Pensions Bill

Public Bill Committee, 5 February 2008.

Nicholas Winterton (Conservative, Macclesfield)

I welcome hon. Members on both sides of the Committee to our thirteenth sitting and hope that they had a relaxing weekend. My wife and I had planned a restful weekend, but it turned out to be not quite as restful as we had hoped. None the less, I am here full of vim and vigour to ensure that we continue to make good progress on this important Bill. I congratulate the Committee and my co-Chairman on the progress that was made last week under her chairmanship.

Schedule 1

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 56, in schedule 1, page 51, line 8, leave out ‘four’ and insert ‘three’.’

It is a great pleasure to serve again under your chairmanship, Sir Nicholas. I hope that the fact that this is the thirteenth sitting is not a harbinger of bad news for anyone, but we shall see.

The amendment is simple and I can do it justice in a short time. It deals with the tenure of office of members of the trustee corporation. I do not know why the Government have alighted on four years. I should have thought that three years would have been more the norm for the initial and subsequent periods of appointment, but there might be some logic to it, so I looking forward to the Minister pointing that out.

Paul Rowen (Liberal Democrat, Rochdale)

Like the hon. Member for Eastbourne, I was a little puzzled by the provision. Three years is the usual appointment period. I look forward to hearing what the Minister has to say about a period of three or five years and why the Government have alighted on four years.

James Plaskitt (Labour, Warwick and Leamington)

Let me also say to you, Sir Nicholas, what a pleasure it is to be serving under your chairmanship at our thirteenth sitting. Let us see if I can start off on a good note by reassuring the hon. Gentlemen about why the terms are set as they are.

This part of the schedule deals with the period for which a person can be appointed a member of the corporate trustee. It restricts the period of an individual appointment to a maximum of four years and prevents someone from being reappointed more than once, as a result of which no one can serve for more than a total of eight years.

I wish first to explain that we intend trustee appointments to follow the principles in the code of practice of the Office of the Commissioner for Public Appointments. That code suggests that it is in the public interest to limit the length of appointments made by Ministers to no longer than a total of 10 years in order to encourage new blood and new ideas and to give other people the opportunity to serve on public bodies. It states:

“The number of terms an individual may serve and the conditions for reappointment vary...However...the maximum period in office must not exceed 10 years on the same board.”

Although, in the case of the corporate trustee, subsequent appointments will not be made by Ministers, we believe that the good practice of limiting the term of appointment should be included in the Bill. The question to consider when determining the length of appointment is what best serves the needs of the task in hand.

I am sure that members of the Committee have noticed that initial appointments to the Personal Accounts Delivery Authority are for a three-year period. That is standard practice for non-executive appointments and for fixed-term contracts, such as the chief executive, but that difference in approach is also appropriate given the different responsibilities. PADA will be a relatively short-lived organisation when compared with the anticipated longevity of the scheme. The most effective blend of trustee for the longer term trustee corporation will be a mix of new ideas, experience and corporate memory. We have chosen a period of sufficient length to match the responsibilities of the trustee while remaining well within the maximum proposed in the guidelines of the Office of the Commissioner for Public Appointments.

Paul Rowen (Liberal Democrat, Rochdale)

I am listening to what the Minister is saying. I said that it was normal for a term to be three or five years, and he has confirmed that the guidance sets out a maximum of two terms of five years. He has chosen four years, so will he explain why the longer period recommended by the public appointments committee was not what was put in the Bill?

James Plaskitt (Labour, Warwick and Leamington)

The guidelines set out a maximum of 10 years, and two terms of five years would obviously go right up to the maximum. Our view is that by going for a potential maximum of eight years, we have struck the right balance of staying within the guidelines and having the right mix of experience and length of tenure of office. This is not far out of practice with other bodies and organisations. A four-year term with the possibility of one renewal strikes the right balance and keeps us within the guidelines. With those reassurances, I hope that the hon. Member for Eastbourne will withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

When I tabled the amendment, I had no idea that it would be so complicated to get an answer. If the Minister had simply stuck a pin in a series of numbers, I would sit down immediately. He has made the case for five years and for three years, but he has not made it for four years. However, life is too short, so I beg to ask leave to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 57, in schedule 1, page 51, line 19, leave out ‘the Secretary of State may determine’ and insert ‘it thinks fit.’

Again—famous last words—this is a simple amendment that has been designed to tease out why the Secretary of State should determine the remuneration, allowances and gratuities paid to members of the trustee corporation. In all these matters, the Secretary of State should keep at arm’s length, if possible. It should be possible for the trustee corporation to regulate such matters itself, possibly by way of a remuneration sub-committee or something similar. I find the reason why the Secretary of State should have his fingerprints on every aspect of the detail of the running of the trustee corporation slightly mystifying. I hope that the Minister can demonstrate that there was serious thought behind the benefits of the provision and that he can tell us why it makes enormous sense.

Paul Rowen (Liberal Democrat, Rochdale)

I found a note given by the Secretary of State about the difference between the trustees and PADA very interesting. As this is a non-departmental public body—an arm’s length body—why is the Secretary of State able to determine the minutiae of its running? I agree with the hon. Member for Eastbourne that PADA is a different organisation. It is a delivery authority and the trustees take it forward. It should be for the trustees themselves to agree the remuneration, having taken advice and after looking at what the industry normally does. We seem to have the big footprint of Government stamped all over a body that in previous debates has been spoken of as “light touch”. This seems to be anything but light touch.

James Plaskitt (Labour, Warwick and Leamington)

Let me see if I can demystify this. I will try to reassure the hon. Gentlemen that there are good reasons behind the arrangement in the Bill.

The amendment would remove the Secretary of State’s ability to determine the levels at which remuneration was set. We intend that the trustee corporation will act independently of the Government. That is right, and our aim is for an emulation, as far as possible, of trust-based occupational pensions schemes in the private sector. None the less, the trustee corporation is being set up as a public body with a central role in delivering a key aspect of public policy. Quite rightly, we expect a high standard of propriety from public bodies, and it is standard practice to include mechanisms for the Government to ensure that they achieve those high standards.

There is a balance to be struck, as the hon. Member for Rochdale indicated. For example, we intend the trustee corporation, once it is up and running, to have the freedom to appoint its own members, but in so doing, it should follow the good practice of the Office of the Commissioner for Public Appointments. When creating a non-departmental public body, it is standard practice to give the Secretary of State of the sponsoring Department the responsibility for remuneration. That is to ensure that the remuneration paid is in proportion to the role and weight of the posts. To reassure members, the Treasury 2007 guidance states:

“Whatever the legal status of an Arm’s Length Body, the Treasury will expect its sponsor department to have a mechanism for asserting an appropriate degree of control over it, especially in financial matters”.

Furthermore, Cabinet Office guidance states that Departments are responsible for determining whether remuneration should be paid to the board members of the public bodies they sponsor and the level at which that remuneration is set. The Bill simply follows the guidance. Such a procedure involving Government guidance on remuneration for key posts also applies to NDPBs such as the Civil Aviation Authority, the BBC Trust and the Independent Police Complaints Commission.

Allowing members of the trustee corporation to set their own levels of remuneration, as implied by the amendment, would be a highly unusual step in the public sector, since no other comparable body bears that responsibility. There is a further consequence of what the hon. Member for Eastbourne is suggesting: the trustee corporation would be left open to accusations of conflict of interest, as its members would be in a position in which they could set their own pay. Many of us in this room are aware of the problems that that might entail, but that would be especially so in this case as the members’ remuneration would come from scheme funds and thus would be paid by scheme members. That is a further reason why it is quite appropriate that the Secretary of State should have some involvement. Far from this being a heavy boot, as the hon. Member for Rochdale suggested, it is an essential safeguard, given the source of the funding to pay the remuneration, and the potential conflict of interest if this were done by some other arrangement to the one set out in the Bill.

In seeking this power, our intention is not to meddle in the day-to-day affairs of the scheme, but to use a standard mechanism by which the Government can ensure that a public body is conducting itself in the way in which we and members of the pension schemes would expect. With those reassurances, I hope that the hon. Member for Eastbourne will agree to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am grateful to the Minister for that explanation and reassurance. I beg to ask leave to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 68, in schedule 1, page 54, line 42, leave out ‘and’ and insert—

‘(aa) an analysis of the potential impact on the financial position of the trustee corporation of different levels of—

(i) take-up of;

(ii) persistency in; and

(iii) contributions to,

the scheme, and setting out appropriate options for managing the financial risks associated with different outcomes; and’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss the following amendments: No. 69, in schedule 1, page 55, line 2, at end insert—

‘(2A) In preparing the report, the Trustee Corporation must have regard to such independent actuarial advice as it considers appropriate.’.

No. 65, in clause 61, page 28, line 29, at end insert—

‘(3A) The authority must within 12 months of the passing of this Act, and at such other time as the Secretary of State directs, publish a report analysing the potential impact on the financial position of a scheme under section 50(1) of different rates of—

(a) take-up of;

(b) persistency in; and

(c) contributions to

the scheme, and setting out appropriate options for managing the financial risks associated with different outcomes.

(3B) In preparing the report under subsection (3A) the Authority must have regard to such independent actuarial advice as it considers appropriate.’.

Nigel Waterson (Conservative, Eastbourne)

The amendments all aim to achieve the same thing, so I apologise if there is a certain amount of confusing duplication involved. We intend that either or both of those bodies—if either, preferably PADA—should, within 12 months of the passing of the Act, and at other times in the future as directed by the Secretary of State, publish a report analysing the impact of the new scheme, which is set up under clause 50. It should examine rates of take-up, persistency and contributions to the scheme, and set out appropriate options for managing the financial risks associated with different outcomes. We also suggest that the authority should obtain independent actuarial advice and publish that at the same time. This is all to do with having the maximum transparency as we head to the starting point of personal accounts, hopefully in 2012.

It will probably be convenient if I deal now with the broader general issues and hopefully obviate a stand part debate, as is common practice these days. It is interesting that in only the past few days, the delivery authority has published its consultation on a possible charging structure. It set out four options: first, an annual management charge when members pay a fixed proportion of the funds under management each year; secondly, a contribution charge when members pay a fixed proportion of each contribution that they make into personal accounts; thirdly, a joining charge—a one-off, up-front fee on joining the scheme—which might be fraught with problems; and, fourthly, a combination of a lower contribution charge with an AMC. I am sure that responses to the consultation will be flooding in. It runs until 22 April, which is a generous period, and the delivery authority will publish its responses to it by 15 July.

While it is important to set out the options for how the charges will be structured, it is impossible at this stage for those running PADA to have an idea of the size of the charges, and I shall come to that in more detail later. In its brief on the amendment, AEGON states:

“In setting the charges to be applied to personal accounts, the Delivery Authority will need to make a set of assumptions around take-up, persistency and contribution levels for the new scheme”,

hence the thrust of the amendments. It goes on:

“Unlike a group personal pension or a trust-based scheme backed by an employer, there is nobody ‘standing behind’ the scheme, so the questions arise as to how any shortfall in revenues will be covered.”

That brings us neatly on to public subsidy and the so-called level playing field.

So far, the Government have been insistent that the scheme will not require public subsidy. I dug out the comments of the Minister for Pensions Reform when he gave evidence to the Committee on 17 January. When I asked him about public subsidy, he replied:

“In terms of public subsidy, our aim is that personal accounts should operate in the same way as most other pension schemes. They would not have a level of public subsidy which would be unacceptable. Indeed, it is the role of the members to pay for the operation of that pension scheme.”

When talking about getting the costs down to 0.3 per cent., he said:

“I made it clear in my evidence to the Select Committee that it may well be 0.5 per cent., at least initially.”

When referring to the budget for PADA, the Minister drew attention to the £21 million for 2007-08, for which we voted during the passage of the Pensions Act 2007, and said:

“We will look at what costs PADA will need in the future, and it has an ability to raise funds if it needs to do so...I want to make sure that once we get beyond that and into the personal accounts board and having an NDPB running a pensions scheme, we will have an organisation that is primarily self-funding.”——[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 113-14, Q138-39.]

We agree. However, obviously the costs are clicking up already. In answer to a written question that I tabled the other day, the Minister said that expenditure on consultancy advice about implementing the personal accounts system had amounted to £6.6 million up to the end of October. Will the Under-Secretary update that figure? A great deal of money has been, and is being, spent. It would be interesting to know how much of the £21 million originally voted for PADA has already been spoken for.

The Government’s policy is clear: the scheme must be self-funded. That means no hidden subsidies, no sweetheart deals, no low-interest loans and so on. We will come on to the specifics later on. The brief from AEGON continues:

“But in the absence of such subsidy, the only recourse would be to borrow potentially large amounts of money. In the absence of other income streams or a sponsoring employer,”

which clearly this scheme will not have,

“this borrowing could only be funded by increasing charges to scheme members.”

It touches on the possibility that

“charges may rise in the future”,

and that calls into question one or two of the options, especially the joining fee set out in PADA’s recent document about its charging structure.

Amendment No. 65 would place a duty on the trustee corporation and PADA to publish a report that examines the issues in detail and sets out how different scenarios for take-up, persistency and contributions will be managed. In short, it would give the Secretary of State a power to require updates from the authority. That would enable a new Secretary of State in an incoming Government—hopefully a Conservative one—to ask for further actuarial analysis ahead of the expected, although by no means certain, go-live date of 2012.

The proposed reporting duty falls some way short of that required of trustees of a defined benefit scheme, as set out in the Pensions Act 2004. However, it goes beyond that required of a normal defined contribution or money purchase scheme. In view of the strong public interest about the new system of personal accounts, and the potentially massive importance of it to many millions of people, the approach strikes the right sort of balance.

I shall set out one other important issue, which was again raised by AEGON. In welcoming the consultation announcement about the charging structure, it said:

“it is encouraging to see a clear acceptance that a flat annual management charge is not the obvious starting point.”

That point is worth making. AEGON also said that it was

“puzzled as to why PADA believes there are commercial sensitivities over publishing its financial modelling.”

I take the opportunity to note that the consultation on charging structures has been financed by PADA. It would be helpful to have the Under-Secretary’s input and to hear his thoughts on the four options, on why PADA cannot publish its financial modelling, and on how difficult it is at this stage for it to have financial modelling, given that it is very difficult to predict the actual costs so early in the game. On that basis, I commend the amendment to the Committee.

Paul Rowen (Liberal Democrat, Rochdale)

Schedule 1 sets out how the Personal Accounts Board will operate. I believe that in setting up personal accounts, we move into uncharted waters. This is not an employees’ occupational pension scheme through which, as the hon. Member for Eastbourne mentioned, a shortfall in the scheme can be met by increased employer contributions. We have little information. We can make estimates about take-up, and we have had extremely involved discussions about contribution levels and how people with varying income levels can access the scheme. However, we do not know how things will work out.

The hon. Gentleman assessed some of the issues, such as the charging structure. I welcome the fact that PADA has started a consultation on that. I believe, as AEGON said, that it is important to have flexibility within the charging structure that is adopted, because it is important that personal accounts are self-financing. I do not want to see a situation whereby, because of the nature of what has been set up, a large Government subsidy is required in future. That would go totally against the spirit of the Bill. Equally, we do not know what the future holds, and the ability to report and present actuarial evidence of how the Personal Accounts Board is operating is important.

We talked earlier about the need for transparency in what we are doing. Personal accounts will involve an awful lot of people who currently do not have access to a pension scheme. We need, therefore, an ongoing mechanism to ensure that as the scheme cranks up, there are regular reporting points on how it is progressing. Amendment No. 65 is important because it would require a report on the financial position that would include evidence of take-up, persistency and levels of contributions to the scheme, and a measurement of that against the running costs of the scheme. We know that in the initial years the costs will be much higher than what will be recouped by the contributions, whatever type of management charge is introduced. It is therefore important that there is a mechanism to ensure that such ongoing discussion takes place.

The financial models that are used by PADA and the Personal Accounts Board must be made available. We must know the assumptions on which the board is operating. Obviously, PADA will be doing a lot of work on this in the next few years and it is important that that information is made available and is up front. That is the best way to ensure that personal accounts get off to being the success that we all want to them to be and that there is flexibility in the system, so that if changes occur that were not predicted at the beginning—I cannot believe that it is possible to predict all the changes—they are reported and prompt action is taken. The worst scenario would be for the organisation to continue on its own as an arm’s length organisation believing that it is doing its best and that it can sort out a problem in the long term, yet meanwhile storing up huge debts that will saddle future members with increased costs. It is important that we have a model from the word go that ensures that costs are recoverable within a time frame that does not mean that future members will be saddled with costs for which they receive no benefit.

John Greenway (Conservative, Ryedale)

I will not detain the Committee long, but I want to make two brief points. First, as my hon. Friend the Member for Eastbourne said, the amendments were suggested by AEGON. I want to remind the Committee that the chief executive of AEGON is Mr. Otto Thoresen, on whose support the success of the measure so depends through his work on generic financial advice on which he will report in about four weeks’ time. While I thought that it might be helpful to point out that the proposals come from a good source on which the Government will rely heavily for the success, or otherwise, of the Bill, I will not labour that point.

Secondly, there is a possibility of some confusion about what is proposed in paragraph 17 of the schedule regarding the annual report, so we might be looking at two different things. We need to know—the Secretary of State and, through him, Parliament need to know—how the corporation is functioning. From my reading, that is the clear intention behind the provision and the note about it.

Amendment No. 68 would do something slightly different, albeit something extremely important that appears to be lacking in the Bill. When assessing the potential success or otherwise of the personal accounts initiative, we must have regular information about take-up, how many people opt out, persistency, levels of contributions and so on, because otherwise Parliament will be in no position to judge whether the scheme is a success. Given the cross-party consensus on the proposals, irrespective of whether the Minister accepts the amendments—one suspects that he will not—will he acknowledge that it is important for that information to be available to Parliament and the wider world so that we can make an ongoing assessment of the scheme’s success?

It will be several years down the track before the measure comes into effect, so there will be another elected Government and different Ministers in place. It is vitally important that a clear commitment is made through this Public Bill Committee process that, by one ruse or another, that kind of information will be available to Parliament and the wider world. There should be an obligation on the delivery authority to provide that information. This is a way of flagging up the fact that, as far as I see, there is nothing in the Bill to say that that information will be published. In reality, I cannot believe that it will not be made available, but we need some reassurance about that.

James Plaskitt (Labour, Warwick and Leamington)

This is indeed an important aspect of the Bill and I am pleased that we are debating it. It is right for hon. Members to seek such reassurances. I am grateful that PADA’s consultation on charging has been acknowledged and welcomed. It is, of course, a consultation on the charging structure, not charging levels. It is welcome, and I am sure that it will be important in terms of finalising the scheme’s details. I am also pleased that there is general support and recognition for the important principle that the scheme will be, in due course, self-financing. I hear that there is an acceptance of the situation during the set-up years—this is a separate issue—but in the long term, it must be self-financing.

Nigel Waterson (Conservative, Eastbourne)

I think it was Keynes who said that in the long term we are all dead. What is the Minister’s definition of long term with regard to amortising PADA’s start-up costs?

James Plaskitt (Labour, Warwick and Leamington)

Certainly, in the long term, Keynes was dead and so were some of his ideas. We cannot put a precise number on that, as I am sure that the hon. Gentleman understands. It is understood that there has not been a venture on this scale before. How long it takes to reach a point of self-financing will depend on the number of people who come into the scheme and how long they stay in it. It will also depend in part on the charging structure of the scheme. The hon. Gentleman will recall that we listened to a number of witnesses giving evidence on that subject during the introductory sittings of the Committee. No one can put a precise number on that—I do not suppose that he can and I certainly could not—but we do know that it will depend on the decisions that people make and the levels of opt-out. That is all the more reason why the design and the climate in which the scheme launches must be right.

We would like the scheme to reach the point of self-financing as soon as possible. That requires the launch and take-up to be a success and for matters such as the charging structure to be right. However, if the hon. Gentleman asks me to put a date on that, I cannot, and nor can anybody else at this time.

