous-looking pair of amendments. Amendment No. 272 would remove two words from the clause and replace them with one word. I am sure that the Minister will congratulate my hon. Friend the Member for Ayr (Sandra Osborne) and me on its simplicity and elegance, and accept it. The Committee must consider it in conjunction with other amendments that we shall discuss later, when we reach clause 98.

The aim of the amendment is to achieve justice for people who have lost the final salary pension schemes that they were promised. Although it is small, I intend to discuss the issue in some depth as we debate it. That is appropriate now, Mr. Cran, because the amendment would allow the Government to pay money into the pension protection fund to assist people who have lost their final salary occupational pension schemes. The Bill is designed to assist such people in future, but the amendments would make it possible to provide compensation for those who were affected before the introduction of the Bill.

It is probably best to explain what the amendments would achieve technically. Clause 90 allows the Secretary of State to pay grants to the board of the pension protection fund. However, those grants may not cover the cost of providing benefits out of the PPF or the fraud compensation fund. Those benefits must be paid for from the levy introduced under the Bill. The clause is authorised by the money resolution, and in particular by the Ways and Means resolution, which has been interpreted as permitting the raising of money for the purposes of the pension protection fund only, but not for the purpose of any additional fund created especially to deal with prior claims.

The amendment would allow the Secretary of State to pay grants to the board of the pension protection fund to meet claims for compensation. Taken in conjunction with other amendments, it would restore benefits for members of schemes that are in wind-up on the appointed day, or have already been wound up. The costs involved for schemes that go into wind-up after the appointed day would be met out of the levy as

contemplated under the Bill, which is what later amendments would achieve. If accepted, my rather innocuous-looking amendment would therefore have massive ramifications affecting the pension protection fund.

I make no apology for dealing in some depth with the issue, which is one of the key issues in the Bill, nor for repeating the story of hard-working honest citizens, who made the fateful and unforgiving error of trusting their employers, and the state, with their final salary occupational pension schemes. They put their money in on the basis that those schemes were guaranteed—a word that appeared throughout the literature that they were given about the schemes. That word was used legally by employers and by Governments and their agencies in that literature.

I will not repeat the examples that I gave on Second Reading from the leaflets that people might have consulted to discover whether their final salary occupational pension schemes were safe. Those leaflets contained assurances from employers, Government agencies, the equivalent of the Department for Work and Pensions, and so on.

My interest in the matter has been triggered by the now well known case of Allied Steel and Wire, which affected my constituency. I will not repeat any of the stories of personal hardship that have arisen from the insolvency of the company and the winding up of its final salary pension scheme. The workers, who in many cases had worked for the company for decades, found that their final salary pension schemes and comfortable, reasonably secure retirements were snatched away from them. That happened for a number of reasons, one of which was the flawed nature of the Pensions Act 1995.

It is wrong to blame the people involved for trusting their employers and the state, because many of my constituents had little choice. Governments of all political strands permitted compulsion by the employer; they allowed employers to force workers to join final salary pension schemes as a condition of employment, and did not permit them to join any alternative scheme. In 1988, that requirement was finally relaxed. However, many of those most severely affected joined their final salary pension schemes well before that date, and had often been subject to that compulsion.

How is it that 60,000 people can find themselves with a so-called guaranteed pension that is not worth the paper it is written on? The amendments are needed to put that right. If we look back at the Standing Committee debates on the 1995 Act, we see how the situation came about.

That Act had its genesis in the Maxwell scandal. It appears that nobody at that time envisaged that a situation could arise in which these amendments would be needed to allow the state to compensate people. As far as I can ascertain, no one fully envisaged the possibility of this crisis emerging. It is true that some organisations, including the TUC, lobbied for a pension protection fund exactly like the one that this Bill would introduce. However, it is clear

that no one then envisaged the scale of the losses faced by workers today.

When the possibility of schemes winding up without being able to meet their liabilities was discussed, it was generally assumed that that would be very rare, and that the minimum funding requirement, which we discussed earlier, would limit those losses to a relatively small amount. In Committee on 13 June 1995, my right hon. Friend the Member for Southampton, Itchen (Mr. Denham) said:

''There is an important point of principle, with which I am sure all members of the Committee would agree; in the event of a shortfall in a pension fund, when it will be difficult to meet pension obligations, whatever the cause of the shortfall, the members are innocent parties, although it is they who will suffer.''—[Official Report, Standing Committee D, 13 June 1995; c. 526.]

The point is that the members are innocent victims. It should not be possible for workers to become innocent victims of a flawed legislative framework and the other circumstances that have arisen.

The problem is that the 1995 legislation made the situation worse for those workers—although that was not the intention—by devising an inadequate minimum funding requirement and by putting the rights to deferred pensions at the bottom of the order of priority. The 1995 Act made no distinction between people who were on the point of retirement and people who had just started with the company.

Nigel Waterson (Conservative, Eastbourne)

I am following what the hon. Gentleman says closely. Does he not agree that the priority order could have been tackled months ago on a cross-party basis? Does he agree that the cliff-edge point between those who have just retired and those who are about to retire should have been dealt with already?

Kevin Brennan (Labour, Cardiff West)

I do not know the technical reason why that has not been possible. I know that the Government announced their intention to deal with the situation. It is well understood that it is not acceptable that somebody who is 30 minutes away from retirement should be treated the same as someone who is 30 years away from retirement, and it is important that that matter be dealt with.

It is important to dispose of the ACT argument—the argument that the shortfall has been caused by the removal of advance corporation tax. I shall kill that stone dead once and for all by quoting Dr. Ros Altmann, who is a well known authority on this subject; we have all got to know her name in this Committee. In a letter, she said:

''the removal of ACT relief is just a very tiny part of the problem. If there are, indeed, 60,000 members affected . . . and if we say that there are 10 million members of occupational pension schemes in the UK, that means only one sixth of 1 per cent. of members have been affected by this.''

She continues:

''The £5 billion relates to all pension schemes. Furthermore, the removal of ACT relief affected only 20 per cent. of the dividend income of the portfolios of these funds. If we assume that the dividend income was 4.5 per cent. of each of the pension funds affected, that means that the dividend income was reduced by just 0.9 per cent. of the fund at the most.''

There is good reason to believe that the figure is even less than that, because we are talking about UK equities only.

Dr. Altmann goes on:

''So the removal of ACT relief simply reduced income by 0.9 per cent. at worst. Yet schemes require far more than 0.9 per cent. extra to have enough to meet their liabilities . . . these schemes are underfunded by 30 per cent., 50 per cent. or more on a buyout basis and, therefore, the ACT argument is simply trying to make a political point but is of negligible size in this debate in practice. Even if they still had the ACT relief, there would not have been enough in the funds to pay the pensions. I certainly do not want to be associated with any argument that says this problem was caused by the removal of ACT relief.''

Nigel Waterson (Conservative, Eastbourne)

I do not for a moment accept Dr. Altmann's analysis; she is straying away from her undoubted expertise into the realm of politics. She and the hon. Gentleman fail to make the distinction between schemes that have gone bust because their sponsoring employers have gone bust, and the many schemes, which are often big and well run, that have substantial deficits but are still going concerns. Does he not accept that, at least for them, ACT must have made a significant difference?

Kevin Brennan (Labour, Cardiff West)

Dr. Altmann used her expertise to point out in a technical way—it was not done in a political way, because to the best of my knowledge she has no political allegiances or associations with any party—that it is unlikely that the exposure of any scheme as a result of that would amount to more than 0.9 per cent. of the value of the whole scheme.

On that basis, it is clear that any argument that ACT caused the problem, as was said on Second Reading, is a politically motivated one, rather than one that seeks the true causes. Those are the flawed nature of the 1995 Act, the fall in the value of equities and the failure of a number of companies in the engineering and manufacturing sector, where such schemes tend to predominate.

Vera Baird (Labour, Redcar)

The Opposition always fail to mention that at the same time as ACT relief was stopped, the rate of corporation tax was reduced by 2 per cent. That was thought to represent a bounty of £6 billion to the companies involved. At that time, the measure was supported by the CBI. In addition, Norman Lamont, a preceding Chancellor of the Exchequer, had already cut ACT tax dividend relief twice—in 1993 and 1994. It was completely illogical tax-relief.

Kevin Brennan (Labour, Cardiff West)

My hon. and learned Friend is right, of course. That means that there is no reason why companies should not have been able to assist their pension funds out of the benefits that they gained from those changes.

Gregory Barker (Conservative, Bexhill and Battle)

The hon. Gentleman mentioned the underperformance of the UK stock market as one of his three reasons. To my mind, with the exception of single companies that have gone bust or have been particularly badly managed, that underperformance is the overall reason why most of the people concerned are in a difficult situation. We have now underperformed on all the other major indices for more than five years.

Does the hon. Gentleman draw no correlation at all between the underperformance of the British stock market over that period and the changes that this Government have made in both ACT and the regulatory regime for business, and the long-term impact on the competitiveness of British business?

Kevin Brennan (Labour, Cardiff West)

There is no inference at all to be drawn from that. There would be, if the UK stock exchange were the only one in the world that had suffered any difficulties in the past few years, but in fact, it has done better than many others. Of course, what the hon. Gentleman says is one reason, but it is ridiculous to try to associate it all with the changes to ACT and the balancing changes in corporation tax.

I shall return to the essence of the amendments. They are intended to put this matter right for those who have suffered, as well as complementing the Bill, which will put it right for those who could suffer in the future. As I have said, what is so welcome about the Bill is the fact that it is a brave measure. However, it would be even braver, and the right thing to do, to assist the people who have already lost out.

I shall also return to how the issue was examined during the Committee stages of the 1995 Act. My right hon. Friend the Member for Southampton, Itchen raised the case of Swan Hunter, which was having similar sorts of difficulties. He talked about the fact that although the scheme would have met the minimum funding requirement being introduced by the Bill at the time, its members were facing cuts of up to 40 per cent. in their expected pensions. That is a significant loss.

In response to those observations, the Minister who then had responsibility for pensions, the right hon. Member for Richmond, Yorks (Mr. Hague), said that the minimum funding requirement would ensure that

''We are not talking about loss on the scale mentioned by the hon. Member for Itchen.''—[Official Report, Standing Committee D, 13 June 1995; c. 533.]

If only that were so, and that the worst case meant people losing up to 39 per cent. of the value of their pension. My constituents in Cardiff are not facing a loss of just 40 per cent. of the expected value of their pensions; if that was all their loss was, they would bite our hands off to get as much as 60 per cent.—although they deserve more. The best estimates that we can get—as we know, it costs money to get information out of independent trustees—is that my constituents can expect a total of 14 per cent. of the expected value of their pensions. That is an 86 per cent. loss—and it might be even worse; we just do not know what the final figures will be.

I submit, as I have done all along, that there is a duty of care. There are moral, legal and public interest arguments to be made. I have tried to make the moral argument, which is that successive Governments have inadvertently participated in mis-selling the nature of the schemes. What rational economic agent would have bet their pension on the share value of one company—their employer? If people had been given fair warning that that was what they were doing, they would not have done it. I assure hon. Members that my constituents are not stupid enough to bet their

pensions on the price of steel, and that is effectively what they were required to do.

There is a legal side to the issue. As we know, a case is to be heard under the European insolvency directive, although we cannot go into the details of that now. I believe that ultimately, the directive will result in the state having to pay out significantly more than it would if it settled on a reasonable amount of compensation now.

There is also a public interest argument. The Bill is intended to restore confidence in occupational pensions, and to make a pensions promise. That promise has to be real. If 40,000 or 60,000 people were going round the country saying, ''Don't believe in pension protection or what they tell you about it; it doesn't exist. We were told that our pensions were secure, and look what happened to us,'' that would drown out the excellent measure being introduced in the Bill, and undermine the confidence in occupational pensions that the Bill should bring into being. For that reason alone, it would be worth it for the state to do what I ask in the amendments and provide funds for compensation.

Nigel Waterson (Conservative, Eastbourne)

The words ''taxpayers' money'' have not yet fallen from the hon. Gentleman's lips. I appreciate that he is working under the same constraints associated with the money resolution as Opposition Members are, but I assume that he intends the compensation to which he refers to come from taxpayers' funds, as the Bill is not retrospective.

Kevin Brennan (Labour, Cardiff West)

I think that I said before to the hon. Gentleman that I really do not mind where the money comes from, but that I believe the state has an obligation. That is perhaps why I have gone further than he has; he is not prepared to say that the Conservative party would accept an obligation on the part of the state. He would like to pass on the cost, and pay the compensation for free by using unclaimed or orphan assets.

I do not know whether that scheme would work. If it works technically, those resources could be used, but so could the resources of the state. Even if those unclaimed assets are available for use by the state, there is no particular reason why they should be used for this purpose, and I accept that argument. Nevertheless, if the scheme is a painless way of solving the problem, fine—let us do it that way. The state itself may have unclaimed assets in national savings—money that people have lent the Government over many years—and that could be available for use; I do not know. I understand that some of my hon. Friends might table a parliamentary question to ascertain exactly how much the state holds in unclaimed national savings assets. In any case, there is a powerful public interest argument, together with a moral and legal argument, for dealing with the matter under the Bill.

I know that Ministers have heard the arguments on the subject ad infinitum, and that, for understandable reasons, we have heard the Minister's holding response to them ad infinitum, too—[Hon. Members: ''Not quite.''] Yes, perhaps we will hear it again shortly; there is an old political principle that we could add to

the other three arguments—a majority is its own repartee. I hope that things do not come down to that.

It is probably appropriate to draw the attention of my hon. Friends to the fact that early-day motion 200, in my name—which calls for something similar to what I am trying to do with the amendments—currently has 283 signatures, 195 of which are those of Labour Back-Bench MPs. That is a lot of MPs. They all feel strongly about this issue and feel that there has been an injustice, which is a powerful indication to the Government of a desire among Labour Members for something to be done. I know that my hon. Friends in the Committee, many of whom are here this morning, also agree that something ought to be done during the Bill's passage.

We are all eager to hear what the Government will do. I hope that my colleagues will confirm that they agree with me on that, so that the Government can see the strength of feeling about this issue on the Labour Back Benches. I understand the problems. The Government cannot afford to open a Pandora's box; they must do something legal and watertight, which cannot be confused with utterly different issues where there was no compulsion, and no warnings were ever given, involving private mutuals such as Equitable Life. This is a completely different issue. However, I understand that the Government have to pay attention to such issues.

I understand why the Government have to be assured about the costs. I know that the Department for Work and Pensions has been considering the scale of the problem recently and that that others are helping to ascertain the scale of the costs. We are close to the point at which the jigsaw puzzle, if not finally completed, at least displays a picture that is sufficiently clear for us to be able to get some sort of grip on the ball-park costs of doing something about this matter.

The time is approaching when we will need an answer from the Government one way or the other. Are we really going to leave all those people high and dry? I hope that the answer to our question is no. The intention behind the amendment is to secure an acknowledgement of that.

James Cran (Conservative, Beverley and Holderness)

Before we proceed, Mr. Khabra, I have to say that I tried to get one of your colleagues gently to remind you that coffee is not permitted in the Committee. I remind the Committee that that is a rule of this House, and I ask you to take your coffee outside into the Corridor.

Nigel Waterson (Conservative, Eastbourne)

I congratulate the hon. Member for Cardiff, West (Mr. Brennan) on the way in which he presented his amendment. I am sure that his constituents will be fully appreciative. He put his case in a measured, sensible, and in some ways irresistible way, as befits a former president of the Oxford Union. I hope that Ministers are listening. He should not think of apologising for ''banging on'', if I may use that phrase, because we will be doing the same, and so will people like Dr. Ros Altmann and others, until Ministers come up with an answer.

Slowly but almost imperceptibly, the glacier of Government decision making is beginning to move, under pressure from all quarters. Who knows whether the Minister will have something to share with us today? The Prime Minister has taken a personal interest—and so has the Deputy Prime Minister, so we know that at least some of the acronyms will be mangled, if nothing else.

The hon. Gentleman raised a number of issues. I make no apology—there has been a lot of non-apologising this morning—for picking up some of those issues in detail, because this subject is a central theme of this part of the Bill. He was right to make his point with some force on Second Reading. There is a public interest argument for doing as he suggests: it should be done to restore confidence. If the Bill is to have any purpose at all—if all these weeks of human endeavour in Committee are to be of any benefit to the common good—it should try to restore some confidence in the pensions system.

On Second Reading it was painfully apparent to those on our Front Bench—and, I am sure, to those on the Government Front Bench—that the majority of Government Back-Benchers who contributed were relentlessly making the point that what is, in some ways, an admirable piece of legislation is wholly overshadowed by the 60,000 ghosts at the feast—the people who will not receive a penny piece in compensation for having lost all or most of their pension rights.

I should try to rein in the hon. Gentleman's enthusiasm for this measure. Overselling the legislation is the last thing that we should do if we want to help improve confidence in pensions. This is not a pension promise; it is not a 100 per cent. guarantee, for a variety of reasons. That was explained, more learnedly than I could, by the actuaries in their open letter to the Secretary of State. There is a 90 per cent. figure for people who have not retired. There is a cap—a low cap, on one view, compared with some of the figures that have been bandied around. There is a problem to do with indexation, which we shall address in more detail.

The Government are also taking powers to be able to reduce the benefits payable. Some of the more sensible, informed and independent observers can envisage a situation, certainly in the early years, when that might have to be an option if the fund is not to collapse. We should not let people run away with the idea that this is a total safety net. There are also philosophical arguments that we shall come to later, made by organisations such as the CBI, that that should not be the case anyway—that there should always be an element of self-insurance, as it were.

The more we debate how to deal with the 60,000 people, the more we get stuck in the fog created by the fact that we do not know the figures involved. I think that there is now a consensus—certainly the Secretary of State has finally signed up to it—that the estimate of 60,000 individuals is about right; it is a suspiciously round figure, but it is a figure to work with. However, we still lack reliable figures for the amount of money

involved. I have made the point more than once that the official Opposition—the Government in waiting—are not prepared to sign a blank cheque without knowing how much money is involved; I am not remotely embarrassed or abashed about that. I have already paid tribute to the sterling work of Dr. Ros Altmann, and I am sure that all Committee members will do so again many more times, because at present she is the only game in town on this issue.

