Orders of the Day — Pensions Bill

House of Commons, 16 November 2004.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

I inform the House that privilege is involved in a large number of Lords amendments to the Pensions Bill. A full list is available in the No Lobby. If the House agrees to the amendments, I shall arrange for the necessary entry to be made in the Journal.

Clause 4 — Regulator's functions

Malcolm Wicks (Labour, Croydon North)

I beg to move, That this House agrees with the Lords in the said amendment.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this we may discuss Lords amendments Nos. 2 to 19, 24, 25, 27 to 29, 33 to 94, 324 to 329, 358, 481 to 498 and 577.

Malcolm Wicks (Labour, Croydon North)

Before I launch into the first of these very large groups of amendments, it might be helpful if I take this opportunity to remind the House about some of the key points of the Pensions Bill. It is nearly six months since we last saw the Bill at the end of May. Since then, there has been the best part of 70 hours of debate in the other place, which has dealt with more than 1,200 amendments, just over half of which are before us today. The other place likes to describe itself as the revising chamber, but, as will be seen later, we do not always agree with its revisions. In this case, however, its contributions have improved the Bill since we last saw it here.

Most of the amendments were tabled by the Government. I make no apology for that, but I want to make it absolutely clear that it is because we have listened not only to Opposition spokesmen—on occasion—but to Back Benchers on both sides of both Houses. We are also indebted to outside organisations that have continued to take an interest by providing briefings, suggesting amendments and participating in continued consultation over the provisions in the Bill.

As I have explained on several occasions, all other things being equal it might have been useful to present the Bill as a draft Bill to allow us to consider some of the technical details. However, all other things are not equal. We are being urged to protect people's pensions—indeed, urged by some to make the pension protection fund retrospective—and we could not afford to delay because of the issues that are at stake.

The Bill is a good and rounded piece of legislation. It introduces a regulator with teeth who, among other things, will now be able to deal with those who have developed so-called pension liberation scams; provides protection for those who might otherwise lose their defined benefit pensions through no fault of their own if their employer becomes insolvent; and provides an important measure of help for those where that situation has already occurred.

Over the summer, we worked with organisations involved in helping ailing companies, led by the British Venture Capital Association, to enable us to improve and clarify the provisions relating to moral hazard. Some of the amendments reflect and respond to their concerns. Furthermore, the Bill now reflects other commitments that were taken forward from this House, including representation for pensioner organisations in the nomination of trustees and the removal of statutory limited price indexation for defined contribution schemes.

I am conscious of the limited time that we have available today for further debate, Madam Deputy Speaker, and I know that Members will be disappointed if they are unable to catch your eye during the rest of the afternoon. I therefore commit in advance to keeping my remarks as short as I can when agreeing to amendments in order to allow more time for others to speak.

Let me turn without further comment to the first group of amendments, which deals with part 1 of the Bill and the provisions relating to the regulator.

Steve Webb (Liberal Democrat, Northavon)

The Minister mentioned the ending of limited price indexation for defined contribution schemes. If I am correct, that will be discussed in the hour or so that we have to talk about annuities under a separate group of amendments. Almost certainly, therefore, there will be no debate whatever about these changes. Does the Minister think that that is acceptable?

Malcolm Wicks (Labour, Croydon North)

It would always be nice to have plenty of time to discuss pensions. I hope that there will be an opportunity to discuss those matters, but we have made our position clear and a vote has been taken on the programme motion.

Several amendments were made to part 1 to enhance the powers of the regulator. We have given the regulator specific powers to tackle the illegal practice of what some call pension liberation but what should, in my judgment, more appropriately be called pension robbery. As hon. Members are aware, pension liberation schemes purport to offer to convert the accrued rights of members of legitimate schemes into an immediate tax-free lump sum. The organisers of these schemes—I should perhaps say scams—target people who urgently need cash and usually charge high commission, ranging from 20 to 30 per cent. of the individual's total fund. An individual could also end up paying as much as 40 per cent. tax on the total amount. Moreover, their provision for retirement is severely reduced, sometimes to nothing.

Clauses 19 to 22 give the regulator the power to apply to the court for an order that the so-called "liberated" moneys, or property representing those moneys, are transferred back to a pension scheme, put into an annuity or insurance policy or given back to the member concerned. Prior to going to court, the regulator will also have the power to make a restraining order over liberators' bank accounts that contain liberated funds. These are important new powers that will enable the regulator to deal with this nefarious practice.

There has been particular interest in the moral hazard clauses, which were first introduced in Standing Committee. Clauses 44 to 58 are intended to deal with the moral hazard that employers may deliberately manipulate their affairs so as to leave the pension protection fund to pick up the tab for their underfunded pension scheme. Such practice would both put members' benefits at risk and increase the levy costs of well-run schemes.

Several concerns were expressed about the scope and effect of the moral hazard clauses. During the debates in the other place, my right hon. Friend Baroness Hollis offered further to consult the industry over the summer to review their impact and to try to find practical ways of allaying concerns about the measures. As a result, several amendments were made. A key message was the requirement for the regulator to provide a clearance procedure. That has been agreed and is reflected in clauses 43 and 47.

Other headline amendments to the moral hazard clauses include: a time limit of six years for which the regulator can consider acts or failures to act before issuing a contribution notice; the exclusion of insolvency practitioners, if acting in good faith, from the scope of contribution notices and financial support directions; and the exclusion of the majority of individuals from the scope of financial support directions. Also, new clause 58 has been added to the Bill to define partnerships and limited liability partnerships for the purposes of the moral hazard clauses.

There is one further significant change to the moral hazard provisions. Much concern was expressed in the House and in the other place about the regulator's power to issue contribution notices or restoration orders in relation to acts occurring after 11 June 2003, corresponding with the date of the announcement in the House by my right hon. Friend the Secretary of State. The Government continue to believe that the limited retrospection proposed is proportionate as a matter of law.

John Butterfill (Conservative, Bournemouth West)

Can the Minister explain precisely what he means by insolvency practitioners "when acting in good faith"? Insolvency practitioners have only one duty, which is to get the maximum amount of money for the creditors. What does the expression "when acting in good faith" mean in that context?

Malcolm Wicks (Labour, Croydon North)

We assume that insolvency practitioners do act in good faith, given their task. When they do so, they will be excluded from any moral hazard procedures. There is the concern that it might be possible for some practitioners not to act in good faith, perhaps in connivance with others, but if I can provide any further advice on the question later, I will.

I was saying that the Government believe that the proposed limited retrospection is proportionate as a matter of law, but we accept that there may be some who would seek to challenge it, resulting in the regulator being tied up in court for a number of years, unable to act to protect members or the pension protection fund and benefiting only lawyers. For that reason, amendments Nos. 38 and 71 limit the retrospective effect of both contribution notices and restoration orders to acts or deliberate failures to act, and to transactions at an undervalue that took place on or after 27 April 2004, the date on which the moral hazard clauses were introduced in Committee.

The amendments to the moral hazard clauses will ensure that the regulator will retain effective anti-avoidance powers, while removing many of the concerns raised about the potential scope and effect of the original clauses. It has also been necessary to make a number of minor, consequential and technical amendments to part 1 of the Bill to reflect its evolvement, ensure consistency and tighten the drafting.

Nigel Waterson (Conservative, Eastbourne)

I thank the Minister for dealing briefly, as he put it, with some of the Lords amendments. I entirely accept what he said about so-called pension liberation schemes and we welcome the fact they have effectively been shut off as an option.

There is a sort of Alice Through the Looking Glass quality to the Bill. I remember saying, to the point of almost bleating, in Committee and earlier that if ever there were a piece of legislation that cried out to start its life as a draft Bill and be subject to the pre-legislative scrutiny procedures of both Houses, this is it. For the Minister to say rather ruefully, at this half-past 11th hour, that that might have been the best way forward is absolutely amazing.

Malcolm Wicks (Labour, Croydon North)

I must correct the hon. Gentleman. What I said was that there was a great demand out there for pension protection now and that is why we needed to introduce the legislation, even if it meant some inconvenience to various colleagues in having to amend the Bill as it proceeded through its stages. The demand was to protect people now and we responded to it.

Nigel Waterson (Conservative, Eastbourne)

A broader issue that arises—it is more appropriate to debate it in detail in a later group of amendments—is whether the Government have looked into the issue from the wrong end of the telescope. They should have focused their immediate attention and energies on tackling the problem of people in the here and now who have lost their pension rights, while taking a more measured approach, in respect of time for debate and for implementation, to ensure that they got the Bill right. That was certainly the attitude of the then Government towards the Pensions Act 1995.

I am afraid that matters are even worse than I described. Not only did we not have a draft Bill—[Interruption.] It is not just a matter of inconvenience. We are all here to do our best and to take however long it takes. We could certainly spend a great deal more than four hours today on these important matters without unduly straining ourselves, but we are not being allowed to because of the timetable motion that the Government have forced through. The guillotine has been used in one way or another at every stage of the Bill's passage.

I want to discuss the moral hazard provisions, the really crucial part of the group, in more detail. It is not just that there was no draft Bill encompassing those provisions—I am talking about the original provisions—as they were produced at the very end of consideration in the House. As far as I have been able to discover, there was no consultation and no discussion with anybody about whether the provisions were appropriate, workable, and tackled the issues that they were intended to tackle.

What happened in due course—I shall deal with the issue in greater detail when I move on to specific provisions—is that, having failed consistently to listen to Opposition voices in the House or to consult any relevant outside bodies, professional or otherwise, the Government got themselves in a tremendous mess. They then had completely to abandon their first attempt at moral hazard provisions, go through a consultation process—putting the cart before the horse—and then return with a series of further different provisions to deal with the same problem.

The Minister was right to pay tribute to the work of the revising Chamber, though in respect of this particular legislation, the task was more than just revision. The Lords laboured long and hard—we could not in the House, as our consideration was finished— to try to get the Bill right. The fact that, as the Minister himself said, the Lords tabled 1,200 amendments, surely illustrates the Government's problems. The Government tabled 450 amendments during the Commons stages, adding 62 new clauses and 81 pages to the Bill. It arrived in the Lords with 310 clauses and 13 schedules and has now developed into a two-volume Bill. We rarely encounter that nowadays, except in the case of a Finance Bill.

The Bill grew even longer in the House of Lords. Prior to Third Reading, the Government had made 442 further amendments and added a further 16 clauses and 50 pages to its length. On any view, that amounts to an awful lot of afterthought on the part of the Government and their draftsmen.

Following the Minister, I, too, pay tribute to the work of the Opposition, particularly the official Opposition, in the House of Lords. I am particularly grateful to my noble Friend Lord Higgins. The Bill is still far from perfect, but it has been enormously improved.

I shall now deal with the moral hazard provisions in greater detail. Personally, I have always taken the view that a more accurate description would be "anti-avoidance". I made the point in Committee, though much good it did me, about the importance of those provisions for the likely shape of the Bill. I went to Washington to discuss the approach with people who had more than 30 years experience of this matter. I also spoke to experts here, particularly people in the City of London, actuaries, lawyers and others. One theme that always came across vividly was that the Government would be well advised to get the anti-avoidance or moral hazard provisions right from the start, because if they were not dealt with properly, they could make a total nonsense of the other, doubtless laudable, provisions in the Bill. It is a tribute to the Government's incompetence that, far from those provisions being the first to be considered and dealt with, they were among the last, at least during the passage through this House.

The Minister took us through the moral hazard provisions, and he described their effects fairly. We welcome the fact that the time limit involves going back no more than six years, and we are pleased at what was said about insolvency practitioners acting in good faith. In that connection, my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) made a good, practical point. I shall be interested to hear how the Minister deals with that specific question.

There is a new power to ensure that a contribution notice may not be issued to prescribed people, and a new and reasonable test about the issue of a financial support direction. As I understand it, the regulator will need to be satisfied that it is reasonable to issue an FSD—aficionados of the Bill know that it is truly acronym country—to a person. A number of factors will have to be considered when that decision is made, and in respect of decisions about non-compliance contribution notices. The regulator must consider whether any benefit has been obtained, directly or indirectly, by the person named in the FSD from the employer.

I turn now to the clearance procedure. Concern has been expressed about what that could turn into, but the regulator must now provide a clearance procedure, and make decisions about clearance as soon as is reasonably practical. That makes considerable sense in what is a fast-moving business environment.

The regulator will not be bound by any clearance statement if there is a material change in circumstances, or if the circumstances described in the application are not real. Another change of heart by the Government is that most people have been excluded from the scope of the FSDs. We welcome that.

In sum, we welcome what has been put in the Bill about so-called pension liberation schemes. We think that the moral hazard provisions, as they are called, achieve a balance between different needs and aspirations. The process involved has been unnecessarily long and painful, and we must be grateful for the fact that we have an active and vibrant second chamber. Left to themselves, the Government would never have reached this destination.

There is nothing in this group of amendments on which we would wish to divide the House. Again, I am grateful for the hard work done in the other place on this part of the Bill.

Steve Webb (Liberal Democrat, Northavon)

We have 672 Lords amendments to discuss this afternoon, and almost all of them are Government amendments. My arithmetic tells me that we have 21 seconds to discuss each amendment. However, in this section of the debate, we have to discuss 183 amendments in 30 minutes, which comes out at under 10 seconds per amendment. That shows the lack of serious scrutiny that will be given to some important matters.

The amendments propose ways to close what the Minister rightly called scams. It is a source of concern that people can be ripped off in this way, and we welcome this attempt to close the loophole. However, I am worried that legislation passed with the best of intentions but in haste is often repented of at leisure. The short amount of time available for consideration of these amendments means that proper scrutiny is impossible and that there may be unintended consequences. As a result, people who are supposed to benefit from the Bill might suffer from other loopholes created by the attempt to close the particular loophole under discussion.

When pensions legislation is made in haste, it is often poor and in need of subsequent amendment. I often wonder what the Government would have done to close this loophole if they had not had this Bill going through the House. The Bill has been around for a long time, so the Government have thought that they could just amend it and add to it whenever anything on pensions has popped up. They thought that they could use the Bill to do those things on pensions that they quite fancy doing. Often, changes have been made long after this House had a chance to consider the Bill, so it is difficult to do justice to the 112 amendments in this group and to spot the bear pits that the Government may have created.

There is no reason why we could not have been allowed time to scrutinise these amendments properly but, for some reason, the Government decided to prevent that proper scrutiny. On behalf of the people whom we are trying to protect by means of amendment No. 1 and associated amendments, I hope that we do not live to rue that lack of scrutiny.

The people who will lose out are those who find that a large part of their pension investment is taken up by charges and fees when they are sold the products that we are discussing this afternoon. That is what will happen if we do not get the legislation right. Given the cursory run-through from the Minister at the start of this debate, it is difficult to tell whether the amendments will have the desired effect.

The financial services industry is notorious for inventing new products, scams and wheezes to get around regulations. The Government have produced these amendments like rabbits out of a hat this afternoon. It is very late in the day, so it is hard to have confidence that thought has been given to all the ways in which the provisions might be evaded.

On the face of it, the amendments look broadly sensible. They attempt to close down undesirable practices and respond to some of the concerns expressed about the Bill. Like the Conservatives, we shall not divide the House on the amendments, although we do want to register our concern that insufficient time has been given for the scrutiny that such important changes deserve.

Michael Fallon (Conservative, Sevenoaks)

I want to raise again some of the issues that I raised on Report some six months ago about the scope of the pensions regulator. I remind the House of the business interests that I declared then.

On Report, I said that the scope of the regulator was too wide and that his power to hit individuals was too extensive. I also said that the contributions notices and the FSDs were too wide in scope. The Minister will remember that he brushed those concerns aside. He wrote me a four-page letter on 11 June in an attempt to reassure me, but—to his credit—he began a process of consultation almost from that date. That process has led to the very substantial amendments to the Bill that we are discussing this afternoon.