I appreciate hon. Members’ concerns about how participation in the scheme and the contributions to it could affect its financial position and about whether that could entail any degree of public subsidy to the scheme—how much and for how long. As I have just reiterated, it is our intention that the scheme will be self-financing in the long term, but during the phase when the scheme is being set up and for some time after the scheme accepts its first members’ contributions, its revenues will be insufficient to cover its costs. We have asked PADA to advise us on how best that shortfall in revenues may be financed in a way that balances commercial viability with low charges.

The provisions in the Bill are necessarily wide because an optimal funding solution has yet to be developed—that is what PADA is working on. It will depend on a number of things, including the costs of setting up and running the scheme and the factors that influence the flow of revenues into the scheme, including those raised by the hon. Member for Eastbourne: the potential take-up of the scheme and how much, how regularly and for how long members contribute—the issue of persistency in contributions to which he rightly referred.

Nigel Waterson (Conservative, Eastbourne)

I am following what the Minister is saying closely. I do not want to run the consultation here and now, but does he agree that a possible fatal flaw in the idea of a one-off joining fee is that if it is pitched too low, those members would benefit disproportionately and there would be an additional amount to be collected from later joining members, particularly if the persistency is awful? If one adopts the Steve Bee scenario, a lot of people will rush for the exit after two or three months because they have suddenly realised that, due to auto-enrolment, their pay packet is a bit light.

James Plaskitt (Labour, Warwick and Leamington)

The hon. Gentleman tempts me to start opining a view on the options on which PADA is consulting, in respect of the charging structure. It would be quite wrong to do that when the consultation is just getting underway and it is a matter for PADA anyway, not for me. He is right to say that there would be difficulties in opting for just a joining fee approach, but that is pointed out in the consultation document. It is a potential shortfall that PADA identifies. The purpose of the consultation is to run out all of the options for a charging structure, with a view to coming to a conclusion about what is the best charging structure. Each option that it looks at has plusses and minuses to it; it must reach a view, in the light of responses that come into the consultation, about what the appropriate charging structure is to achieve the ideal outcomes that we want. It will engage in precisely the sort of debate that he has just raised.

The precise costs of setting up and running the scheme will not be fully known until the authority is much further down the track in negotiating the contracts for services underpinning the delivery of the scheme. However, we anticipate that, based on data and latest research among employers and individuals, the scheme could have up to 7 million active members. I am confident that the scheme can be delivered in a way that ensures that there is no unfair subsidy from Government and that meets our intention for the scheme to be self-financing in the long term and to deliver at no cost to the taxpayer.

Amendment No. 65 would require the authority to publish a report on the potential impact on the financial position of the scheme under various revenue scenarios, within 12 months of Royal Assent. Amendments Nos. 68 and 69 would place a similar requirement on the trustee corporation and suggest the corporation seek independent actuarial advice. The authority will continue analysing all those factors in developing an optimal funding solution and will consider how it may be adapted under various revenue scenarios. That includes a rigorous analysis of the assumptions and associated risks around take-up, persistency and contributions and how they impact on the financial position of the scheme. Specific provisions in the Bill are not needed to ensure that that work is done. Indeed, it has to be done.

I see no benefit in adding to the already comprehensive regime of financial accountability between non-departmental bodies and their sponsoring Departments. As non-departmental bodies, both the authority and the trustee corporation will be required to publish annual reports and accounts to Parliament. The trustee corporation will also have an overriding duty to act in members’ best interests, including the prudent financial management of the personal accounts scheme. There will therefore be transparency in the scheme’s financial position. Any revenue received would be shown in the accounts of the scheme or the authority, whether it has come from membership charges or other sources including, of course, the Government—if that were required.

I hope that our debates have put members of the Committee in no doubt about the Government’s intention that the personal account scheme will not be given unfair public subsidy. They are right to raise concerns about the extent to which the number of future members and their level of contributions might impact on the financial strategy for the scheme, but I assure them that we are confident that the scheme will be viable within the parameters that have set publicly. Its financial position will be made transparent through existing reporting and accounting requirements that apply to both the trustee corporation and the delivery authority. Given those reassurances, I hope that the hon. Member for Eastbourne will agree to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I do not want to prolong matters, but we shall continue to unpack such issues in the next couple of debates. One man’s unfair public subsidy is another man’s sensible precaution. We will need to probe a little further into exactly what the Minister means by “unfair” and “long term”. For the moment, I beg to ask leave to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 59, in schedule 1, page 55, line 10, leave out ‘grants’.

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss amendment No. 60, in schedule 1, page 55, line 11, leave out from ‘which’ to end of line 12 and insert

‘shall include conditions about repayment and interest at commercial rates.’.

Nigel Waterson (Conservative, Eastbourne)

In a film, the late, great Kenneth Williams memorably said, “Infamy! Infamy! They’ve all got it in for me!” I hope that PADA does not feel that I have it in for it by trying to block a source of income or personal accounts at the start of its fledgling career. It is important to pin down the Minister on exactly what the Government have in mind in respect of propping up PADA in its early days, particularly if is not as successful as Ministers hope and predict.

Amendment No. 59 is straightforward. It would remove “grants” from the provision. I do not know on what basis the Government are considering making grants to the trustee corporation. Perhaps we should be told. The nature of a grant is that it is not expected to be repaid, so what notion of grants is the Government looking at? What size and basis do they have in mind? In what circumstances would a grant of taxpayers’ money be appropriate to an organisation that is conceded by Ministers to be self-financing in the long term? I would prefer them to use the description “medium term”.

Amendment No. 60 is designed to make sure that, if money is lent by the Treasury or the Department, to PADA, it is repaid and that the terms of such loans should be transparent and based on commercial rates, with a proper and appropriate period for repayment.

It would send some serious messages to the industry if the Minister were not prepared to accept at least the second of these amendments, and to clarify the nature of grants in this context. Looking at the evidence of Mr. Stephen Haddrill, from the Association of British Insurers, when I asked him about the level playing field and the public subsidy issue, he said:

“The primary one that concerns me is that there is a power in the Bill for the Secretary of State to make loans to the personal accounts system and to do so without necessarily charging any interest and I cannot see why that should be the case.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 35, Q50.]

I am sure that many of the companies that make up the Association of British Insurers would be delighted if the Government were prepared to offer them interest-free loans with rather loose arrangements for repayment. He goes on:

“It is very important that the system and the consumers of it—the people who go into it—absorb the costs of it just as people who are in other pension schemes have to absorb the costs of those pension schemes...Why should someone who is in a personal account get a taxpayer subsidy other than the basic pension subsidy when somebody in another scheme does not?”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 35, Q50.]

That is a good question, one that I hope the Minister will feel able to answer.

We talked about borrowing. There is not an unrealistic view from the industry. Dick Saunders said at the evidence-taking session:

“There will be a need for the scheme to borrow in the early years to beat that J-curve, which any business plan has. Obviously, that borrowing should be on arm’s-length terms; I am sure the Treasury will not want to lend to it interest-free.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 36, Q50.]

In addition, Mr. Haddrill said,

“what we do feel is, if there is a level playing field with no taxpayer subsidy, that we will take on the competition. That is the sort of industry it is.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 37, Q52.]

I commend that kind of thinking.

I do not think that ABI members or others are fearful of personal accounts; they made it clear in their oral and written evidence that in principle they support the notion of trying to tackle the problem of the target group or groups, who are not currently saving for their retirement and should be. In fairness, they have trooped into the endless seminars, discussions, working groups, consultations and everything else, trying to be as helpful as possible. Where they draw a line, on behalf of their shareholders, is unfair Government subsidy to make personal accounts overly competitive with existing provision. That would be bad for business, but more importantly, it would erode existing pension provision, where we know that the average employer contribution in DB schemes, according to the National Association of Pension Funds, is something like 16 per cent., which dwarfs the 3 per cent. envisaged in personal accounts.

I must pin the Minister down on these amendments; he must give a satisfactory explanation, to the Committee and the industry, of the circumstances under which grants will be given from the Government to PADA, and the basis on which loans would be advanced.

Paul Rowen (Liberal Democrat, Rochdale)

I do not know whether those who drafted the schedule were trying to do the usual civil servant catch-all and include all possibilities in which money or assistance might be sought. That is one possible interpretation of the word “grants”. It is important that, given the Minister’s earlier comments, we have clarification of what the trust board should do. There is one circumstance and one circumstance only where it is proper that the Government can give grants, although I am not sure that those should be to the trust board. We had an earlier discussion about advice and information and provision for that. Looking at schedule 1, I do not see it as being the responsibility of the trust board to provide that information. However, it is legitimate for that sort of information to be provided with some form of Government subsidy or advice alongside the range of other financial advice available through Citizens Advice or whatever. That is a separate issue to schedule 1, which deals with the trust board.

Again, I agree with the hon. Member for Eastbourne: if we are setting this up, we should state clearly from the beginning that there is no subsidy and that any loans granted will be paid back. We must know the terms on which those loans will be granted. Unless it is a usual civil service catch-all, I see no need to include the possibility of obtaining finance for including the word “grant”. If the trust board administers the funds and invests them to ensure a return on someone’s pension, it should operate, as should every scheme, with its costs fully covered. In this case, as it is not an occupational pension scheme, it must be covered through the charges that it makes.

James Plaskitt (Labour, Warwick and Leamington)

As hon. Members have identified, this is an important aspect of the Bill. It is right to seek these reassurances and I will try to oblige. There is understandable interest in how the personal accounts scheme will be funded, whether the scheme will receive financial support from the Government, and if so, in what form. Let me reassure the Committee of the Government’s intentions in that area.

The personal accounts scheme should be self-financing in the long term—I know we will discuss that further—through charges paid by the members of the scheme, and be delivered at no overall cost to the taxpayer. I want to stress that if any degree of Government support is involved in helping the scheme get up and running, it will be fully compliant with all European requirements on competition and state aid—it must be, it should be, and it will be. However, as with many new businesses, there will be a period of time during the scheme’s early years when revenues will be insufficient to cover set up and operational costs. That is understood and accepted.

No decision has yet been made on the best approach to filling that funding gap. It will be for the personal accounts delivery authority to consider the range of funding options available and to make recommendations to the Secretary of State about the best possible approach. Before the authority can provide such advice, it must carry out further work on the detailed design of the scheme, refine its estimates of the costs, and engage with private sector suppliers who will deliver the services that underpin the scheme.

Nigel Waterson (Conservative, Eastbourne)

If I remember rightly, the consultation document on the charging structure says that by July this year, the authority will announce its conclusions. Is the Minister aware whether, in that same time scale, it expects to have reached a conclusion as to the likely actual costs that must be recouped? On that basis, it seems to be a tight time scale and could seriously affect certain options—I touched on the initial one-off joining fee. I do not want to draw the Minister too far down that route, but I raised it as an example where, crucially, the amount to be recovered makes it either a viable option or not.

James Plaskitt (Labour, Warwick and Leamington)

I think that PADA expects to have sufficient information on which to base its decision by the end of the consultation on the charging structure. The consultation will come to an end and there will be a period of deliberation in response to that, which will provide further time. During that time, sufficient information will become apparent to give it a basis for reaching a decision.

The hon. Members for Eastbourne and for Rochdale both referred to what I might call the competition between the trustee scheme and commercially provided schemes on the question of whether it is appropriate to have any degree of public funding. However, one crucial difference needs to be underlined. When giving evidence to the Committee, Paul Myners said:

“We have a universal service provision obligation.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 14, Q14.]

That makes it different from the commercial sector provision. The schemes cannot pick and choose who they take on; they have to take everyone. That fundamentally alters the nature of those pension schemes, putting them in a different situation with respect to charges and running costs, and ultimately returns, to privately provided purely commercial pension schemes, which can exercise far more choice in that respect.

The personal account scheme is therefore unique, but we should not underestimate the challenges that the authority will face when setting it up and developing it. As I said, it is the largest occupational pension scheme in the United Kingdom. When up and running it could easily have as many as 7 million active members. It will be specifically targeted at those who do not have access to a good, low-cost workplace pension scheme; and as Mr. Myners said it cannot pick and choose its customer base.

Once the authority has developed the scheme and its procurement strategy, it will provide advice on the funding solution that provides the best balance between commercial viability and low charges—and I accept that the charges will be important to making the scheme successful. However, all that work can happen only once the authority’s powers have been extended under the Bill, so that it can take the next steps to implementing the scheme. It is therefore important that we do not second-guess the outcome of its work—nor, as the amendments do, should we place undue restrictions on the authority in its consideration of the funding strategy.

It is common practice—the hon. Member for Rochdale alluded to the fact—to take broad powers to finance a non-departmental public body involved in a major project, especially such a one as this in respect of personal accounts. However, I stress that it does not mean that any of those specific powers will necessarily be used. It simply ensures that the authority has the flexibility to identify the funding strategy that provides the best deal for members. In my view, it would be wrong to fetter the development of the best funding solution by insisting on the removal of a potential approach to delivering that financial support.

Nigel Waterson (Conservative, Eastbourne)

May I make clear that my amendments are not designed to fetter the authority? They are designed to fetter the Government. Apart from saying, “We stuck it in because that is what we do in these circumstances,” the Minister has yet to give us a scenario in which he might consider making a grant—presumably a non-recoverable one—to the authority.

James Plaskitt (Labour, Warwick and Leamington)

That brings us back to the heart of the debate. Indeed, it is the point that I am making—that before PADA has completed its work and before decisions are made on how the funding gap should be addressed, it is important to keep our options open. Without any of those things having been done, I cannot say now what precise circumstances would lead to a grant. It would fetter the operation if, at this stage, before any of those decisions had been made and that work done, the Government or PADA removed the possibility of extending the grant to the organisation.

As I said, it is standard practice when setting up non-departmental public bodies to have that funding option. That does not mean that it will be used, but given the scale of what has been taken on and given that PADA has yet to make decisions in respect of the funding structure, it would not make sense to remove one of the options. Indeed, it is sensible to include it in the suite of funding arrangements that the authority could draw upon.

I reassure the Committee that we have no intention of unfairly subsidising the personal accounts scheme. If any Government support is involved, it will be fully compliant with European requirements on competition and state aid. Transparency will ensure that it is also known about, which is clearly very important.

Nigel Waterson (Conservative, Eastbourne)

On the issue of transparency, will the Minister confirm that loans will be repayable within a reasonable and set period, and that they will be subject to commercial rates of interest?

James Plaskitt (Labour, Warwick and Leamington)

That is not exactly the same as the transparency point. On the issuing of annual reports, any funding source that has come into the authority will be reported. In that sense, it is transparent, as are the terms on which that funding is provided. It is not for me to anticipate what kind of deal might be offered. As regards public confidence, it is important that there is transparent reporting. With those reassurances, I hope that the hon. Gentleman will agree to withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

I am not at all content. The Minister is giving us no assurances about there not being grants of any size for whatever purpose—presumably they will be non-recoverable. Nor has he been prepared to give any assurances about commercial rates of interest and repayment over a sensible and normal period. However, he has promised us that when such things are done, they will be transparent. That means that we will get to know about them, which is great. I am not an expert on the European legislation, but I think that the Europeans might have something to say about a non-interest bearing loan, let alone a grant. With all due respect to the Minister, I do not want to leave it to the European Union to sort this out. We need to know the situation now.

The Minister has not said—quite the opposite—that he would not be in the business of issuing grants or non-interest-bearing loans to PADA. In this Bill, it is very important that we set out the parameters for PADA—not only for funding, but for other things—so that it knows that it can cut its coat according to its cloth. The cloth must be made available. If it is apparent to PADA that an escape route of Government grants or non-interest-bearing loans will always be available, it might not concentrate its mind as much as it should on getting its sums right. Whatever deal—to use the Minister’s word—is concocted between the Treasury and PADA, it needs to be known about in advance.

The industry has a legitimate concern about a level playing field. The Minister still talks about long-term rather than medium-term funding when most organisations are in the business of predicting profit and loss. I am not content. Unless the Minister can give me more reassurances, I am minded to press the amendment to a Division.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 61, in schedule 1, page 55, line 13, leave out ‘may’ and insert ‘is required to make.’

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss the following amendments: No. 43, in clause 62, page 29, line 13, at end insert

‘and initially based on an annual management charge of no more than 0.3 per cent. per annum.’.

No. 52, in clause 64, page 29, line 39, at end add—

‘( ) For the avoidance of doubt, all the costs incurred by the Authority in establishing the pension scheme under section 50 of the Pensions Act 2008 (c. ) shall be recouped through charges to members over a period of five years from 2012.’.

Nigel Waterson (Conservative, Eastbourne)

This interesting group of amendments raises some subtly different issues. Amendment No. 61 continues on from the previous debate and would insert into schedule 1, where it says,

“The trustee corporation may make charges in connection with the exercise of its functions”,

an obligation on such a body requiring it to make charges. That is sensible in terms of bringing revenue into the trustee corporation.

Amendment No. 43 relates to clause 62 and I will return to it in more detail later. It is a probing amendment that would insert a provision to the effect that the annual management charge should be

“no more than 0.3 per cent. per annum.”

Amendment No. 52 sweeps up a lot of what was debated under the previous two groups. The amendment would make it clear that all costs incurred by the authority in establishing the pension scheme under clause 50 of the Bill

“shall be recouped through charges to members over a period of five years from 2012.”

I shall deal with this matter first in some detail. Debate has raged for the past hour or so about what “long term” means. The Minister is adamant that the scheme is intended to be self-funding in the long term, but we would be much more comfortable with the expression “medium term”. I am the first to admit that one cannot be absolutely clear-cut at this stage, but we need some idea, in very broad terms, of the Minister’s thinking.

In amendment No. 52, I have plumped for a period of five years up to 2012. That might be over-optimistic or about right. However, it is important that rather than just having vague ministerial assurances that the scheme shall be self-funding in the long term, we have some idea about the time scale in which PADA and the board are meant to get themselves into equilibrium in respect of their costs and charging.

Even if we cannot resolve the matter today, it has to be resolved fairly soon. I have already mentioned the PADA consultation on the charging structure, which says that it will reach a conclusion, following that consultation, by July. As the Minister has already conceded, that would make little sense if it did not also have a fairly clear idea by then about the likely costs that it will have to recoup. It will be interesting to see where we are going on the percentage charge, as well as on the form of the charge. However, as I have already argued, it could knock for six straight away the option of a one-off joining fee for lucky first-time members joining in the first wave, as it were, which may be wholly unrealistic in terms of the recovery of the total costs over the long term that the Minister keeps talking about.

Although I do not want to press amendment No. 52 to a Division, I am still pressing the Minister hard, as we did with the last group of amendments, about what the Government have in mind. I do not mean any ill will to the Minister’s career prospects, but by the time this is all hammered out, the Minister will certainly be long gone. He will probably be doing something much more exciting; he might even be in opposition—who knows? However, we must have a clear idea of what current Ministers consider should be the period over which the scheme washes its face.

Amendment No. 43 draws attention to the level of charges, which is an important point of principle. Without wishing to go back too much into the mists of time, a fundamental principle of the Turner report—the report of the Pensions Commission—was that personal accounts should be a low-cost vehicle for people who are not presently saving for their retirement. The dynamic in that principle is that the low cost should be delivered by what Lord Turner calls an advice-free model. There will be an opportunity later to discuss the sort of advice available. As we have heard, Otto Thoresen and his group are labouring long and hard to come up with an answer on so-called generic advice. It remains a fundamental policy objective of both the Pensions Commission and the Government that the charges are kept as low as possible.

Interestingly, the latest briefing of the Association of British Insurers says:

“The ABI is pleased to see that the Conservatives propose to debate scheme charges, via their amendments to Clause 62. We understand the amendment is probing in its nature, and intended to stimulate debate around scheme costs...The key principle guiding all decisions the Government takes on Personal Accounts must be that all costs incurred in establishing and running must be recouped from scheme members through charges as they are in any other occupational pension model”—

I made that point in the previous debate. The ABI states further that Tim Jones, the new chief executive of PADA,

“is already on record as having noted that a 0.3 per cent. Annual Management Charge...is too ambitious, and AMC of 0.5 per cent. or higher is likely to be more realistic.”