We believe that the Government are beavering away on the problem in the bowels of the Treasury or the DWP, because that idea has been pulled out of Ministers gradually, both at Question Time and in debates—particularly in one debate in Opposition time. Presumably, some very clever people are sitting in darkened rooms thinking about all this. However, the Government have rejected calls from the hon. Member for Sittingbourne and Sheppey (Mr. Wyatt) and others for an independent inquiry. The Opposition do not have the resources to do the work, Short money notwithstanding. The Government have the resources—and it seems that they are doing it, but on the quiet. We hope that sooner or later something will emerge.

I followed what the hon. Member for Cardiff, West said, and I intervened on him during the argument about ACT. Conservative Members have never said that that was the sole—or even the most important—contributory factor, but taking out of pension funds a cumulative sum of £35 billion has certainly not helped. We have continually referred, as the Americans do, to the perfect storm: there is a series of factors, some outside the Government's control but others, such as this one, within their control. What happened with ACT was a clever wheeze when Labour came to power, because it seemed to be a painless way of raising money; following the golden years of Conservative management of the economy, pension funds were doing well, and nobody noticed.

If one is trying to get a handle on what the Government need, it is interesting to sit down and analyse the time scale with some of the protest groups, and people such as Dr. Altmann. I do not argue against the idea that they need a boundary to be drawn, inside which they can say they will compensate, and explain how they will do that.

Most of the schemes that have gone bust have done so in a fairly short time—from 2000 to 2002 onwards. This is a recent phenomenon, although no less important for that reason. Understandably, the hon. Member for Cardiff, West offered his ritual blaming of the 1995 Act. I will offer my ritual defence of it. In the circumstances, it seems to me that it was a major step forward.

Every time the House visits or revisits pensions legislation, at the back of its mind it probably has the feeling that the next political generation will have to revisit it again. This Bill will not be the end of the story, by any stretch of the imagination. However, I realise why the hon. Gentleman has to nod in the direction of the alleged failings of the Conservative Government.

I shall briefly repeat what I have said before in this Committee. The way in which the minimum funding requirement was constructed—for an average person aged, say, 40—and the two dilutions of the MFR by this Government, meant that we could have been changing the proportion from about 80 per cent. to about 20 per cent.

As I understand it, we are all constrained by the boundaries of the Bill, particularly in terms of the money resolution. The hon. Gentleman is suggesting that taxpayers' money be used to compensate the 60,000 people—although he was good enough to say that he did not really care where it came from, which is refreshing. I think that it was Thomas Jefferson who said that a Government big enough to give you everything you want is strong enough to take everything you have. I am, therefore, a little bit dubious about such a broad-brush approach.

We have consistently taken a rather different view, although the original idea was not ours. We have adopted and developed the ideas of the right hon. Member for Birkenhead (Mr. Field), who was memorably asked by the Prime Minister to think the unthinkable, but when he did so, was promptly sacked. We have followed the model of trying to set up a parallel fund—an interim pension protection fund—which will not only be endowed with the remaining assets of the companies that were already in wind-up prior to this Bill, but with so-called unclaimed assets. Until recently, I was beginning to get a bit dubious about whether we would make any progress with that idea. Nevertheless, that is the direction in which our amendments were directed. Sadly, they seem to fall outside the terms of the money resolution—although the Government could put that right at the stroke of a pen.

There have been some major developments in the past week or two, associated with the Budget. Before the Budget the mantra had always been, as the Under-Secretary of State for Work and Pensions, the hon. Member for Liverpool, Garston (Maria Eagle) said:

'''Unclaimed' does not necessarily mean that the assets do not belong to someone . . . but we are willing to consider any suggestions that he or anyone else may have.''—[Official Report, 9 June 2003; Vol. 406, c. 391.]

That mantra, which has clearly been the ''line to take'', was also trotted out by the Secretary of State as recently as June last year—as well as more recently—when he followed up what his junior Minister had said by saying:

''just because those assets are unclaimed does not mean that they do not belong to anyone. She also said, however, that she and I stand ready to meet people and to engage constructively with any sensible proposals on the subject.''—[Official Report, 11 June 2003; Vol. 406, c. 690.]

It is fair to say that until just before the Budget the constant refrain of Ministers has been that the unclaimed assets, which we understand could total £15 billion, cannot be touched. We have expressed in the past our suspicion that the Government were not being wholly straightforward, and that the Chancellor might have other plans for those funds.

In parenthesis, I must say that we need to be careful that we do not talk about unclaimed or ''orphan''

assets too blithely. I have met representatives of the Building Societies Association, which is concerned about its position for two reasons. First, it feels that the sums that may be in building society accounts are much smaller than the figures that are sometimes bandied around. Secondly, it has a concept of mutuality, which means that technically, in the case of the typical building society, those assets are not those of an individual, but belong to the mutual society.

Beyond that, the hon. Gentleman talked about national savings—and then there are the banks, the insurance companies and any number of pots of money lying around in our economy that nobody has claimed for some time and may never be claimed. The right hon. Member for Birkenhead, during one of our recent debates on the subject, ran into heavy flak from Ministers who said that that money belonged to somebody. He asked why we could not start with assets that were 200 years old, on the basis that the people who owned them were probably dead, and work forwards. That seems to be one sensible way of approaching the problem.

However, with a stroke, as if by magic, all such problems have now gone away. I am sure that you are an avid reader of the Red Book, Mr. Cran, and in paragraph 5.72 and those following, the Government have come up with a wheeze for using unclaimed assets. Paragraph 5.73 says:

''The Government welcomes the creation of the Balance Charitable Foundation for unclaimed assets, and the commitment made by two major investment banks to pass over some of their unclaimed assets to the Foundation. The proceeds of such transfers should be distributed fairly across the charitable and voluntary sector.''

It goes on about consultation and so on, and then paragraph 5.74 says:

''The Government looks to the industry to build on current momentum, and expand the scope of voluntary action beyond investment banking into retail banking and the wider financial sector.''

We are promised an assessment and a report on progress by the time of the 2004 pre-Budget report.

I do not know whether all that was decided at the Treasury, with Department for Work and Pensions Ministers blissfully unaware of that policy developed in isolation. However, it does make complete nonsense of the Government's only line of defence against the unclaimed assets proposal.

The hon. Member for Cardiff, West says that he does not care where the money comes from. On Tuesday he said that he had no theoretical problem with unclaimed assets—and now it appears that the Government have disingenuously been working out their own plan for using unclaimed assets, while saying in public, including in the House of Commons, that that cannot be done.

I think that the last road block to our proposals has been removed—removed by the Government; let us give them credit for that. The Chancellor and his officials have found a solution. If it works for the

Balance Charitable Foundation, it will work for the 60,000 workers.

We are not allowed to move the amendments that we tabled; they are out of order because of the money resolution. However, given that there can now be no sensible or practical argument against our proposal, I urge the Minister to say that he will consider amending the terms of the money resolution and accepting our amendments in principle; the Government are very welcome to play around with them, redraft them and improve on them if they wish.

I am sure that that would satisfy the hon. Member for Cardiff, West; it would certainly satisfy Opposition Members. Most importantly, it would provide a just and durable solution to the problems of the 60,000 people and of anybody else who falls into this nightmare scenario between now and when the legislation comes into force.

Bill Tynan (Labour, Hamilton South)

I congratulate the Government on what we have before us today. However, there is an omission in the Bill, and the amendments moved by my hon. Friend the Member for Cardiff, West would go some way towards resolving it.

In the past few years there has been a tremendous campaign on behalf of the 60,000 people—normally long-standing employees of manufacturing firms—who find that they have lost their pension schemes. They had reason to believe that the Government would make their pensions secure, and now their age and their skills background give them no opportunity to correct their position and build up a pension for the future.

The changes made over the years, including allowing pension surpluses to be raided and contribution holidays to take place, weakened the pension scheme funding that would have resolved the problems of those 60,000 people today—and I think that we are continuing to go along the same line. I believe that schemes being wound up should continue to pay all the benefits due, and that the winding-up process should be frozen. One of the major problems is that we are forcing schemes that wind up to go for annuities, and thus losing the value of those schemes. The Government have an opportunity to examine that problem closely, and decide to freeze assets and ensure that schemes continue to pay out.

Many people have referred to Ros Altmann. She claims that £100 million would solve the problem of the people who have lost their pensions—but the Government have never considered the £100 million. It is essential that they consider Ros Altmann's solution to the problem.

Nigel Waterson (Conservative, Eastbourne)

On annuities, I can tell the hon. Gentleman that we have tabled an amendment to at least temporarily postpone the purchase of annuities. As he and Dr. Altmann rightly say, that is eating up a lot of the remaining assets of the schemes that are in wind-up, and that is expensive.

Bill Tynan (Labour, Hamilton South)

I thank the hon. Gentleman for that intervention. I appreciate that he has tabled an

amendment. If we are to protect people, we must consider such amendments. That is the message to the Government. We should seriously consider the £100 million that Ros Altmann has suggested would or could solve the problem of the 60,000 people.

There is a moral argument, which is that the central Government fund would be topped up with moneys classed as unclaimed assets. I am not convinced by that. We need to consider those assets carefully and, as has been mentioned, we could consider periods of 200, 100 or 50 years. However, I believe that the Government have an obligation to ensure that we act seriously in respect of the 60,000 people.

The Government know about many people who have lost their pension schemes. Unlike in the case of the hon. Member for Cardiff, West, only five members of schemes have contacted me. In one scheme, people believed that they would have a basic pension of £17,000 when they retired, but they have now been told that they might have absolutely nothing. The horror that those individuals feel must be brought home to the Government.

I understand the Government's difficulties. If the problem had an easy solution, it would have been solved before now. The Government have offered sympathy, and we have been told constantly not to raise false hopes. However, the longer we take to identify the number of people affected—it is important to identify the real numbers involved in the pension scheme deficits—the longer we shall be building up hopes while people are left in limbo.

I ask the Government to consider three issues. We must define carefully the number of people involved because 60,000 is only a ballpark figure. Each individual has suffered, and they are waiting anxiously for something to be done by the Government to resolve their position. We should also consider the figure of £100 million that Ros Altmann says it would cost to solve the problem. We must seriously examine the winding up of schemes and the buying of annuities where a fund has failed. While making sympathetic noises, it is essential that we decide to move on.

Like my hon. Friend the Member for Cardiff, West, I believe that if we had a vote on the amendment it might be tight. Before Report, we should have a definition of the number of people involved, examine seriously the funding required, and consider the points that have been made in debate. On that basis, we should decide to do something. If the will exists, I believe that we can deliver for the people who are losing their pension schemes.

The Bill is delivering for future pensioners. That is why I congratulated the Government. However, we must rectify the current problems, which became serious only in the past few years. If the Government do not do so they will have misunderstood things, and they will have failed to make an impact for the people who require help. When the Ministers respond, I do not want them merely to make pathetic noises. I want them to say, ''Yes, we are looking at this seriously; we believe that we can take swift action to deliver for the

people who have lost out in their pension schemes through no fault of their own.''

Paul Holmes (Liberal Democrat, Chesterfield)

I wholeheartedly support the principles and intentions that prompted the amendments of the hon. Member for Cardiff, West. Like him, I will not discuss things in as much detail as he and I went into on Second Reading. However, I want to offer a brief résumé. In my constituency, workers for three firms in particular have lost all or most of their pension funds, often after saving for 40 years; I have gone into the details of those cases.

There are two key issues. The first is to do with the compensation for the approximately 60,000 people who have lost out in the gap between 1997 and the introduction in 2005 of the pension protection fund. On Second Reading, I read out in detail statements made by Ministers in the House and the other place during the passage of the 1995 Act, which seemed to make it crystal clear that the intention of that Act was to give a cast-iron guarantee that occupational funds would be safe. I also read out extracts from earlier guidance issued by the Occupational Pensions Regulatory Authority to trustees of pension funds, which seemed to make it clear that such funds were totally protected and safe as a result of the provisions of the 1995 Act. Therefore, it appears that a case can be made that the Government must ensure that the 60,000 people who have lost out are compensated.

One Minister drew an analogy with buying car insurance; if someone bought insurance for a car next week they would not expect to receive compensation for an accident that happened last week. The people who have lost out in their funds, such as the workers at Chesterfield Cylinders, Dema Glass and Coalite in the Chesterfield area, were not buying their insurance at some point in the future to cover them for something that happened at some point in the past; they were paying into their pension fund with deferred wages under what they thought was a commitment from the Government of the day and then from the new Government in 1997 that they were saving for their future in a guaranteed way. We should honour that commitment.

The intention behind the amendments is important in another respect. As the hon. Member for Cardiff, West mentioned, there is the principle of the work of the PPF in the future. The PPF is intended to cover one of the big gaps that have emerged in the 1995 legislation. It is intended to give the message to people who are saving for their future, and to the young people whom the Government are desperately keen to encourage to save for the future, that giving up 10, 20, 30 or 40 years of income for a future pension will not be a waste of time. It is intended to assure them that that will not be a wild gamble because they will not find that after a lifetime of savings they have lost out completely and it is too late to do anything about it. For the PPF to work in that regard, the Government must be the guarantor of last resort. I made that point on Second Reading.

Nigel Waterson (Conservative, Eastbourne)

Is the hon. Gentleman signing his party up to the policy that compensation for the 60,000 people should be met out of taxation? If so,

given the Liberal Democrats' new policy to try to make their figures add up, has he cleared that with the person who masquerades as the shadow Chancellor?

Paul Holmes (Liberal Democrat, Chesterfield)

I thank the hon. Gentleman for his helpful intervention. We have made it clear repeatedly that we are talking about compensation for 60,000 people. As was said on Second Reading and earlier today, in one sense we do not care where the money comes from, as long as it comes from somewhere. We have discussed in detail possible sources of the money. It is estimated that the compensation money would be in the region of £100 million to £150 million. The Department for Work and Pensions has a future yearly estimated underspend of up to £200 million. The compensation sum was described on Second Reading as small change in the pockets of the Government.

Kevin Brennan (Labour, Cardiff West)

I want to make the position clear so that the Committee is not misled. Does the hon. Gentleman agree that the estimate, which is high and based on full compensation and all sorts of assumptions, would be £100 million a year, although it would not be payable for some years if the annuities were not purchased? It would be an ongoing cost that would eventually disappear in time as members of the pension fund departed this mortal coil.

Paul Holmes (Liberal Democrat, Chesterfield)

Indeed, the cost is projected for some 30 to 40 years in the future. It has three possible sources, one of which is the small change of the DWP's annual projected underspend which we have discussed in detail many times. Another source that has been discussed today is the assets of the underfunded schemes. If they were used not to purchase annuities, but to pay for the ongoing costs of the pensions within those schemes, there would be a 10-year gap before a single penny of taxpayers' money would have to be used. That would give ample time to the Department and its billions of pounds of expenditure.

I come now to the third angle. It deals not so much with compensation as with the future pension protection fund. There is an understandable nervousness on the part of all parties to commit the taxpayer in the future to undefined amounts of expenditure. It is unthinkable that the pension protection fund would be allowed to go bankrupt in the future; that would negate its whole point. Let us consider the American Pension Benefit Guaranty Corporation, set up in 1973 to restore confidence in the market after a huge industrial failure. It worked perfectly for 30 years, and only within the past two years as a result of the huge decline in the stock market has it hit problems, having traded well with profitable balances for a long time and having no problem with its assets in meeting its commitments. It is unthinkable that the American Government would allow that scheme to go under and negate the whole point of setting it up, which was to give confidence to people to save for the future and to give confidence back to industry at the same time.

As I said on Second Reading, the same must apply to the Government when setting up the pension protection fund. I cited an example of a constituent

aged 26 about three years ago who was just about to start saving in the pension fund of the major, world-famous international retailing company for which she worked. She thought about what happened to her mother who worked for Chesterfield Cylinders and whose pension was wiped out overnight and said to me, ''What's the point? Why should I start saving at the age of 26 for my pension in 35 or 40 years' time with a company that seems rock solid, but might be worthless in the future? I might as well spend the money on other things.'' If the Government, with an inadequate state pension, say that people must save for their retirement, people must believe that those savings are safe and that they are not taking a wild gamble.

Nigel Waterson (Conservative, Eastbourne)

I wish to make a slightly friendlier intervention. I am following what the hon. Gentleman says closely. I do not know whether he was here on Tuesday, when the Minister, having being pressed on the open letter from the actuaries, said that the PPF was neither a pension fund nor an insurance scheme. That rather leaves open the question of what it is. It is probably a political construct enabling the Government to say that they have tackled a particular problem. There is nothing wrong with that, but does that not add force to the hon. Gentleman's argument that it is difficult for the Government to distance themselves—

Malcolm Wicks (Labour, Croydon North)

Will the hon. Gentleman give way?

James Cran (Conservative, Beverley and Holderness)

No.

Nigel Waterson (Conservative, Eastbourne)

I am not sure whether I am allowed to; things could get messy if I did, because this is, in itself, an intervention.

Malcolm Wicks (Labour, Croydon North)

As time passed, I became unsure of that, Mr. Cran.

James Cran (Conservative, Beverley and Holderness)

I am beginning to take the view that the hon. Member for Eastbourne's intervention is developing into a speech. He may say one or two words more, but then let us hear from the hon. Member for Chesterfield (Paul Holmes).

Nigel Waterson (Conservative, Eastbourne)

I was getting to the point of my peroration, Mr. Cran. I wanted to ask the hon. Member for Chesterfield whether he thought that what I said added force to his argument. The Government cannot have it both ways by claiming that the fund has nothing to do with them once they have launched it into the world.

Paul Holmes (Liberal Democrat, Chesterfield)

I agree. I was not here on Tuesday; I was away on Select Committee business that had been arranged many months before the dates for this Committee's sittings were set. However, I returned late last night and read the verbatim account of Tuesday's business this morning.

There are a number of flaws in the pension protection fund—we will discuss some of those in later sittings—not least of which is the fact that the fund is not a 100 per cent. guarantee, in terms of the amount of cash. We need to consider those flaws. As I said, I agree with the hon. Gentleman's general argument. If the point of the pension protection fund and the purpose of the Bill is to restore confidence in

the pensions system—at least as of 2005—the fund must have a guarantee behind it that it will deliver what it seems to promise. Some of the small print says that there are weaknesses in that respect.