It would be churlish not to acknowledge the great deal of work that has been done, but much concern remains. There is a great deal of worry about the position of insolvency practitioners, to which my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) has referred already, and about the position of individual investors, as they can still be caught by the regulator. However, a much more general concern remains that the Bill establishes what amounts to a new business regulator. It will be something like the Office of Fair Trading, but by no means all business transactions are referred to the OFT. I hope that the Minister will reassure me that the new regulator will have the resources and skills to deal with what I expect to be a flood of clearance applications.

Given that anything that could be construed as removing assets from a pension fund could be caught for six years, almost every business transaction is likely to be submitted to the regulator for clearance. The secondary effect on business could be that deals do not proceed unless the full pension fund deficit has been made up. As a result, struggling companies may be denied the opportunity to be taken over by others.

Therefore, I still need reassurance about three matters, and I hope that the Minister will supply that reassurance when he responds to the debate. First, will he confirm that the regulator will have the resources to deal with the flood of clearance applications that I expect to be put in? Secondly, is not the six-year period too long? I know that it derives from Inland Revenue statute, but I still think that it is too long and that it may have a deterrent effect.

Finally, will the Minister confirm that the new business regulator that he is creating will not deter the formation, or reformation, of businesses that is characteristic of a healthy economy?

Malcolm Wicks (Labour, Croydon North)

We have had a useful airing of some of the issues. Those that I cannot cover in the few minutes I have, I will deal with in correspondence.

The hon. Member for Bournemouth, West (Sir John Butterfill) queried what I meant about insolvency practitioners. We just wanted to make it clear that insolvency practitioners acting in accordance with their functions under the Act cannot receive contribution notices and cannot receive financial support directions, as they are individuals. We meant nothing more than to clarify that.

We have had a welcome for the amendments, if at times—we are used to this—a slightly grudging one. There was no early consultation on the moral hazard clauses. To have consulted before introducing them would have given advance notice to those who wanted to avoid pension liabilities. The changes made in the Lords are not radical, but they make clear on the face of the Bill the Government's policy as expressed in Parliament. We are confident that the moral hazard clauses strike the right balance on protecting members, the PPF, levy payers and business interests.

On the final point from the hon. Member for Sevenoaks (Mr. Fallon), it is not our intention to interfere with legitimate and proper business reorganisation. We have to be concerned, however, to prevent people from dumping pension liabilities on the new pension protection fund. What we are doing has been widely welcomed by outside organisations, and I hope that the House will agree to the amendments that we are suggesting.

Lords amendment agreed to.

Lords amendments Nos. 2 to 94 agreed to.

Clause 168 — Amounts to be raised by the pension protection levies

Steve Webb (Liberal Democrat, Northavon)

I beg to move amendment (a) to the Lords amendment.

Sylvia Heal (Deputy Speaker, Halesowen and Rowley Regis)

With this it will be convenient to discuss the Government motion to disagree, amendments (b) and (c), Government amendments (a) to (k) in lieu thereof, amendment No. 283 and Government amendment (a).

Steve Webb (Liberal Democrat, Northavon)

This is an area in which their lordships substantively disagreed with the Government. The amendments deal with the nature of the levy for the pension protection fund. Their lordships made two substantive amendments in the face of Government opposition when a combination of Conservative, Liberal Democrat and other peers prevailed, as reflected in Lords amendments Nos. 298 and 283.

Amendment No. 298 proposes that 80 per cent. of the levy should be a risk-based levy as opposed to one based simply on the number of members of a scheme. Amendment No. 283 proposes that part of the definition of risk will include the risk that the firm become insolvent, and not merely that the scheme itself is underfunded. It seems entirely proper that there should be a substantial risk-based levy and that the definition of risk should have some regard not merely to whether the fund is underfunded but whether the firm is likely to become insolvent, thereby triggering a claim on the fund.

My reading of the Government's amendments to those amendments is that the Government have largely accepted that argument. I am sure that the Minister will clarify the position, but I understand that the Government broadly accept the principle of an 80 per cent. risk-based levy and of allowing the insolvency risk of the firm to be a determining factor, among others, of the risk-based premium. My understanding of Government amendment (a) to Lords amendment No. 283 is that the Government are giving themselves, or the PPF, the power to exempt certain firms from consideration of insolvency in assessing the level of the risk-based premium. Provided the Minister can assure us that that power will be used sparingly and can give some flavour of the circumstances in which it would be used, I have no objection in principle to the idea that using the solvency risk to the firm might not always be appropriate. We welcome the fact that the Government seem to have accepted the general principle.

That said, I have a number of concerns about how things will operate. I hope that the Minister can clarify a point that remains not entirely clear even after their lordships' discussions. As I understand it, after the transition to a risk-based levy, firms will have the opportunity to move to the risk-based levy more or less straight away. However, firms will still have the option, even if we accept the Lords amendments or the Government's versions of them, to put off for several years the evil day when a risk-based premium arrives. That is my understanding of where we will leave the Bill today; if I am wrong, I hope that the Minister will correct me. I think that firms will still be able to say that they do not fancy a risk-based premium and that they will still go for the flat-rate premium for as long as they can.

Clearly, that creates some bizarre features. If my understanding is right, and if one draws an analogy with car insurance, we are effectively saying that people who drive middle-of-the-road family cars—a Ford Escort, or something like it—can say they would like a risk-based premium because they are not much of a risk and realise they will pay a low premium. On the other hand, Ferrari drivers—and the Ferraris of the pensions world—will be able to say, "Heck, we may face a very high risk-based premium, so we will put off the evil day for as long as we can and will stay with a flat-rate premium."

That seems perverse. If the Ferrari drivers are, in effect, creating a bigger potential call on the fund, and if we do not introduce a levy reflecting that risk, there will be some cross-subsidisation. Essentially, the safe drivers—the low-risk pension schemes—will subsidise the high-risk ones. Will the Minister make it clear whether that is indeed how things will work? Can high-risk schemes put off the move to a risk-based levy? Can he justify that? Now that the Government have accepted the principle of an 80 per cent. risk-based levy, as they have in their amendments, it seems odd to say that high-risk schemes will not have to pay it for several years.

Amendments (a) to (c) are intended to respond to the concerns expressed by Baroness Hollis when she responded in the other place to the Opposition's first attempts to amend the Bill. One of her first responses was to say that there is a problem in applying a risk-based levy to small schemes. As we know, the vast majority of occupational pension schemes are small, with small numbers of members and relatively small assets. There would therefore be a disproportionate cost on the schemes if we required small ones to provide information for the calculation of a risk-based levy and on the PPF from working out the insolvency risk for tiny firms—perhaps even one-man or one-woman firms—especially if the risk simply reflected the fund's being underfunded, which is information it would probably have anyway, but there was also a risk of the small firm going to the wall. Trying to do that for hundreds of thousands of small schemes would be disproportionate.

Baroness Hollis registered that as an objection to the whole principle of an early move to a risk-based levy, advancing that as an argument for why it should not be done at all. The Government have now accepted the principle of a risk-based levy, however, and, aided by the National Association of Pension Funds in drawing up our amendments, we say that small schemes might be exempted. Amendments (a) to (c) set out a definition of a small scheme, and we have referred to a scheme with fewer than 100 members. I must admit that when I first saw our amendments—the Minister knows what I mean by that—I was surprised that 100 was chosen as the threshold, but, as the National Association of Pension Funds points out, at 31 March 2003 schemes with fewer than 100 members accounted for around 60 per cent. of the defined benefits and hybrid schemes that will be eligible for the PPF. By setting the threshold at 100, we are freeing the PPF of the obligation to work out risk-based premiums for 60 per cent. of all schemes, which is a substantial concession in the spirit of Baroness Hollis's objections.

Michael Fallon (Conservative, Sevenoaks)

Has the hon. Gentleman calculated what the loss of revenue in levy not raised would be from that 60 per cent. of schemes?

Steve Webb (Liberal Democrat, Northavon)

There would be no loss, because those 60 per cent. of schemes would make the same total contribution to the levy—on a pro-rata basis, not on a risk-based basis. Our amendments would not change the balance of the burden between big and small schemes, but they would reduce the disproportionate bureaucracy—for both the schemes and the PPF—involved in calculating a risk-based levy for small schemes. The levy could be per head or some other pro rata arrangement.

Although the amendments mention 60 per cent. of schemes, they would affect only 1 per cent. of members of schemes. The amendments would save huge amounts of bureaucracy, but 99 per cent. of members would still be covered by a risk-based levy. That is the neat combination that would be achieved by amendments (a), (b) and (c).

In the other place, Baroness Hollis said, in objecting in principle to a risk-based levy, that

"there will be a number of extremely small eligible schemes that are required to pay the levy—applying an extremely complex risk-based calculation to schemes, which might have 10, 20 or perhaps 40 members, would be a case of using a sledgehammer to crack a nut—and providing the required information may be overly burdensome and costly for the scheme."—[Official Report, House of Lords, 4 November 2004; Vol. 666, c. 490.]

The House will accept that we have gone further even than the noble Lady suggested by relieving the PPF of the burden of that work for schemes of up to 100 members. I hope that the Minister will accept the amendment, given that generosity of spirit and the attempt to address the concerns of the noble Lady.

I believe that the noble Lady last night expressed concern that the amendment had been tabled late in the day, but one of the reasons for that was that the concerns about small firms had been used as an argument to resist risk-based levies. The Government only last night accepted the principle of risk-based levies—it was not until we saw today's amendment paper that we learned of the Government's amendments to Lords amendment No. 298—and our amendment is a tidying-up amendment.

Nigel Waterson (Conservative, Eastbourne)

Is the hon. Gentleman telling the House that he had seen the Government's amendment before tabling his amendment?

Steve Webb (Liberal Democrat, Northavon)

No, I am saying the opposite. Once we knew that the other place had defeated the Government on the risk-based levy, we received representations from the National Association of Pension Funds, which, while it agreed with the principle, was concerned about its application to small schemes. The association helped us to draft amendment (a), which we tabled last night. Since then, it has become apparent that the Government have accepted a risk-based levy in principle, which we welcome.

I hope that the Minister will accept the amendments. It would be a shame to divide the House on them, although we will do so if necessary. The changes the amendments would make are in the spirit of something that the Government argued not so long ago only a few yards away. My understanding is that although the Government disagree with Lords amendment No. 298, the long list of Government amendments (a) to (k) are designed to replicate the spirit of the Lords amendments, albeit slightly more efficiently. I do not have a problem with that and, in principle, we do not have a problem with Government amendment (a) to Lords amendment No. 283, on the assumption that the Minister can tell us what it means when it refers to

"any prescribed scheme or scheme of a prescribed description".

That is one of those phrases that could mean anything and before we give it the nod we need to know whether the Government envisage widespread exemptions or very limited ones. In principle, however, we are minded to be sympathetic to that amendment and we hope that the Minister will accept our amendments in the spirit that they were intended, as he has accepted the spirit of the Lords amendments.

Malcolm Wicks (Labour, Croydon North)

In essence, there is now little between us on this issue, but it is such an important part of the Bill that I need to approach my explanation with care. An Opposition amendment was made on Report in the other place to replace clause 168 with a new clause. We disagree with the amendment made in the other place, but have tabled an amendment in lieu.

The amendment made in the other place had four main objectives—to require the board to collect at least 80 per cent. of the levies estimated to be raised via the risk-based pension protection levy; to require the board to ensure that the amount collected via the scheme-based levy has a value that is no greater than the administration costs; to require the Secretary of State to lay regulations before Parliament before any changes are made over the proposed levies that the PPF board could collect in any given year; and to impose restrictions on the levy ceiling and the increase in pension protection levies from year to year, so that they apply from the end of the initial period, rather than from the end of the transitional period. That would mean that during the transitional period the board would not be able to increase the amount of the levy collected by more than 25 per cent. from year to year. I understand that that was the intended effect of the amendment. However, clause 171(1)(a) would still allow the levy ceiling to be modified during the transitional period. However, let us not worry about that technical defect.

We disagree with the amendment made in the other place for the following reasons. We do not believe it right that Parliament should have to approve changes to the amount collected through the levies. We have made it clear throughout our discussions that it is critical that the PPF can operate independently at arm's length from Government. That was an important lesson that we learned from US experience of the Pension Benefit Guarantee Corporation, where changes must be approved by Congress and where, as a result, no changes have been made since 1991. It is a fundamental principle in our approach that the PPF should operate without undue political interference, and that is why we created different controls through the imposition of a levy ceiling and the 25 per cent. rule.

From the outset it was our intention that, during the transitional period, the amount raised by the board through the pension protection levies should be controlled by the levy ceiling only and not by the 25 per cent. rule, which applies from the second financial year after the end of the transitional period. If the board was constrained by application of the 25 per cent. rule during the transitional period, its only option might be to collect the £300 million that we anticipate will be needed from the end of the transitional period in the first financial year after the initial period, even if that turned out not to be necessary. That might be the only way that the board could ensure that the PPF could meet its liabilities in the subsequent year.

On administration costs, the intention of the amendment seemed to be that the scheme-based levy should be used to collect administration costs for the PPF. We do not think that that is a sensible approach. It is crucial that a clear distinction be drawn between the PPF income that is used to pay compensation and the income that is used to pay administration costs. That is also important so that Parliament can scrutinise the PPF accounts, and is in line with the way in which most other non-departmental public bodies are funded. I should also be clear that the amendment does not achieve the intent I have described. Instead, the effect would be simply to restrict the amount that could be collected through the scheme-based pension protection levy to the same level as the PPF's administration costs.

However, we do recognise the importance of risk in setting the levies, and that is perhaps the crucial point. We have always made it clear that the levies should be predominantly risk based and that we might expect the PPF to collect 80 per cent. from the risk-based levy. We recognise the concerns that have been raised, however, and the importance of the issue for well-funded schemes with a strong employer covenant. We therefore propose an amendment in lieu, with a provision to increase the amount collected through the risk-based levy to 80 per cent. of the estimated total to be collected, through a concession.

If we disagree with the amendment introduced in the other place, some consequential technical amendments would have to be made to the original clause. Those amendments would result from amendments made to clause 166 on Report in the other place, requiring the board to set both a risk-based pension protection levy and a scheme-based pension protection levy in relation to eligible schemes from the end of the transitional period.

In this group we are also considering the amendment tabled by the hon. Member for Northavon (Mr. Webb). Amendments introduced in the other place require the board to set a risk-based levy for all schemes. The hon. Gentleman's amendment would enable the board to make exceptions to that rule and set only a scheme-based levy for small schemes, defined as those with under 100 members. The intention would be to ensure that it would not be necessary for the PPF to undertake a complex and costly assessment of risk to collect a relatively small amount of money. We fully agree that there are possible problems surrounding small schemes and the calculation of the risk-based pension protection levy; the Government raised the same concerns throughout the progress of the Bill, and when the Opposition introduced the amendments in question.

There are, however, a couple of problems with the amendment. It provides that the board may set only a scheme-based levy in relation to small schemes, provided that the amount the board estimates will be raised from those schemes in aggregate is the same as the amount that would have been raised from them if a risk-based pension protection levy had also been imposed. It seems that in order to estimate the amount that would have been raised from schemes via a risk-based pension protection levy, it would be necessary to undertake a risk calculation in relation to those schemes—the very process that we are trying to avoid due to its cost implications.

Steve Webb (Liberal Democrat, Northavon)

I understand why the Minister makes that point, but the burden comes from working out the figure for individual schemes; all the proposal requires is that the aggregate be the same. It is possible to estimate the aggregate without working out the figure for each scheme.

Malcolm Wicks (Labour, Croydon North)

I am genuinely puzzled about how one could work out the aggregate without the sum of the parts.