It would be interesting to hear the Minister’s thoughts on such matters and to find out whether he is still hoping for a 0.3 per cent. figure.

The ABI touches on the consultation on the charging structure and states:

“The ABI has already publicly announced that a hybrid charging model, probably constituting an AMC and another charging structure will be the only way that scheme costs, especially set-up costs, can be adequately managed...It is vital now, that the Government provides public reassurances that all up front set up costs incurred ahead of 2012 are paid for at commercial rates, by scheme members and not from public funds. That includes the large additional resource that will need to be allocated to The Pensions Regulator.”

It is also worth touching on one or two pieces of oral and written evidence that we have had before us. Which? said that it

“believes a low-cost scheme with a target Annual Management Charge...of 0.3 per cent. per year is the most appropriate charging structure because it is simple to understand, comparable with other forms of saving, fair for low earners and will maximise participation in the scheme.”

Mr. Haddrill of the ABI said:

“Talking to PADA recently, I think that it is coming to the view that this 0.3 mantra is the one that is going to be delivered”—

that might be a misprint. He continued:

“We always felt that it would be closer to 0.5 or 0.6. The numbers will come out when the numbers come out”.

Mr. Haddrill has a philosophical approach to life. He continued:

“but from our experience of running these things that is where we think it will end up.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 37, Q52.]

It will be fascinating to hear the Minister’s thinking on that and what he is being told by Mr. Jones, as he conducts his review of which we heard something the other day.

In its written evidence, the CBI said:

“keeping management charges as low as possible is essential and unnecessary complexity will drive up costs. Prohibiting inward transfers is an important measure to contain costs, enabling PADA to achieve an annual management charge for personal accounts scheme members that is close to the Turner Commission target of 30 basis points (0.3 per cent. AMC).”

Finally, when giving evidence, the Minister for Pensions Reform said:

“We have been clear in saying that we believe we can get the costs of running the scheme down to 0.3 per cent., although I made it clear in my evidence to the Select Committee that it may well be 0.5 per cent., at least initially. We think that we can keep the costs low and that the costs of setting up the scheme could be met primarily from the private sector.”——[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 113, Q138.]

I am not quite sure what he meant by that. Perhaps the Under-Secretary will enlighten us and comment on the suggestion that the charge may be 0.5 per cent. initially, but might come down later, presumably as matters balance out. Does he think that it is sensible or logical to have a percentage charge that will change over time?

These are all probing amendments, so I do not want to worry the Minister too much. However, they all raise some important issues of principle.

Paul Rowen (Liberal Democrat, Rochdale)

This debate follows our earlier discussion about the operation of the scheme. Amendment No. 61 has more merit than the other two amendments in the group and establishes the important principle that costs are recovered. The words used in the schedule—“may make charges”—are far too weak. We ought to accept that we are going to incur costs and that those will be recovered.

When we contrast the debate on amendments Nos. 61, 43 and 52 with that on amendments Nos. 68, 69 and 65, there is some incongruity. Amendment No. 43 specifies what the management fee will be, whereas earlier we were saying that we wanted to see published, as part of the annual report, proper analysis—actuarial research—about take-up, persistency and contributions, with the basic principle being to ensure that the costs are recovered. Obviously, that needs modelling over time. I wonder why the Conservatives have alighted on the five-year period to 2012. I hope that PADA will publish the various assumptions and models in respect of which it operates, once those are available. Without that modelling, it would be inappropriate for us to set a time frame in which any start-up costs should be met.

The principle behind amendments Nos. 43 and 50 is right: management costs should be as low as possible. PADA, through the consultation that it has announced, will take advice and publish a report that will set out initial assumptions about the management fee. If we can accept the initial findings of the Turner commission on having as low a management fee as possible, and if the Minister can assure us that that is the principle on which the personal accounts will be operated, that is fine. I accept that it is wrong to stipulate a time frame until the models have been made. However, the principle should be that once PADA has run the models and consulted over an agreed time frame, it should have to say that it expects the scheme to have recuperated its costs and then return any loans—it should not, hopefully, need any grants—and say that it is operating properly. To try to be too restrictive at this stage would be inappropriate, although I agree with the principle that the hon. Member for Eastbourne is putting forward.

John Greenway (Conservative, Ryedale)

Given the long experience that you and I have had of serving on Standing and Public Bill Committees, Sir Nicholas, we know that as we discuss amendments, there is sometimes a sense that we should have worded them slightly differently. I have that sense with regard to amendment No. 43. I am sure that the Minister will give us a robust argument on what it would achieve, which would be a straitjacket of no more than 0.3 per cent. initially. I say to my hon. Friend the Member for Eastbourne that that is no more clearly defined than “long term”, but that is a joke between us. The wording that I might have alighted on would have been a target of 0.3 per cent. We are trying to elicit confirmation from the Minister that that is the target.

That said, I have grave doubts. I share the ABI’s view about whether that 0.3 per cent. is deliverable—the figure is much more likely to be around 0.5 per cent. We must also bear in mind that the stakeholder pension initiative failed because the Government insisted on the straitjacket of 1.1 per cent. of charges. That involved, potentially, the giving of advice, whereas with this arrangement there will be not advice, but information.

My hon. Friend referred to the Thoresen report, and I suspect that we are likely to see from the report, in about four or five weeks’ time, the introduction of a new word: “guidance”. That is not advice. That means that people will not have to be remunerated for giving an explanation to people who automatically enrol, which is the fundamental difference. That is why it is certainly possible—it should be achievable—for the management charges of this scheme to be significantly less than for stakeholder pensions. We need a clearer understanding of the Government’s expectation on record, and I am sure that the Minister will want to take the opportunity to enlighten the Committee further on that point.

While amendment No. 61 is a probing amendment, we need a clear statement from the Government that they expect PADA to make charges for the services that it provides. The wording of the Bill does not provide that commitment. However, there might be something that PADA wishes to do in the future for which it does not wish to make a charge, but for which, if we had the wording proposed in the amendment, it would have to make a charge.

One of the delights of being in Committee is that arguments flow back and forth. We seek the real substance of the Government’s intention. It is absolutely vital that PADA is obliged to make charges, but I can foresee circumstances in which something that they might wish to do would not necessarily involve making a charge. This is an important aspect of the Bill. I will not comment on the other amendment in the group, but I hope that the Minister will take this opportunity to try to give us further enlightenment on these two important matters.

James Plaskitt (Labour, Warwick and Leamington)

I agree with the concluding comment made by the hon. Member for Ryedale: this is an important aspect of the Bill. I am grateful for the probing that members of the Committee are giving us because that is quite right and proper.

I say first to the hon. Member for Eastbourne, “Look behind you.” His colleague, the hon. Member for Ryedale, is right to say that we must be very careful about putting rigidities into the Bill, as the amendments would do. It is not right to put in rigidities at this stage when flexibility is necessary to maximise the chance of success.

When speaking in support of his amendment, the hon. Member for Eastbourne slightly gave the game away. He said, I think, that he did not know what the specific numbers would be, how long it would take to achieve a particular phase, or what the charging levels would be. He said that had “plumped for” a number to put into the legislation. That indicates that it would be an artificial constraint. If the only reasoning behind the numbers in the amendment is that they were “plumped for”, the proposal is no more secure than our suggestion on flexibility about which the hon. Gentleman is concerned.

The hon. Gentleman sees the difficulty of trying to have anything other than flexible arrangements in the Bill. I entirely understand why he wishes to probe the issue, but he has discovered that trying to go beyond such flexibility produces another set of problems. I suggest that if he pursued the road of trying to cement the charge at a particular level, that could add to the difficulties, such as regarding the need for other sources of funding to support the scheme, which he previously expressed concern about. He is arguing against his previous position.

If the hon. Gentleman wants reassurances about short-term public support for such a scheme, we need to give the authority flexibility on charging. If the funding from charging is constrained, that could increase the call on other sources of funding such as public support. From listening to the debate, one can understand the importance of the flexibility that the Government seek, which is why the Bill has been drafted in its present form.

As we have established, low charges are at the heart of the personal accounts scheme. As I have said, we want the scheme to be self-financing in the long term. The trustee corporation will meet all the costs of setting up and running the scheme through charges paid by members. However, the Bill enables the trustee corporation to fulfil that aim by allowing it to charge members for any costs that it incurs in relation to the exercise of its functions.

Amendment No. 61 would introduce the word “must” rather than “may” in relation to when the trustee corporation can levy charges. There are difficulties with that, as the hon. Member for Ryedale indicated. A permissive power is all that is required, and all that would be safe in the circumstances. The trustee corporation is intended to be independent from Government when acting as sole trustee of the personal accounts scheme. It is therefore right for it to retain some discretion, as long as it operates within the parameters that we have set down—mainly to be self-financing.

The precise level and structure of the scheme’s charges are still to be decided. As we have indicated, the structure is being consulted on, and the levels are to be determined later. That will depend on the costs of setting up and running the scheme, its detailed design, and the outcome of the commercial procurement process. We are aware that there is a consultation among stakeholders on the charging structure.

The hon. Member for Eastbourne pursued the point about when the charging structure decisions will be made. A final decision can be made only when the Personal Accounts Delivery Authority has completed its work on designing the scheme and all the commercial procurement processes. The authority will want to reflect on the responses to the charging structure consultation.

I expect that the charging structure will be set out in due course in the scheme order, which will, of course, be subject to further consultation and parliamentary scrutiny. The authority will want to reflect on the views that it receives in response to the consultation and on the recommendations that it provides to Ministers on the charging structure. It is vital that the delivery authority is given time and flexibility to complete its work and to develop a funding strategy that best balances members’ interests with delivering a scheme that is commercially viable, without compromising the Government’s intention for the scheme to be self-financing in the long term.

However, amendments Nos. 43 and 52 would restrict the delivery authority’s ability to find an optimal funding strategy by placing an upper limit on the membership charges that apply under the scheme and requiring that the scheme be self-financing within five years. This argument exposes one of the difficult trade-offs that the delivery authority must seek to balance in providing advice. Although we would want to move to self-financing as quickly as possible, we must ensure that members’ interests are not compromised.

A requirement for the scheme to be self-financing in five years would be likely to lead to unreasonably high charges for the first cohort of members. I do not think that the hon. Member for Eastbourne would wish that to happen. It would certainly eat into their savings and might result in high levels of opt-out at the very time when we want to see the scheme established and the maximum number of people staying in it. Equally, capping scheme charges at 0.3 per cent., as the hon. Gentleman proposes, would affect the revenues of the scheme in the way that I described and would be contrary to reassurances that he was seeking earlier in respect of public funding support.

Nigel Waterson (Conservative, Eastbourne)

I might have misheard the Minister, but I should just reassure him that I was not suggesting starting with a higher charge and then reducing it. The Minister for Pensions Reform made that suggestion in evidence to the Committee.

James Plaskitt (Labour, Warwick and Leamington)

The point that I am getting at is that the amendment is designed to cement a figure in the Bill and therefore impose a charge, which could significantly increase the scheme’s dependence on other forms of charging, including public support, which previously he said he wanted to ensure would not be unduly high because he wanted the scheme to become self-financing as quickly as possible. Flexibility in charging is essential to support that objective.

I cannot say what the charging structure and levels will be, for the reasons that have already been given. PADA is consulting on the structure. It will have to reach decisions about the structure before charging levels can be considered. Charging levels follow that because PADA has to do its work on the whole financial structure of the scheme, so it is not possible at this stage to predict what the charging levels will be or, indeed, whether they will be static. Lord Turner argued in his report that if, once the scheme was up and running, it worked in the way predicted and all other criteria were met, he was confident that a 0.3 per cent. charge was realistic. That is certainly the view that I would take, given the argument in the report.

There is a balance to be struck between the initial level of charges and the time that it takes for the scheme to become wholly self-financing. Given that, we need to allow the delivery authority both the time and flexibility to do its work before closing down options. The hon. Gentleman is seeking to close down options before that work starts, but that might impede the success of the scheme.

John Greenway (Conservative, Ryedale)

There are real tensions, even within the group of amendments. On the one hand, we want to ensure that all the costs are absorbed and charged for in the scheme. Equally, we want maximum take-up, which must mean a charge that is as low as possible. I think that the Minister is saying that, at this juncture, we are not in a position to say whether 0.3 per cent. is achievable, or whether the figure will be higher. Whatever the charge figure is, it will have a real impact on take-up and the general climate in which people will expected to stick with the scheme, and to auto-enrol and not opt out. There has to be a good deal for them. Does it remain the Government’s intention to set a target figure? For all the reasons that have been outlined, we cannot decide whether it will be 0.3 or 0.5 per cent. It is very important that the Minister makes it clear that the Government have a target. If PADA has so much flexibility, how does one deliver that figure?

James Plaskitt (Labour, Warwick and Leamington)

No, I am not going to set a target—that would not be the right thing to do. Having read the Turner report, the hon. Member for Ryedale will understand why Lord Turner thinks that 0.3 per cent. is achievable. He is right to say that the charging level of the structure is critical to the success of the scheme at launch point. We need to have it launched in a context in which information on the charges shows quite clearly that they are a lot lower than alternative commercial schemes.

The hon. Member for Ryedale also knows that charge levels have a big impact on the kind of money that these schemes can release at the end when people come to decumulate. Across a lifetime, the scheme has a big impact. There will no doubt be a lot of debate and discussion about that at the point of launch. Therefore, it is essential that any comparison that is made clearly demonstrates that the charge structure is favourable compared with the alternatives. It would not be sensible to go beyond that. Turner’s argument in support of 0.3 per cent. is well known. Provided that all the launch processes are correct and all other aspects are sorted out, one would hope that such a charge level would be achievable. With those reassurances, I hope that the hon. Member for Eastbourne will agree to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

The Minister accuses us of trying to insert rigidities into the Bill and says that we are giving the game away. I think that I did give the game away because I made it very plain that these were probing amendments that I did not intend to press to a Division. I am very sorry if the Minister has been on tenterhooks ever since then.

As probing amendments, though, these amendments have been a dismal failure. They have failed to probe through the mists surrounding ministerial policy. The Minister said that we plumped for five years. Yes, we plumped for five years because the Minister did not plump for any years. Is he talking about 10, 20 or 50 years, or even six months? Surely, without prejudice—as we lawyers say—he could come up with some kind of time scale. It matters to PADA so that it knows what it is aiming for, and it matters to the industry and to the Committee.

The Minister talks about flexibility, and flexibility is a wonderful thing. At times, though, I think that this personal accounts lark is a bit like trying to put up a tent in a high wind. Unless we nail down one corner, we will never make any progress. So much flexibility has emerged during Committee that one wonders what kind of beast we will end up with.

Then there is the question of Lord Turner. Lord Turner and his fellow commissioners not only argued for 0.3 per cent., but set out a cogent, detailed case for it as a fundamental part of delivering this advice-free model of personal accounts, and as part of their overall package. We should not treat Lord Turner’s pronouncements as holy writ. Not everything in the Turner report is as true now as it might have been at one time, but 0.3 per cent. is a fundamental pillar of the Turner proposals. If we really propose to leave the door open to a significantly higher annual charge than the one envisaged by Turner, a case must be made. Perhaps the Minister does not like being probed and does not want to come up with the answers, but sooner or later he will have to make a case.

People are still working on the figure of 0.3 per cent., or 30 basis points. The Minister is terribly keen not to come down on one side or the other—he missed his vocation and should have become a Liberal Democrat. However, “on the one hand” and “on the other hand” will not do in this instance. Is he talking about 60 basis points, as foreshadowed by Stephen Haddrill, or something even higher? As we move further away from the Turner figure, the justification becomes more difficult.

If the Minister is saying, “Well, this is not a matter for Ministers; we are just going to leave all this to the Personal Accounts Delivery Authority,” who knows what we will end up with? It must be a low-cost, simple vehicle, which is why advice is not being put into the package. If we start fiddling with this part of the package, as I have said in our other debates, we might have to reopen the question of advice and whether that can be factored in after all. Otto Thoresen might not be able to square the circle in relation to so-called generic advice.

I have made it clear that I am not going to press the amendment to a Division, but I am very disappointed by the Minister’s apparent inability to allow himself to be probed by so-called probing amendments.

James Plaskitt (Labour, Warwick and Leamington)

I am more than happy to be probed. That is why I am here. The hon. Gentleman is right to probe me on this issue—I have no worry about that. I simply return to the argument that I made earlier: he is trying to tie the issue down before it is right to do so. To use his analogy, there will be pegs in the ground, but there is a question of timing. The hon. Gentleman is trying to put the pegs in now, which is far too early.

In 2010, when the scheme is launched, many things will have happened. Some of the pegs will be in the ground and the situation will be clearer. Scheme orders will be in place, for example, and PADA will have reached conclusions about the funding structure. Much more will be known, and by 2010 a lot more will be obvious, but the hon. Gentleman seeks to pre-empt all that work with his probing amendments by trying to insert specific numbers now, although it is right at this point to be flexible in the interest of ultimate success.

I think that as time moves on some of the certainty that the hon. Gentleman seeks will emerge, but that will happen at the appropriate time and in the appropriate circumstances, rather than artificially, now, before it is right.

Nigel Waterson (Conservative, Eastbourne)

I do not want to pursue the boy scout analogy too far with pegs in the ground and “dib, dib” and all that. I just want to say—and then I shall finish—that I am not trying to pre-empt anything. If anything, I am trying to “post-empt” something. Turner’s figure was 0.3 per cent. All I am trying to say is that the onus is firmly on anyone, including the Minister, who wants a sharp move away from that to 0.5 or 0.6 per cent. or whatever it might be. That is the problem, but I am clearly flogging a dead horse, or a dead tent, so I beg to ask leave to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 62, in schedule 1, page 55, line 33, leave out ‘must’ to end of line 34 and insert

‘publish and lay before Parliament a copy of the statement and report sent under sub-paragraph (5)(b) on the first working day following receipt.’.

I hesitate now to call any amendment probing, as I might be wasting my breath. The amendment would simply ensure that the report that will be prepared and will go through various stages should be laid promptly before Parliament. That seems eminently reasonable to me, and I cannot think that any but the most churlish Minister could refuse to accept that.

James Plaskitt (Labour, Warwick and Leamington)

That was hardly a ringing speech in support of the amendment. I suspect that the hon. Gentleman knows that there is not much chance of it being accepted.

I hope that we can dispatch the amendment briefly. The simple point is that trying to ensure publication the next day is not practicable. Proof reading has to be done, printing has to be checked, and delivery and distribution have to be sorted out. I am sure that the hon. Gentleman hopes that great care will be taken to ensure that published material is accurate in the interests of correctly informing Parliament and the public. To impose an artificial next-day requirement would make it difficult to achieve that. One would run the risk of errors creeping into published information, and I do not think that he would want that.

Requirements are already in place for non-departmental public bodies on submitting their accounts, and the Government Resources and Accounts Act 2000 imposes outer limits on the timeliness of things being published. Those safeguards are adequate to ensure that things are done promptly, but accurately, in the interests of good public information.

With that assurance, I hope that the hon. Gentleman will withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

Having heard the Minister’s honeyed and reassuring tones, I beg to ask leave to withdraw the amendment.

Clause 58

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 33, in clause 58, page 27, line 26, leave out paragraph (b).

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss amendment No. 34, in clause 58, page 27, line 28, leave out subsection (4).

Nigel Waterson (Conservative, Eastbourne)

We are back on money again. Amendment No. 33 would curtail the powers of the trustee corporation to borrow money. I am happy not to press the amendment if the Minister is able to give me the assurance that he was not able to give on the previous amendment—that any money borrowed would be borrowed on commercial terms and repayable over a reasonable time.