Someone who has saved for their pension for 20, 30 or 40 years and has also paid for insurance on that pension must not feel that, in the future, the Government might turn around and say, ''Sorry, you have lost not only your pension savings—your life savings—but the insurance that you paid for.'' We are back to the car analogy that was, unfortunately, used on Second Reading: someone who takes out car insurance against accident and injury does not expect to be told, when they have an accident, that the insurance company just will not pay out.

Tourist companies operate travel insurance schemes and pay into those schemes so that, if a particular company goes bust and someone is stranded on the other side of the world, the scheme can get them back. Having paid extra money for the insurance, one does not want to be told, ''Sorry, we're negating our agreement; we're scrapping that, and it doesn't apply.''

If we are to restore confidence in the system, we must give people confidence that the scheme and the insurance that they pay for will pay out. That is particularly true in the case of younger people who have not even started saving. We are increasingly told by the Government that we must save because we cannot rely on the state for a pension in future. At some point, whether it be in 10, 20 or 30 years—it took 30 years for the American scheme to hit one major problem—the Government will have to act as a guarantor for the scheme. It is simply unthinkable, in the American and the UK case, for the Government simply to wash their hands of the matter and say, ''The whole thing's a failure, and you're not going to get your pension and insurance; it just will not be there''.

We can argue about the details of where the money comes from, but the Government must act as a guarantor for the schemes in the long run. The Liberal Democrats and I wholeheartedly support the principle of, and the intentions behind, the amendments.

John Robertson (Labour, Glasgow Anniesland)

I do not intend to take too much time. I am speaking in support of my hon. Friend the Member for Cardiff, West, to emphasise to the Minister the strength of feeling on the Labour Back Benches. That can be seen from the turnout at these Committee sittings. Perhaps we can tell the strength of feeling among the other parties by the number of people on their side of the Room. It would seem that the nationalists have not even bothered to turn up, but then again there is nothing new in that.

The Bill, in its entirety, is good, and there is no way that the Government can take any blame for what has happened to the 60,000 people who have often been mentioned. It was not the Government's fault that those people lost their money, but neither was it the fault of the 60,000 people, who contributed to pension schemes, and whose lifetime ambition was to have a long and happy retirement. Unfortunately, in many cases that has proven not to be the case. The fact that

they do not receive the money to which they had been looking forward has caused a lot of anguish and, probably, ill health.

Those of us who have been active in the trade union movement understand members' needs and the need for people such as myself to fight for the individual's rights and for people's contributions to be looked after. However, when it comes to a pension that is wound up, who fights for those people's rights? Who fights for the people who have been left—the 60,000 people who have in effect been left with no money? I believe that the Government have a moral responsibility to ensure that those people's hard earned savings have not been for nought. The Government should consider some form of retrospective payment to them. It was not their fault or that of the Government.

At the end of the day, who protects such people if it is not the Government? It is the Government that we would look to for help and for money when all else has failed, and I think that we have reached the stage where those 60,000 people deserve some kind of contribution. I look to this Government, who on many occasions have proven to be protective of those that have the least, to examine the issue. I ask the Minister to consider the Back Benchers who have spoken—and those who will speak—to note the strength of feeling among Labour Members, and to take that on board when he replies.

Vera Baird (Labour, Redcar)

In speaking in support of the amendments tabled by my hon. Friend the Member for Cardiff, West, I will make a digression at the outset from the topic that we are discussing.

Clause 90 allows the Secretary of State to pay money for the board's expenses. I want to make a powerful point: the Government would make fewer and smaller grants to support that board's expenses if it were located, consistent with the Lyons inquiry, outside London and the south-east. I hope that in due course the Minister will guarantee that, as would be consistent with the announcements in the Budget, the new semi-Government agency will be located elsewhere.

Of course, the purpose of the amendment is to allow grants from the Government, which are public funds, to go into the pension protection fund to cover not merely its expenses, but its expenditure. That allows for past wind-ups to be paid for on the same basis as future ones. It is an important point that the pension protection fund board is the right vehicle for paying out on those past losses. It is not appropriate that, whether the money is paid out of unclaimed assets or in some other way that is yet to be devised, it should be paid out in any other way than one that is totally consistently with the terms, conditions and systems that will be set up for all future payments out of the pension protection fund.

I am also conscious that the nature of the amendments is such that there is no limit on how far back payments out for funds that are already wound up could go. They might go back as far as the pensions of the soldiers who fought in 1066, but that is not the point. The point is that we are making a clear principle

known to the Front Bench. As many hon. Members have said, the strength, depth and breadth of the feeling can be seen by our contributions today and by the very different kinds of Back Bencher who have spoken. One can see the depth, breadth and nature of the support on the Labour Back Benches for some help to be given to those 60,000 people.

No one can be anything other than full of pity and sadness for the people who have suffered. One can see straight away that it is unfair that they are in such a position and one can see that they have, in their own eyes and even objectively, been cheated and betrayed. They were encouraged to be in these funds, and some of them paid under legal compulsion, on the understanding that they would have an excellent pension at the end of the day. The fact that they had to pay as a condition of their employment, and are now getting nothing back, means that they have paid an extra levy for the privilege of working in a firm that has failed to honour its obligations. In that sense, as well as in the ordinary sense, those people are excessively out of pocket.

The Government have some responsibility. I am sure that successive Governments did not expect this to happen. As the hon. Member for Eastbourne (Mr. Waterson) said, this is a new phenomenon that has happened only in the past few years. The reassurances that were given in the first instance to people to invest in their pensions were no doubt given many years earlier, and I suppose that people were left with little choice but to carry on even when doubt entered into the game. Although Government responsibility—certainly this Government's responsibility—is limited because everyone must look after their own interests by hedging their bets as best they can, the great mass of people have lived their lives satisfied that if they paid into a pension fund, they would get a payout. Those people feel a strong sense of betrayal. It is obvious who the culprits are, and they are not the Government. There is an obvious breach of contract, but the people who should be the butt of our comments are simply not available; they are people of straw.

A little while ago I heard the Government make an argument about the extent to which it was their responsibility to cover every vacillation of the stock exchange that caused somebody a serious loss. I can see how that argument might prevail. However, the Government have moved on from that position, and do now accept some responsibility. If they have any doubts about their responsibility, the extent and depth of the loss, the great sense of betrayal and the huge damage to future public confidence in pension funds must make them appreciate the need for action. Voices will not be quieted until these people are given some kind of satisfaction to assuage their hurt and penury. The confidence that the Government intend the Bill's provisions to inject into the pension system will not be restored until those voices are quieted. From a politically pragmatic point of view therefore, it is imperative that help is given to people—although there is a far higher moral reason for helping them.

It is sensible to examine closely the issue of unclaimed assets. I admire the perception of my right hon. Friend the Member for Birkenhead in thinking of the idea. His work has been taken on, and his idea is good. The same idea is now emerging from deep in the bowels of the Treasury. As the hon. Member for Eastbourne said, there was an announcement only last week in the Budget that use could be made of those assets. The Government have started to realise that they might be able to clear away the problems that they once perceived might prevent them from doing anything.

I am much more worried about the proposal by Dr. Altmann that annuities should not be paid and that pensions should be paid from the fund itself. It is hard to evaluate whether that is a sensible way to proceed because on one day at some point in the future there will suddenly be no fund left, and the Government will have to pick up an unspecified figure. It is hard to say whether that is more sensible than proceeding in another way earlier. The purchase of annuities at least guarantees the security of some pensioners, and we can then look for a solution for others.

Many young people are involved in the various pension schemes that we are talking about—they do not usually get much airtime in these debates. It is very much to be hoped that the Government have assisted all those that they can in getting into a secure pension scheme since their scheme has fallen aside. I hope that they have been given priority in terms of Government advice and support, although the real sufferers are, of course, the older people who have no opportunity to make up any of the deficit.

I want to express, as others have done, the powerful sense on the Government Benches of a moral imperative on the Government to do something to help these poor suffering people. I note in passing that when it was set up in 1974 the US Pension Benefit Guaranty Corporation did take retrospective claims and deal with them—although in a minor way. I see my hon. Friend the Minister frowning, but I saw that on the website last night, unless I completely misread it. There is a precedent for the US doing that and for us to do it too, one way or another. This is a model on which the Government rely heavily.

The figures that have been quoted—around £100 million a year—are far too high. However, even if they are correct, they pale into insignificance next to the £14 billion tax relief on private pension contributions that the Government give, by and large, to the better-off. I urge the Government, as my colleagues have done, to start to think much more quickly. I hope that they are able to come up with a solution, at least by Report.

Janet Dean (Labour, Burton)

I support my hon. Friend the Member for Cardiff, West and other hon. Members who have spoken. I think that the sentiment shared by everyone on these Benches is that while the Government are clearly not to blame for the situation in which approximately 60,000 people find themselves, neither are those people who have paid into a pension scheme all their lives. What differentiates their

position from that of others is that they were forced to pay. If hon. Members had paid in only to find that we would not get anything back, most of us would find that difficult to accept. I am sure that those 60,000 people feel that they have been cheated for all their working lives after paying in their money.

I urge Ministers to think carefully about how the Government can meet their moral obligation to those 60,000 people, so that the fear, disappointment and sadness can be removed from their lives. It is also important that we send young people the message that paying into a pension scheme is a good idea. I urge my hon. Friends to do everything possible and to look at the unclaimed assets. That is probably one of the best uses to which they could be put.

Chris Pond (Labour, Gravesham)

We have heard some articulate and powerful, albeit short, speeches this morning on an issue that all Committee members would consider to be one of the most important that we are dealing with.

I pay a particular tribute to my hon. Friend the Member for Cardiff, West for the way in which he set out the argument on behalf of those in ASW, and others, who have lost not only their jobs, but their pensions and their security in retirement. He began by suggesting that I might wish to congratulate him and my hon. Friend the Member for Ayr on what he described as the elegance and simplicity of their wording, and that I might go on to accept them in principle. I am happy to go halfway with him: I congratulate him on the elegance and simplicity of the wording of the amendments.

I should like to reaffirm the effect of the amendments, which is twofold. Amendment No. 272 would provide that the board could, under clause 90, receive grants from the Secretary of State that could be used to pay compensation from the pension protection fund or the fraud compensation fund. Amendment No. 275 to clause 135 would include as one element of the funding of the pension protection fund

''amounts of a prescribed description''

including

''amounts paid, directly or indirectly, to the Board by the Crown.''

As all Committee members are aware, these amendments would mean that taxpayers' money could be used to pay compensation to members of defined benefit schemes, or defined benefit elements of hybrid schemes.

The first difficulty is that that would be entirely contradictory to the overriding principle of the pension protection fund: that it should operate at arm's length of Government and that it should be funded by those schemes whose members could receive compensation, not by the general taxpayer. The amendments could also be targeted at members who had already lost out due to the insolvency of their employer and their scheme's winding up underfunded.

We have heard some powerful speeches on this issue. Committee members and those whom they represent would feel that it would add insult to injury for me to run through yet again the

arguments as to why we are not able at the moment to offer the relief that they seek. However, we are working very hard.

My hon. Friend the Member for Hamilton, South (Mr. Tynan) wanted an assurance that we offer not only words of sympathy. I willingly offer those, but I also assure him that we are seriously considering what we can possibly do to assist. As he suggested, we are looking at the number of people who might be affected. The figure of 60,000 may be right, but there is no certainty about it; we must be absolutely sure. We are considering the costs and all the possible mechanisms proposed to try to help those people. If Committee members wish, we shall return to this matter when we reach clause 98.

As Committee members have recognised, we must be very careful not to open a Pandora's box, to act within the law and to act fairly towards existing scheme members, members who have lost out and taxpayers generally.

Nigel Waterson (Conservative, Eastbourne)

Will the hon. Gentleman give way?

Chris Pond (Labour, Gravesham)

Well—yes, I will.

Nigel Waterson (Conservative, Eastbourne)

The Under-Secretary mentioned the taxpayer. Does he accept that in light of the Budget there are significant unclaimed assets that are now being made available for charities that could be made available for this purpose?

Chris Pond (Labour, Gravesham)

I hope that the hon. Gentleman will forgive me if I come to that point in a moment.

George Osborne (Conservative, Tatton)

Will the hon. Gentleman give way?

Chris Pond (Labour, Gravesham)

Certainly.

George Osborne (Conservative, Tatton)

The Under-Secretary says that the Government are trying to assess how many people are involved and what solutions there may be. Will he give us a more definite timetable? When will the Government come to a conclusion about whether they can help? Will that happen while the Bill is debated in Committee, in the House of Commons or the House of Lords, or will it not happen while the Bill is before Parliament?

The Under-Secretary says what the Secretary of State has said for a number of months, but will he give a more definite timetable on when the Government will come to their decision, and say either yes or no?

Chris Pond (Labour, Gravesham)

The only assurance that I can give the hon. Gentleman is that we will come to a resolution as soon as we can. I do not think that he or other Committee members would want me to say, ''We will give you an answer by Report'', if that was the wrong answer for Committee members and those who have lost so much.

We need to ensure that we do this properly. We have two parallel debates: one about the pension protection fund, which is about protecting people for the future, and the other about how we assist those who have lost so much in the past. We must be careful not to make an assumption that those two debates can be merged together. They must be treated separately.

George Osborne (Conservative, Tatton)

Again on the time frame, are the Government taking their time because they have to

make a lot of technical assessments about cost and practicality? Or does there ultimately have to be a political judgment about whether to help? Is the delay—I do not use that word in the pejorative sense—due to the Government's having to come to a political decision, or to the work that needs to be done in the Department?

Chris Pond (Labour, Gravesham)

No. I say to the hon. Gentleman and my hon. Friends that the matter is not about politics and I hope that no member of the Committee plays party politics with such an issue. The Government have a commitment to try to find means of assisting such a group of people. My hon. Friend the Minister, the Secretary of State, parliamentary colleagues and I have said before that those people have been through so much that it would be wrong of anyone to put them through still more heartache and anxiety by suggesting that we can find a solution if we cannot be certain that we can deliver it. That is why we have given a commitment to do everything that we possibly can, but we shall not give a commitment that we can necessarily find a solution to the problem.

Nigel Waterson (Conservative, Eastbourne)

The Under-Secretary is being very generous. A moment ago, I had the slight impression that he suggested that there was a conceptual difference between the 60,000 people and those who will be protected under the Bill when the PPF is set up. That cannot be right, because surely the only difference in principle is a matter of timing and the Bill is designed to protect people in a different time scale.

Chris Pond (Labour, Gravesham)

Yes. That is a helpful intervention, if the way in which I presented matters was confusing. I was saying that the PPF was not the vehicle for assisting people who had lost in the past. Its purpose is to ensure that such problems never happen in future.

The hon. Gentleman and my hon. Friends referred to the so-called orphan assets. My hon. Friend the Minister and I worked with my right hon. Friend the Member for Birkenhead for many years and we know the imagination that he can bring to finding solutions to such matters. We welcome the work that the British Bankers Association and Building Societies Association are doing to reunite the assets with the people who own them. That is a fundamental first approach. Some have suggested that perhaps we should work only on those assets that have been disunited from their owners for 200 years, on the assumption that, as the hon. Member for Eastbourne suggested, they are probably now dead. I must say to him that, with our investment in the health service nowadays, we can no longer make such assumptions.

It is fair to say that the proceeds of such transfers of assets that are unallocated at present have to be distributed fairly throughout the charitable and voluntary sector. Distribution organisations for such money should be run in an open and consultative manner in accordance with the Government's best practice and with the involvement of the financial services industry in the voluntary and community sectors. We have been considering whether or not that offers a solution. My hon. Friend the Member for

Cardiff, West suggested that it might be a solution, but there is no reason why we should think that, if the assets were available for use, they should be used for such a purpose. We need to hold a further debate on such matters.

Nigel Waterson (Conservative, Eastbourne)

Until relatively recently, the Government's position was that the so-called unclaimed assets were not available for any purpose. Suddenly, we seem to have moved on two steps, so that they are now available only for another purpose—charities. There is something Orwellian about that. How has the Under-Secretary missed out the middle part of the process, which will be to see whether the unclaimed assets could be used for the purpose that we are discussing today?

Chris Pond (Labour, Gravesham)

The fact is that there are real difficulties in spotting that pot of gold and deciding that we shall use it for any purpose. We have been openly looking at it since the proposal was made by my right hon. Friend the Member for Birkenhead. If there is a possibility of using any of those assets, we must be very careful about how we allocate them and we must ensure that that is open, transparent and legal. Plenty of difficulties are involved in that.

Several hon. Members have said that there is a moral obligation on the Government to do something on behalf of those who lost in the past because they were required to take out membership of an occupational pension scheme as a condition of employment. Since the Social Security Act 1986, membership of occupational schemes has not been a condition of employment; also, whether such membership should be a condition of employment was decided by employers—it was not a statutory requirement.

Kevin Brennan (Labour, Cardiff West)

My hon. Friend will acknowledge that that came into effect in 1988 rather than in 1986, and that what in fact happened was that the state permitted the employer to compel, and it did not allow the employee to take out any other form of pension if that occurred. Many of the people affected by those schemes—which were joint schemes when compulsion was permitted—are the very people we are trying to assist because they will have been in the scheme for more than 16 years.

Chris Pond (Labour, Gravesham)

I take on board the point about innocence, which was suggested by my hon. Friend the Member for Glasgow, Anniesland (John Robertson). The people who have suffered are very much the innocent victims; no blame can be attached to them. The question is whether the blame can be attached to a Government. I am arguing that it cannot; it was not the Government who made those requirements.

Kevin Brennan (Labour, Cardiff West)

I have heard my hon. Friend make that point before. It is not the strongest point that he has at his disposal, because it is clear that the state permitted compulsion. If the state does that, it cannot wash its hands of the consequences of compulsion.

Chris Pond (Labour, Gravesham)

As my hon. Friend says, we have talked around this subject a number of times. He may think

that it is not my strongest argument—and I may agree that it is not the strongest argument that we have—but it is an argument. If we were to ask taxpayers as a whole to make a contribution to the costs of that section of the community that has had access to occupational pension schemes when the majority of taxpayers have not had access to those schemes, there would be an issue about whether the Government acting on behalf of the taxpayer should make that requirement.