For the reasons I outlined, we tabled an amendment to the amendments introduced in the other place, which would reduce the burden on the PPF and small schemes to provide an accurate calculation of risk. Our amendment provides a regulation-making power to enable the PPF to disapply the requirement that insolvency risk be taken into account when setting the risk-based levy. We intend to use that regulation-making power to exempt small schemes from the consideration of insolvency risk. We consider that that approach is in keeping with the spirit of the amendment tabled in the other place, which required the board to impose both levies, so that the risk-based levy is imposed in respect of all eligible schemes. In that sense, our approach may go further than the hon. Gentleman's amendment by still requiring a risk-based levy to be in place for all schemes, but it will allow the board to calculate risk much more simply for small schemes. The board would thus have to consider underfunding only to determine the risk-based element, information on which will be provided anyway by all such schemes through PPF valuations. The amendment not only allows burdens on schemes and the PPF to be kept to a minimum, but also ensures that the levy paid by all schemes will reflect at least some assessment of risk. Our approach should go a long way towards meeting the concerns expressed by the Opposition and the NAPF, without undermining the principle of the amendment in the other place—to apply a risk-based element for all schemes.

Michael Fallon (Conservative, Sevenoaks)

I think the Minister's comments will be welcome. Will his definition of a small scheme be the same as that proposed by the Liberal Democrats? Can he clarify that point for the House?

Malcolm Wicks (Labour, Croydon North)

I can clarify that it is also our definition of a small scheme.

In summary, I urge the House to disagree with the amendment introduced in the other place, and to accept the Government amendments to clause 168 that we propose in lieu. The amendments will restore clause 168 to the Bill, but with a change to require that 80 per cent. of the estimated total collected by the levies should be collected via the risk-based pension protection levy. They also make some changes consequential on the amendments made in the other place.

I urge the hon. Member for Northavon to withdraw his amendment relating to small schemes and to support instead the Government amendment that we propose to the Lords amendments to clause 166. To recap, that will have the effect that, in relation to prescribed schemes, the PPF may disapply the requirement that insolvency risk be taken into account when setting the risk-based levy.

In response to some specific questions put by the hon. Gentleman, yes, it is the case that firms will be able to opt for a risk-based levy as soon as they want, but— this may disappoint him—they do not have to move to risk-based levies until the triennial valuation falls due. The hon. Gentleman shakes his head, but there is a question of judgment about how we phase in such things and whether it would be appropriate—we think it would not—to require a scheme to bring forward, no doubt at some expense, its triennial valuation. That is a matter of judgment, not of great principle, and that is our judgment. If the valuation falls within the transitional period, the firm would not have the choice of deferring until a later date.

When well-run funded schemes opt into the risk-based levy, the PPF will need to decide how to charge schemes that have been left outside. It is extremely likely—although it will be a matter for the board—that schemes that do not opt in will have to pay higher amounts as a result, especially as the PPF will want to incentivise schemes to enter the risk-based levy as soon as possible. I hope that goes some way towards satisfying the hon. Gentleman.

The hon. Gentleman referred to the advice he received from the NAPF. It is my understanding that the association recognises the concerns we have raised about the amendments it suggested initially and that it welcomes the Government's approach in response to those amendments, which combines the principles of fairness and administrative simplicity. The NAPF— a great friend of the Government—will of course want to work with the PPF board to put the regulatory framework into practice in a proportionate way.

I hope that after those explanations the hon. Gentleman might consider withdrawing his amendment and supporting our amendments.

John Butterfill (Conservative, Bournemouth West)

First, I remind Members of my entry in the Register of Members' Interests; I chair not only the parliamentary contributory pension fund trustees, but also the trustees of the People's Dispensary for Sick Animals pension fund.

I have one or two queries arising from the comments of the hon. Member for Northavon (Mr. Webb) and the Minister. I am concerned about the way in which the risk element will be assessed. Will the Minister further clarify that? A triennial valuation would make obvious any deficiency in the fund and the extent to which it would need to be remedied, and I see no particular problem with that. However, if I heard the Minister correctly, it is the intention that, in assessing the risk-based levy, the employer's financial viability will also need to be taken into account. What will be the criteria for that?

The hon. Member for Northavon implied that large schemes might be safer than small ones. However, when we recall Enron we might consider that large schemes were not safe at all. In many cases, the greatest risks may arise from very large companies. How do we assess that? Do we say that the asset base of the company is sufficiently large to give us reassurance? On the other hand, we all know that a couple of years of disastrous trading can quickly erode an asset base. We only have to look at what has happened to the market rating of large companies such as Marks and Spencer recently to see how quickly things can turn around. Therefore, will the levy itself be constantly reassessed according to the assessment of the financial viability of the employer, or will that be assessed only on a periodic basis, and what will the assessment be?

What will the situation be for charities? The Minister will appreciate my concern about this in respect of the People's Dispensary for Sick Animals. We have a relatively well-funded scheme, which substantially exceeds the MFR valuation. It does not meet the 100 per cent. solvency test, but very few schemes do. However, there is no trading record in respect of charities. They certainly will have some assets, but the amount of assets tends to be regulated by the charity commissioners. We have to satisfy the charity commissioners that, for example, we are not holding back too much by way of assets to the detriment of using that cash and those assets for our charitable purposes. We hold back, by way of reserve, about one year's operating expenditure, so that if all our charitable donations dried up we could still keep going without anything coming in for a year; that has been accepted by the charity commissioners. If, however, the regulator did not regard that as satisfactory, the Government would have to talk to the charity commissioners to see whether they would allow charities to hold greater reserves in the light of their pension liabilities. The Minister may wish to consider that further and come back to me at a later date, but it is certainly a very relevant point as far as charities are concerned.

The other problem with assessing the viability of charities is that one never knows how much income there will be in any one year. We at the PDSA have become rather good at forecasting what it will be; a lot of our income derives from legacies that we know will be coming to us, so we can make fairly accurate predictions of our legacy income over the next few years. Other charitable income, however, from charity shops or appeals or all the other available funding methods, are subject to much greater fluctuation. To what extent might charities be penalised because they cannot show a trading record in precisely the same way as a firm can? That will be a concern to the whole charity sector.

Malcolm Wicks (Labour, Croydon North)

I am happy to talk to the hon. Gentleman about the PDSA and the point that he raises about charities, given his involvement with the PDSA; we hope that later there will be fewer animals at risk, but that is another debate. In terms of the risk of firms, the board must consider underfunding and it must consider insolvency risk, but other criteria will be up to the PPF board.

John Butterfill (Conservative, Bournemouth West)

I am grateful to the Minister for that. It does seem to me, however, that given the range of risk that will have to be assessed—not just the viability of the fund but the viability of the employer—the process may take quite a long time to complete. Is the Minister satisfied that the present timetable that he has set out will be adequate for that purpose?

Michael Fallon (Conservative, Sevenoaks)

It would be churlish not to recognise that the Minister has moved on the question of the percentage of the risk-based levy, and I think we would all welcome that. My hon. Friend the Member for Bournemouth, West (Sir John Butterfill) has raised a very valid point about charities, because it perfectly illustrates what I think will be the problem under this legislation—regulatory overload. I suspect that in essence, what will happen is that the regulator will have to confirm the trading position of a charity and will be drawn into dialogue, presumably in this case with the charity commissioners, but in other cases probably with the Financial Services Authority and who knows what else, and we shall have one regulator chasing another regulator round and round the block.

It will not quite do for the Minister to say that every conceivable transaction has to be registered, and will not be officially cleared, in case of any change of circumstance, for the whole of a six-year period, and then to say—presumably in reply to my hon. Friend the Member for Bournemouth, West—that this particular issue will not take too long to resolve. The Minister cannot have it both ways.

Finally, on small schemes, I would certainly support the hon. Member for Northavon (Mr. Webb) on exempting small schemes if there is no element of cross-subsidy involved. That was the purpose of my question to him, and he has given me an assurance on that. I suspect that we would support what he has put forward and I hope that he may be comforted by what the Minister has said in reply.

There is one element of the Minister's reply that I would like him to reflect on, perhaps at a later stage of the Bill. He did say that it was his intention to invite the regulator to disapply. I think that that will be in the guidance or, eventually, in the regulations. An awful lot is being left to the guidance and there are a lot of people outside the House who will have no comfort from these debates until they see that guidance and see the form of regulations that will flow from the Bill. I wonder whether, if not now, at some stage in our proceedings, the Minister will be able to clarify what he means when he says, "it is our intention that"; does that mean that he will be publishing guidance in draft, between the passing of this legislation as an Act and the setting up of the regulator and his powers coming into force, or are we simply going to be confronted, as usual, with a great pile of regulations?

Nigel Waterson (Conservative, Eastbourne)

I have a mental image, which I have shared privately with the Minister recently, of the Minister haring up the road to Buckingham palace at the last minute, dashing the pen from Her Majesty's hand before she signs the Royal Assent and saying, "Your Majesty, we have had a final thought on this and we would like to change things just a teeny little bit—tweak things just a fraction to get the Bill right." I cannot get rid of that image. I used to think that it was a joke, but I am beginning to wonder.

We have just heard something extraordinarily revealing from the Minister, which confirms my impression that, from start to finish of the Bill, he has been making it up as he goes along. He has revealed a new bit of policy that has suddenly emerged—unless I just failed to spot it on a previous occasion, although I noted that the hon. Member for Northavon (Mr. Webb) was equally taken aback.

We did manage to extract rather painfully from the Minister in Committee that in fact it could be 2009—although he did hotly contest the idea that it could be 2010—before we had an all-singing, all-dancing risk-based levy system applying across the board. He referred to the question of triennial reviews and he did confirm, as I understood it, in response to a point raised by the hon. Member for Northavon, that it was possible for schemes to opt in early, as it were, to the risk-based levy. Presumably, the other side of that coin is that they can put it off as long as it suits them within the 2009 ceiling.

Then suddenly there emerged the brand new idea that the PPF would somehow produce a yet further basis for charging some schemes, completely outwith anything that has been debated in the House or the other House, to incentivise some of these schemes to opt in sooner than they might otherwise. We have to ask, in all seriousness, is the Minister simply making it up, or is there some developed policy thinking on this, and if so, why does it not feature in the hundreds, if not thousands, of amendments and new clauses that have been pouring out of the Department ever since the Bill saw the light of day?

Steve Webb (Liberal Democrat, Northavon)

The hon. Gentleman refers to schemes choosing whether to go for the risk-based levy or the flat-rate levy, but is there not a further paradox? Presumably, the scheme must guess what its risk-based levy would be, which is related to that specific scheme's features. So the scheme may not even know what its risk-based levy might be, and it will therefore inject greater uncertainty into the Government's proposed voluntary approach.

Nigel Waterson (Conservative, Eastbourne)

The hon. Gentleman makes a fair point. I seem to remember that, in Committee, we as the official Opposition made a kind of rough and ready interim proposal, not unrelated to the MFR, to try to get a risk-based levy up and running sooner rather than later. That was airily dismissed by Ministers, but it at least had the attraction of being more immediate in its application. There is a real problem, but we can be sure that those schemes that face perhaps the greatest risk in reality will be those that are most careful about calculating whether they will be better off staying outside for as long as possible. There is a real worry, and not for the first, the second or the hundredth time, I find myself having to respond to something that is brand new and has just come barrelling out of the blue this afternoon without warning and with no paperwork attached.

Before I move on to the central questions involved in the risk-based levy, I wish to touch on the smaller schemes issue. I take on board some of what the Minister says and some of the things said in the other place about the practicalities; but, on balance, we understand the force of what is proposed by the hon. Member for Northavon, and subject to anything further that I hear from the Minister or any other hon. Member, we would be minded to support the hon. Gentleman if he presses his amendment to a vote this afternoon.

I cannot help reflecting on the fact that, just for once, the exasperation expressed by Baroness Hollis in the other place only yesterday was justified when she made the point that Lord Oakeshott had indeed argued against such a proposition in Grand Committee and on Report. She said:

"When I tried to make that key point on behalf of the Government, it was not acceptable. However, when, beyond the appropriate time, the NAPF takes exactly the same line as the Government, we hear that amendments may be moved in the Commons."—[Official Report, House of Lords, 15 November 2004; Vol. 666, c. 1221.]

I dare say that it is not unusual for the Liberal Democrats to change their minds on any number of issues, but it is worth reflecting on the fact that they seem to have done a bit of gymnastics on this issue.

I shall come now to the key matter. I never know whether this is appropriate, but to be on the safe side, I suppose that I should declare a possible interest in that I have private pension provision, as I have indicated in, I think, all our previous debates on the Bill. We in the House and our colleagues in the official Opposition in the Lords have always had three basic concerns about the risk-based levy. First, the initial levy period should be limited to one year. In other words, as soon as is humanly possible, we should have a risk-based levy, and I shall return to some of the major reasons why in a moment.

Secondly, we want to ensure that, after the initial period, the pension protection levy should comprise both risk-based and scheme factor components. As has been said already, we have consistently, certainly in Committee, looked for the greatest possible definition of risk, so that we consider not just the risks to the scheme of underfunding as well as the nature and quality of a fund's investments, but the likelihood of the sponsoring company's insolvency in respect of any scheme, as the hon. Member for Northavon said.

The third major issue, which the Government are clearly now accepting—although in a sense the Minister did so in Committee, and I shall return to that in a moment, as I would not want to seem to misrepresent his position—is that the highest possible proportion of the levy should indeed be risk-based. We argued successfully in the Lords for an 80 per cent. figure.

Those have always been our major concerns about the Bill, and I shall explain in a little detail why we think that they are important issues. Before the Bill ever saw the light of day, when it was in what passes for its gestation period, I took the trouble of going to Washington to met Mr. Steve Kandarian, the then executive director of the Pension Benefit Guarantee Corporation, the body on which the Government claim that they are modelling the pension protection fund, although that is not the case in a variety of respects. The Government have diluted the model—if one can dilute a model—in a number of important respects, not least of which is that the so-called guarantee offered by the PPF is nothing like as secure as that offered by the PBGC.

Leaving that aside for a moment, Mr. Kandarian, who has since visited London, having ceased to be the executive director, and lectured on these issues at Imperial college, was adamant about a variety of things, one of which the Minister touched on: the importance of not necessarily leaving it to the legislature, particularly in election periods, to decide to increase the levy. Mr. Kandarian was adamant in his discussions with me and, I suspect, with anyone who was prepared to listen to him—I am sure that that included the Minister and his officials, as they prepared the Bill—about the need to have a risk-based levy from the very outset. Indeed, it was a number of years before the PBGC started to pay out benefits, as it gradually built up its funding since its founding in 1974. Mr. Kandarian was very clear that a proper risk-based levy was needed from the start, and he also spoke with some regret that, when the original model was set up in 1974, it was not fully risk based because it did not include all the components of risk that I spoke about earlier. We have always taken the view that that must be an important part of the Bill because it seemed sensible to take some note of 30 years' experience on the other side of the Atlantic, and it became even more important the more we considered the Bill.

I shall briefly refer to the evidence on these issues that Mr. Kandarian gave to the United States Senate when he was still the PBGC's executive director. He said:

"When PBGC takes over underfunded pension plans, financially healthy companies with better-funded pension plans end up making transfers to financially weak companies with chronically underfunded pension plans. If these transfers from strong to weak plans become too large, then over time strong companies with well-funded plans may elect to leave the system."

That is what we are talking about. We can dress it up and call it moral hazard or any number of fancy terms, but the reality is that if the Bill, despite having changed shape in so many important respects, is supposed to protect the members of existing defined-benefit schemes in this country, while encouraging not only those schemes to continue to be open to new members, but perhaps new schemes even to start, the last thing that we want is to deter employers who might be considering opening a new scheme or keeping one open to new members. That is clearly a problem.