Amendment No. 34 would remove subsection (4). The hon. Member for Rochdale spoke on previous amendments about the Secretary of State being a control freak when it comes to dotting all the i’s and crossing all the t’s. Surely, if we are setting up the corporation with proper people, any power that they have, particularly under subsection (3), to enter into agreements and to invest money, particularly if the power to borrow money is to be removed from them, they can do on their own without regularly having to go to the Secretary of State cap in hand.

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

James Plaskitt (Labour, Warwick and Leamington)

Yes, indeed, we are back on money. I shall try again to reassure the hon. Gentleman. We are clear in the intention that the personal accounts should be self-financing in the long term, something that we have already established. However, we know that there will be periods when the scheme will have insufficient revenues to cover its costs. Clearly one source of financing for those costs could be borrowing, which could be from the private sector—the banks or even other pension providers—or from the Government, or a mix of both. We do not know at this point—we could not possibly know—if borrowing will be required. I have touched on the delivery authority’s role in recommending a financing strategy for the personal accounts scheme, and we will have more opportunity to consider it when we reach clause 61.

I reassure the Committee that, if borrowing is required, like any non-departmental public body the trustee corporation will need to comply with existing guidance and legislation to show that value for money for the taxpayer can be achieved. It is important to stress that a decision about how the personal accounts scheme should be financed has yet to be taken. We can only be certain of the right approach when the delivery authority has been given time to finalise the scheme design, develop its procurement strategy and engage with the market, which it can do only when its functions are extended under clause 61. It is vital at this stage that we do not restrict the options for financing the scheme. Doing so would compromise the ability to get value for money for members who are participants in the scheme. By taking away the trustee’s ability to borrow, amendment No. 33 would do just that.

Amendment No. 34 would allow the trustee corporation to borrow and invest, but without the consent of the Secretary of State. As a non-departmental public body, it is normal for functions such as borrowing and investing to require the consent of the Secretary of State. That is because an NDPB’s financial arrangements are to be taken into account in its parent Department’s budgets. Therefore, it is right and necessary that it is subject to scrutiny by its sponsor Department’s Secretary of State. That provides a safeguard to ensure that the wider interests of the taxpayer are taken into account, as well as the NDPB’s objectives. In the case under discussion, the trustee corporation would be responsible for balancing low charges for members against ensuring that the scheme is commercially viable. However, the Secretary of State’s consent is needed to ensure that its actions would not jeopardise the sound management of the Government’s finances.

I ask members of the Committee to note that we have made one exception to that rule under clause 58, which reflects the trustee corporation’s role as sole trustee of the personal accounts scheme. Provision has been made in subsection (5) to ensure that the trustee corporation retains an ability to act independently when acting as the trustee of the personal accounts scheme—for example, with regard to investing members’ contributions to the scheme. In the case of investing, it is clear that that must be the responsibility of the trustee acting in the members’ best interests.

Nigel Waterson (Conservative, Eastbourne)

I need to check that I am following the Minister’s remarks correctly. Is he saying that, under certain circumstances, subsection (5) could overrule subsection (4) so that in some cases when the trustee corporation is exercising certain powers under the scheme as set out in clause 50, it might not need the consent of the Secretary of State, or are we into an entirely circular situation?

James Plaskitt (Labour, Warwick and Leamington)

I am making an important separate distinction, which I have tried to explain. It concerns the importance of the trustee corporation’s ability to act independently when acting as trustee to the personal accounts scheme. That is a separate set of circumstances, which is why the provision has been made.

The hon. Gentleman asked whether non-commercial rates would ever be contemplated. As in other issues such as grants, it is difficult at this point to anticipate the position. It would largely be for the market to determine when loans are being sought. Again, I say to him that, if we tried at this stage to impose severe restrictions on any of the financial options, even though an individual restriction that he sought might have reasons behind it, that would damage the overall context of allowing flexibility and protecting all of the other interests that he rightly wants safeguarded. Pinning down any one restriction would potentially raise difficulties in others. I am sure that he would want, across the whole of the funding arrangement, to maintain flexibility, not only to ensure the success of the scheme, but to minimise any set of issues that might arise if there was over-reliance on one particular source of funding, as I tried to argue in respect of charge levels.

Nigel Waterson (Conservative, Eastbourne)

Is the Minister saying that in the case of the trustee corporation, as opposed to PADA, it is envisaged that when it borrows money, that will be in the markets rather than from the Treasury?

James Plaskitt (Labour, Warwick and Leamington)

It will have a range of options open to it, which is the whole point of my argument about flexibility. It may well take private money, it may well have a loan from public sources. That is all the more reason why it is important at this stage to retain flexibility about funding requirements, so that all options are there, in order to protect and maximise the options for the scheme’s success, bearing in mind the point that I have made about transparency and that any loan, or even grant support, to the authority would have to be consistent with the European requirements. As it happens, those requirements allow for the option of grants because this is a service of general economic interest and in those circumstances particular rules apply.

Nigel Waterson (Conservative, Eastbourne)

The Minister has been helpful, for a change. Is he convinced that the European regulations are directly relevant here? The Government are not proposing to give grants to a manufacturer of aircraft wings or whatever. The personal accounts system will not be competing in any sense with any similar organisation in other European member states, so I wonder how relevant the European dimension is to this situation.

James Plaskitt (Labour, Warwick and Leamington)

Very relevant is the answer, because the regulations that I refer to relate to what are known as services of general economic interest. As the hon. Gentleman rightly says, that is not comparable to a manufacturer in a competitive situation, but the regulations are specifically set down because there will sometimes be large-scale services that are deemed to be of general economic interest. In those circumstances, where there are not the usual commercial constraints, it is important to have a set of rules about the degree to which they may be publicly funded. That is why I cite the rules; they are specifically important for this precise set of circumstances. With those reassurances, I hope that he will agree to withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

I am grateful to the Minister for taking such trouble over his explanation and I beg to ask leave to withdraw the amendment.

Clause 61

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 35, in clause 61, page 28, line 23, leave out paragraph (b).

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss amendment No. 105, in clause 61, page 28, line 26, after ‘Part’, insert ‘but excluding sections 14 to 24’.

Nigel Waterson (Conservative, Eastbourne)

The efforts on this group of amendments are a double-act, and I will leave the hon. Member for Rochdale to make his case for amendment No. 105, partly because I am not sure that I fully understand it. No doubt he will enlighten the Committee in a moment. Amendment No. 35 seeks to remove paragraph (b) of subsection (2). Clause 61(2)(b) adds to the functions of the Personal Accounts Delivery Authority, allowing it

“to give any assistance and advice that the Secretary of State or the Pensions Regulator may require, and any advice that the Authority considers expedient, for or in connection with arrangements to enable requirements imposed by or under Chapter 1 of this Part to be complied with and enforced.”

This is a probing amendment: I want the Minister to tell us the sort of situations in which he envisages that subsection (2)(b) would apply. Subject to that, I would not dream of pressing it to a division.

Paul Rowen (Liberal Democrat, Rochdale)

This is an important aspect of the Bill. We are looking at the functions of the Personal Accounts Delivery Authority, and amendments Nos. 35 and 105 seek to clarify the relationship of PADA to chapter 1 of the Bill. Chapter 1 sets the context in which personal accounts will operate in the pensions market. It mentions occupational pensions schemes, quality requirements, tests schemes and test-scheme standards—a whole range of issues that affect the pensions market. My support for amendment No. 35 and the reason we have tabled amendment No. 105, is because we were unclear, looking at its functions and at clause 61(2)(b), why PADA should advise the Secretary of State on a range of issues for which it is not responsible.

PADA is the delivery authority that will set up personal accounts. It will then hand that over to the pension trustee. In my view, it should not take an interest and involvement in the wider area. Occupational pensions schemes are already regulated, both here and in earlier Bills. It is important that PADA’s functions are clear from the beginning. Chapter 1 sets out the overall content of pensions. It moves on to define the responsibilities of various groups. That could be the responsibilities of the Pensions Regulator—another body whose modus operandi is changed by the Bill—or those of the Secretary of State, or of PADA. PADA should not be advising the Secretary of State on the totality of chapter 1 and if we accept clause 61(2)(b), that is what we will do.

Our amendment is slightly clumsy. It seeks to remove from chapter 1 clauses 14 to 24 which, in our view, have nothing to do with the operation of PADA. They may not be the responsibility of the Pensions Regulator, or those of the Secretary of State, in terms of the operation of the pensions market. However, given that it is PADA’s responsibility to set up personal accounts, we do not believe that it should have the responsibility or possibility of giving advice to the Secretary of State on issues that are not within its responsibility. The operation of occupational pension schemes and the job of the Pensions Regulator, which are covered in chapter 1, are not issues for PADA. It has to be focused and clear. It has a job to do in a short space of time, and if it is advising the Secretary of State on everything else to do with pensions, it will not do the job that it was set up to do. That is why amendments Nos. 35 and 105 are appropriate.

We think that the clause is another example of civil servants going awry. They are trying to include everything, including the kitchen sink, but we do not believe that that is appropriate in this case.

James Plaskitt (Labour, Warwick and Leamington)

We are moving into another important part of the Bill. Clause 61 deals with the functions of PADA. I am grateful to hon. Members for introducing their amendments and for giving me the chance, I hope, to reassure them on the points that they have raised. I understand why they raised them.

The clause sets out the scope of the authority’s functions, allowing it to continue to advise on policy but also to undertake the detailed implementation work necessary to establish the personal accounts scheme and to support the regulator in establishing the processes to maximise employer compliance with the new duties. The amendments would prevent the authority from undertaking some, or all, of the second part of that role, but it is absolutely important that it does, for reasons which I shall try to set out.

The Bill introduces an obligation on employers to enrol eligible workers into a workplace pension and to make contributions to it. We could not introduce such a duty on employers without also having an effective compliance regime—the two go hand in hand. Otherwise, there would be no way of ensuring that more workers have the opportunity to benefit from the reforms, nor of ensuring that employers comply with the law and do not in any way disadvantage their work force.

Paul Rowen (Liberal Democrat, Rochdale)

Does the Minister accept that compliance is the responsibility of the Pensions Regulator, not PADA?

James Plaskitt (Labour, Warwick and Leamington)

I am about to come to that very point. I am sure that if the hon. Gentleman will just hang five, we will get there.

This is a major project, and although the regulator will be leading on delivery, there are benefits at this stage to be gained from sharing expertise. Many of the challenges in setting up an effective compliance regime are not dissimilar to the challenges in establishing the personal accounts scheme; for instance, specialist planning and project support for what is, clearly, a large programme. There is a significant amount of preparatory work to be done on the design of the compliance processes.

That work needs to start quickly, and we do not want to jeopardise the timetable for delivery. We think that the most effective approach to the scale of the project is for the regulator and the Department to utilise the authority’s resources, skills and expertise in the design of the personal accounts scheme, and in support of the establishment of a compliance process. I believe that the hon. Gentleman accepts that that is of critical importance.

Amendment No. 35 would prevent the regulator having access to the authority’s experts in such areas as project management, procurement and design. I am aware that in taking the approach that we are, there could be a perceived conflict of interest between delivering the personal accounts scheme and supporting delivery of the broader compliance regime. I believe that that is what is exercising hon. Members in this group of amendments.

Let me be absolutely clear: the regulator, not the delivery authority, will be responsible for ensuring that the compliance regime is fit for purpose. That is a clear distinction. The role of the authority will be restricted to supporting delivery of the compliance processes, and clause 61 simply enables it to carry out that role. Its detailed remit will be set out in other documentation, largely the framework document still to come. It will clearly specify the degree of the authority’s responsibilities in supporting the regulator, and also its more substantial role in respect of personal accounts.

Nigel Waterson (Conservative, Eastbourne)

We have been here before. A few months after the passing of the 2004 Act, which set up the regulator and the Pension Protection Fund, it became apparent that a written protocol was needed to work out the boundaries between the two. Are we not heading for the same problems in this instance?

James Plaskitt (Labour, Warwick and Leamington)

No, I do not think that we are. I am saying that these bodies need to show their authority and expertise during the building process. Once we move into the regime, however, the functions are very clear and do not have the overlap that the hon. Gentleman is concerned about. The boundaries will be very clear once the scheme is in operation. Furthermore, the authority’s annual business plan will set out its key objectives and targets. Both of those will be published along with the framework document once the authority has legal authority to carry out its extended role. Those governance and practical arrangements, supported by robust stewardship from our Department, will ensure that any potential conflict of interest is removed from the decision-making process.

Paul Rowen (Liberal Democrat, Rochdale)

On the framework document, can the hon. Gentleman give us a time frame in which he expects it to be published? Clearly, the document is key to removing some of our concerns about how the clause will operate.

James Plaskitt (Labour, Warwick and Leamington)

It is a key document, and the hon. Gentleman is right to describe it as such. I cannot tell him precisely when it will be available. It will be available for study in the Library of the House in plenty of time before the scheme is up and running. I am grateful to the hon. Gentleman for clarifying amendment No. 105, which seeks to exclude the authority from even giving advice and assistance on clauses pertaining to qualifying schemes.

Let me try to reassure the hon. Gentleman that there will be no conflict of interest here. While the authority will be able to advise the Secretary of State on setting the criteria for qualifying schemes, there will be no role beyond that. Any body or stakeholder that the Government consult when drawing up the regulations will have no additional role. It will be for the Secretary of State to satisfy himself that the regulations achieve the appropriate policy outcomes and to ensure that the criteria continue to support all good quality provision. In due course, it will be for the House to pass those precise regulations.

Moreover, excluding the authority from providing support to the regulator, under clauses 14 to 24, as the amendments seek to do, could, in fact, lead to a confused and fragmented approach. That is another kind of problem that I am sure the hon. Member for Rochdale would want us to avoid. It would be very difficult for the authority to offer constructive support on the compliance process without regard to the spectrum of schemes that could fulfil those duties.

In summary, robust Government arrangements will ensure that the regulator will be responsible for questions of design in the compliance regime and the authority will be restricted to supporting delivery. With those reassurances, I hope that the hon. Gentleman will agree to withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

I am grateful for the Minister’s reassurances. It seems that we have to wait for the framework document, which will answer all our concerns and worries. I beg to ask leave to withdraw my amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 36, in clause 61, page 28, line 36, leave out paragraph (b).

Nicholas Winterton (Conservative, Macclesfield)

With this it will be convenient to discuss amendment No. 37, in clause 61, page 28, line 37, leave out subsection (7).

Nigel Waterson (Conservative, Eastbourne)

The amendments may have a familiar ring to them. The Minister can just read out what he said in answers to previous amendments. Amendment No. 36 seeks to take out the authority’s power to borrow money, which is a bigger concern for us than the trustee corporation. I do want not want to rehearse those arguments. We need clarity about where PADA is going to get its money from, whether it will get a bung from the Government if it gets its figures wrong and whether it will be lent money at absurdly low interest rates, or no interest rate at all, and so on.

Amendment No. 37 would remove subsection (7), which has the Secretary Of State getting in on the act yet again. That is the right approach and it is encapsulated neatly in the two amendments, which set out clearly the parameters for the PADA to operate in and let it get on with it.

James Plaskitt (Labour, Warwick and Leamington)

As the hon. Member for Eastbourne said, there is a certain familiarity about the arguments that we are engaged in, so I will try to be as brief as possible.

As we have already established in debates on previous amendments this morning, there will be an initial period when the scheme has insufficient revenues to cover all its costs. For example, it is envisaged that the authority will incur costs in finalising the design of the scheme and making payments to contractors before the scheme has actually opened its doors to its first members. Clearly, given our intention that the scheme be ultimately self-financing, the likely source of financing for those costs could, indeed, been borrowing. However, as I hope I have already made it clear in earlier debates, no decision on how the personal account should be funded has yet been taken and we have not yet decided whether any borrowing will be from the private sector, the public sector or from a mixture of both: that will depend on a number of factors, including the scale of any borrowing requirement and the willingness of the private sector to engage with a project of this scale.

We can only be certain of the right approach once the authority has been given time to finalise the scheme design, develop its procurement strategy and engage with the market. If borrowing is required, then, like any other non-departmental public body, the Personal Accounts Delivery Authority will need to comply with all the existing guidance and legislation to show that value for money can be achieved.

As we have heard in previous debates, it is vital that we keep all the options open at this stage and allow the authority to recommend the best financing strategy for the personal accounts scheme. We should, at this stage, try to tie the authority’s hands by removing any of the options that are open to us.

Conversely, amendment No.37 would allow the authority to borrow, but, again, it would remove the requirement for the Secretary of State's consent. As the Committee will be aware, it is normal for borrowing by non-departmental public body to require precisely that consent, because its financial arrangements are required to be taken into account under its parent Departments’ budgets. Therefore it is right and necessary that such an arrangement is subject to scrutiny by the sponsoring Department’s Secretary of State. That process also provides a crucial safeguard to ensure that the wider interests of the taxpayer are being taken into account and, indeed, that the personal accounts scheme will be self-financing in the long run and will meet the non-departmental public body’s objective to set up a scheme that balances low charges for members against ensuring that the scheme is commercially viable.

For reasons that are, by now, somewhat familiar, I hope that the hon. Member for Eastbourne will ask leave to withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

The familiarity of the arguments makes them no more persuasive. The Minister’s reiteration of what Donald Rumsfeld calls the known unknowns—let alone the unknown unknowns—is tedious to the point of rendering us comatose. I will not tempt the Minister to say any more about this, so I beg to ask leave to withdraw the amendment.

Clause 62

Paul Rowen (Liberal Democrat, Rochdale)

I beg to move amendment No. 160, in clause 62, page 29, line 2, after ‘must’ insert—

‘(a) exercise an overriding duty to act in the best interests of members and future members of the scheme, and

(b) ’.

Janet Anderson (Labour, Rossendale and Darwen)

With this it will be convenient to discuss the following amendments: No. 161, in clause 62, page 29, line 5, after ‘participation’, insert ‘amongst appropriate eligible employees’.

No. 162, in clause 62, page 29, line 5, leave out ‘qualifying schemes’ and insert ‘a scheme established under section 50’.

No. 106, in clause 62, page 29, line 6, at end insert

‘among those on low incomes and who are not currently saving enough for retirement’.

No. 46, in clause 62, page 29, line 18, at end insert—

‘(g) the best interests of prospective members in the period prior to 2012 are served;

(h) the level of savings shall be increased as well as the number of existing savers, and that in general better retirement incomes are achieved.’.

No. 108, in clause 62, page 29, line 18, at end insert—

‘(g) the Authority acts in the best interests of prospective members in the period prior to 2012’.

No. 109, in clause 62, page 29, line 18, at end insert—

‘(h) the Authority achieves delivery of a simple system of personal accounts’.

Paul Rowen (Liberal Democrat, Rochdale)

It is a pleasure to see you in the Chair, Mrs. Anderson.

I should like to continue our discussion on the Personal Accounts Delivery Authority. Clause 61 concentrates on its functions and clause 62 deals with the broad principles under which it should operate. The group of amendments has two aims. Through some of the amendments, we seek to clarify and set out important principles in the Bill. In others, we seek to specify the area in which PADA should operate. It is clear from our debate on clause 61 that we believe that some aspects of the Bill set PADA’s remit too wide, so it is important to set down the clear principles and priorities.

Amendment No. 160 would add to the principles under which PADA should operate. It should have an overriding duty to act in the best interests of members and future members of the scheme. It has a clear job to do and a set time period in which to do it. It should be clear right from the start that its prime purpose is to act in the best interests of members and future members. There is a great danger, given the different relationships among the Pensions Regulator, the Secretary of State and occupational pensions, that PADA could lose focus. Our amendment would prevent that.

Amendment No. 161 also addresses the purpose of PADA and what it should seek to do. Everyone accepts that it will not be appropriate for every eligible person to sign up to a personal pensions scheme. It is vitally important that only those for whom personal accounts are appropriate are signed up. We do not want PADA to go out and try to sign up all and sundry. We know that there is a huge pool of people who currently do not have an occupational pension scheme, and they might well be the target market. Once we have established that, we have to start looking at who is appropriately eligible to be signed up.