Kevin Brennan (Labour, Cardiff West)

We asked the taxpayer to pay £14 billion a year in tax relief to subsidise people in private pension schemes, which are the very schemes that those individuals were not allowed to access because they were compelled to join final salary occupational pension schemes. [Interruption.]

James Cran (Conservative, Beverley and Holderness)

Order. There is a noise. Will somebody deal with it?

Chris Pond (Labour, Gravesham)

Thank you, Mr. Cran.

These debates could last for most of today, but they would not take us much further forward. The argument that I now want to develop will be relevant.

Paul Holmes (Liberal Democrat, Chesterfield)

Without repeating the debate that we have just had, I endorse the comments of the hon. Member for Cardiff, West.

The Under-Secretary washes his hands of some things by saying, ''If employers compel people to pay into pension funds, that is their issue.'' However, for some employees, such as those who worked for firms in the steel industry such as Chesterfield Cylinders or ASW, the employer was initially the state because certain industries were nationalised. Are the Government not responsible in such cases?

Chris Pond (Labour, Gravesham)

I am not seeking to wash my hands of responsibility on this. We are looking at all these issues very seriously. I am merely saying that I do not think that we can find an automatic justification for agreeing to the amendments before us on the basis of Government responsibility.

Sally Keeble (Labour, Northampton North)

Does my hon. Friend agree that one of the difficulties is that the general taxpayer is being asked to underwrite the risks of what is essentially a private financial arrangement? My constituents might feel that that is a bridge too far, in terms of what they are prepared to underwrite themselves.

Chris Pond (Labour, Gravesham)

I thank my hon. Friend for that point; I wanted to come to that issue. It concerns the nature of the pension protection fund, which we are seeking to establish as an independent non-departmental public body, operating at arm's length from Government and responsible for its own financial management. The proceeds that it distributes are to be funded by the levies on schemes, not by the taxpayer. The issue that my hon. Friend raises about the Government standing behind the pension protection fund is important. It is a fundamental principle, which is relevant to our discussions about the protection or the compensation that we might be able to consider for those who have lost everything. I say ''might be able to consider''; again, I am not raising any false hopes.

To ensure that the organisation has the practical means to fulfil its independent role, we have given it every reasonable possibility of acting in a flexible manner so as to deal with potential financial difficulties, although we have, of course, included some reasonable checks and balances. Those possibilities include the options to invest, to increase the levy—subject to a cap—and to borrow commercially to cover a short-term cash-flow problem.

We discussed the US experience. The Government have drawn from the experience of the US Pension Benefit Guaranty Corporation. We have taken the best aspects of it, and learned lessons on how we could improve on it, particularly in terms of the emphasis on risk-based levies. We have built a protection fund that we hope can meet any eventuality, based on very prudent assumptions and funded through the levy. People can have confidence in the guarantee that it offers.

I am sorry to say that the hon. Member for Eastbourne seemed to be trying to undermine confidence in the PPF even before it was established. He suggested that it was a political construct—that was the term that he used. It is not a political construct; it is a protection fund to provide protection for more than 10 million scheme members. Despite all our discussions this morning, we must not lose sight of the fact that what we are seeking to do through the Bill, for example in clause 98, is to establish the sort of protection that will ensure that no one in this Room will ever again have to make the sort of speeches that they have had to make today—which, incidentally, they made very effectively—about those who have lost out.

We do hope that the way in which we established the PPF, the risk-based approach to funding, and the powerful regulator giving protection to existing schemes will provide confidence in pensions in future.

Paul Holmes (Liberal Democrat, Chesterfield)

On the point about confidence in the system, the Minister has distanced the Government from the issue of compensation, saying that that was an issue between employers and members who had paid into an employer's scheme. He is distancing the Government again from the PPF in future. He is saying that it is an independent organisation that independently administers the fund. Is he clearly saying—so that we do not have to repeat this process in 10, 20 or 30 years—that if the PPF ran into a deep, short-term problem, as the American scheme has done in just two years out of 31, the Government would in no circumstances act as a guarantor or a lender of last resort in order to overcome those temporary problems?

Chris Pond (Labour, Gravesham)

Yes. I am saying that that will not be necessary. The hon. Gentleman should remember the way in which we set up the scheme; the safeguards that we built into it; our prudent assumptions about the scale of demand that the protection fund could cope with; the flexibility built into it—the ability to vary the levy, subject to the cap—and the power of the board to borrow in order to cope with those short-term fluctuations. We are establishing the fund precisely so that it does not have to call on the back-stop of a Government guarantee. That is a basic principle, for

which we are not making any apologies. That is the way that we are designing it and it is important that we do so, because we must ensure that we do not have a situation where people will say, ''Well, okay, this is the cushion before we get to the real guarantee, which is the Government and the taxpayer.'' As my hon. Friend the Member for Northampton, North said, such a situation would not be generally acceptable to the public and the taxpayers, many of whom will not benefit from that protection.

I shall address the specific point raised by my hon. and learned Friend the Member for Redcar (Vera Baird) about the protection fund's location.

Nigel Waterson (Conservative, Eastbourne)

Eastbourne.

Chris Pond (Labour, Gravesham)

There has been a bid for it to be located in Eastbourne. I can tell my hon. and learned Friend the Member for Redcar that the decision has been made to rule out Croydon, North. I am sorry to say that Gravesend has also been ruled out as a possibility in the short term. However, I cannot promise her that Redcar will be the location. It is a decision that is still to be made, but we have listened to the points that she has raised on the matter.

Finally, we have had a serious discussion, which goes to heart of much of the debate that we have had on pensions generally, about the compensation for those who have lost out. I would say, to hon. Friends in particular, that I understand and share the strength of feeling on the issue. I can give them a reassurance that we are examining seriously what can be done to assist those who have lost so much.

However, I am asking my hon. Friend the Member for Cardiff, West to withdraw the amendment, not as an indication that we, or our hon. Friends, are abandoning those people, but in recognition of the fact that the pension protection fund is not the vehicle for seeking to provide them with compensation. The amendment tries to use the fund as that vehicle and therefore undermines the fund's basic principle that it is an independent organisation at arm's length from Government. That could make it more difficult for us to ensure—both this morning and throughout the process of the Bill—that we are establishing the protection that should mean that in future people never face the sort of tragedy that many of our constituents have faced. That is not to say that we have given up on finding a solution to the plight of those who have suffered so much. I am saying to my hon. Friends, and to other Committee members, that the pension protection fund and this amendment are not suitable vehicles for doing that. Indeed, it could make it more difficult for us to find a long-term solution.

Kevin Brennan (Labour, Cardiff West)

I said at the outset that this is an amendment that removes two words from of the Bill and inserts one. Nevertheless, we have managed to debate it for nearly two and three quarter hours. No, I have got that wrong. It was about one and three quarter hours; it was not for as long as I said.

Nigel Waterson (Conservative, Eastbourne)

It just seemed like it.

Kevin Brennan (Labour, Cardiff West)

It may have seemed that long, even though the amendment removes one word net from the Bill.

I would like to thank hon. Members on both sides, including the hon. Members for Eastbourne and for Chesterfield (Paul Holmes), who contributed to the debate on the amendments that I tabled. In particular, I thank my hon. Friends the Members for Hamilton, South, for Glasgow, Anniesland and for Burton (Mrs. Dean), and my hon. and learned Friend the Member for Redcar. All conveyed the fact that this is an issue about which there is strong feeling on the Labour Back Benches. I mentioned that almost 200 Labour Back Benchers have supported the call for compensation for the workers who have been affected. I know that there is sympathy among other Committee members who were not able to be present this morning.

I understand the points that my hon. Friend the Under-Secretary made about the fund. As he knows, the Ways and Means resolution is not the vehicle that I would have used to establish the principle that the Government should assist in some way. The jigsaw puzzle is nearly complete and the picture of what we are talking about is emerging. As my hon. Friend the Member for Hamilton, South said, it is important that the Government reach a conclusion during the next month or six weeks before the Bill is debated on Report.

I accept that the Under-Secretary was unable to make such a commitment earlier, but it is important that we receive a clear picture of what is emerging from the Government's work. I can confirm from my knowledge of matters, such as it is, that evidence shows throughout the country that they are working hard and examining the scale of the problem—and rightly, too—to find out what, if anything, they can do. It is right that the Government are taking such action. We are now almost two years into the discussion about the emerging problem and, now that the Bill has been drafted, we must bring it to a proper conclusion.

I certainly have no desire to play political games, nor does any other member of the Committee. Intelligent and sensible contributions have been made to the debate, which should be cogitated on, and the Government should consider them further. This morning's debate confirms the importance of the issue and of making the Bill the success that we all want. We want to make it a Bill that members of the Committee are proud of, not a Bill that will come back in nine years' time, as the Pensions Act 1995 has done, so that any mess that is left can be put right. That is why we scrutinise the Bill properly in Committee and want to draw the right conclusions.

I do not want to put into the Bill a measure that is flawed or unworkable, but I say to the Under-Secretary that it is vital that the matter is drawn to a proper conclusion and—as my hon. Friend the Member for Hamilton, South said—brings justice to the workers who are involved. I reserve the right to return to such matters later in our proceedings, and I beg to ask leave to withdraw the amendment.

James Cran (Conservative, Beverley and Holderness)

If one member of the Committee objects to the amendment being withdrawn, it cannot be withdrawn. The debate either continues or I put the question.

Nigel Waterson (Conservative, Eastbourne)

Put the question.

Question put, That the amendment be made:—

The Committee divided: Ayes 4, Noes 12.

Kevin Brennan (Labour, Cardiff West)

On a point of order, Mr. Cran. Can you confirm that the fact that this matter has been voted on in Committee does not preclude it from being raised again on Report?

James Cran (Conservative, Beverley and Holderness)

The hon. Gentleman knows perfectly well that he can use the rules of the House to raise any question he wishes. He can have that question tested on Report.

Clause 90 ordered to stand part of the Bill.

Clause 91 - Administration levy

Nigel Waterson (Conservative, Eastbourne)

I have a couple of specific questions that I am sure the Under-Secretary will be able to answer without too many difficulties.

Subsection (2)(a) states that the administration levy shall be payable to the Secretary of State on behalf of

''trustees or managers of an eligible scheme''.

That makes sense. However, subsection (2)(b) refers to ''any other prescribed person.'' I wish to know what kinds of people it is envisaged will be covered by that.

Subsection (5) states:

''An amount payable by a person on account of an administration levy is a debt due from him to the Secretary of State.''

This is one of those strange provisions where the Secretary of State seems to have a major role. The Government go in and out of focus on the general point. A few moments ago we heard the Under-Secretary talk eloquently about how the PPF will be a separate and independent organisation—that it does not need Government backing and it will go off and do its own thing. We all have our own views about that. However, here we suddenly learn that the Secretary of State is the person who can recover the debt when the administration levy is not paid. That strikes me as illogical, but the Under-Secretary is waving a sheet of paper so there may be a very good explanation for it.

Chris Pond (Labour, Gravesham)

The clause addresses how the administration levy is paid. This organisation is to be set up at arm's length from the Government, so its administration costs—including the costs of setting up the PPF—will be funded through grant in aid, as is the case with most executive non-departmental public bodies. The grant in aid will be paid by the Secretary of State out of money provided by Parliament, and will be recovered through the PPF administration levy. The clause sets out the detail of how the costs will be recovered through the administration levy.

On the hon. Gentleman's specific question about who the other persons are, I can confirm to him that they are scheme administrators. I have forgotten his second question; will he refresh my memory?

Nigel Waterson (Conservative, Eastbourne)

Why is the Secretary of State rearing his ugly head? I do not mean that literally, of course.

Chris Pond (Labour, Gravesham)

Although the PPF will be an independent body set at arm's length from the Government, it is important that it is accountable to Parliament for its actions. It will be funded by grant in aid, which means that once the funds have been made available to it, it is within the constraints set out in the terms and conditions of that clause—

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 91 - Administration levy

Chris Pond (Labour, Gravesham)

Before we were so rudely interrupted, I was answering the question asked by the hon. Member for Eastbourne (Mr. Waterson) about the role of the Secretary of State in relation to the administration levy. I am sure that the Committee will have been hanging on my last words of the morning, so let me add what I was about to say.

As the pension protection fund will be funded by grant in aid, which we discussed in our lengthy debate on clause 90, the administration levy will recover the Secretary of State's expenditure. In practice, the Secretary of State's involvement will be minimal. The board will make recommendations to the Secretary of State about the rate needed to recover the amount of grant in aid each year. That will work on a flat-rate basis, in a similar way to the general levy that occupational pension schemes currently pay.

Once the rate has been approved, the regulator will carry out the practical collection of the administration levy on behalf of the Secretary of State. On a pragmatic point, we plan to introduce a system whereby the regulator collects all the PPF levies. That way, the schemes will receive only one bill, so easing their administrative burden. That is much like the situation with the council tax bill, which we are all used to receiving broken down into different elements. I hope that, with that explanation, the hon. Gentleman is happy for the clause to stand part of the Bill.

Question put and agreed to.

Clause 91 ordered to stand part of the Bill.

Clause 92 ordered to stand part of the Bill.

Clause 93 - Annual reports to Secretary of State

Nigel Waterson (Conservative, Eastbourne)

We are delighted to have a double dose of you today, Mr. Cran.

James Cran (Conservative, Beverley and Holderness)

Order. That is the second time I have received abuse this afternoon. The first time it came from the Under-Secretary, who said that I had

rudely interrupted him this morning. However, I forgive hon. Members.

Nigel Waterson (Conservative, Eastbourne)

Looking on the bright side, at least you are being abused by hon. Members both sides of the Committee, Mr. Cran. [Interruption.] We have been joined by the hon. Member for Chesterfield (Paul Holmes), one of the Liberal Democrats; that is nice.

I have a couple of questions. First, in subsection (4) there is rightly a requirement that the report be laid before both Houses of Parliament. Is it envisaged that there will automatically be a debate on it? I think we covered that when we discussed part 1, so I do not want to labour the point, and I understand that interest might wane as the fund goes from success to success. However, it would be sensible to hold such a debate, certainly in the first couple of years. I appreciate that the Under-Secretary cannot speak for the usual channels, but it would be nice to hear an expression of intent on that.

To go back to clause 88, does the Under-Secretary envisage that the statement of investment principles will be included in the annual report, among other things?

Chris Pond (Labour, Gravesham)

My reference to the rude interruption was aimed at parliamentary procedures and not at all to you instructing us on them, Mr. Cran.

It would not be normal to have a debate on the report laid before the House by the Secretary of State, although I quite understand the hon. Gentleman's suggestion that it would be of interest to Parliament. We want to ensure that it is subject to proper parliamentary scrutiny, but, as he says, a debate would be a matter for the usual channels. It is not envisaged that a provision for debate would be built into the legislation.

I think that the statement of principles will be included in the report. We will want the principles by which the board is to operate to be outlined in it. That will be an important part of the parliamentary scrutiny.

Question put and agreed to.

Clause 93 ordered to stand part of the Bill.

Clause 94 - Duty to notify insolvency events

George Osborne (Conservative, Tatton)

I beg to move amendment No. 256, in

clause 94, page 57, line 14, at end insert

'who shall have a duty to inform the members of the scheme'.

James Cran (Conservative, Beverley and Holderness)

With this we may discuss the following amendments: No. 257, in

clause 96, page 60, line 13, at end insert

'who shall have a duty to inform the members of the scheme'.

No. 258, in

clause 97, page 60, line 29, after 'scheme', insert

'who shall have a duty to inform the members of the scheme'.

No. 259, in

clause 102, page 63, line 25, after 'scheme', insert

'who shall have a duty to inform the members of the scheme.'.

No. 262, in

clause 117, page 72, line 42, at end insert

'who shall have a duty to inform the members of the scheme'.

George Osborne (Conservative, Tatton)

Unlike other Committee members, Mr. Cran, I have not been rude to you—[Hon. Members: ''Yet.''] Indeed.

Amendment No. 256 relates to clause 94 and the other four amendments relate to later clauses. Without getting into a substantive discussion about the later clauses, it is worth touching on the principle. The amendments are basically the same in that they require the trustees and managers of a pension scheme to keep the members informed about what is happening to the scheme as it is dealt with by the PPF and the board.

It is probably wrong to use the term ''well managed'' because a well managed scheme would not be looked at by the PPF. One would hope that conscientious managers and trustees would keep members of the scheme fully informed about what was happening to it. However, that will not always be the case. There may be instances when trustees and managers are negligent or do not take the time and trouble to inform scheme members of what will be a traumatic experience for them.

We have spoken many times—indeed, we mentioned it only this morning—of the anxiety that people feel when their pension is in trouble, the company is facing insolvency and their scheme may be underfunded. That could be the most stressful experience of their life. Without straying into the subject covered by this morning's debate, we all have constituents who have gone through that. We know that it is not only a time of enormous uncertainty, but that there is often a vacuum of information. It is often difficult to get information on what is happening to a scheme and a pension, and scheme members read about it in the newspaper without hearing about it first-hand.

The amendments would impose a duty on trustees and managers to inform scheme members. We have used the identical phrase in each amendment which would insert in the various clauses an obligation on trustees and managers so that they

''shall have a duty to inform the members of the scheme''.

The circumstances in which they shall have that duty are different, which is why there are different amendments.

Amendment No. 256 applies to clause 94, which requires the insolvency practitioner to give notice to the board within the notification period, and would require the trustees, having been informed by the practitioner, to pass on that information to the scheme members. One hopes that good, conscientious trustees would let scheme members know that the company with which they have a scheme is entering insolvency. However, the amendment is merely a failsafe mechanism—a belt-and-braces approach—to ensure that they do that.

Clause 96, to which amendment No. 257 relates, requires an insolvency practitioner to issue a notice about whether a scheme rescue has occurred or is not possible. Again, there is an obligation to inform a number of people, including the board, the regulator, the trustees and managers of the scheme. Our amendment would put a subsequent obligation on the trustees and managers of that scheme to tell their members.

Amendment No. 258 applies to clause 97, which deals with an insolvency practitioner's failure to issue a required notice. The board will issue the notice that should have been issued by the insolvency practitioner to the trustees and the managers. The amendment would simply require the trustees and managers to inform scheme members in that circumstance.

Amendment No. 259 applies to clause 102, which relates to the board's duty when it receives an application from the trustees or managers of a scheme because the employer is no longer a going concern. It requires the board to confirm whether a scheme rescue is not possible or whether such a rescue has occurred. Again, scheme members should be kept informed in such circumstances.