If we tell well-run schemes and well-run companies that, for a significant period, they will end up paying a flat-rate levy that is not fully risk-based—in effect, the good will subsidise the bad—perhaps some of the less well-run, more risk-based schemes will be able to continue to opt out for as long as possible from the whole scheme, despite the new bit of policy that we heard about just a few minutes ago,

In America, as Mr. Kandarian went on to say in his evidence, there is

"a flat-rate charge of $19 per participant, and a variable rate premium of 0.9 per cent. of the dollar amount of a plan's underfunding, measured on a 'current liability' basis."

His great regret, which he explained to me and others, was that the system was not got right from the start and that regret is encapsulated in the example of Bethlehem Steel. It resulted in the largest single claim in the history of the PBGC. However, Bethlehem Steel paid no variable rate premium for five years prior to termination despite being drastically underfunded on a termination basis. That flags up the enormous importance of ensuring, as we have consistently said, that the risk-based levies are in place early on.

In fairness to the Minister, what he said earlier—apart from the new bit of policy—only reflects what he said in Committee. It emerged that he conceded that, because of the practicalities involved in bringing in a fully risk-based element, it would not come in for three or four years. That obviously took me by surprise, because he refers to me grimacing from a sedentary position. He added that

"if a scheme chose to bring forward the three-yearly valuation, presumably to benefit from a lower risk base, it could do so."

However, the hon. Member for Northavon pointed out that this could end up without a proper insurance scheme covering all funds until 2010. The Minister responded—somewhat in annoyance, as I recall it—by saying that that was certainly not the case, but added:

"The three-yearly valuation cycle takes us to 2008, so the full risk-based levy could be introduced for all schemes at the end of the process by 2009"—[Official Report, Standing Committee B, 1 April 2004; c. 560, 568.]

The Hansard report shows that that remark was followed by an "Interruption", I am not at all surprised.

There will be a significantly longer period for all schemes to pay a fully risk-based levy, but the position gets worse. We heard only recently that the burdens on the PPF at its inception are increasing rather than decreasing. We will spend more time on that when we come to a later group of amendments, but I think of the statement the other day about schemes such as that run by Turner and Newell. They still might be dealt with retrospectively under the PPF even if there were a significant event before April 2005.

There have been strenuous arguments on all these issues. I think that the Government have accepted most of them and, in particular, the argument about the figure of 80 per cent. It is important to point out that the National Association of Pension Funds has been clear throughout that it wants the highest possible proportion of risk element in the way that the levy is calculated. It says:

"NAPF would like the PPF's risk-based levy to be at least 80 per cent. of the total funds raised, in order to minimise moral hazard. The initial transitional period when there is only a flat rate levy should not extend beyond a year."

The fact that we need to debate this issue in the Lords or this House is slightly curious. In Committee, the Minister said that

"we consider that an appropriate split in due course could be—although it is up to the board—about an 80 per cent., 20 per cent. split in favour of risk factors."—[Official Report, Standing Committee B, 1 April 2004; c. 588.]

There has never really been a lack of common ground between the two sides on the 80 per cent. issue. This is all about whether the Government have been prepared to include that figure in the Bill. Baroness Hollis put it rather well when she said:

"I, too, support the amendment: I just cannot accept it."

That struck us as slightly bizarre. She also coined the memorable phrase when she said that, in the early stages, there would be a

"mixed economy in which all schemes will have some scheme-based levy and others will carry, by choice, a risk-based element. It is clear that insofar as the good companies seek the risk-based element in the hope of reducing their premium, this will have"—

this is an important admission—

"an adverse selection effect on the scheme-based levy for the rest."—[Official Report, House of Lords, 4 November 2004; Vol. 666, c. 485, 497.]

That is the point that the hon. Member for Northavon made. Some good companies will clearly be disadvantaged by the long run-in to a fully risk-based levy right across the board. We think that that is wrong.

The good news is that the Government appear to accept the 80 per cent. figure and that we should be moving as rapidly as possible to a fully risk-based levy. We still think that they could do more to tighten up the time scale, but we do not propose to divide the House on the main issue. We think, however, that there is sufficient merit in the amendment tabled by the Liberal Democrats, and we do not think that it should be dealt with in the way that the Minister suggested. The amendment makes a clear point that should be included in the Bill, so we urge the hon. Member for Northavon to pursue it. We are prepared to support him in the Lobby.

Steve Webb (Liberal Democrat, Northavon)

I am grateful for the support of the hon. Members for Eastbourne (Mr. Waterson) and for Sevenoaks (Mr. Fallon), and it is only right that I respond briefly to some of the questions that have been raised about the amendment and clarify what it will and will not achieve.

The hon. Member for Eastbourne asked about my noble Friend Lord Oakeshott, who pointed out in another place that the effect of the risk-based levy on small schemes was not a reason for rejecting an 80 per cent. risk-based levy. That point has been missed. Baroness Hollis has used the effect on small schemes as a reason for not having such a levy at all. That reason has now gone, because the Government have now said that they will accept the 80 per cent. rule. We can therefore modify it to deal with the legitimate concerns that she raised. It was not a fatal objection, but it needs addressing.

I listened to the Minister's response, and I am now puzzled. He said that the Government propose that every tiny scheme will have a risk-based levy based only on the underfunding and not the insolvency risk. That means, however, that every small scheme might have a unique level of risk-based premium. Such a proposal is vastly more complex than it needs to be. Every scheme will have to have an individually assessed risk that is based, admittedly, on information that will presumably be gathered anyway. However, if we are to do the job properly and assess the level of risk in a particular scheme based on the position of the fund—I shall be interested in the thoughts of the hon. Member for Bournemouth, West (Sir John Butterfill) on this—we do not necessarily need precisely the same information to assess the level of underfunding as we do to assess the risk arising from that underfunding. For example, there may be a given level of underfunding on a particular definition at a particular point in time, but the likelihood of two schemes with identical levels of funding at a snapshot making a claim on the scheme may vary greatly depending on the asset mix or something like that.

Assuming that we fail with this amendment, the PPF board will have to make an individual calculation for every single—even one-member—occupational scheme and the PPF will not just need the information that it collects anyway. I am happy to take an intervention from the Minister on that point, because it is important. As I understand it, for the PPF board to work out the risk-based levy on small schemes even just based on the funding in the fund will require more than the information that it collects anyway. To do the job properly, there is the realistic prospect that it will require further information, such as information about the asset mix. That could create serious administrative burdens on small schemes.

John Butterfill (Conservative, Bournemouth West)

The hon. Gentleman makes a valuable point; he is entirely correct. The question that I raised earlier was how far we go in pursuit of the information. How do we assess the viability of small firms without the benefit of international credit ratings to assist us? A detailed examination of the accounts and the current state of play of individual employers may be required. The amount of work involved in that is huge.

Steve Webb (Liberal Democrat, Northavon)

I greatly respect the hon. Gentleman's knowledge of such matters. As he says, it would be difficult to assess the insolvency risk of such small firms. To be fair to the Government, as I often am, the thrust of Government amendment (a) to Lords amendment No. 283 is the exemption of small schemes from the need for a calculation of insolvency risk. However, even a risk-based element that is based on the funding of the PPF will put an unnecessary burden on small schemes.

The Minister pointed out what appeared to be a paradox in the amendment's wording, although I hope that I have reassured him about that. To go back to the point that the hon. Member for Sevenoaks made, we would exempt small schemes from a risk-based element, so we would not change the balance between the overall burdens on smaller and larger schemes.

The Minister asked how we would work out what small schemes would have paid as a risk-based premium if we did not make individual calculations for each scheme and suggested that that would create the problem that we were trying to avoid. However, if I may draw an analogy with car insurance, it is perfectly possible for Direct Line to work out the average risk of Ford Escort drivers without calculating the risk of each individual Ford Escort driver, which will vary. The company knows the average risk for the group, so it does not have to work out each person's risk. It would not be a problem to work out the aggregate risk-based premium for small schemes, and thus ensure that the overall burden would not change. The calculation would be simpler than that envisaged, so it would put less burden on the PPF and small schemes. As the bureaucracy would be less, there would be a smaller overall burden—a smaller levy—which is what we all want, so I am somewhat puzzled about why the Government want to go down their route.

I was astonished by the Minister's response to my question about the ability to make a choice about whether to be insured according to risk. The idea that people who are a bad risk may choose to pay a different and lower premium for an insurance scheme is bizarre and implies that cross-subsidisation would occur.

The Minister came up with an extraordinary ad hoc suggestion—although I think that he was reading it—that firms that did not adopt the risk-based element as soon as possible would be incentivised to do that. Which aspect of the Bill gives the PPF the power to do that? It can set a scheme-based levy based on the number of members in a scheme, but can it change the levy to penalise the bad guys who do not adopt the risk-based option? The Government seem to be making things up as they go along. The Minister told us at the start of his speech that the PPF will be independent of the Government, so the Government could not make the fund do that. Has he drawn up any guidance for the PPF? Will he ask it to encourage people to adopt the risk-based levy?

If the Government think that it would be good to get people on the risk-based levy, why do they not make them do so? If that measure would result in a proper insurance scheme more quickly, the Government should implement it. They say that they want to incentivise people, but where will the money for that come from? It would be bizarre to give people an incentive to adopt the risk-based scheme, and thus presumably pay a higher premium. Perhaps we will pursue the matter through a written question, because although I would be happy to give way to the Minister, he does not have the opportunity to make a speech in which he may explain himself.

We welcome the fact that the Government amendments in lieu of Lords amendment No. 298 accept its spirit. However, Liberal Democrat amendment (a) to the Lords amendment deals with a point about small firms that Baroness Hollis raised. The amendment would achieve something that the Government should try to do, so I would like to test the opinion of the House.

Amendment proposed to the Lords amendment: (a), in line 13, leave out from first "The" and insert "Subject to subsection (4A), the"—[Mr. Webb.]

Clause 106 — The Non-Executive Committee

Malcolm Wicks (Labour, Croydon North)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to take Lords amendments Nos. 96 to 120, 122, 123, 125 to 130, 132, 133, 135, 137 to 144, 146 to 150, 152, 153, 156, 160, 162 to 165, 167, 169, 171 to 179, 181, 184 to 196, 198 to 208, 211 to 218, 221 to 223, 227 to 230, 232 to 246, 248 to 256, 258 to 260, 262 to 270, 272 to 277, 279 to 281, 284 to 292, 294 to 297, 299 to 303, 306 to 323, 330 to 345, 384, 388 to 397, 399 to 401, 499 to 523, 525 to 538, 540 to 542, 544 to 551, 554, 555, 558, 563, 565 to 567 and 569 to 576.

Malcolm Wicks (Labour, Croydon North)

I want to offer a brief explanation of the Government amendments on the pension protection fund, which were tabled in the other place. On compensation, we have introduced a set of amendments to cover court orders made against a pension scheme following divorce or nullity proceedings. The amendments enable the PPF to honour attachment, earmarking and pension-sharing orders made before the end of the assessment period, and in particular to implement pension-sharing orders made before the end of the assessment period but not implemented before the board assumes responsibility for the scheme.

Following representations made in Standing Committee, provisions have been extended to provide compensation to surviving unmarried and civil partners. We have also included regulation-making powers to enable us to ensure that survivors' payments will be made only where there was provision to pay survivors' benefits under the scheme.

Other provisions allow for compensation to be paid to members whose scheme characteristics differ from traditional defined benefit models, for example, cash balance schemes. That is a response to changes in scheme design as employers seek to share risk with their employees but still offer attractive pension benefits. Further changes have been made to ensure that members who have been in their pension schemes a short time are treated fairly. Amendments will replace the current statutory priority order on wind-up with a new one when the PPF commences business. The priority order will be aligned with PPF benefits to ensure that if a scheme has been through a PPF assessment period but has not transferred into the PPF, scheme members receive broadly what they would have done had the scheme gone into the PPF. The Government's view is that it would be unfair for people to be entitled to significantly less on winding up than they would have received had the scheme gone into the PPF. The same priority order will apply whether a scheme starts to wind up owing to the insolvency of the employer, or does so while the employer is solvent. The objective remains to ensure that the limited assets available are distributed fairly between all scheme members during a scheme wind-up.

Moving on to the PPF's entry rules, changes have ensured that insolvency practitioner notices have no effect until they have been verified by the board. Because of the importance of those notices, we have made that verification a reviewable matter. The board will also be able to modify certain insurance contracts to ensure that no one receives more than the PPF level of compensation. Further amendments have ensured that schemes that become ineligible during an assessment period are still able to enter the PPF if necessary— for example, to cover the situation when there is a two-member scheme in an assessment period and one of the members dies. We have also protected the PPF against certain compromise agreements and, in the light of industry concerns, have ensured that the board's powers in insolvency proceedings do not exceed those of trustees. We have also taken a regulation-making power to ensure that, in the valuation of a scheme, the PPF will take account of any contribution notices and financial support provisions put in place by the regulator using its moral hazard powers. Without those amendments, the PPF could be called upon to assume responsibility for schemes which, had they been taken into account, could have been wound up outside the PPF to the benefit of members.

On levies, the Opposition have introduced amendments limiting the initial period to 12 months and requiring the board to set both the scheme-based and risk-based pension protection levies. We have revised the non-executive functions for the PPF board in response to Opposition's concerns, so that they include only remuneration and the review of financial affairs. Other functions that were previously listed as non-executive functions become subjects for inclusion in the board's annual report. Rules governing the investment strategy of the PPF board have been amended to ensure that the interests of levy payers and scheme members are taken into consideration.

Steve Webb (Liberal Democrat, Northavon)

I am aware that the Minister has only a few minutes—nine, I think—to deal with this huge group of amendments. He is working through them systematically, but the group deals with an important matter that I fear he will not reach. Does the group contain amendments relevant to his written statement of last Monday and his press release of last Thursday about schemes in the gap year and the scope of the financial assistance scheme and the PPF in relation to schemes that become insolvent now? Will he clarify the position of schemes in the 12-month period—the gap year? Do they go into the FAS or the PPF, or can they go into either?

Malcolm Wicks (Labour, Croydon North)

The relevant amendments are in this admittedly rather large group. Our concern was to ensure that we took a comprehensive view across the piece so that people could be protected as Parliament intended. We hope and assume that the PPF will come into force in April, subject to the will of Parliament. Let us suppose that an insolvency event affecting a scheme occurs before April—the company goes into administration, for example. We are now stating clearly in the legislation that scheme members should not be prevented from benefiting from the PPF as long as there is a second insolvency event—for example, the company goes into liquidation—after April. If there is a second insolvency event, a scheme can be covered by the PPF, subject to other criteria. A scheme that is totally wound up before April, however, will not be subject to the PPF.

The other announcement that we were able to make last week is that the financial assistance scheme will cover what some call the gap year—the period to April next year—as we intended. We were concerned about moral hazard issues, but we are now satisfied that they cannot arise. I hope that that answers the hon. Gentleman.

Steve Webb (Liberal Democrat, Northavon)

Will the Minister make it clear that if a first insolvency event occurs in the gap year, the company will have some incentive to delay the second insolvency event until the PPF comes into force, because it is more generous than the FAS—that, in principle, a scheme that enters administration now might hold on for the PPF because it gives scheme members more? Is that how it will work?

Malcolm Wicks (Labour, Croydon North)

I am happy to write to the Opposition spokesmen about this important matter. Despite our initial doubts, having consulted a number of people we are now reassured that such manipulation—delaying until after April—cannot take place. That is why we felt able to make the announcement we did.

Nigel Waterson (Conservative, Eastbourne)

I agree that this is an important issue. Yesterday in the Lords, Baroness Hollis was at pains to say that the Minister's statement a few days ago made no real difference; it was merely a clarification. However, when the information was leaked or announced to the press, it was presented—or spun, if one prefers—as good news for, for example, the Turner and Newell pension scheme. Either it makes a difference or it does not, but the noble Lady's suggestion that it makes no difference to the potential liability of the PPF must surely be wrong.