It might be a case of simply saying that anyone who earns within a certain range would be appropriate, but this comes down to the debate that I am sure we will have once the Thoresen report is published about what is the appropriate generic advice and information that is provided, and even, as the hon. Member for Eastbourne said this morning, whether the guidance is appropriate. We need to be sure that there is a target market, and we should aim it at the appropriate employees.

Amendment No. 162 would ensure that qualifying schemes—those that PADA will have responsibility for setting up—would fit within clause 50. The use of broad language and talk about qualifying schemes is part of the unfocused thinking that pervades certain aspects of the Bill. We are talking about personal accounts and schemes for people who do not have occupational pension schemes, and we need to define tightly what those qualifying schemes should be. The best way to do that is to use clause 50, which sets out clear parameters for the scheme, if it is to come within the criteria. PADA has a very short life and an awful lot to do, and we believe that some of its remit is too wide. It needs to concentrate on its core objective, and if that is to set up PAs, the Bill should say so.

Amendment No. 106 would insert who the target market is into the set of principles by which PADA operates. That is important. We want to send out clear messages that it is not meant to compete with or replace occupational pension schemes, and that it is for people on low incomes and those who are not saving enough for retirement. This goes back to a discussion on an earlier amendment.

The Equality and Human Rights Commission gives clear figures in its briefing on who should be in the target market. It says that women are under-represented among employees earning more than £33,000, and over-represented among employees earning less than £5,000. Some 43 per cent. of female employees earn between £5,000 and £15,000, and disabled employees are also over-represented in that earning group. Those people are in the target market that we want PADA to concentrate on. This is about ensuring that PADA provides appropriate advice and guidance and that those people are signed up. If there is too much of a blunderbuss approach, the authority will lose some of its effectiveness. Taken with the Minister’s earlier assurance that there will be a review of how people on benefits or low incomes will be affected by various changes, we believe that amending the principles to set out how the measures should operate will send a clear message to people who might sign up to the scheme, and to PADA and the wider market, that this is what PAs are about.

With amendment No. 108, we are saying that PADA should act in the best interests of prospective members. We have talked about the importance of existing members and people who might sign up in the period leading up to PADA completing its work.

Amendment No. 109 also concerns a principle, so we are not talking about an operational matter. We are not prescribing how PADA should deliver its functions, but saying what its principles are. The first principle I stated was that it should protect the interests of prospective employees and scheme members. The second is that it should deliver a simple system of PAs. We want to ensure that we protect the interests of those signing up, and we want PADA to ensure that its products are for those who are most eligible and, predominantly, on low incomes and in certain sectors. Furthermore, the system provided to them must be simple to operate and understand.

We believe that our amendments would strengthen this clause by setting out some very clear principles to which PADA should adhere during the time span. I believe that they are neither unreasonable nor unworkable, nor that we would be saddling PADA with something that it could not deliver. We are trying to ensure that everybody is very clear about what personal accounts are for, who they are for, and how they will be delivered.

Nigel Waterson (Conservative, Eastbourne)

Welcome back to our deliberations, Mrs. Anderson.

This and subsequent groups of amendments are very important, so we must give them the attention that they deserve. I am grateful to the hon. Member for Rochdale for setting out his stall, as it were, on his amendments so carefully and clearly. We are totally as one with him on the need to limit PADA’s scope. As I said earlier, it is not that we have got it in for PADA. We simply take on board entirely the mantra of its chief executive, Tim Jones, about keeping it simple. The less that PADA has to worry about, the better, which is why we want to ensure that in achieving its prime objective of delivering personal accounts to the target market on time, in 2012, at the least possible cost and with the greatest efficiency, it is bound very carefully on how it operates and the principles that inform its activities.

We agree with some of the amendments in the group, but not with others. We do not agree with amendment No. 160 because we think that it would put the concept of a series of principles out of balance. The particular principle proposed in the amendment should not be an overriding one. It is important to establish a group of clear, easily-understood principles, none of which are contradictory. Many of the principles flow from Turner, the Government’s White Paper, and some of the debates on amendments that I proposed to the Bill that became the Pensions Act 2007. We need to get the principles absolutely right.

We are quite taken with amendments Nos. 161 and 106, which are both concerned about, and focused on, the target group, which has to be the sensible approach of the Bill. Mission creep, as it has been called, must be resisted at all costs. The Bill is all about getting cheap, easy-to-understand pension cover and savings to the several million people who are not saving anything, or anything like enough.

I think that I can see where the hon. Member for Rochdale is coming from with amendment No. 162, which would make clear which schemes fall under clause 50. That is broadly the right approach. I wonder whether amendment No. 108 is in conflict with some of the other principles or objectives, but amendment No. 109 is right on the money. Again, simplicity has to be the theme throughout this part of the Bill, so we are very much in favour of that amendment.

I shall spend a little longer on our amendment No. 46, which would insert two principles into the list in clause 62, even though it is important that that list it is not too long. The first principle is that

“the best interests of prospective members in the period prior to 2012 are served”,

which ties in with an amendment proposed by the hon. Member for Rochdale. The second principle is also important. Given that it has not been touched on in the debate so far, allow me to spend a couple of minutes explaining what we mean by

“the levels of saving shall be increased as well as the number of existing savers, and that in general better retirement incomes are achieved”.

The latter part of the provision is almost a direct quote from one of the Pensions Policy Institute’s excellent papers on the likely effects of personal accounts, which also examined the so-called at-risk groups.

Although the Minister for Pensions Reform was slightly evasive when I quizzed him during our evidence sessions, I am sure that both he and the Under-Secretary would agree with the proposition that if personal accounts do not deliver more savings overall, as well as more savers, they will have failed. If the Under-Secretary takes great umbrage at that statement, he can always intervene. It is almost inevitable that the system will produce more savers simply by dint of the process of auto-enrolment. Whether that is 4 million or 5 million, or 7 million, 8 million or 9 million, is, to some extent, in the lap of the gods, but there is no doubt that there will be more savers. Issues such as the persistency of the savers are matters that whoever is in government at the time will have to grapple with.

It is worth reminding the Committee that it could be possible, as is demonstrated by one of the PPI’s pessimistic scenarios, for the number of personal accounts to go from zero to a substantial amount, yet for the overall amount of pension savings in the country to fall. Even if they were to stay the same, but be distributed among more people, that would be a failure for personal accounts. We must guard against that.

The second part of the provision states:

“in general better retirement incomes are achieved.”

That goes back to the issue of levelling down. It is important that people do not come out of defined benefit schemes in which, as we know, the average employer contribution is 16 per cent., into personal accounts in which the employer contribution is much less: 3 per cent. It is vital that we retain a Berlin wall between existing provision and personal accounts, which is why personal accounts will not have been a success if they do not deliver generally better retirement incomes than people had heretofore.

In stark terms, for the great majority of people, that means no retirement income versus that delivered by personal accounts. That must be the result of the project and it is why we tabled amendment No. 46. I shall spend less time on proposed new paragraph (g) in the amendment because such matters have been dealt with under another amendment tabled by the hon. Member for Rochdale. I do not need to repeat his arguments, which I support entirely.

It is important that the criteria for the success and failure of personal accounts are clear in the Bill and well understood by Paul Myners, Tim Jones and all those who will be working hard to deliver on personal accounts by operating PADA and functioning under the Bill. I shall be interested to know whether the Minister disagrees with how I have defined the success or failure of personal accounts.

John Greenway (Conservative, Ryedale)

I am delighted to welcome you to the Chair this afternoon, Mrs. Anderson. I am sorry that I was absent last week, but I was not too well. However, I am much better now.

I share the concern of my hon. Friend the Member for Eastbourne about some of the amendments tabled by the hon. Member for Rochdale, but I want to take a slightly different approach from him to the matter of an overriding duty to work in the best interests of members and how far the remit of PADA actually runs. I have sympathy with the view that, if we are asking through the scheme that there should not be a levelling down from existing occupational schemes and that people already enrolled in existing schemes should be encouraged to stay in them, surely PADA’s remit needs to be slightly more widely drawn than that suggested by my hon. Friend. However, the hon. Gentleman is on to something by talking about an overriding duty to work in the best interests of members.

PADA is an extraordinary beast. It is a completely new and unique concept, yet it will be giving information and guidance to people. As we discovered at the evidence-taking session in the Boothroyd Room, there will be a lot of media comment about whether a personal account is good or bad for a lot of individual people on low incomes. Given the way in which that publicity will be dealt with and how people will receive and react to it, we cannot see this issue in isolation from what is happening in the pensions market and in the financial services industry in general.

One of the overriding principles that the Financial Services Authority has introduced into financial services regulation in the last couple of years is the principle of treating customers fairly. That is in vogue at the present time and all finance institutions are struggling to come to terms with what it actually means—it is a nice easy statement. Treating customers fairly applies to companies and finance institutions, including many of the pension companies that are offering group personal pension schemes. We know that there as an issue about whether those can be regarded as suitable for auto-enrolment and meeting the European Union directive on distant selling, and the way in which that will be cleared up. To add the principle of an overriding duty to work in the best interests of scheme members, or something similar, would help. It would help the authority and, in the long run, it would provide some comfort to the many millions of people who are going to join the personal account scheme in the years to come.

Today, and even in the next three or four months as the Bill progresses through both Houses, we cannot envisage where all of this will end up. If we were dealing with a charity, there would be clear charity law with similar implications. If we were dealing with an organisation such as an insurance company, for the purposes of financial service regulation, there would be something of this nature in the principles under which it was regulated. It seems that my hon. Friend the Member for Eastbourne and the hon. Member for Rochdale are both on to something with these amendments regarding an overriding duty to work in the best interests of the members of the scheme. This is the only that opportunity we have, as the Bill progresses, to put this measure, or something similar, in the Bill.

There is one other way in which the Minister might consider dealing with the same point, which is to say something similar in clause 63, which relates to the directions and guidance that are given to PADA on how it carries out its duties. This is an important principle that we should grasp. It should be incorporated in the Bill at some point, if not today, as a clear duty of the authority.

James Plaskitt (Labour, Warwick and Leamington)

Let me add my welcome to you, Mrs. Anderson.

Clause 62—the principles—is an important part of the Bill, and these amendments have sparked an interesting debate. I agree with the aspirations expressed by those who have spoken in support of them. As many have said, they go to the heart of our ambitions for these reforms: more people saving for retirement; more people contributing more and for longer; and, ultimately, higher incomes in retirement. That is all underpinned by the establishment of a simple low-cost scheme focused on those currently without workplace provision.

Although I can sympathise with the aspirations behind the amendments, I suggest that they are not the right way forward. I am not necessarily in disagreement with the points on which hon. Members seek reassurance, but I am not sure that the amendments are the means by which to get there.

I will try to explain why, while taking the amendments in groups. Amendments Nos. 46, 108 and 160 seek to ensure that the authority acts in the best interests of future members of the personal account scheme. We must not lose sight of the fact that the authority is designing and setting up the scheme as an integral part of our ambitions for the reforms. While the interests of prospective members of the scheme are important, we must ensure that the authority has regard to other matters that are important to the success of reforms—including the impact on employers and on the broader pensions industry.

Therefore, I do not agree that there should be one overriding principle, as has been suggested. It is imperative that the authority gets the balance right among the needs of the personal accounts scheme and its members, the overall impact on employers, and the impact on the broader pension industry, including members and prospective members of other qualifying pension schemes. It is only by achieving that balance that we will successfully achieve all the core objectives of the reforms. I agree that the interests of future members are of central importance, but it is not necessary to add a specific principle to achieve that, and that could run the risk of unbalancing other important objectives in the way I have just described. The current principles have been drafted to ensure that the authority takes account of those matters that will be important to prospective members of the scheme.

Paul Rowen (Liberal Democrat, Rochdale)

Does not the Minister think that having regard to other schemes, and the relationship between other schemes, is the responsibility of the Pensions Regulator, not PADA? PADA was created to set up personal accounts. Regulating the whole market is the responsibility of the Pensions Regulator, not PADA.

James Plaskitt (Labour, Warwick and Leamington)

No, I would not agree. We must think about this while PADA does its setting-up work. PADA is commissioned to design the system that, in the end, the trustee operates and the regulator regulates. In designing that system, PADA must have mind to the principles and ensure that nothing is done at the design stage that would conflict with the ultimate objectives. Therefore it is right and proper that it has regard to those issues.

That is why we have principles covering the need to encourage and facilitate participation, to minimise costs, to take account of members’ preferences in making decisions about investment choice, and to respect diversity. The interests of future members are already at the forefront of the authority’s thinking. It has established a consumer representative committee to provide expert advice on a range of consumer matters related to the personal accounts scheme, such as the charge structure, the investment principles of the personal accounts scheme and, ultimately, the scheme rules. The authority is also in the process of setting up an extensive customer insight and research programme to ensure there is thorough testing of relevant processes by those who are likely to be scheme members.

Finally, may I remind members of the Committee that once the scheme is operating, the trustees who run it will be required to act in the best interests of members and beneficiaries? Clearly, when designing the scheme, it is essential that the authority keeps that in mind.

The hon. Member for Eastbourne revisited the debate about trading down, and the issue of whether we are looking for not only more savers, but more saving. That is inextricably part of the levelling down argument. I would encourage him to recall what Lord Turner said during the evidence-taking session. On that issue, I can tell the hon. Gentleman that if all other aspects of the design of the measure are as we hope, and that therefore up to 7 million people who have not saved before save, it is highly probably that there will be more net saving and not simply more savers.

The measures will limit the extent of levelling down through the provisions on nil transfers in and out of the scheme and the income brackets to which that applies. There will be an opportunity to revisit that in 2017 in the light of experience. I call that the fifth-term review, and perhaps the hon. Gentleman will understand why. Let us consider Lord Turner’s evidence and the private schemes that have a large body of members who work in highly respected companies. There is no evidence to suggest that large schemes such as those will engage in substantial levelling down. Their employer contributions are probably way above the 3 per cent. level, so it will not be in their recruitment or retention interests to engage in levelling down, and our consultations in these early stages have given us no reason whatever to believe that they would do so. Given that, and looking at the potential scale and impact of the number of people participating in the schemes, we will have a substantial amount of levelling up—people will go from zero to having a significant pension.

Of course the objective is to see more people saving. That is relatively easily achieved through auto-enrolment and the other criteria, but one would expect to see more saving, given the reassurances that we have given on previous clauses on levelling down.

Nigel Waterson (Conservative, Eastbourne)

Does the Minister agree that if we end up with more savers, but not more saving, personal accounts would be a failure?

James Plaskitt (Labour, Warwick and Leamington)

We are clearly setting out what we mean by the success of the scheme in the measures that we are debating. The principles and primary intention of those is perfectly obvious. In the first instance, more people must save, because the whole purpose of the measures is to close the gap in pension provision, which is what we asked Lord Turner to look into. That is the central objective: we want more people to save so that they have higher incomes in retirement and so deal with the issues that we asked Lord Turner to address. In addition, given the other dimensions of the reform that we are introducing and the other safeguards, and bearing in mind the principle in subsection (2)(c), we expect to see more people saving. Whether that happens depends on the success at launch stage and how many people come in.

This is reminiscent of this morning when the hon. Gentleman asked for similar assurances. I cannot give them at this stage because the design is not in place and recruitment has not begun. However, I expect there to be more savings as well as more savers.

The hon. Members who spoke to amendments Nos. 106, 161 and 162 explained that they would ensure the personal accounts are properly aimed at, and are promoted to, the target group. I have no problem with that ambition, but the Bill will achieve it. We are clear that the personal account scheme should focus on the target group of moderate to low earners who currently do not have access to good-quality workplace pension provision. We believe that the combined effect of our package of proposals will achieve that. That package includes, as I said in respect of the earlier group of amendments, the prohibition on transfers, the limit on contributions into the personal accounts scheme and the simple qualifying test.

The principles have a key role to play. Clause 62(2)(a) to which the amendments relate requires the authority to consider the encouragement and facilitation of participation in all qualifying schemes. That means that the authority will have to think very carefully before doing anything that discourages the worker or employer from using a scheme other than a personal accounts scheme. The point of that is that personal accounts are intended to complement, not undermine, other good quality provision. By narrowing the scope of that principle, the amendment would have the opposite effect to that which is intended. The authority would be required to have less regard to participation in other qualifying schemes, making it less likely that it would remain focused on its target market.

In addition, it is clear that the authority is already focused on its target market. When the chief executive, Tim Jones, appeared before the Committee, he spoke about the gap in the current pension provisions market. Hon. Members might recall him saying that

“the market correctly recognises that it is a very difficult sector to address because of the very large number of small employers and the costs of approaching it”.

He put the authority’s role beyond doubt, saying:

“It is our job to address that target market.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 17, Q2121.]

It could not have been put more clearly than that.

The scheme will be a success in meeting the needs of the target group, who will typically have less experience of financial products, only if it is kept simple. I again find myself agreeing with the sentiments expressed in amendment No. 109, that the personal accounts system should be as simple as possible. However, I draw the Committee’s attention to what the impact assessment says on this issue on page 71. It explains that one of the key drivers of these reforms is simplicity. It says that the

“scheme must simplify the decisions people are asked to make about their retirement provision and provide an easy way to save”.

Stakeholders feel very strongly about the need for simplicity as a means of focusing on the target group. That came across loud and clear throughout the oral evidence sessions. Paul Myners underlined the point in those sessions when he said:

“Keeping it simple is critical to the successful delivery of personal accounts. Every further bell or whistle that is added to the scheme will have to be paid out of people’s retirement income.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 8, Q33.]

The phrase “keep it simple” that I am using does not appear in the Bill, but I believe that the principles in clause 62 communicate that message. They require the authority to take account of a range of matters that will guide it towards designing and building a scheme that is simple and is focused on the target group.

Finally, I suggest that the final part of amendment No. 46 is entirely in line with the intent of our reforms. As I said earlier, those are intended to increase the level of savings and savers to achieve better retirement incomes. To achieve that ambition, we need to harness and build on what is good now, including the very many good quality pension schemes that are available today. Our reforms will have a positive impact on private pensions saving in the UK with more individuals saving for more pension contributions. I do not believe that that needs to be expressed as a distinct principle in its own right because it is part of the rationale that runs throughout the Bill.

I hope that I have reassured hon. Members during this important debate that the ambitions behind the amendments are entirely fair, but that there is no need to amplify, amend or extend the statement of principles that is in the Bill. In the light of that, I hope that the hon. Member for Rochdale will withdraw the amendment.

Paul Rowen (Liberal Democrat, Rochdale)

I am grateful to the Minister for his explanation. I believe that it is important, when dealing with principles, that we have discussions like this. Some of the issues that we raised were not clear in the principles in the clause, but I am happy to accept his assurance that they will be there in practice once PADA is in operation. I beg to ask leave to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 38, in clause 62, page 29, line 2, leave out ‘have regard to’ and insert ‘at all times comply with’.

Janet Anderson (Labour, Rossendale and Darwen)

With this it will be convenient to discuss amendment No. 48, in clause 62, page 29, line 21, at end add—

‘(4) The Secretary of State shall collect and publish appropriate data annually, and will consult with industry, to measure the extent to which the Authority has achieved these principles in carrying out its functions.

(5) The Secretary of State shall by regulation identify the data and targets to be used for this purpose.’.

Nigel Waterson (Conservative, Eastbourne)

We are still unpacking the clause and, sadly, we will be doing so for some time yet. Going back to the first part of the clause; instead of a slightly diluted obligation on the authority that it must have regard for the principles set out in subsection (2), we are trying to tighten that up significantly, by saying that it must comply with the principles at all times. There has been a debate about what those principles should or should not be, but we think that there is no earthly point in putting them in the Bill unless the authority is under an obligation to comply with them. That is the purpose of the amendment.