Amendment No. 262 jumps way ahead to clause 117, which we may get to before Easter if we are very lucky. The clause deals with circumstances in which the board ceases to be involved with an eligible scheme. Again, scheme members should be informed in such circumstances. The principle of keeping people informed is pretty straightforward.

As I understand it, the point of the PPF is first and foremost to provide protection for pensions and to try to avoid the situation in which 60,000 or so people have lost part or all of their pensions. However, there is a secondary objective: to restore faith in occupational pensions. Part of that could be achieved by giving an assurance that scheme members would be more involved with and kept more informed about their occupational pension schemes. We have discussed other provisions—member-nominated trustees and so on—that would achieve that. It would be good to extend that principle to this part of the Bill so that as a scheme goes through the fairly traumatic process of being considered and examined by the PPF, the scheme members are kept fully informed.

I say ''fully informed'', but some of the information required would be fairly basic: whether a company has gone insolvent, whether there could be a rescue attempt or whether the PPF is still involved. One would hope that the trustees would keep scheme members informed in such circumstances. However, it is possible to imagine circumstances in which they would not. I am thinking of schemes that have been badly run by negligent people in which the trustees, managers and, perhaps, employers have had little or no concern for the scheme members.

After all, the PPF will deal with some of the worst managed schemes in the country. In such circumstances, the amendments provide a fall-back position that puts a duty on trustees and managers to

keep scheme members informed about one of the most important things in their lives: their pension.

Malcolm Wicks (Labour, Croydon North)

Good afternoon, Mr. Cran. It is a pleasure to see you. Unlike my colleagues, I have curried favour with you; I hope that you will bear that welcome in mind if I stray.

We are considering a small group of clauses concerned with the entry rules to the PPF. I hope that Committee members agree that it would be helpful if, in addressing the amendment, I set the scene for those clauses.

I rather agree with the hon. Gentleman's argument, but in my own way. I hope that he withdraws his amendment because it is unnecessary and his objectives will be met in another way. Those schemes with a pension promise and on which people set their hopes of receiving a set amount of retirement income will be eligible for PPF compensation. Therefore, all private sector-defined benefit schemes, including hybrid schemes that have an element of defined benefit provision, will pay the PPF levy, except those schemes that have a Government guarantee and those that are currently exempt from the applications of the minimum funding requirement and are also exempt from the new scheme's specific arrangements. The PPF is intended to protect members whose companies have gone bust, where schemes are left underfunded and the companies cannot pay members their promised pensions.

To qualify for PPF compensation, events along the following lines must occur. Entering formal insolvency or bankruptcy proceedings is classed as the qualifying insolvency event, which gets the PPF involved. That triggers the beginning of an assessment period in which the PPF considers whether a scheme rescue is possible, whereby another company takes over the insolvent firm and its pension scheme. The PPF also carries out a valuation of the scheme's assets. During that assessment period, members are paid scheme benefits equal to the compensation that would be payable by the PPF, so no one is left short of money in the meantime.

If a scheme rescue is possible, the scheme will be taken on by the new company and the PPF ceases involvement. If a scheme rescue is not possible and the scheme has enough assets to pay members at least a level of benefit that would be payable under the PPF, the PPF ceases involvement and the scheme will wind up in the normal way. Members will be refunded any difference between the benefit received during the assessment period and the pension that they should have received and will now receive according the original scheme rules. If a scheme rescue is not possible and a scheme does not have enough assets to pay members at least the level of benefit that would be payable by the PPF, the board will take over the scheme and members will continue to receive the PPF level of compensation.

As my right hon. Friend the Secretary of State made clear on Second Reading, given the time constraints it has been necessary to introduce some aspects of policy in Government amendments. I thank

hon. Members in advance for their patience. Similarly, greater precision on PPF design, such as the exact nature of entry rules, will appear in regulations. Again, I trust that our debate will prove constructive in developing that next tier of detail.

Needless to say, it is hugely important that no one is tempted to take advantage of the PPF so that its funding position is protected and people have confidence in the PPF guarantee. Several moral hazard provisions are already in the Bill. We have recently discussed the safeguards in the new scheme-specific funding, which aim to limit calls on the PPF as well as on the pension regulator, who will have close relations with the PPF and a commitment to protect it. Hon. Members should be aware that further measures to reinforce protection of the PPF will be introduced when we consider new clauses after Easter.

We are all agreed that protection needs to be introduced sooner rather than later, which is why we are working hard towards introducing the fund in the first part of 2005, subject to the will of Parliament. It is vital, however, that we do not run before we can walk and rush through the design stage in our haste to meet a set deadline. That is why, as we embark on making the PPF a reality, we are continuing to engage with experts, who have helped enormously from the outset, and it is why I look forward to the chance to explain further our decision making during the forthcoming discussions. Having set out the context, I shall deal with clause 94.

Nigel Waterson (Conservative, Eastbourne)

The Minister said that we are all agreed on the timetable. I do not think that Opposition Members are agreed. Later, I shall explain why we think that commencement should be postponed until the risk-based levy is firmly in place, and why the Government should look much more closely at the interim measures that we debated this morning.

Malcolm Wicks (Labour, Croydon North)

Indeed, we had a good debate this morning. There might be an opportunity to have the discussion that the hon. Gentleman wants later today or next week.

Clause 94 sets out the insolvency practitioner's duty to issue to the PPF board, the pension's regulator and trustees or managers of the pension scheme notification of when a insolvency event occurs in relation to an employer. The occurrence of the insolvency event triggers the PPF's involvement in a scheme and marks the beginning of the assessment period, during which the PPF board will establish whether a scheme should come into the pension protection fund. The insolvency practitioner's role, both in notifying the PPF board, the regulator and scheme trustees or managers of the occurrence of the insolvency event, and in determining the scheme's eventual status, is crucial to the entry rules for the new fund. It is imperative that the insolvency practitioner's role is clearly set out in legislation, including details of the various bodies that should be notified of the insolvency event in relation to the sponsoring employer of a scheme and the time frame in which that should be done.

The amendment would require that trustees or managers of a scheme must copy certain notices received from the insolvency practitioner or the PPF board to members. Provision currently allows for those notices to be issued to the board, the regulator and the trustees or managers of the scheme.

As I told the hon. Member for Tatton (Mr. Osborne), I am sympathetic to his amendment's objectives. Indeed, similar amendments have been proposed to other parts of the Bill and I have replied in a similar way, because essentially they involved the same question. His proposal is not necessary because clause 165(1)(b), which deals with the provision of information to scheme members, ensures that regulations will require trustees or managers of a scheme to inform members of all appropriate information. That will include most notices, applications or determinations that relate to a scheme and its status as regards entry to the PPF. Thus the amendment would needlessly replicate existing provision. Perhaps the hon. Gentleman will withdraw it.

George Osborne (Conservative, Tatton)

It is useful to have the Minister tell us what will be in the regulations, since we have not seen them, so the debate has been worth while. We take him at his word and that the regulations issued under clause 165 will require trustees and managers to keep scheme members fully informed.

I have a final question for the Minister. Will the events prescribed by regulations under clause 165—detailing where scheme members will have to be contacted—cover all the amendments: the events under clause 94, which requires the insolvency practitioner to give notice to the PPF and the trustees; the events under clause 96, whereby the insolvency practitioner issues a notice; the event set out in clause 97, when the insolvency practitioner has failed to issue a notice and the board steps in to do that; the events under clause 102, when the board receives an application from trustees and managers; and, indeed, the events under clause 117, which details the circumstances in which the board ceases to be involved with the scheme?

Malcolm Wicks (Labour, Croydon North)

Yes.

George Osborne (Conservative, Tatton)

Good. That is the kind of crisp answer that one prays for in Parliament. In view of such a clear assurance that all the things that we were concerned about will be covered in regulation, and because we hope that scheme members' interests will be protected in the sense they will be kept fully informed of what is happening to their pension during what will inevitably be a period of great anxiety, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 94 ordered to stand part of the Bill.

Clause 95 - Insolvency event, insolvency date and insolvency practitioner

Clause 96 - Insolvency practitioner's duty to

Nigel Waterson (Conservative, Eastbourne)

I have some unrelated points on the issues surrounding insolvency. The term ''issues surrounding'' is a phrase that we are not supposed to use any more because it irritates people. It certainly irritates me if somebody else uses it. Nevertheless, it is appropriate to raise such issues on this clause now.

Scheme rescue is the main subject of the clause. The National Association of Pension Funds has flagged up a concern about the definition of a scheme rescue. The explanatory notes say that that

''occurs when a solvency practitioner in relation to the employer is able to confirm the pension scheme has or has not been rescued and therefore will or will not enter the PPF.''

That suggests that the PPF may not be called on despite the employer being insolvent. I am sure that that is not the intention, but it is worth getting the Under-Secretary to clarify it.

The NAPF is also concerned about how we define insolvency, which pertains to this clause and related clauses. The definition could go wider than what is meant by the word ''liquidation''. It says that as drafted

''it appears possible that where a company voluntary arrangement is proposed, a cash-strapped employer with an underfunded scheme could dump it on the PPF but continue to trade, having cleared some of its non-pension debts. There needs to be greater clarity.''

There is anecdotal evidence that a number of schemes are tottering on in the hope of being parked in the PPF once it is up and running, despite the challenging time scale for getting everything organised.

There is a third suggestion, which did not lend itself to an amendment. I am not convinced that it is fair to deal with it now, but the Under-Secretary may want to reflect on it and write to me. The British Chambers of Commerce says that it could be in the worst possible interests of scheme members for it to be wound up because the company has become insolvent

''at a time when the assets are significantly below the level of liabilities.''

It thinks that that could be temporary. I am sure that many companies that are not going bust also fervently hope that that is the case, despite the effects of FRS 17.

The British Chambers of Commerce wants a provision so that if there is a proposal to wind up a scheme, an application is first submitted to the regulator for authorisation so that he can examine the merits of the application. If the accrued liabilities exceed the current value of the assets by, say, more than 10 per cent., and if the regulator thinks that there is a reasonable chance that the scheme could meet a higher proportion of those liabilities by continuing as a closed scheme, he should be able to instruct the trustees to do just that. If they are not willing to continue the scheme on that basis, the regulator should have the power to employ an independent trustee company, which already happens in some circumstances, to act on the scheme's behalf.

Such a provision could help to rescue a scheme which was not in the most serious of difficulties. It could also reduce the cost to the PPF and, consequently, the levies proposed for other pension schemes as a result. The British Chambers of Commerce feels strongly about that and has more general reservations, and its idea is worth considering. Perhaps if the Under-Secretary has considered and discarded it, he might share his reasons for doing that with the Committee.

Chris Pond (Labour, Gravesham)

The hon. Gentleman's first point, raised by the National Association of Pension Funds, relates to what scheme rescue is. It includes those situations in which the employer can emerge successfully from insolvency proceedings with a scheme intact, or when a purchaser of a business agrees to take over a scheme and protect members' benefits. If, however, the employer's business is to be sold on without the pension scheme being transferred, the pension liabilities will be left behind with the original employer, which is likely to be dissolved or to cease trading, with its creditors, including the pension scheme, paid out of any remaining assets. It will be clear in those circumstances that there is no employer to support the scheme in future and the scheme has not, therefore, been rescued.

Creditors' voluntary liquidation allows an insolvent company to put itself into liquidation and wind up its affairs without the need for a court order. The distinction is between that and members' voluntary liquidation, which allows a solvent company to put itself into liquidation and to wind up its affairs—for example, when no one is left to run a family business.

In general, members' voluntary liquidations are not included as an insolvency event for the purposes of the PPF as they apply to a solvent form of company wind-up. For example, a company going into members' voluntary liquidation can make a statutory declaration that it will be able to pay all its debts in full, together with interest at the official rate, within a specified period not exceeding 12 months from the date of the commencement of the winding up. However, there are circumstances in which members' voluntary liquidation can be converted into a creditors' voluntary liquidation if it transpires that the debts cannot be paid in full within the specified period. Although clause 95 recognises CVLs—creditors' voluntary liquidations—triggered in the usual way, a

resolution is passed for a voluntary winding up of the company without a declaration of solvency.

The Government amendment will ensure that CVLs that occur as a result of a conversion from MVLs—creditors', as opposed to members', voluntary liquidations—are also covered. Members of such schemes are thus able to benefit from PPF protection. As for the hon. Gentleman's third point about the British Chambers of Commerce, I should like to take up his offer and reflect on what he said. We do not want to come up with an answer now that is not the Government's final settlement. Perhaps we can write to him and other members of the Committee about that.

Question put and agreed to.

Clause 96, as amended, ordered to stand part of the Bill.

Clause 97 - Board's duty where there is a failure to comply with section 96

Clause 98 - Eligible schemes

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 2, in

clause 98, page 61, line 9, leave out subsection (2).

James Cran (Conservative, Beverley and Holderness)

With this it will be convenient to discuss the following:

Amendment No. 273, in

clause 98, page 61, line 9, leave out 'not'.

Amendment No. 274, in

clause 98, page 61, line 9, after 'up', insert

'or if it has already been wound up.'.

Amendment No. 276, in

clause 136, page 83, line 46, at end insert—

'(2A) The regulations must prescribe that the initial levy is not to be used for payments under section 135(3) in so far as they relate to schemes which are being wound up or which have already been wound up on the date prescribed for the purposes of section 98(2).'.

Amendment No. 277, in

clause 137, page 85, line 11, at end insert—

'(11) Regulations must make provision that the pension protection levy is not to be used for payments under section 135(3) in so far as they relate to schemes which are being wound up or which have already been wound up on the date prescribed for the purposes of section 98(2).'.

Nigel Waterson (Conservative, Eastbourne)

We are about to debate the point that we covered this morning, but we shall approach it from a different direction. Amendment No. 2 would remove subsection (2), which makes it clear that any schemes that are in wind-up before the Bill comes into

force are not eligible. I do not want to rehearse our earlier arguments about the 60,000 people who need compensation and who will not be compensated under the Bill because its measures do not have a retrospective effect.

However, the Committee would be surprised if I did not touch in passing on the slightly bizarre result of our Division this morning, whereby Labour Members voted down one of the amendments tabled by the hon. Member for Cardiff, West (Kevin Brennan), while he personally abstained. I hope—as I am sure the 60,000 people do—that that was on the basis that those 60,000 are on a promise that the Government will make some detailed proposals to deal with the problem soon. Tea and sympathy is wearing a bit thin, although at least we have avoided the old mantra about not raising false hopes.

Kevin Brennan (Labour, Cardiff West)

I abstained because the Government promised to continue considering the issue. I accept that the amendments that I tabled might not technically have achieved what we want to achieve. However, I note that for the first time, Conservative Members voted in favour of using public money to achieve such an end. Does the hon. Gentleman agree that public money should be used to compensate the workers? Is that now his party's policy, as Conservative Members voted for it this morning?

Nigel Waterson (Conservative, Eastbourne)

It is said that attack is the best means of defence. The hon. Gentleman must make his own peace with those who inspired his amendments. As for his question, I thought I made my position crystal clear this morning. We are a responsible Opposition—I do not of course include the Liberal Democrats in that—so we will not sign a blank cheque. My position is that simple. However, we think that unclaimed assets provide the answer—[Interruption.] I am sorry that Labour Members find this so exciting. It was the hon. Member for Cardiff, West who took the view that he did not care where the money came from.

Kevin Brennan rose—

Malcolm Wicks (Labour, Croydon North)

Will the hon. Member for Eastbourne give way?

Nigel Waterson (Conservative, Eastbourne)

I will, after I have given way to the hon. Member for Cardiff, West, whose last intervention I am still trying to deal with. It is a luxury of sitting on the Back Benches not to care about where the money comes from. Those of us who sit on the Front Benches have to take a more responsible view, and my party's position could not be simpler. If the hon. Gentleman was reassured by the Government's wind-up speech this morning he is easily satisfied, because it seemed to me that they were still taking the view that they could not compensate people retrospectively; their thinking had not moved forward.

Kevin Brennan (Labour, Cardiff West)

I am happy to confirm to the hon. Gentleman that I stand by what I said: there should be compensation, and I do not mind whether it comes from public funds or another source. He is right to say that I am a Back Bencher—but he sits on the Front

Bench and speaks on behalf of his party, and he led his troops to vote for the amendment that called for public funds to be used. I would have thought that that had some meaning in terms of the Conservative party's position. When he voted for that, did he mean it or not?

James Cran (Conservative, Beverley and Holderness)

Order. What we discussed this morning bears a certain resemblance to what we are discussing this afternoon, but I do not want a rerun of this morning's debate.

Nigel Waterson (Conservative, Eastbourne)

I will deal quickly with the point that has just been made, and then if the Minister still wants to intervene I will give way.

The hon. Member for Cardiff, West is mixing up two things, as did the Under-Secretary in his summing up this morning. One factor is giving the power to pay compensation to the 60,000 people, which the amendments of the hon. Member for Cardiff, West were primarily about; the other factor is where the money comes from. It is still firmly our position that it should come from unclaimed assets. The Under-Secretary signally failed to give any genuine justification of why, if unclaimed assets are now miraculously available to give to charities, at least some of them—we are talking about a sum that could amount to £15 billion—are not available for his constituents and those of other Members.

Malcolm Wicks (Labour, Croydon North)

If the Opposition's contention is that the money should come from unclaimed assets—that is a reasonable proposal that can be, and has been, discussed—why did the hon. Gentleman vote this morning that it should come from the taxpayer? Has he discussed that with the Shadow Chancellor?

Nigel Waterson (Conservative, Eastbourne)

I am sorry if the Minister has difficulty with our position. It would be infinitely more interesting to the Committee if he had a position on this matter, other than the tired mantra that the Government do not want to raise false hopes. I have made my position abundantly clear this morning, as did the hon. Member for Cardiff, West. I am only sorry that the vote was lost.

Paul Holmes (Liberal Democrat, Chesterfield)

The hon. Gentleman spoke disparagingly about Members who offer tea and sympathy and then back away. Can he clarify what his party's position now is? Is he saying that, as in this morning's vote, he is in favour of providing assistance but only on condition that it comes from unclaimed or orphan assets? Is he therefore saying that if that route proves to be a dead end, all he will offer is tea and sympathy, because he would not provide the funding from any other source? I supported the private Member's Bill introduced by the right hon. Member for Birkenhead (Mr. Field) that would have gone down that route, but Government Whips blocked it.