Malcolm Wicks (Labour, Croydon North)

I do not wish to refer to any particular scheme, although I have to say that some of the news on one scheme might be looking better than it was. However, surely even the cynics accept that, together, the two announcements are good news, because it means that, subject to the criteria being satisfied, scheme members in defined benefit schemes will now be covered, one way or another, either because we have extended the FAS to the start of the PPF or because we have now covered cases in which a second insolvency event occurs after April. Fair-minded people should welcome that news.

Andrew Miller (Labour, Ellesmere Port and Neston)

Following on from the same point but looking back in time, when does my hon. Friend expect to be able to announce the date on which the Government propose to commence the financial assistance scheme?

Malcolm Wicks (Labour, Croydon North)

I have said that the scheme will be up and running in the spring.

Andrew Miller (Labour, Ellesmere Port and Neston)

I apologise to my hon. Friend—I was not clear enough. I was asking about the earliest date from which pension schemes can be eligible to claim from the scheme.

Malcolm Wicks (Labour, Croydon North)

We are engaged in a secondary exercise to collect precise data from schemes. Although hon. Members have particular interests in certain schemes, I know that my hon. Friend will appreciate that we are dealing with perhaps 250 schemes and that the data-gathering exercise is complex. He will therefore understand that I am not yet in a position to answer his question.

Given the interest in this matter, we felt it important to make the announcements last week because it had come to our attention, from a number of people within the pensions industry, that some pension scheme trustees were unaware of how the Bill's provisions would operate. We felt it essential to confirm the position to enable trustees to make more informed decisions about the future of their pension schemes. It is very much that concern that enabled us to rethink the advantages and disadvantages. We thought that there were advantages in the announcements, which is why we were able to proceed in that direction.

I appreciate that there is a good number of amendments before us and that we have relatively little time to deal with them. I am happy to have been sidetracked—I do not mean that pejoratively—into these important issues. With those remarks and with the interventions that have been made, I shall draw my remarks to a conclusion.

Steve Webb (Liberal Democrat, Northavon)

We are dealing with a large number of amendments and I want to refer only to those that we have been talking about that relate to the FAS and the scope of the PPF.

One of my concerns is that the Government are not getting best value for money out of the wind-up of the schemes. Schemes are winding up now and the assets are being used to buy deferred annuities. People will then be left with a substantial shortfall, some of which will be made up by the FSA scheme. I plead with the Minister, in the seconds that we have available, to look again at the issue of allowing schemes to close through poor value deferred annuities, thereby leaving the FSA scheme having to make up a big gap.

Would it not be better to take those assets as a going concern not into the PPF, but into some form in which they could be carried on? That would mean that there would be less of a burden on the FSA scheme, which is already overburdened. There is a danger that it will be even more overburdened by the announcement that the Minister has just made.

It being two hours after the commencement of proceedings, Mr. Deputy Speaker put the Question already proposed from the Chair, pursuant to Order [this day].

Lords amendment agreed to.

Mr. Deputy Speaker then proceeded to put the remaining Questions required to be put at that hour.

Lords amendment No. 283, as amended, agreed to.

Lords amendments Nos. 96 to 282, 284 to 297 and 299 to 358 agreed to.

Before Clause 229

Removal of compulsion to take annuities

Malcolm Wicks (Labour, Croydon North)

I beg to move, That this House disagrees with the Lords in the said amendment.

I obviously know all the amendments off by heart, but I had briefly forgotten the significance of Lords amendment No. 359, although it is of considerable interest to the House. Mr. Speaker has brought it to the attention of the House that the amendment involves the question of Commons privilege. It relates to financial matters where it is the role of the Lords to agree not to initiate or to amend.

The effect of the amendment is to alter the taxation arrangements made by the Commons: it allows annuities not to be paid where they might otherwise be paid; it extends tax relief by allowing more people in some circumstances to pass their tax privileged pension pot on to their survivors tax-free; it allows in some circumstances for contributions to be made to pension schemes beyond the age of 75; it reduces the instances when part of the tax relief given to contributions is recouped when an annuity is paid, and so on. The House can waive its privilege but I think that it is inappropriate to do so.

I shall explain the proposed amendment and its background further. It is similar in intent to one that we in this House have previously rejected in Committee. It is also a topic that has been endlessly debated in this House as a result of a number of private Members' Bills and during the progress of this year's Finance Bill.

The present rules on annuities mean that members of personal pensions schemes and small defined contribution occupational schemes must purchase an annuity with their pension fund by the time that they reach the age of 75. Members of occupational pension schemes are required to receive a pension, rather than purchase an annuity at the age of 75.

The intention behind these rules is to ensure that pension pots are used to provide a stream of income in retirement. Personal pension schemes will purchase an annuity and occupational pension schemes usually, but not always, provide a pension from the scheme rather than for the purchase of an annuity. Members of pension schemes benefit from more favourable tax treatment than other savers. Tax relief is provided at the pension scheme member's marginal income tax rate so that, in effect, he saves the gross amount and not the net amount of income into his pension pot.

John Butterfill (Conservative, Bournemouth West)

Will the Minister give way?

Malcolm Wicks (Labour, Croydon North)

Yes, but I want to make some progress. The House needs to hear the whole story.

John Butterfill (Conservative, Bournemouth West)

I am sure that the Minister did not wish in any way to mislead the House. That is why I am grateful that he has taken my intervention. There are other savings schemes that are equally tax privileged. I am thinking about enterprise investment schemes and venture capital trusts. There are a number of other schemes that involve quite significant levels of tax relief in terms of savings schemes that do not have the lock-up that pensions do. I do not think that the Minister would be completely accurate in saying that these reliefs were not available to other savings schemes that are open to the public.

Malcolm Wicks (Labour, Croydon North)

Let me make some progress. I think that I will be able to cover some of those issues.

The contributions grow in a tax-favoured environment when invested. There is also the tax-free lump sum on vesting a pension, which adds to the favourable treatment. That can be up to 25 per cent. of the value of the fund and is recognition by the Government that people need encouragement to lock away their money for a considerable period until they are ready to draw retirement benefits.

Those tax reliefs are then only recovered when the pension fund is converted into an income stream either by taking a pension or purchasing the annuity. That can happen as early as age 50 under present rules but must happen once the member reaches the age of 75. I recognise that there will be a debate about the cost-benefit tax analysis of that against other savings vehicles but our argument would be that this is a tax-privileged area for savings for retirement.

Frank Field (Labour, Birkenhead)

Will my hon. Friend give way now that he has interrupted himself?

Malcolm Wicks (Labour, Croydon North)

I welcome my right hon. Friend to our proceedings and I am happy to give way.

Frank Field (Labour, Birkenhead)

There is probably no one in the House who is arguing that people should be able to unlock their funds before they are retired, and having done so then make a claim on welfare. That is surely the issue that we are addressing in the Lords amendment.

Malcolm Wicks (Labour, Croydon North)

Indeed. If I come to the end of my script and give a better balance, I think that my right hon. Friend will be able to stay until the end.

The amendment from another place would remove the requirement on members of personal pension schemes and some occupational schemes to purchase an annuity—and thereby secure an income stream—by the age of 75. However, there is a proviso. That is that only those who can "demonstrate" that their existing resources mean that they can avoid any reliance on means-tested benefits are allowed the privilege of not having to purchase an annuity. At any one time, and for any one individual, it is quite difficult to say what level of resources might be required to avoid entitlement to the income-related benefits. However, I can assure the House that the amounts involved are far in excess of the amounts that most people saving into personal pension schemes have in their pension funds. Furthermore, to ensure that the individual continues to avoid entitlement to the income-related benefits the annuity would have to be index-linked. There are therefore several ironies. First, for the vast majority of annuity purchasers, the Lords amendment would create a far more restrictive environment than currently exists and, secondly, it would undo the liberalisation that we are seeking to achieve on index-linking elsewhere in the Bill. It will benefit the top 3 or 4 per cent. of annuity savers and in particular the 1 per cent. with pension funds in excess of £250,000, should they attain the age of 75 without purchasing an annuity.

Independent research shows that most people buy their annuities when they retire and even those who do not do so still purchase their annuity well before the age of 75. The paper by the Association of British Insurers entitled, "Annuities—The Consumer Experience" shows that, of people who retired in the past two to three years and purchased an annuity, 95 per cent. did so before the age of 70. The ceiling of 75 for annuity purchase is clearly not a major problem for the vast majority of annuitants. It certainly is not for my constituents nor, I suspect, those of my right hon. Friend the Member for Birkenhead (Mr. Field). The Lords amendment would certainly not benefit the vast majority of pension savers, because 80 per cent of pension pots are worth less than £30,000—a sum significantly and substantially less than the funding needed to be above income-related benefit.

The Government recognise the underlying issues of greater longevity and demographic shifts in this country and, indeed, across the developed world, both of which have profound implications for the way in which our pensions policies are put into effect. The Government are taking action through the Bill and in other ways to meet those and other challenges. We set up the Pensions Commission under Adair Turner to review the regime for UK private pensions and long-term savings. Its first report, published last month, provides a mine of detailed and valuable information on the demographic challenges that we face. It is a singular fact that we are debating whether to preserve one of the few elements of compulsion in our pensions structure, but the Pensions Commission was set up specifically to look at the effectiveness of the voluntary approach to pensions and whether there is a case to move to greater compulsion. The commission is considering whether the level of compulsion within the UK pension system is appropriate. For people investing in a pension, the requirement to purchase an annuity at 75 with tax-privileged saving is a compulsory element in the existing system. Once the commission has reported on the wider issues relating to compulsory saving, the Government will wish to consider key issues, including annuitisation at the age of 75, with particular care and urgency, and decide whether they remain fit for the purpose.

It should be clear by now that the Lords amendment is not appropriate, although we acknowledge the evident interest shown by the other place. The amendment would specifically benefit people who do not need to buy an annuity while requiring the less well-off to subsidise them through income taxation.

Steve Webb (Liberal Democrat, Northavon)

The Minister has ruled out scrapping the age limit of 75, but does he accept that, since it was introduced, male life expectancy has risen from 65 by more than five years, contrary to what Baroness Hollis said in another place. Is there therefore not a case for raising the limit to at least 80?

Malcolm Wicks (Labour, Croydon North)

I can only repeat what I said earlier. The Government will wish to consider key issues, including annuitisation at the age of 75, with particular care and urgency, and decide whether they remain fit for the purpose. That is as far as I can go.

The Lords amendment is not appropriate, but we acknowledge the high level of interest in the issue. We are, as I have just shown, prepared to respond constructively and promptly, including on the specific issue of annuitisation, as a priority once the Pensions Commission has reported.

Edward Garnier (Conservative, Harborough)

The Minister should not allow himself to think that interest in this matter was confined to the other place. He acknowledged that it had been discussed on previous occasions in the Commons, but he seems to have found it inconvenient to remind himself that, on 7 March 2003, the Retirement Income Reform Bill, which I had the honour to introduce in the House, completed its Second Reading with a majority of 101. It is therefore the settled will of the Commons that Lord Higgins's proposal in Lords amendment No. 359 should come into law. The Minister is a great supporter of the supremacy of the House of Commons, so perhaps he could be consistent and argue for it in this case as well.

Malcolm Wicks (Labour, Croydon North)

I had better not comment on the hon. and learned Gentleman's judgment that that was the settled will of the House. That may have been the case on a rather quiet day, but there are more than 100 Members in the House, as we will demonstrate later. However, I have said that we will look at the specific issue of annuitisation as a priority once the Pensions Commission has reported. I acknowledge the interest shown by the House, both in this issue and in pension matters that affect the other 99 per cent. of the population.

David Willetts (Conservative, Havant)

The Minister has just made a tiny concession, although it required a trained eye to spot it. Indeed, that is why he had to repeat it for the Liberal Democrats. However, it will not quite do the job. It would be helpful if he explained what the Government will look at after Adair Turner reports. Can he give a firmer commitment, particularly on the age limit for buying an annuity? I am afraid that I do not regard what he has said as a significant concession, given the weight of opinion in both Houses. There was a substantial vote in the other place last night, because their lordships feel strongly about the issue. I do not have any expertise on matters of privilege, but there is a strong belief in the other place that privilege does not apply in the way that the Minister suggested.

This is not just a matter for the other place. As my hon. and learned Friend the Member for Harborough (Mr. Garnier) said, Members of the Commons feel strongly about it as well. I am grateful to him for reminding the House of the heroic moment when the Government suffered a defeat on Second Reading. We fondly remember that great moment, which was a reminder to the Government of how strongly people feel about annuities. The fact that the vote took place on a Friday shows how much the Opposition care about the subject, because we were all willing to turn up to support our hon. and learned Friend who, like my hon. Friends the Members for Taunton (Mr. Flook) and for Bournemouth, West (Sir John Butterfill), introduced a private Member's Bill on retirement income.

I shall not rehearse all the arguments in favour of the Lords amendment, because a tight programme motion is in operation. I shall therefore comment briefly on some of the things that the Minister said. First, a simple point of principle is at stake. Why should we pass regulations in the House telling adults what they should do with their savings provided that the taxpayer does not have a direct interest in the result? Once we have covered that angle—the Lords do so successfully in their amendment—it is not legitimate for us to tell people what to do. With the greatest respect to my hon. Friends, the proposal inserted in the Bill in the other place achieves that neatly and simply by specifying that there should be no requirement to buy an annuity by the age of 75

"provided that the pensioner can demonstrate that he has resources to ensure that he will not become dependent on means-tested benefits."

Beyond that simple proviso, what right do we have to tell people what to do with their money?

John Butterfill (Conservative, Bournemouth West)

I have been listening carefully to my hon. Friend, and I thoroughly agree that, provided that we can demonstrate that there is no call on the state, people should be free to do as they wish? Can he imagine an independent financial adviser telling someone that they should put all the money for their retirement into an annuity? Does he think that the IFA would be performing his duty as a financial adviser if he did so?

David Willetts (Conservative, Havant)

That is a very good question. I sometimes fear that, as we get into these pension debates, I may occasionally find myself straying into giving financial advice without being regulated to do so. Given my hon. Friend's expertise on the subject, he makes a powerful point that I hope the Minister will take into account.

The Minister argued that the people who convert into an annuity do so significantly before they reach the age of 75, so the requirement to convert at the age of 75 cannot be a serious obstacle. That is my summary of his argument, but the evidence from a survey by Watson Wyatt rather undermines that argument. The evidence was that there was a group of people who wished to convert into an annuity and they did, it is true, by and large do so before reaching the age of 75. However, there was a large group of people who had no desire to convert into an annuity—59 per cent. of pensioners had no desire to move into an annuity at all, and 12 per cent. said they would do so later. It is not that people are up against a deadline. There is a significant group of people who do not want to convert into an annuity. Another group may wish to do so earlier. It is not for us to tell them.

We have already had one concession from the Government, aimed particularly, as we understand it, at Plymouth Brethren to tackle their ethical objections to annuities as they are currently constructed. If the Government can be flexible for that group, why can they not be flexible for the rest of the population? The Minister needs to address that argument.

Frank Field (Labour, Birkenhead)

Should the Government not be doubly flexible on the matter? Plymouth Brethren lobbied me, as they no doubt lobbied other Members of Parliament. In representing their views, we knew that they would not be voting for any of us. There are large numbers of other people who are affected and who would vote.

David Willetts (Conservative, Havant)

It is perhaps a reflection on the Chancellor of the Exchequer's view of the world that one does not have to be a Plymouth Brother to take advantage of the concession that we are told is for Plymouth Brethren. The concession is potentially rather wider than we were told it was intended to be. Even when the Chancellor makes a concession, he does not want to admit how big it could be. The right hon. Member for Birkenhead (Mr. Field) is right. It could extend way beyond the Plymouth Brethren. As far as I know, the Government have not imposed a religious test before people take advantage of it—yet. Who knows? There are still another 24 hours and the Government may well amend the Bill further. They are only up to 950 amendments so far.