I have already made the point once or twice that we want to send the PADA off into the world with a clear set of orders. It is going on a voyage, and those voyage orders must cover exactly what it has to do, with no diversions or lack of focus on what it is supposed to be up to. I think that Paul Myners and Tim Jones will appreciate that clarity in their mission.

As long as we have established a set of principles—no doubt we will return to the debate about what they should be at another stage of the Bill’s progress—I do not believe that there is any internal conflict between them. As I have said before, I think that they flow from Turner, the White Paper and debates on previous legislation. I do not think that there is any inherent conflict between the different principles or those that the Opposition parties would have liked to put in the Bill. However, there is no point in them being there, unless it is clear that the authority must comply with them. If it does not, it can be called to account by this House as to why not.

Amendment No. 48 is a slightly different matter. After the sub-clause about the authority’s obligation to engage in discussion with public authorities, it imposes two further obligations. One is on the Secretary of State, to collect and publish data annually, and to consult with the industry, to measure the extent to which the authority has achieved those principles in carrying out its functions. The second is that the data and targets involved should be set out in regulation for that purpose. Again, that is not trying to make life unduly difficult for PADA, or for Ministers, but trying to ensure that putting the principles in the Bill is not merely a load of pious aspirations. I hope that in the offices of the chairman and chief executive the principles will be up on the wall somewhere in a prominent position; I shall certainly look for them when we visit their lodgings in due course.

On amendment No. 38, I hope that PADA will realise that the principles are a firm obligation on it to comply with. I hope that the officials will recite them every morning, and ask themselves to what extent they have complied with them. I also hope that they will be aware of the obligation, if we can put it in the Bill, that the data will be looked at regularly and that their performance will be judged against both the principles and the data; there will be targets.

We talk blithely about x million people who may or may not auto-enrol. We talk about how many of those will persist beyond the first two or three pay packets. We talk about the levelling down of existing provisions. We talk about all those things in a vacuum. However, it is essential that these things are monitored very carefully indeed, and that that data is made available so that we can all judge the extent to which PADA has been meeting its targets and operating according to the principles set out in the Bill.

I assure the Committee that if this bunch of Ministers are not prepared to sit on PADA’s shoulders to require that data and to demand a performance-based approach, Conservative Ministers will do so.

It would be nice if amity broke out and the Minister could see the point of accepting the amendments, otherwise he will have to explain to the Committee why he wants a group of principles to be set out in the Bill without a mechanism for ensuring that they must be complied with and for measuring whether they have done so. Those are my primary arguments for the amendment and I hope that the Minister will see the sense of them.

Paul Rowen (Liberal Democrat, Rochdale)

The Minister explained why the principles set out in clause 2 are important and what they will deliver. If they are as important as he says I do not see why there should be any problem in insisting that they are complied with. I agree that if there is a set of principles and PADA is given a set of functions, there must be a performance management structure to measure how far it succeeds in delivering what has been set. Publishing targets and recording performance, as proposed in amendment No. 48, is an important part of the process.

Given the enormity of the task that PADA faces, the fact that it is going into uncharted territory means that toughening at this point is to be encouraged. We can have arguments or discussions about the principles, but once they have been set in the Bill they should—not may—be complied with and performance should be measured. The amendments would allow us to do that and I hope that the Minister will accept them. At the end of the day, it is a sure way of making certain that PADA delivers the task it has been set.

James Plaskitt (Labour, Warwick and Leamington)

Putting the principles in the Bill shows our commitment to them and provides assurance that the delivery of the reforms will remain focused on these aims, but the principles are not objectives. The intention is not that each of these principles should be achieved in its own right, rather that they must together underpin the authority's day-to-day work and be considered as a whole. Indeed, the very nature of the principles means that they will, at times, require a resolution of possibly competing priorities.

No single principle will necessarily determine the choices the authority makes. It may need to make judgments across the set of principles to reach decisions that provide the best solution to a particular challenge. For instance, when designing the collection mechanism for the personal accounts scheme, the authority will need to find a solution that takes account of a number of factors, in particular how this system might affect employers, whether it will facilitate participation, and how it might affect membership costs. There will not necessarily be one answer that ticks all those boxes, nor one principle that is the sole guide, but the authority will have to consider all of them together, in balance, in reaching a conclusion about how to solve a problem.

Similarly, in making decisions on investment fund choices, the authority will need to balance certain principles. It will need to take account of members' preferences for fund choices and also consider the effect on membership costs so that the provision of investment choices does not get in the way of our aim for a low cost scheme.

We have deliberately chosen to use the phrase “have regard to” because it recognises the balances to be struck between the principles and the need to judge in the round. It also recognises that there will be important and complicated judgments to make. Asking the authority to comply with all the principles at the same time, as amendment No. 38 would do, is simply not practical. It does not allow for the need to consider and strike a balance between them.

On amendment No. 48, I would like to make it clear that, while the principles are not intended to be measurable objectives, there are a number of ways in which the authority will show how it is considering them. Internally, the board of the authority will regularly review how, during the course of its business, it is taking account of the principles. Through its annual report, the authority will provide detail on the delivery and performance of its business. This will include information on how the principles have been considered during the year. Furthermore, the decisions and recommendations that the authority will make, in light of the principles, will be reflected in the scheme design. That will be subject to the oversight of the Secretary of State, and Parliament, through scrutiny of the detail of the scheme order, which will be set out in secondary legislation.

I have explained that the principles are designed to reflect the Government’s ambitions for these reforms. I would also like to assure the Committee that, as with all such reforms, we will be evaluating their impact. We are currently developing plans for an evaluation strategy that will monitor and assess the extent to which our aims have been met. The results will allow us to understand progress towards our aims, including the role that the authority and other key stakeholders are playing in this process.

The Department has an extensive ongoing research and data collection programme which will inform the evidence base for that evaluation. And we are actively engaging with external stakeholders to help improve this evidence base: identifying the key questions that need answering, the key evidence gaps and how best these can be filled. The authority will have an important role to play in contributing to this process. We plan to put in place arrangements that will allow us to monitor the impact of the reforms from 2012 onwards so that we can identify whether there are any areas for improvement. We would expect to undertake a full evaluation after the reforms have bedded in, and thereafter on a continuous basis. We will, of course, publish the key findings of that evaluation.

Furthermore, we have made a public commitment to review a number of policies set out in this Bill in 2017, and we will need to ensure we have the relevant information and analysis to do that. That report will be published and laid before Parliament. I hope that this has clarified how seriously the Government take our assessment of the achievement of our reforms. I want to assure the Committee that while it is not appropriate to measure the authority’s achievement of the principles, we will put a comprehensive range of measures in place to evaluate the broader policy ambitions that sit behind them.

The hon. Member for Eastbourne asked what was the point of having the principles if there is not an achievement mechanism behind them. It is quite a step in itself to put in the Bill, and therefore into legislation, a set of principles. If the Bill secures parliamentary approval, that will become law. Of course we would expect PADA to have due regard to that as we would not expect it to try to operate outside the law. The principles enshrined in legislation have an important status. They may not be the subject of a daily boardroom chanting exercise, but they will most certainly be enshrined in law. It will be possible for all of us to assess how the authority is doing in respect of those principles. I hope that with those reassurances the hon. Gentleman will withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am not sure how reassured I am. The Minister seems to be saying either that some of these principles are contradictory, or that they have varying importance in relation to each other at different times. Apart from setting out law—which I will return to in a minute—we are supposed to give PADA a clear steer as to how, and under what conditions, to operate. What happens if it complies with one or two of the principles and not with the others in making a particular decision?

When the Minister says that we are making law, he is right—that is the point. That is why it must be clear so that no one can be under any illusions as to their obligations. Precisely because it is in the legislation, someone could challenge a decision or a direction of travel taken by PADA and that is why we must make it crystal clear. With all due respect, what the Minister has been advancing is an argument for not having the principles in the legislation.

I remember great arguments during the passage of the previous Pensions Bill. We tabled an amendment that set out a series of principles that would guide PADA. It was not totally dissimilar to this list—in fact, it was lifted almost word for word from the Government’s White Paper. At the time the Minister, now the Secretary of State, argued against it on the basis that we did not want that sort of thing in the legislation. Clearly the Government have relented, or perhaps they took the view that if they did not table it, we would and the argument would begin all over again.

I am open to the argument that we should not put such matters in the legislation because that is not where principles should be placed, What I am not open to, is the argument that we should put them in the legislation but make it clear that it is a bit pick and mix, and that they could become of more or less importance at any given time depending on what PADA wants to do. That is not appropriate.

James Plaskitt (Labour, Warwick and Leamington)

May I take the hon. Gentleman back to the exchange that he has just referred to about the evidence given during the previous Bill by my right hon. Friend who is now the Secretary of State? My right hon. Friend did not say, as has been suggested, that we did not want them. Rather, the now Secretary of State said that at that stage it was inappropriate to put the proposed objectives in the Bill because they were still being consulted on. It was not because he did not want them.

Nigel Waterson (Conservative, Eastbourne)

I stand corrected. However, they did not end up in the Pensions Act 2007, but here we are trying to put them in this legislation. If we are going to do it, we should go the whole hog.

I was grateful for the Minister’s assurances that this information and data would be collected and published in due course. I have one small query: he said that it would start to be looked at after the legislation had bedded in. I wonder if he could perhaps give us a more technical view about when that first amount of data and analysis is likely to emerge. My suspicion is that it would be soon after 2012, if that is the start date, before certain trends began to emerge. The sooner that the Government—whoever they are—can get on top of those trends, the better to avoid the nightmare scenario where we have more savers and less, certainly not more, savings.

James Plaskitt (Labour, Warwick and Leamington)

I suspect that the information is likely to begin to become available once we receive the annual report. The first point at which the information starts to emerge would be post 2012.

Nigel Waterson (Conservative, Eastbourne)

I reserve the right to come back on the issue later in the passage of the Bill, but for now I beg to ask leave to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 66, in clause 62, page 29, line 5, after ‘in’, insert ‘existing’.

Janet Anderson (Labour, Rossendale and Darwen)

With this it will be convenient to discuss the following amendments: No. 39, in clause 62, page 29, line 5, leave out ‘qualifying’ and insert ‘occupational and personal pension’.

No. 40, in clause 62, page 29, line 6, at end insert

‘, and the Authority shall at no time seek to provide financial products beyond the scope of personal accounts;’.

No. 67, in clause 62, page 29, line 9, after ‘on’, insert ‘existing’.

No. 42, in clause 62, page 29, line 9, leave out ‘qualifying’ and insert ‘occupational and personal.’.

Nigel Waterson (Conservative, Eastbourne)

These amendments, for want of a better expression, could have the theme “existing provision, protection of”. I will talk through what they seek to achieve, and then talk more generally about the existing provision in the usual way, trying to obviate the need for a stand part debate.

Amendment No. 66 would insert the work “existing” and tries to tighten up the wording so that we do everything we can to ensure that personal accounts do not have an impact on good quality, existing schemes. It is useful to take amendments Nos. 39 and 42 together as they would both do much the same thing, again with the idea of tightening up the wording significantly for that same aim.

Amendment No. 40 perhaps needs a little further explanation. My own theory, for what it is worth, is that although it is right to focus the personal accounts for the system of PADA in the current phase leading up to 2012 on the basics of this scheme and try to keep it as simple and cost-free as possible, there will be a temptation—I put it no higher than that—for the people running PADA, once the scheme is up and running, the computers are whirring quietly and efficiently, everything is going fine, money is being collected, investment is being made, everyone is happy and there are more savers and savings, to start thinking, “Well, we could be doing more than just offering a vanilla project and should branch out into pistachio and whatever flavours might be available.”

Therefore, I think that it is important to have a point in the Bill that states, “this is as far as you go, and no further” and that the role of PADA is and ever shall be simply to promote personal accounts in the stripped-down, low-cost, post-Turner version that we are debating at the moment, and that is the point of amendment No. 40. Indeed, if the Minister were unhappy about accepting that amendment, that would set alarm bells ringing on this side of the Committee and perhaps further afield.

Amendment No. 67 basically relates to the same theme of protecting existing provision, which came up quite a bit in the oral evidence that the Committee heard. It was even raised in the evidence of the pension commissioners themselves. One of the commissioners, Jeannie Drake, said:

“Although it is necessary, as set out in the Bill, that one of the principles is that the reforms should not undermine good occupational pension provision, which was always the intention of the Pension Commission’s recommendations, you cannot eliminate all elements of potential levelling down in part.”—[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 103, Q126.]

That was the last part of her comments, but it is certainly useful to have her confirmation that it was uppermost in the minds of the commissioners, when they were deliberated on their report, that that should be countered in due course in the legislation.

The National Association of Pension Funds, in its written evidence, stated:

“We believe that PADA should have clear statutory objectives from the start that should be intrinsically linked to the main functions and ensure that the scheme design and implementation does not have an adverse impact on existing workplace pensions. The Bill should be amended to include an objective to minimise, rather than have regard to, any adverse effects that Personal Accounts may have on existing good quality pension provision.”

That is certainly something that we on this side of the Committee would endorse. Joanne Segars of the NAPF, during an oral evidence session, when asked by the Minister for Pensions Reform how best to target those currently without pension provision, replied:

“One of the ways in which we can make sure that personal accounts are adequately targeted is by ensuring that the Bill is crystal clear on this point. One of the things that we would like to see is an amendment to the Bill that, where we are talking about the Personal Accounts Delivery Authority’s principles, makes it absolutely clear that PADA is focusing personal accounts on those who currently have no pension provision.”—[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 23, Q29.]

The amendments are all designed to tighten the Bill’s wording to make the aims and objectives of PADA abundantly clear—if they were not clear already. They would put no finer point on matters than to say that it was hands-off existing provision, and that PADA was not in the business of competing with existing provision and that its role would be straightforward and focus on the target group, and provide basic low-cost personal accounts that are envisaged in Turner, the White Paper and the Bill.

James Plaskitt (Labour, Warwick and Leamington)

We have always been clear that the rationale for personal accounts is that they will be targeted specifically at those eligible employees with low to moderate incomes who do not have access to a good, low-cost, workplace pension scheme. Our intention is that personal accounts will fill the gap that we have identified in the pensions market. The authority will design a scheme that is simple, low-cost and focused on the target group that I have described.

The personal accounts scheme is not being introduced to replace or undermine good quality pension provision. Instead, it will introduce an additional pension product into the market that we envisage sitting alongside other schemes in an already successful private market. That is the core ambition of our reforms, and it is the reason why the principles are so drafted under clause 62. Subsection (2)(a) requires the authority to have regard to encouraging and facilitating participation across all qualifying schemes. Subsection (2)(c) requires them to have regard to any adverse effect on the other qualifying pension schemes and members, or future members, of those schemes.

Amendments Nos. 39, 42, 66 and 67 would broaden the scope of the principles to cover pension provision beyond that we have defined as qualifying under clauses 14 to 24 to cover existing occupational and personal pension schemes. That would require the authority, in designing personal accounts, to have regard to all existing schemes not only those that satisfy the qualifying test. It would include schemes that did not meet the minimum standards that we consider important in providing for a reasonable income in retirement. That cannot be right, which is why it is appropriate to use the term “qualifying schemes” in the principles.

The Bill defines the minimum standards for a qualifying scheme. The reference to qualifying schemes in the principles therefore makes it plain to the authority that we want to preserve good quality existing workplace pension provision, much of which, of course, offers greater member benefits than the minimum standard prescribed by the reforms. The authority is alive to, and strongly supportive of, that. In carrying out its functions, the authority will need to engage with the industry—those that are providing existing, good quality provision. Indeed, it is already talking to key stakeholders in the industry. Not only does that help to ensure that the authority understands the concerns that other pension providers might have about the scheme, but it helps it to learn from their expertise in its design and operation.

To reinforce our commitment to such provision, clause 62(3) places a duty on the authority to take steps during the implementation phase to engage in discussion with stakeholders about its functions. The authority is currently developing its consultation programmes, which will allow the industry as well as consumers and employers to contribute to its thinking as it designs the personal accounts scheme. I believe that, as drafted, the principles give us sufficient reassurance that the authority will make reasoned judgments in delivering the personal accounts scheme and, in particular, with regard to the effect on qualifying schemes.

I share the wish of the hon. Member for Eastbourne that the private pensions industry, which is working perfectly well for millions of individuals, is allowed to flourish, and that is why we have shaped our reforms in the way that we have.

Finally, on amendment No. 40, which can now be referred to as the anti-pistachio amendment, the provisions in clause 61(2) task the authority with assisting and advising the Secretary of State in establishing the personal accounts scheme and allow the authority to assist in supporting the delivery of the compliance regime of the new employer duties. This sets the legal remit for the authority. It will have no legal authority to undertake any wider activity, including providing financial products beyond the scope of the personal accounts scheme.

My Department will be holding the authority to that task through our stewardship of its business plans and resources, and Parliament will see the emerging results of its work from the annual report and accounts. There is no intention—or legal authority—for the authority to stray beyond the provision of a trust-based scheme and the associated compliance regime, so it is a vanilla provision. I hope, therefore, that the hon. Gentleman will agree to withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

Those who represent sea-side towns are used to all of these flavours. Next time the Minister is in Eastbourne, perhaps for a conference, I will invite him into Fusciardi’s, the long-standing and traditional ice-cream parlour on Eastbourne seafront.

James Plaskitt (Labour, Warwick and Leamington)

Are you buying?

Nigel Waterson (Conservative, Eastbourne)

I am very happy to buy him a pistachio ice-cream, if that is his tipple, but he will find many other flavours on offer. Well, I think that that is enough of that.

I hear what the Minister says, it all seems to make jolly good sense to me and I beg to ask leave to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 44, in clause 62, page 29, line 14, after ‘the’, insert ‘needs and’.

Janet Anderson (Labour, Rossendale and Darwen)

With this it will be convenient to discuss amendment

No. 45, in clause 62, page 29, line 16, at end insert

‘, provided this can be done at no disproportionate cost to the scheme overall.’.

Nigel Waterson (Conservative, Eastbourne)

There is no ice-cream theme at all running through these amendments, but we are attached to them none the less.

It seemed to us, emboldened by the support of organisations such as the Equality and Human Rights Commission, that these amendments made considerable sense for the way in which the clause is intended to read. The first amendment, to clause 62(2)(e), would mean that instead of the clause stating only that

“the preferences of members and future members should, so far as practicable, be taken into account”

it would include the words “and need”. With all the respect in the world to members and future members, their idea of what they prefer may not coincide with what they really need, particularly in pensions, where those two often diverge because people may simply not know what is best for them.

The other amendment, at the end of the clause, would add the words:

“provided this can be done at no disproportionate cost to the scheme overall.”

This is an important issue, it is one of those issues where two perfectly legitimate aspirations are in danger of colliding. We can envisage a situation where the enthusiasts among members—the 4, 5, 6, 7, 8 or 9 million new members—might be all for any number of exotic options, in terms of investment funds.

John Greenway (Conservative, Ryedale)

Quite right.

Nigel Waterson (Conservative, Eastbourne)

I hear my hon. Friend saying quite right. I cannot remember the figure, but I think that in Sweden something like 200 or 300 options, at least, are available. I do not want to go back to the ice-cream analogy, but that seems excessive. There is a tension here between choice—consumer preference—and cost. I am delighted to say that the EHRC supports both of the amendments.

Julie Kirkbride (Conservative, Bromsgrove)

I certainly agree with the thrust of my hon. Friend’s argument so far, but the question that strikes me is how will the preferences of members and future members be recognised by PADA? How can they initiate a preference? Is it simply the management of PADA that will decide what the preferences might be? I wonder whether my hon. Friend has any ideas about how the Government will require the management of PADA to implement such a clause. How will those preferences come to bear?