Nigel Waterson (Conservative, Eastbourne)

At the risk of testing your patience, Mr. Cran, let me again tell the Committee what I said this morning—and, perhaps more importantly, what I have consistently said to the various groups who have come to see me about the issue. We believe that the route advocated by the right hon. Member for Birkenhead is the right one, and certainly the one that we prefer. The Government have twice blocked

the measures in the right hon. Gentleman's Bill, and only in the past few days has it become apparent that those unclaimed assets are indeed available. I have yet to get a straight answer as to why those assets are not available for the purposes that we propose.

Kevin Brennan (Labour, Cardiff West)

Will the hon. Gentleman give way?

Nigel Waterson (Conservative, Eastbourne)

Let me just—

James Cran (Conservative, Beverley and Holderness)

Order. I am getting restless now. We are getting back to the debate that we had this morning. I want Mr. Waterson to address himself to the amendment. I do not want to hear justifications of who voted for what this morning.

Nigel Waterson (Conservative, Eastbourne)

Pressing on, I shall adopt what I have just said as part of my recommendation for the amendment: our preferred solution is to use unclaimed assets. There now seems to be no practical bar to doing that—or if there is, I have yet to hear about it from the Government Front Bench.

On amendment No. 2, as I said this morning in a different context, we will not sign a blank cheque for taxpayers' money. We cannot understand why the Government will not make a proper independent inquiry into the cost envisaged. We will make spending commitments when the need arises, but only when we know what they involve. It is as simple as that. [Interruption.] I understand the embarrassment of Government Members, but we should try to deal with amendment No. 2.

James Cran (Conservative, Beverley and Holderness)

Yes, I hope that we will.

Nigel Waterson (Conservative, Eastbourne)

Schemes that are wound up before the Bill comes into force should also be eligible. As we have said, we will discuss later an amendment, or amendments, suggesting that until the risk-based levy is properly in place, we should postpone the start of the PPF. I imagine that when we get to that point, Ministers will criticise us and say, ''People need the PPF. They need the protection and confidence that it offers to pensioners and would-be pensioners.'' We do not disagree with that, but we commend to the Government the example of the Pensions Act 1995, and in particular the excellent speech made on its Second Reading by my right hon. Friend the Member for Hitchin and Harpenden (Mr. Lilley), who was then the Minister responsible.

My right hon. Friend made the point that in the face of the Maxwell crisis, the Government's immediate concern was not to rush to legislate, but to stabilise the short-term position. His Government had various imaginative ideas, not least the concept of the non-reimbursable loan from the Government. That somehow managed to get past the scrutiny of the Treasury, and enabled the people immediately faced with destitution to be looked after. That Government worked to a schedule that seems positively leisurely when compared with what this Government have in mind for the Bill; the 1995 Act was introduced and came into force a year or two later.

In this area of law, it is absolute madness for any Government to legislate in haste. The Government themselves have used the word ''challenging'' about the time scale for introducing the legislation, especially

the PPF, and that is, if anything, a massive understatement. We think, as the industry does—we will deal with that subject in more detail later—that it is asking for trouble to start off with a flat-rate levy rather than a proper risk-based levy. The Government would be much better advised to put off the implementation of the legislation. However, the other side of that coin is the need to tackle the interim situation.

We have been given a figure of 60,000 people; I hope that that number does not rise before April 2005, or whenever the legislation comes into force, but it may well do so. Every week of every month, smallish schemes get into such difficulties as we heard described this morning. Rather like the Government of the 1990s, this Government should be looking at the interim situation at least as seriously as the long-term situation, and should be making sure that they get that right, too.

We simply cannot understand why the Government are being so slow to consider options for dealing with the interim situation, and problems that have arisen, or might arise, before the legislation comes into force. If they have considered options, and are thinking very hard and carefully about them, why do they seem so unwilling to share them with the Committee? I suppose that they may have shared more with their Back Benchers, which may explain the slightly bizarre voting patterns this morning.

The Government's explanation for not addressing this issue is becoming threadbare. From their point of view, the way in which the Bill, which has many good things in it, is being overshadowed by the problems of the people who have lost out and who will continue to lose out when the legislation comes into effect, must be extremely annoying. I am trying not to repeat too much of this morning's debate, although all those arguments remain valid.

Bill Tynan (Labour, Hamilton South)

Is the hon. Gentleman saying that the official Opposition think that retrospection should be part of the Bill?

Nigel Waterson (Conservative, Eastbourne)

It depends what the hon. Gentleman means by retrospection. I see the logic of the Government's position to the extent that it would be inappropriate to use the revenues and levies from the Bill to pay claims that have arisen in the past. That is why our preferred model, as set out in our amendments—the first to be tabled on the subject—is to have a separate interim pension protection fund, running in parallel to the PPF, which uses the unclaimed assets as a method of compensating people who have already lost out by the time the legislation comes into force. If that is what he means by retrospection, the answer is yes. If he means a simple retrospection that uses the PPF and its future levies for past claims, the answer is no.

Kevin Brennan (Labour, Cardiff West)

Amendments Nos. 273, 274, 276 and 277 relate back to, and are interlinked with, much of what we discussed this morning. I am trying to probe the Government's thinking and can suggest a possible way forward. I want to find out where the Government are going and when they will give us a

definitive answer, which they have been unable to do so far, on how they will deal with the problem covered by my amendments.

I want to give the Government the opportunity to respond to my amendments. It seems from the vote this morning and from what the hon. Member for Eastbourne just said that we have discovered why the Opposition voted for my suggestion of a possible way forward—namely, to use taxpayers' money to compensate schemes. They were in favour of it, not because that is their position, but because they want to cause embarrassment and to play a political game. I thought all parties had agreed that we would not act like that. I appeal to the Opposition to stop playing that game.

James Cran (Conservative, Beverley and Holderness)

Order. The Committee is doing exactly what I said it should not do. Mr. Brennan, I want you to speak to your amendments and to nothing else.

Kevin Brennan (Labour, Cardiff West)

I hear that loud and clear, Mr. Cran, and that is exactly what I will do.

Amendment No. 273 refers to clause 98. It is a simple amendment that would leave out the word ''not''. That would bring schemes that have been wound up and schemes that are in the process of being wound up under the auspices of the PPF. Clause 98 defines the schemes that are eligible for assessment, that will be taken into the care of the pension protection fund and, ultimately, that will be bailed out by that fund. Under the clause as drafted, schemes in wind-up on the appointed day will be expressly excluded from the provision and therefore from the scope of the pension protection fund. The amendment would bring those schemes under its scope.

We can assume that, with the best will in the world, it takes years for any scheme to be wound up because of the complexity involved in identifying all its liabilities. The amendment would bring the schemes of companies that have gone bust in the past two or three years, but which are still in wind-up, under the scope of the PPF. That would include schemes in which the wind-up has not progressed far, such as the Allied Steel and Wire scheme in my constituency, and other schemes that concern hon. Members, such as the Kalamazoo scheme, for which the wind-up is nearly complete and annuities have been purchased. The amendment would not cover schemes that had completed winding up.

Amendment No. 258 would complete the job left undone by amendment No. 273 and bring in schemes that had already finished winding up—those in which annuities have been purchased and final accounts have been completed, and whose lights have been switched off.

James Cran (Conservative, Beverley and Holderness)

Order. The hon. Gentleman said amendment No. 258. Did he mean that? We are all confused.

Kevin Brennan (Labour, Cardiff West)

I beg your pardon, Mr. Cran. I meant amendment No. 274; my apologies for that slip of the tongue.

No end date is specified in the amendment, which would bring schemes that were wound up many years ago into the scope of the pension protection fund. I anticipate that the Minister may have concerns about that. The only insolvent schemes that the amendment would not cover would be those in respect of which the last traceable beneficiary had died.

In fact, in the legal case pursued by Amicus and the Iron and Steel Trades Confederation, the legal obligation that they rely on refers to the EU insolvency directive, which only goes back as far as October 1983. During the course of our discussions, the only schemes that we have discovered that would be likely to be a great liability if compensation were to be introduced are those for which wind-up commenced after April 1997. As was mentioned earlier, the mass pension failures and difficulties that we have experienced are a relatively recent phenomenon.

Before that date, guaranteed minimum pensions could be brought back into the state earnings-related pension scheme without great difficulty, the cost being borne by the national insurance fund if the scheme could not afford to do so. The unmet benefits could only relate to pensions in excess of the guaranteed minimum pension, but that is still a substantial benefit, if smaller than complete compensation.

Finally, Mr. Cran—I will try to get the numbers right—amendments Nos. 276 and 277 relate to clauses 136 and 137 respectively. Amendment No. 276 would effectively ring-fence the levy to deal with the problem mentioned earlier. It would be incorrect for the levy to be used to compensate schemes that had gone bust before the Bill was introduced.

Had we passed the amendment on that subject this morning, the Secretary of State would have been permitted to contribute to a single pension protection fund, which otherwise would consist of funds raised only by the levy. As I said, some of my other amendments would bring past insolvencies within the scope of the pension protection fund and allow it to pay past claims. Amendment No. 276 would ring-fence the money raised by the levy so that it could not be used to meet claims in respect of schemes in wind-up on the appointed day or of those that had completed wind-up.

Amendment No. 277 would do the same in relation to the ongoing levy after the initial period. In other words, levy money could only be used for those schemes in wind-up after the Bill's introduction. I realise from the rejection of my amendments this morning that that would create the difficulty of how compensation could be paid if it did not come from the levy and if there were no public funds available to pay it.

Malcolm Wicks (Labour, Croydon North)

The discussion has been useful and I thank my hon. Friend for his contribution. He has become a significant champion of this group of workers.

Clause 98 defines those schemes that are not eligible to be taken over by the pension protection fund. Subsection (2) specifies that those schemes that are in the process of winding up immediately before an appointed day are ineligible for compensation.

Amendment No. 2 would enable members of schemes that are in the process of winding up before the introduction of the PPF to become eligible for compensation. That extension would effectively make the PPF retrospective. Therefore, the question of how that would be paid for arises, and that has been discussed.

Amendment No. 273 would do the same thing. Amendment No. 274 would, similarly, cover members of schemes that have completed wind-up before the introduction of the PPF. Those extensions would also effectively make the PPF retrospective.

Amendments Nos. 276 and 277 specify that the initial levy and the pension protection levy should be used only to compensate members of eligible schemes that commence wind-up after the introduction of the PPF. We cannot disagree with that because it supports our intention as set out in the Bill. However, I realise that amendments Nos. 276 and 277 were meant to be considered alongside amendments Nos. 273 and 274. Those amendments would make schemes that are in the process of winding up or have completed wind-up before the introduction of the PPF eligible for compensation. The effect of amendments Nos. 276 and 277, if taken with amendments Nos. 273 and 274, would merely leave open the source of funding for retrospective compensation payments. That would mean that the PPF would take on unknown and potentially very large liabilities without any obvious source of funding for the compensation. However, I acknowledge that there are good intentions behind the amendments.

My ministerial colleagues and I have spent a lot of time meeting hon. Members and scheme members to hear their concerns. We never refuse such requests and there are a couple of forthcoming meetings. It is worth noting that the Secretary of State has met workers from ASW, Dexion and UEF. I have met workers from Kalamazoo, Felix Schoeller and Dexion. My predecessor, my right hon. Friend the Member for Makerfield (Mr. McCartney), met workers from UEF, ASW, Astra Training Services and Ravenhead, and the Under-Secretary of State for Work and Pensions, my hon. Friend the Member for Liverpool, Garston (Maria Eagle), met workers from Famous Army Stores. We have also met concerned workers from solvent employers, including Parsons and Triplex. Therefore, we have had an opportunity to listen to and learn from those directly affected, and to try to explain the Government's position to them.

When I say that I sympathise with the people who will not receive the pensions that they were expecting, I, too, choke on the word ''sympathise'' because it is inadequate to express our feelings for those people. It is one thing to hear examples in Committee, but when we are face to face with them and hear what that means for their hopes and aspirations, and when they talk with what I would describe as quiet dignity about the impact on their health, welfare, and sometimes their marriages, the word ''sympathise'' does not begin to describe our feelings. We are examining closely all the suggestions that have been put to us, but given workers' anxieties, which we understand, we owe it to those affected to do so without raising expectations.

There are formidable difficulties involved in what hon. Members propose. As I said, retrospective cover would mean the fund taking on unknown and potentially very large liabilities. Such provision would also prove administratively difficult, if not impossible, to carry out for those schemes that have completed the wind-up process. With the prospect of guaranteed coverage for schemes that have not yet completed that process, some employers might seek to abandon their pension liabilities, thus further increasing costs on the new PPF. Such additional costs could threaten the viability of the fund. They would also be likely to place an unfair and disproportionate burden on levy payers.

Amendments Nos. 2 and 273 could also encourage schemes to slow down the winding-up process, in the knowledge that they would be covered by those provisions. Let me reassure hon. Members that the Government are sympathetic—to use that word again—to all those who will not receive the pension that they worked so hard to build up for their retirement. As my hon. Friend the Under-Secretary explained this morning, we are currently exploring with industry representatives a basis on which we can establish firm estimates of the extent of the problem of defined benefit schemes winding up under-funded. We are also assessing the numbers affected and the potential scale of losses. Once those data have been collated, my right hon. Friend the Secretary of State for Work and Pensions will be in a better position to report more fully the findings of our examinations and to suggest the appropriate course of action, if any. If I were a Back Bencher whose constituents had been affected, I too would be impatient to hear more, but that is as far as I can go today.

I understand the time scales involved, and that we have a duty to report to the House on this matter as soon as we have the information. That is our considered position. In asking the hon. Member for Eastbourne to consider withdrawing his amendment, I would say that it is better to have such a considered position than to be all over the place on the question of how we can deal with the issue of cost.

Nigel Waterson (Conservative, Eastbourne)

I do not know who the Minister means when he talks about people being all over the place—

Malcolm Wicks (Labour, Croydon North)

You.

Nigel Waterson (Conservative, Eastbourne)

I thought as much. I notice that he singled out the hon. Member for Cardiff, West when he was talking about the good intentions behind amendments. The Minister should move on. I am sure that we all take what he says about sympathy at face value, as do the people affected. We have all, both Ministers and shadow Ministers alike, had those meetings, and there will no doubt be more, and more discussions on ways of dealing with the problem. I welcome the admission that the Government are to produce some hard figures. I do not want to understate the challenge, because the Opposition have tried to find ways of producing those, and it is quite a large task. The Government are the people to do it, and I am delighted that they now agree—I wonder why they

have been so unwilling to admit that for so long. However, that does not deal with the question of how compensation will be structured once the figures are known.

I am minded to withdraw amendment No. 2—on one simple condition. The Minister has told us that the Government are looking into the figures; as I have said, that is welcome. I will withdraw the amendment if he undertakes not to exclude—indeed, actively to consider—the use of unclaimed assets, now that the Chancellor in his Budget proposals has apparently swept away any practical problems. I am not asking the Minister to commit himself to that as the preferred option, but if he undertakes to ensure that that is one of the options that the Government will consider, I will happily seek to withdraw the amendment—although of course, hon. Members may not wish me to do so. Otherwise, I shall be minded to press amendment No. 2 to a vote.

The hon. Member for Cardiff, West seems to resent Committee members supporting his amendments, which could make for a rather unhappy Committee stage for him. I hope that that does not mean that he is pulling his punches.

As a former Back-Bench Member under a Conservative Government, perhaps I could give the hon. Gentleman a bit of advice: it is always as well to pin down one's ministerial colleagues pretty firmly before deciding not to pursue such amendments. In principle, we support his amendments in this group. I do not know about the procedure, Mr. Cran, but I should be grateful for your support and advice. If I do not get the reassurance for which I have asked the Minister—who is welcome to intervene at any point—to what extent could we engineer votes on amendments Nos. 273, 274, 276 and 277, as well as on amendment No. 2?

Malcolm Wicks (Labour, Croydon North)

I do not want to strain this point, but the hon. Gentleman is calling for retrospection, and the issue of cost does arise. In view of the fact that he voted this morning to spend taxpayers' money, yet now seems to be talking about unclaimed assets, I must tell him that I can only give him an answer if I know what the question is.

Nigel Waterson (Conservative, Eastbourne)

I thought that I had put it fairly simply. Let me try to put it in words of one syllable—or even less. [Interruption.] Sorry, I meant two syllables. I will seek the Committee's leave to withdraw the amendment if the Minister will give an undertaking not to exclude—and indeed, to consider as an option—the use of unclaimed assets to compensate the 60,000 people. I do not expect him to say that that would be the preferred solution, I merely ask him not to close his mind to it.

Malcolm Wicks (Labour, Croydon North)

I cannot add greatly to what my hon. Friend and I have said already. We have given an undertaking that we will listen to and study all serious suggestions for a way forward.

Nigel Waterson (Conservative, Eastbourne)

The problem with that is that it is inherent in the Minister's previous remarks that he does not regard that as a serious suggestion. If he

accepts that it is, why can he not say, ''We'll take it away and look at it''? He could always come back and say, ''This is unmitigated rubbish—and we think that the Chancellor has got it wrong as well, because it does not work.'' In that case, I would happily withdraw the amendment. Apparently we are not going to get to that point, so I shall not seek leave to withdraw the amendment.

Question put, That the amendment be made:—

The Committee divided: Ayes 4, Noes 12.

Nigel Waterson (Conservative, Eastbourne)

On a point of order, Mr. Cran, I am sure that I distinctly heard the hon. Member for Ealing, Southall (Mr. Khabra) say ''Aye''. Perhaps he wanted to correct his vote, but he did not try to do so before Division was concluded.

James Cran (Conservative, Beverley and Holderness)

Mr. Khabra, will you clarify that?

Piara S Khabra (Labour, Ealing, Southall)

I said, ''No.''

Nigel Waterson (Conservative, Eastbourne)

May I repeat my request that having lost that vote, we should be able to vote on one of the amendments tabled by the hon. Member for Cardiff, West?

James Cran (Conservative, Beverley and Holderness)

Do you want to move any of your amendments formally, Mr. Brennan?