I shall touch briefly on the argument that the amendment would affect only a small number of rich people. The point was made in the other place by the Minister there, as the Minister for Pensions has just reported to the House. The Minister in the other place said:

"We estimate that about 1 per cent. of all annuitants . . . would have an annuity worth more than about £250,000 that would therefore float them into being able to take advantage of this amendment".—[Official Report, House of Lords, 15 November 2004; Vol. 666, c. 1233.]

I wonder whether the Minister remembers our exchanges in oral questions just over a year ago. I invited Deborah Cooper of Mercer's to do a calculation on how much money someone needed to build up a sum of capital to pay them an income that would be sufficient to keep them off means-tested benefits throughout their retirement. The figure that she calculated was £180,000. I put that to the Minister, who said:

"The example presented by the shadow Secretary of State was specific, very long-term and assumed that the couple were not owner-occupiers, which would not be typical of elderly households, so I dispute its usefulness."

He went on to say:

"What the figure might be depends on a wide range of assumptions, but bringing forward a figure that is in denial of owner-occupation, which is the common experience of pensioners, is not at all helpful."—[Official Report, 20 October 2003; Vol. 411, c. 358–9.]

We had an estimate of £180,000, which I thought was pretty high and a reminder of how shockingly extensive means-tested benefits have become. The Minister did not accept the figure of £180,000. The Government are now using an even higher figure of £250,000 to stop any movement on annuities by saying that anybody with a saving of less than £250,000 would not benefit from the amendment.

The Minister cannot have it both ways. He cannot reject £180,000, a figure suggested to him in the Chamber only a year ago, and suddenly say for the purposes of annuity reform that the figure is even higher. I paid great attention to what he just said. He seemed to be willing to endorse a figure of £250,000, which I think is a very high figure. Let us assume for a moment that it is right. After the exchanges on annuities over the past few days in another place, I am tempted to say that, from now on, we know from Ministers that means-testing is so extensive that people need not £180,000, but £250,000 as a sum of capital to keep them off means-testing in their retirement.

Let us assume that the £250,000 that the Minister has just endorsed is the correct figure. He thinks that that tells us we should not reform annuities. I think that it tells us that we need to reform the benefits system. It is not an argument against annuity reform. It is an argument in favour of tackling mass means-testing of pensioners. That is why the policies to which we are committed, and which, in a different form, the Liberal Democrats also believe in, are aimed at reversing the number of pensioners who are on means-tested benefits and ensuring that that very large figure starts to fall. That is the best way of tackling the problem.

Malcolm Wicks (Labour, Croydon North)

I had better not let the hon. Gentleman get away with that. He is obviously limbering up for the debate on hunting. What he says is misleading. I was not implying that £250,000 is what people need to avoid a means test. He knows that I did not suggest that. Perhaps he could pay more attention to the 80 per cent. of British people with pension pots worth less than £30,000. Whatever the merits of his argument, does he concede that he is speaking—as can happen on certain Benches—about a very small privileged group of well-off people?

David Willetts (Conservative, Havant)

I am happy to accept another intervention from the Minister if he has further and better information. We know the size of the individual pot, but we do not know how many pots an individual has. The Minister does not know how much, on average, an individual has. All he is measuring is the size of specific pots. It is perfectly possible for someone to have two or three personal pensions in specific arrangements. Sadly, one of the problems of personal pensions is that they are fragmented. It would therefore be wrong to regard that figure as the total amount of money held, on average, by an individual.

Adrian Flook (Conservative, Taunton)

I may be able to help my hon. Friend. The Minister may not be speaking of the figure of £250,000, but the noble Baroness in another place said precisely that £250,000

"would therefore float them into being able to take advantage of this amendment"—[Official Report, House of Lords, 15 November 2004; Vol. 666, c. 1233.],

so the Government have collective responsibility for the figure of £250,000.

David Willetts (Conservative, Havant)

My hon. Friend is right. The Minister was trying, in his previous intervention, to escape from the figure of £250,000 but it is clear how the figure has been used in both Houses to justify the Government's position.

Edward Garnier (Conservative, Harborough)

Does my hon. Friend accept that the Government's arguments about large pots being required to bring people into a reasonable income have been put to us time after time? I am sure that we heard them in the context of the Bill introduced by my hon. Friend the Member for Bournemouth, West (Sir John Butterfill), and perhaps later in connection with the Bill introduced by my hon. Friend the Member for Taunton (Mr. Flook). One would have thought that, by now, the Government would have provided us with the information from the Treasury or the Department for Work and Pensions, having done the research to find out how many separate pots people had in order to accumulate a sufficiently large pot. Moreover, just because we cannot help everybody, is it the Government's case that we should not help anybody at all?

David Willetts (Conservative, Havant)

My hon. and learned Friend is right. I would have wanted the flexibility that we offer in the amendment that the Government are trying to remove to extend to as many people as possible. That is why, as I was arguing, we believe in reforming the benefits system so that there is less means-testing. As we do that and reverse the spread of means-testing, and as the value of the basic pension increases, fewer and fewer people will be excluded from that flexibility by the requirement. Accepting the amendment introduced in the other place, and even accepting at face value the Minister's argument that people need £250,000 to avoid means-testing, confirms to me that we should be energetic in trying to reverse means-testing.

We shall divide the House if the Minister attempts to reverse the amendments made in another place. I do not regard the concession, if concession it be, that he made about the terms of Adair Turner's report as rising to the strength of feeling that has been shown in both Houses on this very important subject.

Frank Field (Labour, Birkenhead)

May I briefly add three points to the debate, Mr. Deputy Speaker? Although we are debating annuities, we are also debating the nature of government and our belief in it.

First, although my hon. Friend the Minister is right to say that in his view few people in Birkenhead would benefit from the proposal, both he and I might be surprised by the number of people in Birkenhead who would benefit. The Minister and I learn from our constituents, but that is not the only way in which we gain policy ideas. Sometimes we must make policy decisions that do not arise directly from our constituencies, and this is one such case.

Secondly, one of the Labour party's goals is to spread wealth as far as possible, and not to see wealth confiscated. The arguments about the privileges by which people built up their pension pots are difficult, but as the hon. Member for Bournemouth, West (Sir John Butterfill) quickly told us, people who build up other pots of savings are not required to cash them in at the end of the day. Although the proposals may affect only a few people, the Government have deployed the weak argument that the proposals will affect annuity rates, because there will be a rush out of the annuities market, but that there is no need to worry because almost nobody will be affected.

It is a matter of principle: as far as I am concerned, the principle is that we should, at all times, allow people to keep their wealth rather than deciding what is best for that wealth. Way back at the beginning of my political career, I believed that we should have been the party that introduced the sale of council houses, and that was in favour of spreading wealth. Because we did not drive the policy, the funds were not used to replenish the housing stock—we all know what happened because we did not lead that reform. We must learn that lesson and apply it to this particular reform, which is about giving people freedom over their savings.

Thirdly, the Government and the Opposition parties are feeling their way to a new consensus on pensions. Even 10 years ago—certainly 20 years ago—we had extraordinarily high hopes for what the Government could achieve for everybody on pensions, but now our objectives are much more limited. All the Government's energy should be spent on ensuring that everybody is brought up to a minimum pension provision. What people do above that is not our concern, and we should not try to put our sticky fingers into people's private affairs.

In conclusion, first, although some people in Birkenhead would benefit, that is not the only reason why one should vote on the proposals; secondly, the Labour party should be about spreading wealth, not confiscating it; and thirdly, we must think about what the Government can do well and concentrate on that, rather than meddling in affairs that we continually get wrong.

Steve Webb (Liberal Democrat, Northavon)

I normally pride myself on speaking for the poor, marginalised and dispossessed, but occasionally I keep in with the well-off, and this is one such occasion.

I accept that we are discussing relatively small numbers of people and relatively large pension pots, but as the hon. and learned Member for Harborough (Mr. Garnier) said a moment ago, that is no reason why the regime should not be rational and sensible.

The Minister's arguments are woefully thin. The freedom not to annuitise has always been subject to two caveats: first, that one does not then make a claim on means-tested benefits, which is dealt with explicitly in the amendment; and secondly, that the tax take is eventually obtained. The Minister is worried that people will pick up tax relief when they pay in, tax relief on the fund and a tax-free lump sum. However, one does not get a tax-free lump sum until the money is taken out. It is not the case that when someone picks up a tax-free lump sum the taxpayer does not get their share, because people do not get a tax-free lump sum if they do not annuitise. I cannot see the relevance of the tax-free lump sum. On death, a 35 per cent. tax rate applies to uncashed pension pots, so the taxpayer potentially takes a beneficial stake compared with a tax-free lump sum being taken and the rest of the pot being taxed as income. The taxpayer may make a gain, and it is hard to see the potential loss.

If the Minister will not abandon that principle, in the spirit of new Labour, he surely wants to modernise it. In 1976, the age limit at which that provision bites was raised to 75 for particular sorts of pensions. Yesterday, some discussion occurred in the other place about the relationship between that threshold and life expectancies. Undoubtedly unintentionally, Baroness Hollis gave the other place the misleading impression that the life expectancy in years for a man of 65

"is now about 16, so far as we can tell."—[Official Report, House of Lords, 15 November 2004; Vol. 666, c. 1231.]

However, the Turner report states that the figure is 19 years, which is the most up-to-date estimate. That point is significant because, since the age threshold was raised to 75, male life expectancy has risen not by three and a half years, which is the impression that Baroness Hollis gave to the other place last night, but by six and a half years, which makes the case for raising the age threshold from 75 to 80 compelling.

Today, my noble Friend Lord Oakeshott has written to Baroness Hollis asking her to correct the record, and I hope that she will do so. The substantive point is that freezing the threshold at 75, which the Government want to do, will make the provision bite more and more. When the threshold was first introduced, a good number of men would not have made it to 75. With substantially enhanced life expectancies, more and more people are being covered by the annuity rule.

A moment ago, the Government hinted that next summer, after the election, they might think about the threshold. Surely the electorate deserve better than that—they deserve to know the Government's plans. The amendment does not change any of the arguments of principle. I agree that the restriction is not necessary in principle, and if the framers of the legislation and its amenders in 1976 intended the provision to apply to a particular proportion of the retired population, keeping that threshold up to date with changes in life expectancy would not even undermine the Government's principle.

I know that several other hon. Members have, like me, pursued the issue over a number of years, and I am sure that the House would like to hear from them. However, I share the view taken by my noble Friends that the annuity rule is altogether unnecessary. At the very least, I ask the Government to reflect on whether raising the threshold might go a good way to addressing some of the concerns that have been expressed.

John Butterfill (Conservative, Bournemouth West)

I agree with everything that the hon. Member for Northavon (Mr. Webb) just said—he made some extremely valuable points.

In some cases, it would be in the Exchequer's interest to agree to the relaxation. When I introduced my private Member's Bill, I received many letters from all over the country. One chap wrote to me a few months before his 75th birthday. He did not have a wife—he had no dependants at all. He had built up a substantial pension pot over the years and was required to buy an annuity with it. Had he died before his 75th birthday, the Exchequer would have received a significant chunk of his pension pot, but because he had to convert it into an annuity, the Exchequer got a bit of the 25 per cent. that was left, and all the rest of it went to the insurance company that sold him the annuity. As far as the Exchequer is concerned, requiring people with a short life expectancy to convert at 75 is absolute madness, and the Chancellor would be far better off letting such people carry on with their arrangements.

Such an approach would also benefit some people with small pension pots. For example, somebody with a small pension pot who has a wife and family and who knows that he is suffering from a terminal illness may find that annuitising works to his disadvantage, particularly if he has a policy with a guaranteed annuity rate, which he will lose unless he converts. However, if he converts, just over half of his pot will go to his wife—if they bought a joint policy at a reduced rate. Somebody in that position may be able to leave more to a spouse by not annuitising and hoping that he will live long enough to reach the relevant age.

The figure of £30,000 or £40,000 that the Government give is a complete myth, because most people have other savings beyond that. Probably the largest element will be their house, from which they may already derive an income through a home income plan. They may have all sorts of other savings that they have accumulated through personal equity plans, tax-exempt special savings accounts and other vehicles. Yet the Government clearly have no idea, because if one asks them what the average level of total savings for any individual is, they have no statistics on which to give a reply.

It is completely wrong to say that this will apply only to very rich people and not to those with only modest pension funds. In the course of modern life today, many people have been through several careers. At some point, they may have been self-employed and paid into a pension fund, while at other times they may have been employed and the beneficiary of a company pension scheme. They may have had small businesses that they have sold and invested the funds in other ways. People have retirement income from all kinds of sources. It is demonstrably wrong to say that this will affect only the very rich, not those with modest pension pots, and completely unreasonable for the state to tell somebody that, when they reach a certain age, 75 per cent. of their savings must be invested in an annuity at a time when annuity rates are at an all-time low and almost any other form of saving will give them a higher return.

Another person who wrote to me was, like me, a chartered surveyor. Being a shrewd chartered surveyor, he had invested cautiously but successfully in commercial property through a self-administered scheme. As a result of his expertise, his fund had built to a very substantial sum and was showing a return of 20 per cent. on the money that he had put in. He told me: "At age 75 I'm going to have to sell this property on which I'm getting a 20 per cent. yield and put that same lump of money into something yielding me about 5 or 6 per cent." Is not that potty? I rest my case.

Edward Garnier (Conservative, Harborough)

The example of the chartered surveyor cited by my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) exemplifies the silliness of the Government's antipathy towards the amendment tabled by my noble Friend in the other place, which has two advantages: first, it is written in simple English that anybody could understand; and secondly, it would work. The Government's argument that it would benefit only a very small number of very well-off people is designed to terrorise Labour Back Benchers—other than the right hon. Member for Birkenhead (Mr. Field) and the hon. Member for Crewe and Nantwich (Mrs. Dunwoody), who are completely impervious to terror—to dissuade them from supporting it. The Government think that if they can persuade their supporters that this is rich man's racket, they will agree that it must be a jolly good thing to knock it down. I suspect that neither the former Financial Secretary to the Treasury, the hon. Member for Bolton, West (Ruth Kelly), nor the Economic Secretary to the Treasury, the hon. Member for Wentworth (John Healey), who argued against my private Member's Bill from the Front Bench, nor anyone else who has thought about this for more than a moment, could possibly argue against the common sense and good sense of my noble Friend's amendment.

The right hon. Member for Birkenhead is entirely right to identify the main principle and the growing consensus across the Floor of this House with regard to the pensions question. The amendment would provide grown-ups with choice and, as along as they maintained a level of income that did not allow them to resort to means-tested benefits, nobody would lose. The problem is that the Chancellor of the Exchequer does not like any idea that is not his own. The reason why the Department for Work and Pensions, which he no doubt thinks is subordinate to his Department, is having to advance a particular argument is that the dead hand of the Treasury is forcing it to take that line.

Frank Field (Labour, Birkenhead)

I have noticed that my hon. Friend the Minister, who knows his brief as well as anyone, agrees with an argument, hardly ever looks at his notes, but when he knows that he has to deliver a script he reads them closely.

Edward Garnier (Conservative, Harborough)

Interestingly, when the right hon. Gentleman intervened on the Minister earlier, the Minister asked to be allowed to finish his script. I do not know who writes the Minister's script, but he certainly read it extremely well.

Malcolm Wicks (Labour, Croydon North)

My analyst will of course write to my right hon. Friend the Member for Birkenhead about that perverse observation.

Edward Garnier (Conservative, Harborough)

I hope that when he has done so the Minister will keep taking the pills.

I want the public to be given a choice that enables them to make provision for their own old age. If they want to choose an annuity, let them do it. If they want to buy equities, let them do it. If, like the chartered surveyor who contacted my hon. Friend the Member for Bournemouth, West, they want to buy a portfolio of properties, let them do it. The amendment, like my Retirement Income Reform Bill, has the advantage of being gender-neutral and would provide an answer—if not a complete one—to the growing deficiency in the savings ratio that we have experienced over the past few years.