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend makes an excellent point. Clearly the needs are a matter of judgment for PADA, which hopefully will be stuffed full of the best expertise that money can buy. However, how will members and future members express their preferences? Perhaps the Minister will help us with this point. Can they just write or e-mail in and say, “I would like an emerging economies-based, eastern Caribbean sugar-based, or gold mine-based fund?” How much weight should be attached to such preferences? There might be just a tiny minority of members with an obsession with Bolivian gold or tin mines who try to get a whole fund based on that. However, it is only fair to address their needs because otherwise it puts a kind of brake on their enthusiasm.

I digress slightly, but one of the saddest cases that ever came to my advice surgery was a constituent who had been very badly injured in a car accident. He had been paid compensation through the legal process and had invested every penny in channel tunnel shares, which was a bizarre decision, given that they became worth a fraction of what he paid for them. Obviously, he had not had any advice—not even generic advice.

I was just talking about the support from EHRC. It says:

“The design of a good quality default fund that meets the needs of the majority of the target market is critical.”

We all know in our heart of hearts that the vast majority of funds, and the vast majority of members, will end up in the default fund because, rather like auto-enrolment, it does not involve any conscious decision.

The EHRC goes on to say:

“We think there is a difference between consumers needs and preferences in that an individual may ‘prefer’ to choose a risk averse fund for their saving...but perhaps as a young person with 40 plus years of pension saving ahead of them may ‘need’ to be in a higher risk fund at the beginning of their saving period in order to get the best returns at the end. The structure of the default scheme must reflect these individual needs.”

That is an important point because an element of risk is important. We seem to be turning into a risk-averse society, but high risks often bring high returns. It goes on to say:

“It is also important to have a degree of consumer choice”—

I would agree with that. It says:

“These choices may be based on an individuals’ religion or belief, or their ethical beliefs. A Sharia compliant fund should be part of the basic choice of funds.”

The Minister might wish to give a personal view on that point, but I think that there almost certainly should be a sharia-based compliant fund. Whether that will work out as a good investment in the long term is another matter.

The statement then refers to research carried out by Which?, which

“suggests that consumers could be confused if a large number of funds are available through personal accounts. We believe that managed choice with a limited number of funds, graded by risk is the best option for consumers. If consumers request other options then we believe in order to keep costs down for everyone, they should be expected to pay a fee, as should those who wish to frequently change funds.”

That raises an interesting issue that I will not dwell on now, but although I have not read the PADA consultation on the structure of charging from end to end, I do not think that it touches on that possibility. If people want to go to exotic funds, or to change funds on a regular basis, perhaps they should pay an additional fee.

Andrew Selous (Conservative, South West Bedfordshire)

I wonder if my hon. Friend spotted the briefing from the TUC, which drew attention to the fact that:

“The UK Pension Protection Fund and ... the French Fonds de Reserve pour les Retraites and the New Zealand Superannuation Fund are also signatories”

of the United Nations principles of responsible investment. Those are big national schemes. Does my hon. Friend think that it might be useful to ask the Minister whether that is something that PADA will be following?

Nigel Waterson (Conservative, Eastbourne)

I am grateful to my hon. Friend for that point. He speaks with some knowledge on these matters. Yes, I would be interested to hear the Minister’s comments. We will have a debate fairly soon on the UN principles of investment.

Alternatively, there might be people who are desperate to invest in things such as arms manufacturers because they might get a higher return. What I am trying to get at is that choice could be the enemy of simplicity and keeping costs down. I would not like to see scores of different funds, bearing in mind the extra costs involved in people changing funds and having different funds available. The vast majority of people will end up in the default fund in any event.

Julie Kirkbride (Conservative, Bromsgrove)

Again, I am grateful to my hon. Friend for allowing me to press him—and, through him, the Minister—on the implications of the various funds. Depending on how many there are, what will be the reporting requirements on growth? Will we know how much these funds have grown by each year? Will we then be able to assess which have done better and which have done worse? What will be the impact on the owners of the funds? They might wish to swap funds if they could see that their default fund was not performing as well as the new emergent economies fund. Could this eventually lead to some kind of public action when there was disappointment that the default fund, which the majority of people were in, had not performed as well as another fund, which was in the public domain and that some people might feel they were wrongly advised not to join?

Nigel Waterson (Conservative, Eastbourne)

My hon. Friend touches on an important and sensitive issue. The more choice there is, the more people may be tempted to go into higher risk funds to get a higher return. However, as the adverts always say, shares can go down as well as up. She will be well aware that one of the debates that is running in parallel to the Bill is about advice. No one is queuing up to give people advice about these investments—certainly not the Government, Governments in waiting, or employers. We thus have to wrestle with this slippery concept of generic advice, whatever that may mean.

It is perfectly possible that people will emerge 10 or 20 years after the setting up of personal accounts saying, “I have not got a very good return. I went into Bolivian tin mines and I have no money left,” or, “I went into the safe old default fund and I might as well have put the money under the mattress.” Those are extremes, but it is a measure of that sort of risk that people are going out of their way to avoid giving advice on this.

What it probably boils down to at the end of the day is a reasonably limited choice. After all, there is nothing to stop people investing for their retirement in ways other than personal accounts and opting out and getting specific advice—or not, as the case may be. They could throw the dice, if that is what they want, get into more traditional pension schemes, or have a self-invested personal pension. Those options are not going to go away as a result of personal accounts. It comes down to a relatively small number of credible, well managed funds giving an element of choice, particularly relating to religious and ethical beliefs, and a very well managed default fund, which I predict will probably end up with at least 90 per cent. of all the invested funds.

Perhaps I could also draw on the advice of the Investment Management Association. It supports amendment No. 45 and says:

“One of the underlying principles behind personal accounts is that they should be simple and costed appropriately for members. While it is desirable that members’ preferences on investment choice are taken into account, where those preferences involve a higher cost than the most popular/mainstream investment choice it is right that these should not raise the cost of membership for all members and that additional costs should be borne by those taking advantage of the costlier option(s).”

Again, that echoes what the CEHR was saying.

The Minister might not feel able to say at this stage, but the question of whether extra charges could be imposed for people with exotic and changeable preferences—at least in their investment life—could feed into consultation on the structure of charging. An element of churning should be discouraged, if at all possible. That is what is behind the amendments. They are designed to be helpful and to try to protect the position of members of personal accounts so that not only their preferences, but their needs, are taken into account, and so that any excess costs generated by numerous choices and changes of funds are not borne by the entire membership, the vast majority of whom will end up, in any event, in the default fund.

Paul Rowen (Liberal Democrat, Rochdale)

With regard to subsection (2)(e), which deals with investment in funds, it is important that we discuss some of the principles on which that will be done. The next amendment that we will consider takes that further, but these two amendments are key. I certainly have no problem with what the hon. Member for Eastbourne is seeking to do because I think that it is fundamental that any investment meets investors’ needs. That presumably means that there will be sufficient growth in the funds to justify the investment.

I believe that it is right and proper that PADA and its successor, the trustees, report on how the funds invested on their members’ behalf are progressing. Equally, it is useful and preferable to take into account different preferences, and I agree with the hon. Gentleman that those will come down to a few based on ethical or religious grounds. If the personal accounts are to have the broad approach that we want, the investment portfolio needs to have that option within it so that a member can see that it does not conflict with their religious beliefs or particular ethical concerns. Those are two important principles that the amendment has allowed us to express so that they are clear in the Bill.

The third principle is that any investment should not necessarily come at disproportionate cost. If I may continue with the ice cream analogy, a friend of mine was encouraged to invest in vanilla growing in Uganda a few years ago. The price that Uganda could obtain was relatively high at the time, so he judged it to be a successful investment. Of course, as soon as he and others pumped their funds into it, the price collapsed and he lost his investment. It is very important to consider that there is an opportunity cost to investment. Such a cost cannot be disproportionate, or the fund will not achieve what it is set out to do: to provide an income in retirement that many people would not otherwise have.

James Plaskitt (Labour, Warwick and Leamington)

This has been an interesting and helpful debate. As with other trust-based occupational pension schemes, investment-related decisions for personal accounts will be the responsibility of the trustee corporation, which will have a duty to act in members’ best interests—that is established in law, of course. Investment choices will not be a matter for Government.

Prior to the appointment of the scheme’s trustees, the delivery authority will undertake initial work on the scheme’s investment approach and develop a draft statement of investment principles for the trustees’ consideration. The principles that will underpin that and all the authority’s work are set out in clause 62. I am sure that members of the Committee will agree with the sentiments behind the amendments and I hope that they will be reassured to know what the principles are designed to achieve.

Personal accounts will be a success only if they focus on and meet the needs of their target market. That applies not only to investment choice but to all aspects of the scheme's design. It is one reason why we set out the authority's guiding principles in the way we have done; they will run through all that the authority does and reflect the Government's ambition for pension reform.

In developing the personal accounts investment approach, the full range of guiding principles will apply, which will mean the authority having regard to members' preferences and to the other principles, including encouraging participation in qualifying schemes, minimising member charges, and respecting the potential diversity of members and future members. The hon. Member for Bromsgrove asked how the preferences are established and I can tell her that PADA will soon begin the consultation process with the public to establish more information on that subject.

Julie Kirkbride (Conservative, Bromsgrove)

I am grateful to the Minister for letting me know how the preferences will be established. There may also an argument for having only one fund and saying that those members who do not like the principles on which the fund is being invested can be transferred to another scheme offering the investments that they want. That would be simple, it would not add to the cost and there would be great clarity about the way forward.

James Plaskitt (Labour, Warwick and Leamington)

I do not agree with the hon. Lady, who usually speaks in favour of more choice, but in this case seems not to want any. Although it is not for the Government to anticipate the investment preferences of individuals coming into these schemes, we know at this stage as a matter of general understanding rather than anything specific that some groups will want certain criteria in their investments. If we were to say that those criteria cannot be met because there is only one fund, it would result in a lot of extra people opting out and possibly having nowhere else to go to achieve the investment for their pension that we want them to have.

To maximise the opportunities of people staying in this scheme and deriving its benefits, it needs to be able to meet at least a minimum range of choices and discretionary options that individuals may have in respect of minimum requirements for their pension fund but we do not expect a large number. The hon. Lady may recall Tim Jones, saying in evidence to the Committee on 15 January that he envisaged a number of funds, perhaps going into double figures. He quoted quite small double figures and certainly ruled out the notion of 50, 100 or anything like that. That is his expectation and we can probably go with that.

A consideration of members' needs will therefore already be embedded in the authority's work to prepare the scheme’s investment strategy. For example, research has shown that the way in which investment choice is structured can make a significant difference to participation in pension savings. While some investors like to have fund choice, too much choice could lead to confusion and higher rates of opting-out amongst others. That is exactly the type of issue the delivery authority will need to consider when developing the scheme's investment approach and thinking about how best to encourage and facilitate participation.

These principles reflect our intention that the personal accounts scheme should be a low-cost scheme, which is necessary to maximise the returns on members' savings; it is particularly important if the scheme is to meet the needs of those for whom it is being created. Therefore, the cost of the proposed approach to investments will be fundamental to the authority's deliberations.

The hon. Member for Eastbourne and the hon. Lady asked about scheme hopping, which would be an issue if members were jumping from one fund to another on a regular basis. However, that is not likely, given that this is a default option for people who do not want complication in their pension investment but just the reassurance that there is a long-term, low-cost investment that will give them a better income in retirement. People understand that pension investment is long term investment and are not likely to be jumping regularly between funds. More sophisticated investors operating on discretionary margins would tend to do that more than core investors.

The hon. Member for Eastbourne asked whether PADA is considering in its consultation the charging implications if people jumped funds. It is examining such matters and he will find reference to them on page 218 of the consultation document. I hope that my assurances are sufficient to encourage Opposition Members to withdraw their amendment.

Nigel Waterson (Conservative, Eastbourne)

I agree with the Minister. The debate has been interesting and useful. We should not be getting ahead of ourselves because ultimately more clever investment managers than us will be sorting out the matter. However, it has been helpful to have had some of the issues out in the open air and to have had a look at them. On that basis, I beg to ask leave to withdraw the amendment.

Paul Rowen (Liberal Democrat, Rochdale)

I beg to move amendment No. 110, in clause 62, page 29, line 18, at end insert—

‘(g) the UN Principles for Responsible Investment should be adhered to’.

Janet Anderson (Labour, Rossendale and Darwen)

With this it will be convenient to discuss amendment No. 159, in clause 62, page 29, line 18, at end insert—

‘(g) international best practice on responsible ownership and environmental, social and corporate governance issues should be considered.’.

Paul Rowen (Liberal Democrat, Rochdale)

The amendments would add a new paragraph (g) to subsection (2). The hon. Member for Carmarthen, West and South Pembrokeshire and I are seeking to achieve similar outcomes. I shall begin by explaining what the amendment would do and then say what it would not do, because there is some confusion within the Department for Work and Pensions about that. I shall explain its positive advantages and how it will meet the Government’s wider agenda and the benefits for long-term investment for those members for whom we want personal accounts to be successful.

We want to put into an investment strategy through the UN principles some cognisance of environment, social and governance principles when investments are being made. We do not want to dictate the total strategy. The Department for Work and Pensions has said that it is not for the Government to set the investment strategy. On 11 June 2007, when discussing the then Pensions Bill, Lord McKenzie of Luton said that

“it is not appropriate to commit the authority to follow a specific objective”.—[Official Report, House of Lords, 11 June 2007; Vol. 692, c. 1532.]

I do not believe that the inclusion of the amendment would tie PADA and the trustees to a particular range of investment paths or to a particular strategy. The UN principles are voluntary and aspirational. They are regarded as a tool kit by which fund managers can measure the investment that is made. I hope that the Minister will not repeat what has been said by his Department. The amendment does not seek to dictate what should be invested, where and when.

Taking on board our earlier discussion, it is clearly important that the needs of members are paramount. My example of investment in vanilla in Uganda is appropriate. It may be good for the farmers in Uganda to invest in growing vanilla, but if there was no economic return from that particular investment, it clearly does not do any good to the personal accounts of members. The UN principles do not prescribe that we always have to go down a particular route. They are aspirational.

With regard to the benefits of the Government’s wider agenda, it is clearly important that the Government’s key goals and aims are somehow demonstrated through this sort of investment and others in every piece of legislation we introduce.

The Government have got a clear strategy on tackling climate change. One might ask what that has to do with investment. Clearly, when talking about environmental investment there are positive ways in which investment in certain schemes, through an ethical funding mechanism that the UN principles suggest, can be successful. Information that was provided in relation to pensions suggests that Insight Investment, working with UK house builders, improved the sustainability of the houses they were building against WWF criteria from 47 per cent. to 68 per cent. in one year. That is an example of where the Government’s objective on meeting the challenge of climate change runs alongside the Fund’s investment of securing a return. Given that most pension investments are medium to long-term investments, as the Minister said earlier, I put it to him that we clearly need to set a direction on ensuring that some of our wider social and governance objectives are achieved.

Another example of where investment can perhaps support Government policy is the treatment of AIDS in Africa. GlaxoSmithKline has now reduced the cost of the antiretroviral drugs that it has made available in South Africa, but that would not have happened without the Government and investors in GlaxoSmithKline saying that there was a wider, long-term benefit to be achieved, both in getting a return for the company through the sale of the drugs and in meeting some of the Government’s wider objectives, which in this case is ensuring that the treatment of AIDS is dealt with as a matter of priority.

Julie Kirkbride (Conservative, Bromsgrove)

I am interested in the argument that the hon. Gentleman is advancing, but while I see the benefits of some of the examples he has given, I wonder, in the light of his own party’s policy on nuclear energy, for example, whether the guidelines that he is trying to impose on the Minister mean that a company that was investing in nuclear energy would not be the kind of company that would have power to invest in it.

Paul Rowen (Liberal Democrat, Rochdale)

The words that the hon. Lady used illustrate some of the misunderstanding about adhering to UN principles. We are not saying on every occasion, “You must do X because it is ethical”, or whatever. We are saying that it is a set of principles and a toolkit that sets out a broad sense of direction, and it comes back to the point that was made earlier and which I think is fundamental to any decision: a company has got to meet the needs of its members and secure an adequate return.

I happen to believe that investment in nuclear power will prove to be hugely expensive and will not secure the Government’s broader objectives or deliver what might be delivered in the case of electricity. I believe that it will end up being hugely subsidised by the Government because the private investment will not be successful enough to secure the return needed to generate invested.

However, that is a different argument to the one that I am trying to advance, which is that there should be a set of principles on environmental, social and governance issues on the face of the Bill. That does not mean stating what always must be done, as Lord Mackenzie and the statement from the Department for Work and Pensions attempted to say. Rather, they would be a set of principles, and in the long term they would achieve that. If the PPF fund and BT, which has a large pension fund and many commitments, can sign up to the principle, along with—as the hon. Member for Eastbourne said—the main French and New Zealand pension schemes, why cannot we make a similar statement of principle by introducing this scheme to broaden pension savings for the vast majority of people?

It is only a principle, it is not a strategy or diktat about what can be invested in and what cannot, but it sets a clear direction and allows the Government to ensure that their actions are in tune with their broader objectives. I hope that the Minister will support the amendments—they are not mischievous, they do not seek to detract from anything else that is achieved in the Bill, but they set a clear direction for the future that chimes with everything else the Government want to achieve.

Nick Ainger (Labour, Carmarthen West and South Pembrokeshire)

I will speak to amendment No. 159 tabled in my name, which, as the hon. Member for Rochdale has indicated, is in line with his amendment. The aim of my amendment is to require the authority to be a responsible investor and to take environmental, social and corporate governance issues into account in its investment decisions.

It is sad that we still need to argue and make the case for ethical investment in terms of its performance, compared to, not mainstream investment perhaps, but other investment. All the evidence shows that mainstream investment occasionally, and sadly all too often, makes serious mistakes. I do not know how many pension funds had invested in Enron or WorldCom or Tyco, but clearly, massive losses were incurred because of serious irregularities in the corporate governance of those companies, in the financial irregularities that led to their collapse and, in certain circumstances, the imprisonment of those company leaders.

That could perhaps have been prevented by those pension funds taking a keen interest in the corporate governance of those companies. I note that the Investment Management Association published a guide to ethical and socially responsible investment funds. With regard to the performance of ethical funds, its advice to consumers states

“you don’t have to sacrifice investment performance when investing ethically”.

Last year, an ethical fund managed by Co-operative Investments was the best-performing fund in the UK all-company sector. Investing ethically and taking environmental, social and corporate governance issues into account, does not mean that there will be a bad return—far from it. First, it gives protection in terms of corporate governance issues. The example of vanilla-growing in Uganda may have been environmentally and socially very good, but perhaps the problem was a lack of corporate governance. Quality performance does not have to be sacrificed when making ethical investments. All the companies that have been invested in and that have high-quality leadership, actively consider environmental and social issues and protect and enhance shareholder values. That is what we all want to happen particularly, as I mentioned earlier, with the default fund.

The earlier debate about how many other funds there are was interesting, but let us be honest: the vast majority of the investment that will be made by the contributors to the personal accounts will go into a default fund. They are not going to say, “I want my money to be invested in this particular area.” There will be a substantial amount of funds going into that default fund, so the authority and the trustees are going to become a significant investor in the economy. Their decisions will send a clear message to British companies, and other companies outside this country, about what is expected of them; setting an example, as the hon. Member for Rochdale said, in relation to climate change or human rights, and generally sustainable development. It is likely that other UK asset owners and other pension fund managers will follow suit and we will get a mainstreaming of ethical investment happening. That would be welcomed by both sides of the Committee, particularly the Government because of their commitment to sustainable development and investment in the long term, not just in the UK, but in Africa and the developing world.

I would hope that, as the hon. Member for Rochdale has said, we are not being prescriptive here; we are saying that the authority must have regard to ethical investment principles. That way, we will get investor protection and good performance for this fund.

James Plaskitt (Labour, Warwick and Leamington)

We have had an interesting debate on this important subject. I am grateful to the hon. Member for Rochdale and my hon. Friend the Member for Carmarthen, West and South Pembrokeshire for contributing constructively in the way that they have. I reassure them straight away that, to use the phrase of the hon. Member for Rochdale, I certainly do not regard the amendments as in any way mischievous—these are important issues.