Kevin Brennan (Labour, Cardiff West)

May I speak to them, Mr. Cran?

James Cran (Conservative, Beverley and Holderness)

No, we have had the debate. Do you wish to move an amendment formally or not?

Kevin Brennan (Labour, Cardiff West)

No, I do not.

Clause 98 ordered to stand part of the Bill.

Clause 99 - Duty to assume responsibility for

John Robertson (Labour, Glasgow Anniesland)

I beg to move amendment No. 416, in

clause 99, page 61, line 14, leave out from 'where' to end of line 15 and insert—

'(a) a qualifying insolvency event has occurred in relation to the employer in relation to an eligible scheme; or

(b) such an event would have occurred but for an agreement reached by the trustees or managers of the scheme and the employer in order to avoid a qualifying insolvency occurring.'.

Under the present proposal, the PPF will be able to help only where employers are insolvent. The amendment addresses the situation when trustees reach an agreement with the employer to waive a debt owed to them. The employer, unable to fund the pension scheme, puts forward a proposal whereby the

scheme will wind up in deficit. Ordinarily that would trigger the obligation on the part of the employer to make up the deficit, under section 75 of the Pensions Act 1995. Unfortunately, in such a case the employer cannot afford to do that. Under the agreement that he reaches with the trustees, that debt is waived in whole or in part, the scheme winds up with an unmet deficit, and benefits are cut. However, waiving the debt means that the employer is safe and no insolvency proceedings are required.

That situation looks similar to the one that the PPF is meant to deal with. However, it is not covered by the Bill. To fall within clause 99, which requires the PPF to take responsibility for the scheme, the employer must be insolvent. To fall within clause 101, which enables trustees to call on the PPF, the trustees must be satisfied that the employer is unable to meet its debts. Arguably the trustees could refer the scheme to the board under clause 101, but I will explain in a moment why I do not think that that would happen.

The amendment would bring those compromises within the scope of clause 99, and would require the PPF to assume responsibility for the scheme where a compromise had been agreed, whether or not the trustees saw fit to refer the scheme to the board. The main purpose of the amendment is retrospection. Amendments were tabled to clause 98 so that the PPF would cover a scheme that had already been wound up. Unfortunately, they were not accepted.

However, where the trustees have agreed the compromise and the situation is favourable schemes fall within the definition of ''eligible scheme'', because once the compromise is agreed, the scheme inevitably winds up. However, it will still not be covered by the PPF, because clause 99 requires an insolvency event. Clause 101 cannot apply because there is no question of the employer being unable to pay its debts. The amendment would bring such schemes within clause 99, so that the PPF would have to take responsibility for a scheme for which a compromise had been agreed and the scheme had been wound up in deficit. The unmet benefits would fall to be restored under clause 128.

An example of such a case is Triplex, where a debt of £18 million was compromised at £500,000. After the PPF is in place, trustees might not be prepared to make a compromise agreement such as that. Instead they might push companies into insolvency, and that could lead to an avoidable loss of jobs. I ask the Minister to address those probing questions. Without doubt, at the end of the day our aim is to try to keep people in employment, and not to force companies into insolvency.

Malcolm Wicks (Labour, Croydon North)

The amendment raises one of the more complex issues in a difficult field. I understand the points that my hon. Friend has made. Clause 99 details the board's duty to assume responsibility for schemes following an insolvency event occurring in relation to their sponsoring employer. The amendment would mean that if the trustees of a scheme with a solvent employer had reached a compromise agreement with that employer to accept a lower amount than was due to the scheme on wind-up, the scheme could still be covered by the PPF. Such an

agreement would occur where the employer was experiencing such financial difficulties that he was on the verge of insolvency, and the debt that the employer would owe to the scheme could not be paid in full.

The trustees might also find that the effect of such a compromise agreement was that the amount that the scheme received from the solvent employer was higher than it would have received if the employer had gone into insolvency. In that situation, the compromise should result in the employer avoiding insolvency and the scheme receiving more funds than it would otherwise have done.

Compromise agreements should be made with great care, and only after careful consideration of all relevant information. As hon. Members are aware, scheme trustees have a fiduciary duty to act in the interests of all scheme members and beneficiaries at all times. Also, trustees are answerable via the courts if they breach those responsibilities. Trustees should believe that they have taken the best decision available to them having taken account of the position of their scheme.

The amendment would allow schemes, on which a compromise agreement had been reached with the sponsoring employer in order to avoid insolvency, to enter the PPF. Although I have sympathy for the underlying spirit of the amendment, it could lead to abuse and ultimately jeopardise the existence of the PPF. With such a change, trustees and employers may be motivated to reach compromises so that the scheme can enter the PPF and the employer can continue as a going concern. Trustees may be tempted to accept a compromise agreement that offered the scheme low amounts of money on the basis that the scheme would still be able to enter the PPF and pensions would be looked after. That would be likely to have a significant impact on the PPF's funding, and PPF would not be able to claim all of the funds to which it was entitled. To meet the corresponding increase in its liabilities, it may also have to increase the levy substantially.

Ultimately, the impact of such an approach could be to affect the continued existence of the PPF. The avenue that the amendment provides could prove attractive to the unscrupulous employer. He could pay his final salary scheme a few pennies and dump his pension liabilities on the PPF. That may also provide him with competitive advantages over more principled employers.

As I have suggested, I find this issue difficult. I learned a lot about it when I met members affected at Triplex, which the hon. Gentleman mentioned. Trustees who are considering a compromise agreement in good faith must weigh the need for the firm to continue and for safeguarding jobs against the rights of all pension scheme members, but especially those close to retirement age. That is a genuine dilemma for trustees.

Bill Tynan (Labour, Hamilton South)

I understand the argument that the amendment could force a bad employer to wind up a scheme or ask the trustees to wind it up. However, a scheme could be in difficulty because there is no funding, and, if the employer does not wind up the

scheme, his only other choice would be to close down the business. Under those circumstances, the members of that scheme would benefit from the PPF because the company would be insolvent. The amendment is an attempt to keep jobs and ensure that the company remains if pension schemes agreements are made similar to those of Bradstock. Will the Minister examine the proposition closely and consider what we can do under the circumstances of compromise agreements? I understand that this is a complex issue, but it is important that decisions are taken in the best interests of scheme members and employers.

Malcolm Wicks (Labour, Croydon North)

My hon. Friend has made the point well, as did my hon. Friend the Member for Glasgow, Anniesland (John Robertson). I said that I would find such matters difficult. It is a genuine dilemma. However, as I have emphasised, there is a real danger of what people would call moral hazard. Why should an employer put more into a pension fund if he or she knows that the PPF will ride to the rescue? It is a difficult one in terms of perverse incentives. When I spoke to the Triplex workers, I gained a better understanding of the difficulty. I shall ask my hon. Friend the Member for Glasgow, Anniesland to withdraw his amendment. However, the Department and I want to reflect further on the matter. I mean that sincerely, but I will do so without obligation. The problem is difficult and it requires some further thought. I thank my two hon. Friends for their contributions to the debate on such an important matter.

John Robertson (Labour, Glasgow Anniesland)

I listened to the Minister and my hon. Friend and I shall reflect on what he said. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 368, in

clause 99, page 61, line 26, at end insert—

'(2A) For the purposes of this section, in relation to an eligible scheme an insolvency event (''the current event'') in relation to the employer is a qualifying insolvency event if—

(a) it occurs on or after the day appointed under section 98(2),

(b) it—

(i) is the first insolvency event to occur in relation to the employer on or after that day, or

(ii) does not occur within an assessment period (see section 104) in relation to the scheme which began before the occurrence of the current event, and

(c) it does not occur in such circumstances as may be prescribed.'.

James Cran (Conservative, Beverley and Holderness)

With this it will be convenient to discuss Government amendments Nos. 369, 374 and 391.

Malcolm Wicks (Labour, Croydon North)

Amendments Nos. 368 and 369 would amend clause 99. They are grouped with amendments Nos. 374 and 391, which would make consequential changes to clauses 104 and 144. The clause sets out the criteria that must be satisfied before the board can assume responsibility for a scheme when an insolvency event has occurred.

Amendment No. 368 would add further provision, setting out that any insolvency event that occurs in relation to the scheme is only a qualifying event for the purpose of entry to the PPF if it occurs after the day that the PPF starts operating which, subject to Parliament, is planned for April 2005 and defined under clause 98 as the ''appointed day''. Clause 98 makes it clear that any scheme that commences winding up prior to the appointed day will not be covered by the PPF. The amendment further ensures that scheme trustees will not be able to manipulate their situation in the run up to the PPF to gain entry. Without the amendment, a company could go bust today, but if the trustees could prevaricate for long enough and delay commencing winding up the pension scheme, the PPF could be liable to pay compensation.

The amendment also includes a power to prescribe further circumstances in which an insolvency event would not be classed as qualifying for the purposes of the fund. That power will protect the PPF and levy payers from employers who can manipulate the insolvency proceedings as a way of letting their pension scheme fall into the PPF when it is up and running.

George Osborne (Conservative, Tatton)

I understand that the Minister is trying to protect the PPF from inheriting many insolvencies, but the counterpoint to his argument is that some workers will not have protection in the absence of a retrospective scheme because the insolvency people could not prevaricate. Does he have an idea of how many people during the next year that could affect? If we did not accept the amendment, a company could hold out and people could receive some compensation by entering into the scope of the PPF.

Malcolm Wicks (Labour, Croydon North)

No, I do not, but there will be some people.

I shall continue my explanation. An insolvency event, as defined under clause 95, could occur after the appointed day but in fact be a stage in an ongoing insolvency proceeding that started prior to the introduction of the PPF. For example, a company could go into administration today but hold off its liquidation until after the PPF goes live—hopefully, in the spring of next year.

As responsible businesses and employers gear themselves up to pay the levy from next year, we must do all we can to protect the PPF and those levy payers from moral hazard and from employers and trustees who would seek to bend the rules, undermining a principle at the core of the PPF. In that respect, the PPF is like an insurance scheme. People cannot get the payout if they have not paid the premium. I should add that without the amendment the line on retrospection would be blurred, and members of schemes facing difficulties now would face a lottery as to whether they might potentially be able to enter the PPF entirely independent of whether their scheme trustees or managers might be able to manipulate the rules surrounding winding up.

Amendment No. 374 makes a consequential change to clause 104 to ensure that the definition of a qualifying insolvency event is consistent with the

provisions relating to the assessment period. Amendment No. 391 has the same effect on clause 144, which relates to fraud compensation. I urge hon. Members to agree the amendment.

Amendment agreed to.

Amendment made: No. 369, in

clause 99, page 61, line 28, leave out paragraph (a).—[Malcolm Wicks.]

Clause 99, as amended, ordered to stand part of the Bill.

Clause 100 - Duty to assume

Malcolm Wicks (Labour, Croydon North)

It might be useful if I described, albeit briefly, the purpose of the clause. It provides the PPF with the power to assume responsibility for certain schemes where there has not been an insolvency event as defined by clause 95—for example, public sector schemes without a Crown guarantee and schemes with employers based overseas and subject to foreign insolvency proceedings. We are totally committed to providing protection for the members of such eligible schemes who will be liable to pay the PPF levy. We need to ensure that the legislation provides for eligible schemes whose sponsoring employers cannot meet the insolvency events test to enable them to benefit from PPF compensation. The clause makes provisions to protect their members, because we recognise that such schemes may also face risk in future.

George Osborne (Conservative, Tatton)

The Minister mentioned in passing public sector schemes that did not have a Crown guarantee. Could he give the Committee some examples of such schemes? Presumably they will be paying the levy.

Malcolm Wicks (Labour, Croydon North)

Yes.

George Osborne (Conservative, Tatton)

Given that they are public sector schemes, what would be the burden and will the costs of the levy be borne by the taxpayer?

Malcolm Wicks (Labour, Croydon North)

We are talking about prime examples of all non-departmental public bodies whose employers are not members of the civil service pension scheme. They will pay the levy and will be able to benefit from the PPF in such adverse circumstances.

George Osborne (Conservative, Tatton)

Will the Minister give way?

Malcolm Wicks (Labour, Croydon North)

May I give some examples? I am talking about—[Interruption.] I did not hear that. No doubt the hon. Member for Eastbourne could stand up and say that. In giving examples, I do not want to frighten workers in those bodies by saying that they are on the verge of bankruptcy. Examples would include, inter alia, the Arts Council, the British Tourist Authority and the Medical Research Council.

Several hon. Members rose—

Malcolm Wicks (Labour, Croydon North)

I give way.

James Cran (Conservative, Beverley and Holderness)

Let us take a decision. Who are you giving way to, Mr. Wicks?

Malcolm Wicks (Labour, Croydon North)

I give way to the hon. Member for Tatton.

George Osborne (Conservative, Tatton)

There may be quite a large number of such bodies. We want to provide their scheme members with protection—I am not suggesting that we do not. However, I am not sure whether the Minister dealt with the second part of my intervention. Will the cost be borne by the taxpayer, presumably because most of these bodies receive grants from Whitehall Departments, or by the levies and charges on some of those bodies? Is there any idea of cost? I am not sure that I saw anything in the regulatory impact assessment about the ultimate cost to the taxpayer of what could be a significant bill if all the non-departmental public bodies were not paying this levy.

Malcolm Wicks (Labour, Croydon North)

From memory, after the initial year with the flat-rate levy, we are talking about £20 on average per scheme member. That is a general PPF estimate, without taking account of the risk-based levy. The amount of money would be of that order; I am not saying that it is insignificant, but it would not represent a significant burden on those bodies.

I think that the hon. Gentleman is trying to persuade me to say that, given that many such bodies are funded by the Exchequer, there is an implication for the taxpayer. Yes, there is such an implication. However, it is for the bodies to determine how they would afford the levy, which would give them important protection.

Nigel Waterson (Conservative, Eastbourne)

I have had a slightly surreal thought, which the Minister may be able to confirm. Presumably, the PPF staff's pension fund might well be included among those of the non-departmental public bodies.

Malcolm Wicks (Labour, Croydon North)

No, because those staff will be counted as civil servants. They will be in final salary schemes, but counted as civil servants. I recognise the hon. Gentleman's line of questioning, but it seems to me that the Arts Council could arrange some glorious spectacular of modern ballet and rock music to pay the levy.

George Osborne (Conservative, Tatton)

I was not planning to speak on the clause. We are being asked to agree to something, but the Minister has given no clear indication of the scale of the impact that it would have on the Exchequer. We do not know whether this will cost the taxpayer a million pounds, or more. The Minister said in a jokey way that the Arts Council could organise a rock ballet to pay for it.

All the bodies will be faced with additional cost. All that I ask of the Minister is that he should give some idea that the Government know the cost that they are imposing on themselves, or rather on the non-departmental bodies that they work with. Perhaps he would write to me and other Committee members about that. What will be the cost to all the bodies paying the levy that fall within the broad ambit of the public sector? That seems a perfectly reasonable

question. I am not against the levy, and I am not trying to be critical. I would just like to know the facts—what the burden on the taxpayer will be.

Malcolm Wicks (Labour, Croydon North)

It will be up to the bodies for which we are legislating to determine the nature of the levy for these institutions; my guess would be that for many of them, the risk-based element would be nothing or very low. We are not talking about a large sum of money. There are not large numbers of such organisations with large staff memberships. However, if I can help the hon. Gentleman with some arithmetic on the matter, I will do so by letter, and I will copy that to other Committee members.

I am slightly confused about whether we should take seriously the big spender assumptions of the Opposition in terms of retrospection, or their minute concern about the arithmetic as it affects the bodies. Which is it to be?

George Osborne (Conservative, Tatton)

The Minister has attempted to taunt us all day by asking, ''Where is the money coming from?'' It is perfectly reasonable in discussing this clause to ask where the money is coming from and how much money will be involved.

Malcolm Wicks (Labour, Croydon North)

I have said that I will send the hon. Gentleman the best estimates that I can get. As a polite response, perhaps he and his colleagues would write to me about how they propose to fund their ideas—that would be a good quid pro quo, as we say in Croydon.

Question put and agreed to.

Clause 100 ordered to stand part of the Bill.

Clause 101 - Applications and notifications

Nigel Waterson (Conservative, Eastbourne)

I feel that we have reached a milestone. We have now passed the 100-clause mark—that is, on one view, at least; we keep leaping

about the Bill, so perhaps it is not so much of a milestone after all.

People in the industry have raised a couple of points with me about subsection (1), which imposes an obligation on trustees to apply to the board, so that it can

''assume responsibility for a scheme . . . if it appears to''

the trustees that the employer

''is unlikely to continue as a going concern''.

That is a pretty imprecise phrase, and I do not recognise it as a legal term of art. If we are imposing obligations on trustees in the clause, as we are in various parts of the Bill, we should be pretty clear about what that obligation is. It seems that trustees, who may have no real internal knowledge at all about the employer, its business or its finances, will have to make a subjective judgment. Is it fair to impose such an obligation, rather than simply giving trustees the power to make an application, so that they have the option, but not necessarily an obligation?

That unease is also reflected in the views of the National Association of Pension Funds. It suggests that trustees get guidance from the regulator on how to discharge their responsibilities. There are two ways of approaching the problem, but we definitely believe that there is a problem.

Malcolm Wicks (Labour, Croydon North)

In the light of that line of questioning, it would be helpful if I explained that clause 101 relates to a scheme that is not subject to insolvency events, but for the great number there is an insolvency event and a clear trigger. The clause provides for the trustees or managers of an eligible scheme, the employer of which is not subject to insolvency events as defined in UK legislation, to apply to the PPF for the board to assume responsibility for the scheme. Examples include some public sector schemes without a Crown guarantee, or schemes with a foreign sponsoring employer.

Equally, the clause provides that, where the regulator becomes aware that the sponsoring employer of such a scheme is unlikely to continue as a going concern, it must notify the board. The PPF is keen to ensure consistency in the process of triggering its involvement with eligible schemes. We recognise that some employers will not be covered by the insolvency events as listed in clause 95, and we have therefore made provisions to cover those schemes. We are keen to ensure that legislation captures all eligible schemes whose employers will have been required to pay the PPF levy, and that those members are therefore protected by the PPF. I hope that that satisfies the hon. Gentleman as to the type of schemes—they are in the minority—that could be subject to the PPF and that do not have the formal trigger of the so-called insolvency event.