The Government have a perverse order of priorities. When my Bill achieved its Second Reading by 101 votes, the Government put up a Back-Bench Member, the hon. Member for Hendon (Mr. Dismore), who spoke for about an hour and a half—it seemed longer—to try to talk it out. He failed. Yet when a Conservative Front Bencher in the other place tables a short, understandable and sensible amendment, and we are permitted to discuss it here, the debate is truncated by Government diktat. The Government must sort out their intellectual approach to such issues, quite apart from the way in which they manage the business of this House.

Adrian Flook (Conservative, Taunton)

The private Members' Bills promoted by my hon. and learned Friend the Member for Harborough (Mr. Garnier) and my hon. Friend the Member for Bournemouth, West (Sir John Butterfill) were very much along the lines of a Bill that I promoted, and another similar Bill was promoted by my right hon. Friend the Member for Skipton and Ripon (Mr. Curry). All four Bills were perfectly formed around the idea of removing the annuity age barrier of 75 and introducing a minimum income guarantee. The Government dismissed that suggestion out of hand in the course of several debates. I was therefore pleased to see how neatly my noble Friend Lord Higgins incorporated our private Members' Bills into his amendment in a specific, one-sentence clause.

The removal of the age barrier of 75 receives cross-party support from everywhere bar the Government. For that we have to thank the Retirement Income Reform Campaign under the leadership of Dr. Oonagh McDonald, a former Labour Member of Parliament. Whenever we debate this principle, we are inundated by letters from pensioners and those looking towards their retirement who are extremely worried about being compelled to take an annuity. The Minister suggested that only a small number of people are concerned, but there is great demand for such legislation. It is therefore extremely comforting that the Lords voted by a considerable margin for an amendment that would give effect to the private Members' Bills that have been introduced three or four times in this House.

The Minister said that there is not much demand for these provisions, but Lord Higgins pointed out in the other place that 58.8 per cent. of people asked in a survey never wanted to annuitise their pension pots, with 12.1 per cent. wanting to do so later than required at present. That amounts to quite a substantial 70 per cent. who do not agree with the way in which the Bill is formulated. As several of my hon. Friends have pointed out, the Bill does not address the problem, which will only worsen. A number of large blue-chip companies in this country have defined-benefit schemes that can only be described as dying. More are looking to move out of a defined-benefit scheme and into a defined-contribution scheme. If we do not deal with the problem of annuities, their unfairness and the age barrier, the position will get worse.

As a Conservative, I do not believe in compulsion. I believe that the current position does not work at all. As we have heard, it forces pensioners to annuitise three-quarters of their pension at the age of 75, which is old-fashioned and anachronistic. It is not followed anywhere else in the world and I cannot see that the singular benefits of the British system provide any reason to continue it.

The other problem with the current system is that it sets up an unbreakable contract for the remainder of the life of the annuitant. As we heard so eloquently from my hon. Friend the Member for Bournemouth, West, there is usually only a single provider. The Minister, who I am sure wants to spread the risk, must acknowledge that relying on one insurer, such as Equitable Life—we have seen what has happened there over the past few years—promotes and imposes a moral hazard on pensioners. The Bill thus appears entirely arbitrary, given that the same size pension fund can buy widely varying incomes, depending—this is the key point—only on the date of purchase.

The current position also introduces sex discrimination into retirement income. As the Minister knows, annuitants are forced to take the price that is offered to them, which unfairly varies from male to female. It does not happen with the state pension or with defined-benefit pensions such as those that MPs and civil servants enjoy. It is particularly unfair that women are being discriminated against as a result of the Government's refusal to act.

There is a further problem with the current system, which the Lords amendment is designed to address. Occupationally defined contribution schemes are limited by their index linking—sometimes at about only 3 per cent.—which poses the risk of inflation. When it comes to inflation, even the Chancellor cannot determine that he has completely rid us of boom and bust.

The virtue of the scheme proposed by the Lords is, as my hon. Friend the Member for Bournemouth, West explained, that it protects the interest of the state while providing much greater freedom. It provides the state with more revenue, as the pension funds remain invested in a range of financial instruments, allowing them to grow. They can then be taxed, as and when. In other countries such as Canada, there is no obligation and retirees can choose to put their pension funds into a retirement income fund managed on their behalf, over which they have control. If it is good enough for Canada, it should be good enough for pensioners in Britain. This is a principled and practical amendment that the House should support.

Malcolm Wicks (Labour, Croydon North)

We have had an interesting debate and a rehearsal of the issues, many of which are familiar to the House. I am feeling quite nervous because my right hon. Friend the Member for Birkenhead (Mr. Field) implied that it is only when I look up that I agree, and that when I am reading I do not. May I say for the record that I agree with every inch of Government policy? That is what it says here in my brief anyway.

I cannot add a great deal to what has been said already. For the record, I note that the hon. Member for Northavon (Mr. Webb) made a demographic point about different estimates of longevity. Perhaps he will receive a written reply, but I understand that the difference relates to different measures of life expectancy. My noble Friend in the other place used one measure and Lord Oakeshott used another. I am advised that, on a standardised basis, the difference is about one year, so there is not that much to get excited about, even though the hon. Gentleman did appear to get excited about it.

David Willetts (Conservative, Havant)

The wider point is whether there could be a better compromise than the tiny concession made on the Turner commission. It would mean the Minister accepting that, if he wants to retain an age rule, it need not be 75. It could, for example, be 80. Is there no flexibility whatsoever? The inflexibility is what causes frustration among Opposition Members.

Malcolm Wicks (Labour, Croydon North)

Let me come back to that point, but I want to deal with another issue mentioned by my right hon. Friend the Member for Birkenhead. He said as a matter of philosophy—I rather agree with him—that where the state has no direct interest, it should not interfere, but we are not talking about savings that have been built up with no impact from the state. I am sure that we would all agree that we are dealing with a tax-privileged situation for those who are building up pension funds. The purpose is that people have a guaranteed income in old age. That is the state's interest in putting tax resources into pensions generally. In that sense, we are not talking about free decisions in a free society.

Frank Field (Labour, Birkenhead)

Provided people do not go back on to welfare, that part of the bargain has been fulfilled.

Malcolm Wicks (Labour, Croydon North)

Yes, but it was not a bargain to use the money in any old way: it was a bargain to produce an annuity for old age. That is the matter for debate.

I want to sum up now because we have covered all the issues; my opening statement anticipated most of them. I repeat that once the Pensions Commission has reported on a range of issues, the Government will want to engage with it again, including annuitisation at the age of 75, about which the hon. Member for Havant (Mr. Willetts) asked. I have already said that we will look further into that with particular care and particular urgency. We will then decide whether the proposals remain fit for purpose. That is as far as we can go on this matter today. This financial matter is one of privilege for the House of Commons and it would be altogether wrong, off the back of a Pensions Bill, to deal with other matters that are not directly concerned with annuitisation with a view to launching a major reform. In our judgment, that would not be appropriate.

Edward Garnier (Conservative, Harborough)

This whole issue has been discussed for some years. It is not new, but the Government always come back to the House, claiming that they are considering the matter and will do this, that and the other. It is rather like pulling teeth. Is there no energy in the Government, whether in the Department for Work and Pensions or the Treasury, to encourage Ministers, special advisers and civil servants to get to grips with the impoverishment of elderly people through the forced annuity? Why do the Government not do something about it? They should do it before the election; if they did, they might even just win it.

Malcolm Wicks (Labour, Croydon North)

There is just a chance that we might win it anyway, but we will have to wait to see. I cannot add any more. The hon. and learned Gentleman has made his points forcefully and I have made mine.

Steve Webb (Liberal Democrat, Northavon)

I know that the Minister would like to clarify a point that he made about the figure of 250,000 people. He implied that he was being misrepresented and that that was not the right number of people who would be clear of means-tested benefits. In that context, will he tell us what is the question to which 250,000 is the answer?

Chris Pond (Labour, Gravesham)

The question might be, is 250,000 another way of saying a quarter of a million?

Malcolm Wicks (Labour, Croydon North)

Yes. The point is that we are talking about a quarter of a million people who are way above means-tested levels. I recognise that there is a gap in evidence about the accumulation of different pension funds but, as I said, 80 per cent. of people have very tiny pension pots. It would require some very clever arithmetic to show that large numbers of people could be placed in the relatively rich category that we have been discussing.

I accept that we need to consider this matter, and we will do so in due course. With that, I hope that the House will decline to accept the view of the House of Lords on this matter.

John Butterfill (Conservative, Bournemouth West)

On a point of order, Mr. Deputy Speaker. It will not have escaped your attention that we have been dealing this afternoon with 97 pages of Lords amendments, which occupied their Lordships for more than 90 hours of debate. This House has been given four hours to debate what the Lords took 90 hours to debate. This subject is of vital importance to citizens all over this country, but debate will be curtailed simply so that the Government can get in their wretched Hunting Bill, which more than 56 per cent. of the population do not want anyway. Is not that an abuse of this House?

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The hon. Gentleman is an experienced Member of Parliament and he knows that that is not a matter for the Chair. We are also now taking away from what time we have for the next debate.

Clause 274 — Financial assistance scheme for members of certain pension schemes

Chris Pond (Labour, Gravesham)

I beg to move, That this House disagrees with the Lords in the said amendment.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

With this we may discuss Government amendment (a) in lieu, thereof

Chris Pond (Labour, Gravesham)

I am sure that if the hon. Member for Bournemouth, West (Sir John Butterfill) had had the opportunity to hear my arguments on the last group of amendments, he would not have felt it necessary to vote against them and use up still more time.

In the other place, clause 287 was amended on the subject of the funding of the financial assistance scheme. Lords amendment No. 416 requires that the FAS is paid for entirely from public funds and not in part or in full by way of a charge, levy or contribution from the private sector. I accept the spirit of the amendment, to the extent that imposing any sort of compulsory charge, levy or contribution on the private sector does not figure in our plans for the FAS. Indeed, my noble Friend offered repeated assurances in the other place that we will not impose such charges. That is just as well, because we do not have powers to do so under clause 287.

The amendment made in the other place has, however, a second and much more unwelcome effect. By prescribing that the FAS should be a scheme for making payments entirely from public funds, the amendment disables the FAS from receiving voluntary donations from the private sector. Because the FAS will increase confidence in pensions and will benefit the industry as a whole, we feel that it is right to keep open the option of obtaining voluntary financial contributions from the private sector. We are most grateful for the valuable assistance in kind offered by the pensions industry to date, both in sharing its expertise through the FAS industry working group and in supporting the data collection exercises that enhance our understanding of the problems that the FAS must address. We maintain a firm hope that the industry will further support the Government's leadership in assisting the individuals and we believe that it has a strong interest in doing so.

Nigel Waterson (Conservative, Eastbourne)

So far, has any company, industrial organisation or other body or individual indicated in any shape or form that they are remotely intent on making any voluntary contributions to the fund?

Chris Pond (Labour, Gravesham)

The hon. Gentleman knew the answer to that question before he decided to put it on the record. My point is that we should leave open the possibility that we might receive contributions from the private sector, because it will have a strong interest in providing them. As it stands, the Bill would shut the door in the face of anyone outside the Government who is willing to support our commitment to help the victims of pension wind-ups. That will ultimately reduce the potential level of financial assistance made available to those individuals, which none of us wants—although, sadly, we have seen attempts to vote out many aspects of the Bill, which could put that at risk.

I urge Members to disagree with the Lords in their amendment and to support our substitute amendment, which makes it explicit that regulations under clause 287 may not impose a levy or charge on anybody for the funding of the FAS. It does not, however, rule out voluntary contributions to the fund. I hope that Members will support that approach.

Nigel Waterson (Conservative, Eastbourne)

Although I am not sure that the word "concession" passed the Minister's lips, this is in fact another concession from the Government, for which we are grateful. I do not anticipate a Division, because we accept the Minister's comments on the drafting and technical points, and that his version may be an improvement on that proposed by the Lords.

The background to the concession is important, however. We all know that a situation had developed in which it became clear that more than 60,000 people had lost all, or a large proportion, of their pension rights and there was a mounting cross-party campaign on the issue. The Government were faced with a dilemma. They had set their face against doing anything more, but it looked increasingly as though they would be defeated in the House by a combination of the Opposition parties and Government Back-Bench rebels. So they probably panicked, but then, at the last minute, they cobbled together the so-called financial assistance scheme and produced the magic figure of £400 million.

Many people have tried to find some justification for that figure and the basis on which it was arrived at. We have yet to find the envelope on the back of which it was sketched out, but it is perfectly clear that it was the amount that the Treasury was prepared to make available. As the then Secretary of State said:

"The Government will therefore make available £400 million of public money . . . with the possibility of further contributions from industry."—[Official Report, 14 May 2004; Vol. 421, c. 32WS.]

A few days later, the Minister for Pensions said:

"It is open to industry to offer further support. We hope that that support will be forthcoming."—[Official Report, 19 May 2004; Vol. 421, c. 983.]

The Minister who has just opened this debate was not entirely clear in his answer to my intervention, but I think we can take it that from that day to this no one—but no one—in industry has come forward to say that they might even consider making any kind of offer to top up the £400 million, exactly as we predicted at the time. That particular fig leaf has, sadly, been torn away from the Minister—[Interruption.] I do not want to go too far down that road; it is nearly dinnertime.

Following that announcement in the middle of May, the whole credibility of the FAS has been systematically crumbling, partly due, it must be said, to friendly fire from the Government. There has been a series of leaked announcements about the people and situations that will not be covered by the FAS. We have seen a consistent retreat from the package. I can understand why Ministers might want to do that; it was clear from the start that the sum was woefully inadequate to meet the needs, especially in the cases put forward genuinely and often with passion by Back-Bench Labour Members representing their constituents.

It has been indicated that solvent wind-ups will not be included in the package, even though it is impossible to make out the moral distinction between workers who have lost everything due to a solvent wind-up and those who have lost due to an insolvent wind-up. There is also the so-called gap year. Ministers or officials let it be known that, because they had changed the priority order, there was to be a period between May 2004 and April 2005—when the PPF is supposed to come into force and open its doors; at the present rate, the queue will stretch round the building—during which people would not be covered by the FAS.

That position was clearly unsustainable so the Department found another wheeze: to throw some of the liabilities forward into the PPF itself. The crucial thing we have to remember about the amendment is that, basically, it is recognising the inevitable: there is no way that industry will make contributions. Although we must let Ministers retain a certain amount of dignity, no one ever seriously expected them to impose a further levy, on top of all the other imposts they are intending to make on good, well-run companies and pension schemes, but they had that forlorn hope that people would be queuing up to give them the money. It is clear that that will not happen.

All sorts of things have happened to the Bill, bits have fallen off and new bits have been added, but one of the few wholly consistent themes running run through it from start to finish—like the word Blackpool through a stick of rock—has been that the PPF will not be retrospective. In fairness, the official Opposition and, I think, the Liberal Democrats, too, have always accepted that principle. The analogy, much overworked in various debates, is that one cannot insure one's house against fire after it has already burned down. Members on both sides of the House have accepted that the PPF, funded by the levy—going forward, in a phrase that the Minister has used more than once—cannot consider settling claims that have arisen by the date that it opens its doors; yet the other day, very quietly, under the cover of departmental questions, in which the matter received no mention at all, under the cover of a debate in the Lords on these very issues, in which it received no mention at all, not even as a footnote, the Minister put out a short statement, indicating that—surprise, surprise—some schemes that got into difficulties during the so-called gap year could fall within the PPF's responsibilities.

Since then, attempts to explain that statement have taken two separate directions. The Minister in the Lords, Baroness Hollis, made the point that there had been considerable media interest in the Minister's statement and said that she wanted to reassure the House. She continued:

"The Statement made on Monday simply confirmed how existing provisions in the Bill would apply . . . The position has not changed . . . the PPF has not, and cannot, become 'retrospective'."—[Official Report, House of Lords, 15 November 2004; Vol. 666, c. 1212.]

That seems fairly clear. However, on the day that the announcement was made, it became clear that, as is their wont, the Government had spun it to the newspapers. The spin put on it by a Government spokesman was that this was good news—the Minister used that very phrase in an earlier debate this afternoon. Indeed, it was good news, especially in the context of the Turner and Newell pension scheme.

I know about the Minister's reluctance to talk about that scheme; that is perfectly understandable and we wish it well. We all hope that its difficulties will be resolved in due course. The way things were put, however, meant that people in that position—perhaps I can stop referring to that particular scheme, and instead refer to "those in that position"—[Interruption.] The Turner and Newell scheme is a useful reference point, not least because it involves some 40,000 people and a shortfall of nearly £900 million on paper, so it is not exactly insignificant, but my point is that there must be a series of much smaller schemes that are in the same kind of no man's land, or what was no man's land until the Minister's statement clarifying the position. The indication is that the position has changed for people in that unfortunate situation. So which is right—the version in the Lords, that the statement changes nothing, or the version from the Minister of State to the effect that it does make a change, and it is good news because it is helping people in such a position?

I hope that when the Minister responds he will take the trouble to explain—I have tabled a parliamentary question on this subject because I think that it is sufficiently important—what estimate the Department made, before it issued that statement, of any extra liabilities that were likely to fall on the PPF as a result of that statement, or clarification if they prefer to describe it as such. That is an important question, to which the House deserves an answer.

What is at issue actually goes further than that, because it is suggested that we have had a tacit acceptance by Ministers that the £400 million fund is inadequate for the purpose, and hence this attempt, as I have said, to throw forward liabilities on to the PPF, completely contrary to the entire philosophy underpinning the Bill.

Many Members of the House will be familiar with the work of Dr. Ros Altmann, who has done sterling work over a long period in trying to help the now 65,000 or more people who have lost their pension rights through no fault of their own. She has done some number crunching, which actually does not tell us anything very new because I do not think that anyone, except possibly Ministers, actually believes that £400 million is remotely enough to compensate those people. Indeed, the Secretary of State admitted as much the other day in questions when he made a very clear distinction between assistance and compensation. One thing is very clear: there will be a large gulf between the benefits that people will receive under the PPF and the assistance that they might receive under the FAS. Let no one be in any doubt about that.

Vera Baird (Labour, Redcar)

I am waiting with bated breath to hear what sum of money the Conservatives will put into the FAS to rectify the faults that he is now picking on.

Nigel Waterson (Conservative, Eastbourne)

I have never known what bated means, but I hope it is not painful. If the hon. and learned Lady will bate her breath just a little bit longer, I will come back to the point that she very reasonably raised.

I return to the point that I was discussing. Dr. Ros Altmann has done some figures, and on her calculations, the £20 million a year that the Government are proposing to put into the FAS would buy a pension of £6,000 a year for 130 people. Compare that to 65,000 people who we know for sure have lost a large proportion or all of their pension rights. And for many people, £6,000 does not begin to compensate for what they have already lost. Let me repeat: on Dr. Altmann's calculations, 130 people might be assisted.

I think, in fairness—I am not trying to pre-empt something that the Minister may want to say—one must add to that any remaining assets of those funds that would be carried into the FAS, in the same way as I assume they would be carried through into the PPF when that is up and running, but by definition those assets are inadequate for the purpose of paying pensions and buying annuities under the current system.

Is it not strange that before the announcement of 14 May, the mantra we consistently heard, over and over again from Ministers, whether in Opposition day debates or departmental questions, was that they did not want to raise false hopes? I am afraid that the charge now is that on 14 May they did precisely that; they raised false hopes by cruelly making a lot of people think that they were going to be compensated for the pension they had lost.

I think it is somewhere in Sherlock Holmes that there is talk about the dog that did not bark, but I think this is more a question of the dog that stopped barking, by which I mean those Labour Back Benchers who have been so persistent and vociferous in pursuing the interests of their constituents who have lost their pension rights. They have largely, if not entirely, fallen silent. These are intelligent Members of Parliament, who, I hope, display a cynical disbelief in what most Governments have to say, so it cannot be, I trust, that they believe that the £400 million will be enough.

John Butterfill (Conservative, Bournemouth West)

While my hon. Friend is talking about cynical disbelief, may I point out to him that the effect of the Government amendment to the Lords amendment is that it does not rule out private contributions as long as they are voluntary, but of course there are various ways of ensuring that one might get voluntary contributions, such as a great deal of arm twisting? Has it occurred to my hon. Friend, for example, that it might be rumoured that the Government were thinking about new tax changes that would affect the industry, but of course if members of the industry were to make voluntary contributions, that might become unnecessary? Should we not therefore reconsider whether we support the Government amendment?

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend makes a very good point. There are sectors where the Government might have more leverage, such as the defence sector or any sector where the Government are the customer. Computer procurement and IT might be another area.

Michael Fallon (Conservative, Sevenoaks)

There is another example in this very sector, and that is of course the banks. They were asked whether they would contribute to the costs of the universal bank that the Government were setting up through the Post Office and the Department of Trade and Industry. When the Minister uses the phrase "obtain a voluntary donation", that is exactly what happened; the banks were strong-armed into making that donation. I would not be at all as sanguine as my hon. Friend is about the effect of Government amendment (a). I hope that he will start opposing it soon.

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend makes another very good point. All I can say is that, so far, the arm twisting has clearly failed to produce any results.

I was just touching on the fact that all the noise and fury we heard from Labour Back Benchers stopped, in effect, on 14 May and we have heard very little from any of them since. It cannot be because they believe that the £400 million is adequate, but could it be that, with an election looming, they realise that it is not in their interests to rock the boat? Is that the real purpose of the £400 million and the announcement of the FAS on 14 May?

I return to the point raised by the hon. and learned Member for Redcar (Vera Baird). She knows what I am going to say, but let me say it anyway. We do not believe in using yet more taxpayers' money to make the FAS workable. We have long borrowed the proposal, originally made by the right hon. Member for Birkenhead (Mr. Field), to use unclaimed assets. Despite the Secretary of State's round abuse of that idea—put forward by his own Chancellor—until relatively recently the mantra of the Treasury was that just because assets are unclaimed does not mean that they do not belong to somebody. Then suddenly, in the small print of the last Budget, we saw that unclaimed assets were suddenly available but for a different purpose. My understanding, having met the British Bankers Association among others, is that those proposals are continuing and are going forward, and we expect, because I was told so in a reply to a question the other day, that we shall have an update on that policy in the pre-Budget report.

A respected body—the Unclaimed Assets Register—stands by its estimate that there are £15 billion of unclaimed assets in this country, and it is estimated that some £3 billion of pensions remain unpaid every year. The Government trouser vast sums in unclaimed gilts and national savings; they simply put that money in their own pocket because no one has claimed it. So a variety of different pots of unclaimed assets are available. In Ireland, such assets are disposed of for charitable purposes.

There must be proper safeguards—I shall not discuss them in detail today, although I hope that we will hear more about them when the Chancellor reports on his own pet project for unclaimed assets—but when the next Conservative Government take office, possibly in May next year, I hope that we will find a new, finely honed, glossy fund, produced under this Government, for claiming unclaimed assets and putting them to good use, and one of the good uses to which we intend to put them is providing compensation over and above the existing £400 million to the people who have lost their pension rights.

Bill Tynan (Labour, Hamilton South)

In the unlikely event that you are in government come next May, what payment would you take from—

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

Order. The hon. Gentleman must use the correct parliamentary terms. I think it most unlikely that I will be in government next May, whatever happens.

Nigel Waterson (Conservative, Eastbourne)

We would have to look at that at the time. Let me finish the paragraph if not the sentence. We still have not got from the Government the details of how their scheme will work. What is the level of benefit? How will it be paid? Who will be excluded and who will be included? The one thing that will certainly not happen this side of next April, at the earliest, is that anyone will see any money. Again, that seems extraordinarily convenient.

Vera Baird (Labour, Redcar)

Is the hon. Gentleman saying that the Tories would not put a penny of the Government's money—the taxpayer's money—or anyone's money, apart from the unclaimed assets about which there is strong argument, into trying to save all the 65,000 people who have lost their pensions? Is he making it clear that the Tories would not give them a penny piece?

Nigel Waterson (Conservative, Eastbourne)

Let us be clear on two issues. First, the £400 million is already part of the public expenditure figures. We would take that over, and I am talking about topping it up to a realistic figure by the use of unclaimed assets. Secondly, the only argument about unclaimed assets is going on within the Government between the Chancellor and the Secretary of State for Work and Pensions, who has expressed tremendous independence and freedom of thought since he took over, but I am sure that people in the Department will eventually beat that out of him. They are the ones who are arguing, not us—we have said all along that those assets are available. The only argument is between the Treasury and the Department for Work and Pensions.

We accept—I do not want to seem entirely churlish—that the Government have made a concession. They have had to recognise the wisdom of the Opposition's arguments. We also accept, as I said at the start, what the Minister says about the drafting and technical issues on these amendments.

Steve Webb (Liberal Democrat, Northavon)

The purpose of Lords amendment No. 416 was to ensure that private funds were not required to top up the inadequate sums in the financial assistance scheme, and I am perfectly happy to accept the principle that Government amendment (a) will do so rather more effectively than the Lords amendment. In the unlikely event that such a contribution was freely given—I understand the comments made by the hon. Member for Bournemouth, West (Sir John Butterfill)—it would be slightly absurd if statute prevented that money from being accepted into the financial assistance scheme, so the change is sensible.

The very fact that the Government said that private contributions might be part of the package proves that £400 million was not enough. If £400 million were enough, extra money would not be needed from the private sector to make it up to a decent level. Indeed, that money would be turned away as excessive and unnecessary—so the £400 million is inadequate.

There has been an important development this afternoon with regard to the prospects of the people who will come under the financial assistance scheme getting justice. The parliamentary ombudsman announced this afternoon that she will investigate the alleged maladministration of several Departments, including the Department for Work and Pensions, leading to the loss of those workers getting a fair deal. I wrote to the ombudsman last May to ask whether, in principle, she would investigate. I met her, together with Dr. Ros Altmann, who was mentioned by the hon. Member for Eastbourne (Mr. Waterson), and members of a pensioners action group in July. I and other Members, including the hon. Gentleman, have made submissions to the ombudsman. I am delighted that she has confirmed that she will investigate, because that seems increasingly likely to be the only way that the workers covered by the financial assistance scheme will get justice.

The Minister for Pensions, speaking at the weekend, appeared to be rather surprised that the private sector had not come up with some cash to top up that inadequate fund. We need to understand just how inadequate that £400 million is. It inevitably sounds like a lot when added up over 20 years. If my overdraft was added up over 20 years, it would look even more terrifying. We are talking about £20 million each year. In the context of a departmental budget of £100 billion a year, the Government are putting in 0.02 per cent. of the Department's budget. That is clearly not enough. When the scheme was proposed, the figure of £400 million was presumably based on the assumption that schemes that went to the wall in the infamous gap year would not be covered. Assuming that the scheme was not adequate on that basis, it is clearly even more inadequate now.

The key point with regard to Government amendment (a) is that, even if the sums were to come from the private sector, they are likely to be extraordinarily limited in scope. Even if the private sector were to become extraordinarily generous, it will not begin to touch the millions of pounds of underfunding. The best estimates are that £20 million a year over 20 years should have been perhaps £75 million a year over 40 years. The idea that the private sector might come up with £50 million every year for 40 years to bail out an underfunded scheme seems wholly implausible.

Although we shall reach the end of our consideration of these amendments to the Bill in a few moments, we shall still end up in a wholly unsatisfactory situation, with a huge hole in the financial assistance scheme. Government amendment (a) will allow the possibility of the private sector bailing the Government out, but no one seriously expects contributions of anything like the necessary level and the people who will lose out are those workers who trusted Governments of successive parties, who believed that their company pensions were safe and who have been cruelly let down. I am afraid that the financial assistance scheme is wholly inadequate to deal with that problem.

Michael Fallon (Conservative, Sevenoaks)

I agree with the hon. Member for Northavon (Mr. Webb) on one point: £400 million will certainly not be adequate. It was always a fairly suspicious figure—suspiciously divisible by 20. That is the real explanation. The figure will not be enough, but I caution my hon. Friend the Member for Eastbourne (Mr. Waterson) on thinking that it can be simply topped up from unclaimed assets. If he has talked to the banks and the British Bankers Association, he will know that the pot of gold of unclaimed assets may not be quite so large as he thinks. Those assets are certainly very difficult to define in statute. I am not at all sure that the Conservative party should be in the business of expropriation, but that is for my hon. Friend to justify in the necessary legislation.

I was broadly in favour of Government amendment (a) until the Minister was honest enough to explain it. Until he made it absolutely clear that not making provision for any levy or charge left open the opportunity of obtaining voluntary donations, I was on his side, but it is now clear what will happen. Those in the pensions industry will be told that extra taxes and regulations will laid on them, unless they feel obliged to make those voluntary donations. The phrase "obtain voluntary donations" is sufficiently chilling for us to encourage my hon. Friend the Member for Eastbourne, who speaks from the Opposition Front Bench, to oppose that amendment.

John Butterfill (Conservative, Bournemouth West)

When the programme of assistance was first announced, the Government said that they would get voluntary funding from the industry and, at that time, I asked what was meant by "the industry". If it means other insurance companies that may handle the pensions of individuals, such funding can be obtained only to the detriment of those who save with the people providing their personal pensions. If it means the companies that are paying for final salary schemes for their employees, such funding could be obtained only to the detriment of those companies and their employees. If the Minister means the trustees of existing pensions funds, they would be in breach of their fiduciary duty if they made contributions.

The only reason why the Government have changed the wording inserted by the Lords is so that they can engage in the arm-twisting that my hon. Friend the Member for Sevenoaks (Mr. Fallon) has just described. It is entirely likely that that will happen. That has happened on many occasions in different instances, and we will be deluding ourselves if we do not believe that it will happen now. I urge my hon. Friend the Member for Eastbourne (Mr. Waterson) to reconsider his opinion. I, for one, will be voting against amendment (a).

Chris Pond (Labour, Gravesham)

The House and the thousands of people looking to the financial assistance scheme and the PPF to assist them in what is a real tragedy for many of them will see through the position taken by the hon. Member for Eastbourne (Mr. Waterson). The House will remember that he voted to decline to give a Second Reading to a Bill that establishes the PPF. He now tells us that the financial assistance scheme is, in his words, "woefully inadequate", but he would not he tell us how much he would put into the scheme and he would not allow us to obtain contributions from the private sector. It is clear that the position that he has taken throughout is to talk down the PPF and to talk down the extra protection in the Bill. Now, he is talking down the financial assistance scheme, to which thousands of people are looking to help them out of the tragedy that they face.

Lords amendment disagreed to.

Motion made, and Question put, That amendment (a) in lieu of Lords amendment No. 416 be made.— [Mr. Pond.]

Michael Martin (Speaker, Glasgow Springburn)

I think the Ayes have it.

John Butterfill (Conservative, Bournemouth West)

No.

Michael Martin (Speaker, Glasgow Springburn)

What does the hon. Gentleman wish to do?

John Butterfill (Conservative, Bournemouth West)

I want to vote against Government amendment (a).

Michael Martin (Speaker, Glasgow Springburn)

I shall put the Question again.

Government amendment (a) in lieu of Lords amendment No. 416 agreed to.

Lords amendment No. 417 disagreed to.

Government amendment (a) in lieu of Lords amendment No. 417 agreed to.

Remaining Lords amendments agreed to [some with Special Entry].