Question put and agreed to.

Clause 101, as amended, ordered to stand part of the Bill.

Clause 102 ordered to stand part of the Bill.

Clause 103 - Protected liabilities

Clause 104 - Assessment periods

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 441, in

clause 104, page 64, line 23, leave out sub-paragraph (iii) and insert—

'(iii) the conditions in section 119(2) (no scheme rescue but sufficient assets to meet protected liabilities etc) are satisfied in relation to the scheme,'.

James Cran (Conservative, Beverley and Holderness)

With this it will be convenient to discuss the following:

Government amendments Nos. 443, 445 and 446, 453 and 454, 460 to 469, 471, and 473 to 475.

Government new clause 10—Schemes required to wind up but unable to buy out liabilities.

Government new clause 11—Treatment of closed schemes required to wind up.

Government new clause 12—Valuations of closed schemes.

Government new clause 13—Applications and notifications where closed schemes have insufficient assets.

Government new clause 14—Duty to assume responsibility for closed schemes.

Government new clause 15—Closed schemes: further assessment periods.

Chris Pond (Labour, Gravesham)

This is a large group of amendments and new clauses, which adds a significant and crucial extra limb to the process that determines whether a scheme can enter the PPF. I apologise to the Committee that we were unable to table these amendments and new clauses earlier. I hope that the notes on them that we have circulated to Members are helpful in explaining their purposes. I will try briefly to explain their background, purpose and provisions in some detail.

As drafted, the Bill provides that, following a valuation under clause 112, if a scheme with an insolvent employer, and no hope of scheme rescue, is found to have sufficient assets to buy out benefits at above the level of the protected liabilities, it will not enter the PPF and the trustees of the scheme will be required, under clause 119, to wind up the scheme and secure members' benefits in accordance with the priority rules. Schemes would secure members' benefits by purchasing annuities for pensioner members and deferred annuities from insurance companies for actives and deferred members.

However, the Bill as drafted does not cater for the situation where scheme trustees cannot obtain a protected benefits quotation. That could occur in relation to very large pension schemes, where the insurance market at present appears to have insufficient capacity to absorb the pension liabilities

of a large scheme on a buy-out basis. The bulk annuity buy-out market expands and contracts depending on both the availability of gilt-edged stock needed to underwrite the contracts and the willingness of the few life offices currently in the market to take on business. The market is such that currently we estimate that pension funds worth anything over £500 million could find that they are unable to obtain a buy-out quotation as required by clause 119.

However, it is important to recognise throughout our consideration of these amendments that such a situation depends on both the sponsoring employer of a large scheme becoming insolvent and a PPF valuation showing that the scheme's assets are sufficient for it to buy out benefits above the level of the protected liabilities. It is also important to recognise that in the UK no scheme of this size has ever suffered the double whammy of underfunding and insolvency of the sponsoring employer.

Nigel Waterson (Conservative, Eastbourne)

Does the Under-Secretary have any idea how many funds are worth over £500 million?

Chris Pond (Labour, Gravesham)

There are very few, and that is one reason why this is a bit of a belt and braces approach. We want to ensure that we cover all eventualities; it is prudent to do so in order to protect the PPF from these unusual circumstances if they were ever to arise. Perhaps I can give a detailed response to the hon. Gentleman's question in writing.

The events that these detailed Government amendments and new clauses address are unlikely to occur. Were they to do so without the protection provided by the amendments and new clauses, there is a danger that they could impose a heavy burden or place a considerable risk on the PPF.

Nigel Waterson (Conservative, Eastbourne)

I thank the Under-Secretary, and through him his officials, for producing the notes. I only hope that they keep pace with the torrent of new Government amendments, as that would save us time.

I have a couple of questions that arise out of what the Under-Secretary said and what is in one helpful note. It is a shame that we have not adopted the American system in which the notes become part of the record, but the Under-Secretary must make his points, and we must make ours.

I think the Under-Secretary is saying that, on current depressed values, we are talking about a rare combination of circumstances that will affect only a tiny number of schemes, and I accept that. Despite the apparent complexity of the long list of amendments and new clauses, that seems to be the right approach to the closed-scheme problem.

I have two other points to make. As the notes say, the schemes

''represent a significant potential moral hazard risk to the PPF'',

but the moral hazard argument goes beyond those particular, rare circumstances. A great debate has been going on for years, and is still going on in America, about whether such a scheme produces the perverse incentives to which the Under-Secretary referred. Industry is concerned that there will be a substantial moral hazard problem. As long as everybody knows

that there is a safety net, people may not be so careful about how they run their schemes. We shall return to that issue to consider it in more detail.

There is one other point in the notes that was not clear to me. They say:

''In order to protect the PPF against moral hazard, such schemes will be subject to increased supervisory requirements and will only be able to pay out benefits in line with the statutory priority order (to be introduced when new clauses are considered after Easter).''

I was under the impression that that was a matter for a separate statutory instrument, which is hanging around waiting to be considered in Committee. Is it being suggested that a different priority order applies to these schemes, or will that be dealt with as part of the Bill?

Chris Pond (Labour, Gravesham)

It is important for hon. Members to recognise that the enhanced scrutiny by the regulator is an important part of our measures to prevent the moral hazard to which the hon. Gentleman refers.

Our proposals for the priority order, which we hope to introduce to the Committee as soon as possible after Easter, will be part of the Bill. We will have an opportunity to consider that in this Committee.

Amendment agreed to.

Amendments made: No. 374, in

clause 104, page 64, line 25, leave out subsection (3) and insert—

'(3) In subsection (2) ''qualifying insolvency event'' has the meaning given by section 99(2A).'

No. 443, in

clause 104, page 64, line 37, leave out sub-paragraph (iii) and insert—

'(iii) the conditions in section 119(2) (no scheme rescue but sufficient assets to meet protected liabilities etc) are satisfied in relation to the scheme,'.

No. 375, in

clause 104, page 64, line 40, leave out 'section 127(5)(a)' and insert 'section 101(5)(a)'.

No. 444, in

clause 104, page 64, line 41, leave out 'respect of' and insert 'relation to'.

No. 445, in

clause 104, page 64, line 42, at end insert—

'( ) This section is subject to section [closed schemes: further assessment periods] (which provides for further assessment periods to begin in certain circumstances where schemes are required to wind up or continue winding up under section 119).'.—[Mr. Pond.]

Clause 104, as amended, ordered to stand part of the Bill.

Clause 105 - Admission of new members,

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 377, in

clause 105, page 65, line 14, leave out subsection (5).

James Cran (Conservative, Beverley and Holderness)

With this it will be convenient to discuss Government amendments Nos. 379 and 385.

Chris Pond (Labour, Gravesham)

The purpose of the amendment is simply to ensure that all elements of the legislation are clear and watertight.

Amendment agreed to.

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

Nigel Waterson (Conservative, Eastbourne)

It might be my fault, but have we gone past amendment No. 408?

James Cran (Conservative, Beverley and Holderness)

Amendment No. 408 was due to be considered with amendment No. 376, but that was not discussed. It was for the hon. Gentleman to catch my eye at that point if he so wished, and he did not do so.

Nigel Waterson (Conservative, Eastbourne)

I apologise for missing amendment No. 408, but I want to make the substantive point during the clause stand part debate.

Clause 105 in effect freezes a scheme during the assessment period. Subsection (3) states:

''No further contributions . . . may be paid''.

However, it should be made clear that that would not prevent a statutory debt being payable to the trustees. If the Under-Secretary thinks that the Bill is clear, no doubt he will explain why. Alternatively, he might think that that needs to be dealt with, if not now perhaps later on.

Question put and agreed to.

Clause 105, as amended, ordered to stand part of the Bill.

Clause 106 ordered to stand part of the Bill.

Clause 107 - Restrictions on winding up of schemes

Clause 108 - Power to validate

Clause 109 - Board to act as creditor of the employer

Nigel Waterson (Conservative, Eastbourne)

I have a small point to make, which has been raised by experts in the industry. Clause 109(2) provides that

''During the assessment period, the rights and powers of the trustees . . . in relation to any debt'',

including a statutory debt,

''are exercisable by the Board''.

I suppose it can be argued that it is implied that that will not be exercisable by the trustees. However, there is a feeling that it should be clear in the Bill that the board will have the same powers as the trustees to enter into what is called in the trade a Bradstock compromise. I should be grateful if the Under-Secretary clarifies that.

Chris Pond (Labour, Gravesham)

I do not want to be discourteous to the hon. Gentleman and hope that it is not out of order for me to deal with something that he raised earlier. We are moving at such a pace that although he asked about a question relating to amendment No. 408, he received no reply. I should say that Government amendment No. 376, which has been made, has the effect that he wanted. I hope that he is satisfied with that answer. I apologise for any apparent discourtesy.

As the hon. Gentleman said, clause 109 provides for any debt owed by the employer to the trustees or managers of a scheme to be regarded as a debt owed to the board and for the board, in this case, to be treated as a creditor of the employer during the assessment period. The purpose of that is to ensure that PPF can prevent trustees or managers from compromising the debt in any way and, therefore, increasing the liability of the PPF. The board can, if it so wishes, exercise the powers of the trustees or managers of the scheme in relation to any debt owed to them by the employer,

whether by virtue of section 75 of the Pensions Act 1995, or otherwise. That can be done to the exclusion of trustees. The board can, in such circumstances, use those powers to protect the position of scheme members and the PPF.

Clause 109 includes the ability to enter into the Bradstock arrangements should that be appropriate. I hope that with that clarification the Committee can accept the clause.

Question put and agreed to.

Clause 109 ordered to stand part of the Bill.

Clause 110 ordered to stand part of the Bill.

Clause 111 - Loans to pay scheme benefits

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 452, in

clause 111, page 68, line 26, leave out 'This section' and insert 'Subsection (2)'.

This is a minor drafting amendment.

Amendment agreed to.

Amendment made: No. 453, in

clause 111, page 68, line 41, leave out from beginning of line to end of line 43 and insert

'the assessment period ends because the conditions in section 119(2) or (5) are satisfied,'.—[Mr. Pond .]

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 410, in

clause 111, page 68, line 45, after 'scheme' insert

'(but not from their personal assets)'.

This is a small point, but one that is thought to be important by those who know about such things. The clause gives the board power to make loans to an eligible scheme and subsection (3) sets out the circumstances in which they are repayable by the trustees. I am advised that it should be made clear—possibly in the Bill—that they are repayable out of the assets of the scheme, not from the trustees' personal assets. I am sure that trustees would be relieved if that were so.

Chris Pond (Labour, Gravesham)

The amendment tabled by the hon. Gentleman is not necessary because under the current wording of the clause trustees or managers would not in any case be held personally liable. The reference to trustees or managers refers only to their legal capacity as trustees or managers of a scheme, not to any personal agreements entered into by them. I hope that with that assurance the hon. Gentleman will withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

I am happy to do so, since what the Under-Secretary said is on the record. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 454, in

clause 111, page 69, line 2, after '(3)(b)', insert '(i)'.—[Mr. Pond.]

Clause 111, as amended, ordered to stand part of the Bill.

Clause 112 - Board's obligation to obtain

Clause 114 - Binding valuations

Clause 115 - Schemes which become eligible schemes

Nigel Waterson (Conservative, Eastbourne)

The clause is one of those shell clauses that do not really give much away about what they mean. Inevitably, it begins, ''Regulations may provide . . . '' It is hardly worth my breath to ask, but I assume that there are no draft regulations in the offing, and we cannot see what will be in them. It would be helpful if the Minister could walk us through what might be in the regulations, when they appear.

As I understand the clause, the board has to satisfy itself that what was otherwise an eligible scheme

''was not such a scheme throughout such period as may be prescribed''.

Again, it is a bit difficult to comment until we get some idea of what kind of period we are talking about. The clause goes on to say that

''the Board must refuse to assume responsibility''.

I am lost as to what kind of situation the clause is trying to deal with, and it would be helpful if the Minister could talk us through the thinking behind it.

Chris Pond (Labour, Gravesham)

Draft regulations are not yet available. I wish to explain the overall purpose behind the clause, which, as the hon. Gentleman says, is to protect the PPF from abuse by schemes that manipulate their structure in order to become eligible for PPF compensation, when they were not eligible, and thus subject to the requirement to pay the levy, in a prescribed period preceding the assessment date. The clause is essential to stop abuse by schemes and to protect businesses from subsidising such schemes through the pension protection levies.

Without the clause, the PPF could be required to pay compensation to any scheme that manipulated itself so as to become eligible to benefit from the PPF.

The hon. Gentleman asked for examples, such as schemes that convert benefits from money purchase schemes into final salary schemes. The provision sets out that regulations may prescribe the period that the board can refuse to assume responsibility for a scheme in respect of changes made to its structure.

The intention is that a scheme will be required to have been an eligible scheme, and thus to have paid the levy, for three years in order to be taken over by the PPF. When a scheme has been established for less than three years, in order to be taken over by the PPF it will have to have been an eligible scheme from the date of entitlement to the date of the insolvency event, or clause 101 application or notification.

The clause requires the board to issue a withdrawal notice ending its involvement with a scheme to the regulator, trustees and managers of the scheme and any insolvency practitioner acting in relation to the employer when it is required to refuse to assume responsibility for a scheme. It is crucial that the PPF is able to protect itself against moral hazard, so that the fund will be sustainable in the long term, and that responsible levy-paying employers do not subsidise those who would seek to manipulate the PPF rules.

In answer to the specific questions raised by the hon. Gentleman, I can say that the three-year period will not be specified in primary legislation, so that the PPF board will have the flexibility to protect itself against moral hazard. Specific periods are not usually specified in primary legislation, so as to ensure that it is not too restrictive.

Question put and agreed to.

Clause 115 ordered to stand part of the Bill.

Clause 116 ordered to stand part of the Bill.

Clause 117 - Circumstances in which Board ceases to

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 380, in

clause 117, page 72, line 30, after 'occur' insert

'before the end of the period of six months beginning with that date'.

It might be helpful if I briefly set the amendment in context before I talk about it specifically. Clause 117 provides for circumstances in which the board ceases to be involved with an eligible scheme on the occurrence of a withdrawal event. The so-called withdrawal events provided for are when a scheme rescue notice is issued by an insolvency practitioner, the board confirms a scheme rescue in cases where no insolvency practitioner is involved, and the board refuses to assume responsibility for a scheme as a result of a determination under clauses 115 and 116 on the grounds of moral hazard. In circumstances where a withdrawal notice is issued, the involvement of the PPF will cease and the scheme will either run on

following a scheme rescue or proceed to wind-up outside the PPF.

The clause is crucial in defining a key stage in the PPF entry process, and following the completion of any appeals process applicable or resolution of any outstanding appeals. The withdrawal notice marks the end of the assessment period of such schemes. This is essentially a drafting amendment to clarify the process set out in clause 117, which provides for circumstances in which the board ceases to be involved with an eligible scheme on the grounds of a withdrawal event.

Amendment agreed to.

Clause 117, as amended, ordered to stand part of the Bill.

Clause 118 - Consequences of the Board ceasing to

Clause 119 - Requirement to wind up schemes with

Malcolm Wicks (Labour, Croydon North)

I beg to move amendment No. 459,

That Clause 119 be transferred to the end of line 45 on page 76.

As was mentioned earlier during our debates on clause 104, the amendments on closed schemes mean that clause 119 should now be transferred to the end of line 45 on page 76.

George Osborne (Conservative, Tatton)

Ah!

Malcolm Wicks (Labour, Croydon North)

I did not realise that this was so interesting. That will mean that what is now clause 119 will stand part of the Bill after the current clause 121.

Nigel Waterson (Conservative, Eastbourne)

I am grateful that, as a courtesy, we were given advance warning of this motion, although for the life of me I still do not really understand why we are moving the hapless clause 119 within the batting order, but it obviously matters to somebody, so who am I to stand in their way?

Question put and agreed to.

Clause 120 - Application for reconsideration

Chris Pond (Labour, Gravesham)

I beg to move amendment No. 382, in

clause 120, page 75, line 36, after 'quotation' '' insert

', in relation to a scheme,'.

James Cran (Conservative, Beverley and Holderness)

With this it will be convenient to discuss the following:

Government amendments Nos. 383, 384 and 386 to 388.

Nigel Waterson (Conservative, Eastbourne)

May I make a point that is not about these amendments as such? I appreciate that we may be running ahead of ourselves slightly. I lay no blame anywhere for that, but may I repeat our informal agreement that we should get some notes about new Government amendments so that we can prepare ourselves in advance? As I say, I do not think that it is

anybody's fault that that has not happened—we have suddenly put on a turn of speed—but if we can ensure that we have notes soon for the Government amendments that will come up next Tuesday, that would be helpful.

Chris Pond (Labour, Gravesham)

We certainly note that point, and will do whatever we can.

Amendment agreed to.

Amendments made: No. 465, in

clause 120, page 75, line 40, after 'scheme', insert 'from the reconsideration date'.

No. 383, in

clause 120, page 75, line 46, leave out from 'member's' to 'rights' in line 47 and insert

'entitlement or accrued rights (including pension credit rights within the meaning of section 124(1) of the Pensions Act 1995 (c.26)) under the scheme rules (other than his entitlement or'.

No. 466, in

clause 120, page 75, line 48, leave out from 'benefits),' to end of line 2 on page 76 and insert

'whichever benefits can, in the case of that member, be secured at the lower cost.'.

No. 384, in

clause 120, page 76, line 2, at end insert—

' ''scheme rules'', in relation to a scheme, means—

(a) the rules of the scheme, except so far as section 129 of the Pension Schemes Act 1993 (c.48), section 117 of the Pensions Act 1995 (c.26) or section 230 of this Act overrides them,

(b) any provision of any of those Acts which overrides or modifies any of the rules of the scheme by virtue of one of the provisions mentioned in paragraph (a), and

(c) any provision which the rules of the scheme do not contain but which the scheme must contain if it is to conform with the requirements of Chapter 1 of Part 4 of the Pension Schemes Act 1993 (preservation of benefit under occupational pension schemes).'—[Mr. Pond.]

Clause 120, as amended, ordered to stand part of the Bill.

Further consideration adjourned.—[Margaret Moran.]

Adjourned accordingly at fourteen minutes past Four o'clock till Tuesday 30 March at half-past Nine o'clock.