Investment-related decisions in trust-based occupational pension schemes are the legal responsibility of the trustees, who must act and are bound by law to act in the best interests of their members. However, prior to the appointment of the personal accounts scheme trustees, the delivery authority will undertake consultation and research in developing the scheme’s investment approach and draft an initial statement of investment principles for the trustees’ consideration.

Amendment No. 110 would require the authority to adhere to the UN principles for responsible investment in making its investment recommendations to the scheme’s trustees. Amendment No. 159 is similar, but would extend in general terms to international best practice. In practice, the amendments would have little effect as they relate to the authority, which does not have responsibility for investment-related decisions and therefore can only make recommendations to personal accounts trustees. If we were minded to place that kind of requirement on the scheme, this would not be the place to achieve it.

I appreciate that there is an increasing interest in the importance of responsible or ethical or sustainable investment—it has various adjectives—but I do not think that the Government should intervene in decisions on how people’s pension savings should be invested. That is a matter for their choice and a matter for the expert, independent trustees to decide. It is a decision for which they should be responsible and accountable. There is movement in the direction that the hon. Gentlemen wish; I understand that there are currently 21 UK investment managers signed up to the UN principles, but it is up to the managers at the trust level to take on board those principles, not for PADA.

Legislation already requires trustees to state the extent to which, if any, social, environmental and ethical considerations have been taken into account, when preparing and reviewing their statement of investment principles. That requirement will also apply to the personal accounts scheme, but it is not right to go any further than that. We are already setting the personal accounts scheme a significant challenge: to provide effective and low-cost pension saving to millions of people who do not have that opportunity at the moment. We should not restrict its hand any further in how it goes about doing that.

However, I can assure the Committee that the authority and the trustees of the personal accounts scheme will consider the best interests and preferences of members and future members, and take account of appropriate best practice when carrying out their investment duties. Hon. Members speaking in support of the amendments may be reassured to know that both Ministers from the Department and staff from the delivery authority have had meetings and discussions with the UK Social Investment Forum on exactly the matters indicated by hon. Members. Therefore, with what I hope that they would regard as reassurances, on what is an important issue—

Andrew Selous (Conservative, South West Bedfordshire)

I am grateful to the Minister for giving way just before his conclusion. From what we have heard in the evidence sessions and again today, there seems to be a commitment to a sharia fund. The Minister may correct me if I am wrong on that.

I and other members of the Committee would be reassured if at least one of the funds on offer complied with the UN principles and general environmental, social and corporate governance principles. If the Minister is able to give some comfort on that, it would be useful.

James Plaskitt (Labour, Warwick and Leamington)

With respect, that is not for me to decide. As I said in response to an earlier debate, PADA is about to begin a considerable consultation process with potential scheme members and the public, on their preferences. It must do so, in honour of one of the principles that we have just debated. A strong desire may emerge from that process to have a fund similar to that which the hon. Gentleman described, but the Government cannot be prescriptive about that.

We may hope and expect that certain types of fund will emerge, but it is not for me or for only us in this room to say that. We have to have regard to what the members who will go into the schemes may want. Yes, we have an indicated an expectation that there will be a sharia-based account, for the obvious reason that we can clearly identify one group of people, many of whom may be coming into the scheme, with very specific religious requirements for their investments. Therefore, one could easily anticipate that.

Demand for a specifically ethical or sustainably-based fund may also emerge, but I cannot anticipate, recommend or call for that. We can only speculate about what type of funds there may be. Again, we need to bear in mind the general expectation of keeping the costs, the system and the choices simple. We do not expect there to be too many funds for people to choose from.

Andrew Selous (Conservative, South West Bedfordshire)

We all understand the point about the sharia funds and the religious obligation and feelings of those potential investors. However, we live in a diverse society. Many clergymen and ministers, for example, may also feel strongly that the dictates of their Christian faith would cause them serious problems with being auto-enrolled into a scheme not compliant with the UN principles, or not having the option to do that.

The Minister is flagging up that there is likely to be a sharia scheme, but he cannot go any further in committing on any other scheme. I am a little uneasy, because that seems to acknowledge the genuine and legitimate needs of one section of constituents, but perhaps to ignore the needs of a considerable amount of others.

James Plaskitt (Labour, Warwick and Leamington)

I do not think that that is the case. I take what the hon. Gentleman is saying, but to try to reassure him and my hon. Friend the Member for Carmarthen, West and South Pembrokeshire, let me draw their attention to one of the principles in clause 62(2)(f). We have had hardly any debate about it, but it is an important additional principle. It calls on the authority to have regard, among the principles it is considering, to diversity among members and future members of such a scheme, and for that diversity to be respected. It does not specify who or which categories should constitute that diversity . It is a catch-all call to respect diversity, given that that is enshrined in the principle. I think that that captures the point that he is making and places an obligation on PADA to think about those aspects when it is designing the scheme.

I completely understand the reasons why Members who have spoken in support of these amendments want to see that happen. We will all have personal views on our individual investment preferences and our own ethical judgments about what is acceptable and what is not, but the Government will not do this. As I have tried to argue, PADA is not the right vehicle to be assigned to this undertaking, either the UN one or a more general one. That in the end comes down to the trustees managing the schemes. I hope that the hon. Gentleman will accept those reassurances and agree to withdraw his amendment.

Paul Rowen (Liberal Democrat, Rochdale)

There were three points in the Minister’s remarks. The first relates to subsection (2)(f) and diversity, and that is very much a diversion. It is certainly not what the two amendments were about. We understand that there may be a sharia fund and various other funds that deal with particular religious issues that respect the diversity of the UK. However, I do not accept that some of the points that we were making are necessarily covered by that provision.

Secondly, the Minister said that he did not believe that PADA was the appropriate body to be covered by an amendment that says that when policies are drawn up, notice should be taken of the UN principles. I have to disagree with him. Between now and 2012, PADA will be the authority that will draw up the whole basis on which personal accounts are to be administered. In 2012, or slightly later, the trustees will take over. However, right at the beginning, surely it should be possible to express a commitment to a set of UN principles. I have laboured the point all along that this is not about prescribing investment strategies or where things should be put. We are laying down a set of principles.

I come from Rochdale and the co-op principles on which the modern co-operative movement was set up were written by people from Rochdale. They are very clear. A number of statements set out what the co-op in Toad lane wanted to achieve when it was set up in 1848. I believe that, in setting up PADA, a clear set of principles about how we are going to invest should be laid down right at the beginning. I cannot see why the Minister is reluctant to do that. This is an important issue. We have argued that it is possible to invest with principles and make money. If the Pension Protection Fund can sign up to that, and if New Zealand and France can also sign up to that, I cannot see why we cannot.

We are Parliament and we are setting a direction. We can tell the trustees and PADA what we want to achieve. This is all about doing certain things. It is about ensuring that people save more and that they have a better pension when they retire, but it also should be about saying that while we are about doing our business and investing this money, we will look to certain principles that we believe are right and proper. I keep saying that they are only principles, not diktats, but they are very clear. As the Minister has not given us any assurance that something along these lines will be introduced later, it is important that we have a vote on the amendment.

Nick Ainger (Labour, Carmarthen West and South Pembrokeshire)

May I urge my hon. Friend the Minister to look at the amendments? There is genuine feeling about them, particularly bearing in mind the experience of similar funds throughout the world that do not appear to have a problem with signing up to the principles. Perhaps we could reconsider the matter and return to it on Report.

Colleagues on both sides of the House feel strongly about including the principles. I do not think that they will have a detrimental effect. They will have a positive effect, particularly on the default fund. As the hon. Gentleman rightly points out, paragraph (f) refers to diversity. Perhaps those who want a far riskier option could request that a separate fund be set up for them, but for the vast majority of people who want sustainable development and a decent pension that has been responsibly invested in for the long term, I am sure that we can find a way of including the principles in the Bill. I ask the Minister to reconsider the amendment and perhaps to come back to it on Report.

Alan Keen (Labour, Feltham and Heston)

I will not waste time repeating my hon. Friend’s words, but I agree with everything that he said. As a Labour and Co-operative Member of Parliament, I hope that the Minister will carefully consider the amendment.

Nigel Waterson (Conservative, Eastbourne)

I was not intending to take part in this debate. First, I pay tribute to the hon. Members who tabled the amendments. They discussed them in a measured way, and the diversion into the history of the co-op movement was fascinating as well. I do not know whether either amendment will be pressed to a Division, but I do not think that my party is minded to support them. However, we support the underlying principle. There will almost inevitably be a sharia-based fund—I do not think that it would be possible not to have one, and I am not saying that there should not be one; I think that there should be one—and I agree with my hon. Friend the Member for South-West Bedfordshire that there has to be something equivalent for people with broadly Christian or other ethical views.

Ministers, and certainly PADA, should take away from this debate the Committee’s strong feeling that such an option should be included in some shape or form. I am not sure that either of the amendments is quite right, partly for the reasons that the Minister set out. We will not support either of them in a Division, but we support the principle and would like to hear more about it, perhaps at a later stage of the Bill’s passage.

James Plaskitt (Labour, Warwick and Leamington)

I urge caution on hon. Members who might be inclined to press the amendment to a Division, although I understand entirely the motives for raising the issue and I do not have much in the way of personal disagreement with anything that they have said.

Let me first say that I will convey what has been said to PADA—rightly so—so that it can take it on board. PADA is thinking about the investment principles and working on them, and it is right that it should hear what this Committee has said on the subject. However, it will also want to think about the potential implications of putting into legislation what the hon. Member for Rochdale seeks, and I would certainly urge it to do so.

Although all of us in this room can perhaps almost instinctively sign up to the notion of such an investment, we should be careful about speaking for everyone and potentially proscribing funds that might emerge or form part of the whole suite on offer. We might have a set of ethical views, but it will be important for others to be in the scheme and to have these funds. They may not share our views, and they are entitled not to. We must not do anything that could proscribe them from investing in something that they want to invest in, just because we do not feel comfortable about it.

I urge the Committee not to cross the important line between thinking about the principles that relate to the architecture of the scheme and ensuring that it delivers its fundamental objectives of including people and giving them a decent income in retirement, and moving into an argument about the values for such a scheme. I want to be cautious about that, although I am fully in sympathy with the UN objectives. Although I might wish to adhere to them myself, I would rather transfer the debate to PADA and ask it to reflect on the principles as well as on the implications of what could be done. That would be the right place to give further thought to such matters.

David Borrow (Labour, South Ribble)

Bearing in mind what has been said, does my hon. Friend think that, by the time that we discuss the Bill on Report, PADA will have reached such a point in its deliberations that he will be able to inform the House in a way that would be helpful to all hon. Members and give them the reassurance that the majority of members of the Committee clearly need?

James Plaskitt (Labour, Warwick and Leamington)

My hon. Friend is helpful. I cannot give him an absolute reassurance now because I have not had the opportunity to discuss with PADA the stage that it has reached. However, I hope that it will be of assistance if I give him an undertaking that we shall collect a view on the subject in time for when the Bill is discussed on Report, which hopefully will inform further deliberation. It is reasonable for me to obtain such information for him.

Given what I have just said, my other reassurances and the fact that I respect greatly the arguments advanced by members of the Committee, as well as having personal sympathy with them and regard for the wider issues at stake, I ask the hon. Member for Rochdale not to press the amendment to a Division. We can then pursue such matters with PADA, which is the appropriate body to reflect on what has been said.

Paul Rowen (Liberal Democrat, Rochdale)

I am grateful to the hon. Member for South Ribble for his intervention. The Minister’s statement was reassuring. I am happy that details of our debate will be passed to PADA and that, by the time that we discuss the Bill on Report, we shall have information on its particular line. I must say that if we do not receive such reassurances on Report, I will table a further amendment, because we feel strongly about the issue, which I am sure the Minister appreciates from our debate. I beg to ask leave to withdraw the amendment.

Paul Rowen (Liberal Democrat, Rochdale)

I beg to move amendment No. 163, in clause 62, page 29, line 18, at end insert—

‘(g) clear and robust information and generic advice should be available to members and future members of the scheme’.

The amendment moves our discussion on a stage further to the heart of last week’s debate, to which I have no doubt we shall return. The Minister knows that, regardless of what the Thoresen report may conclude—presumably by the time that we debate the Bill on Report—the Liberal Democrats have made clear all along their serious concerns about ensuring that the appropriate people sign up for personal accounts and that they receive the right advice.

The amendment would ensure that there was another particular principle in the delivery authority’s targets: to make sure that clear and robust information and generic advice are made available to all future members of the scheme. The Minister knows from our earlier discussions that we are concerned about such matters. I am aware of the differences between such advice and information, but nevertheless I believe that, for the target group that we are discussing, we will have clear advice and—given what the hon. Member for Eastbourne said earlier—probably guidance. We do not want to see people signed up for the scheme when they should be paying off their debts and would be better off doing so. I accept that it is not for PADA to provide that type of advice, as bodies such as Citizens Advice already give such information. Nevertheless, the availability of clear and robust information and generic advice should be a clear principle for PADA, and I hope that the Minister will accept this amendment as a clear principle.

Nigel Waterson (Conservative, Eastbourne)

I just want to pin down what the hon. Gentleman means by “clear and robust”. Is he crossing the line into advocating specific advice? It seems to me that the only distinction worth debating is that between generic and specific advice. All the weight of opinion is that no one is going to be in the business of giving anything but generic advice. That was the view of the Thoresen review, and that is what we will hear about in March—I think that that was the latest indication. I wish the Thoresen review well with that.

However, as I understand it, nobody but nobody is volunteering to give specific advice, by which I mean giving a particular individual, on the basis of their own circumstances, advice on whether or not they should be auto-enrolled. Is the hon. Gentleman suggesting that such advice should be given?

Paul Rowen (Liberal Democrat, Rochdale)

Certainly not. I do not want to see the type of individual advice that adds to costs and that does not necessarily deliver. By “clear and robust”, I mean advice that is simple, that is easy to understand by the target audience, that is not over-complicated, and that will stand the test of time. Obviously, circumstances will change, but in terms of robustness, the advice must point in certain directions. What are the advantages of signing up to this particular pension scheme? What will someone achieve by doing so?

Therefore, when I am talking about “clear” advice, the advice must say, “If you do this, you will get that,” always accepting the caveats about pension schemes. However, the advice must not mislead, or be over-generous about what the benefits of a scheme might be. Also, it must not be too underwhelming. It must be very clear for people in these circumstances, who may be on the margins and for whom it is debateable whether they should go into the scheme or not. It must be clear about what the advantages are for the target group.

Nigel Waterson (Conservative, Eastbourne)

By “it”, does the hon. Gentleman mean a leaflet, a website, or something else? I am interested in how he thinks that he can ensure that the target group will read this information and take it on board.

Also, Ministers used to say, “Put in a pound and you get two pounds back.” I think that we have broken them from that habit because that was fundamentally misleading, and we would not want anyone to sue Ministers or the Government, would we? However, does the hon. Gentleman have some idea about giving people an idea of what their return is likely to be? If so, how would he manage that, given all the evidence that we have about at-risk groups in the target group?

Paul Rowen (Liberal Democrat, Rochdale)

The hon. Gentleman raises two issues, the first of which is where people get the advice. There will need to be a mix of sources from which advice can be obtained. Some people will need to talk to someone, but they might only be a tiny minority—I am thinking about people with special needs, for example. There are particular circumstances in which although the advice might be generic to a particular group, that type of advice will not just be available in a leaflet. There are other people who would be quite happy looking at a website. With many pension schemes, people are now able to put in figures and see what the returns are suggested for various options.

The clear point is not, “You put in one pound and get two,” but that there is a range of possibilities based on how the market may perform. If that sort of advice is given, people will be able to make their own decisions. The problem in the past was that the advice was too black and white. The advice must be robust, by which I mean that it must stand up to the test of time. It must be clear and not over-complicated. It must be understood, although I accept that that is a difficult issue. It must be generic to different groups because there are different types of people with different needs.

Perhaps I am pre-empting what Thoresen will say, but, nevertheless, our reason for raising this matter now is that my party has all along made clear its concerns about having appropriate advice and ensuring that only the appropriate groups are signed up for personal accounts so that they are not used as a vehicle for mopping up people for whom there might be a better option. That is a difficult circle to square, and no doubt we will see what Thoresen has to say, but the purpose of the amendment is to flag up some of our concerns about how this whole issue will be dealt with. We believe that it will be fundamental to the success of the scheme and its successful implementation.

James Plaskitt (Labour, Warwick and Leamington)

As we have already discussed, we place the highest importance on the information strategy that will be put in place to support this reform. Clause 8 recognises that individuals will need access to relevant and accurate information about the effect of the new employers’ duties in relation to them. The clause requires regulations to set out what that information should include.

The amendment would create an additional principle for PADA: to ensure that clear and robust information and generic financial advice is made available to members and future members of the scheme. I listened carefully to what the hon. Member for Rochdale thought that he meant by robust. There was a lot of content, but it was not altogether clear. I think that he can see that when we dig into the word, it brings a lot of complexities with it.

The amendment is unnecessary because the existing principles are designed with the intention of keeping the interests of future members at the centre of the scheme. It is inconceivable that the authority could do that without providing good and clear information. In addition, the personal accounts scheme, as with other qualifying schemes, will be required to provide a wealth of information on its features, costs and benefits. All occupational schemes are required to provide information to prospective and active members in line with the occupational pension disclosure regulations. Failure to comply with that legislation could incur a penalty charge from the Pensions Regulator.

It is worth reiterating the information that must be provided because this list goes almost all the way, if not the whole way, towards providing what the hon. Gentleman is looking for. The information must provide: the conditions of eligibility; relevant joining processes; how contributions, tax relief and benefits are calculated; arrangements for making any additional contributions; survivor benefits under the scheme; transfer rights within the scheme, when they exist; the period of notice to terminate membership; what benefits are payable under the scheme; an annual illustration of benefits at retirement; and procedures in the event of any dispute.

The authority is well aware of the importance of providing information relating to personal accounts. Indeed, at the evidence-taking sessions we heard Paul Myners, the chair of the authority, say that it

“will be working hard to develop highly effective communication”

and that its consumer and employer representative committee

“will be specifically charged with giving us advice on issues relating to communication and the provision of information.”——[Official Report, Pensions Public Bill Committee, 15 January 2008; c. 10, Q6.]

The amendment does not refer just to information. As we have heard, it refers specifically to generic financial advice being made available to members. It might be helpful if I clarify the distinction between the terms as it goes to the heart of what the hon. Gentleman has been saying. Information is not tailored to a specific individual and could be provided in a variety of forms. Generic financial advice is not regulated and does not recommend specific products, but it is, or can be, tailored to individual circumstances. If we accepted the amendment, the authority would need to consider the provision of generic advice to members of the personal accounts scheme. The reforms have been designed so that the decision to remain in a pension is simple, because of the employer contribution. We recognise that some people, but by no means all, may want generic advice when auto-enrolling. A number of existing bodies, such as the Pensions Advisory Service and the citizens advice bureaux, already provide a professional, well trusted and respected generic advice service. The Thoresen review and the Government’s forthcoming action plan on financial capability will assess the need to add to those services that are already available.

There may be a peak in demand around 2012, which is the launch point for this type of service for those automatically enrolled into personal accounts under qualifying schemes. I can reassure the hon. Gentleman that we will work with stakeholders, expert organisations and the authority on how best to ensure that that potential peak demand is met. I therefore hope that he will withdraw the amendment.

Paul Rowen (Liberal Democrat, Rochdale)

I am grateful for the Minister’s reply, which hinted that the scheme is very much work still in progress. I accept what he says about the work that is ongoing to ensure that information is made available. I beg to ask leave to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 47, in clause 62, page 29, line 20, after ‘others’, insert ‘including Opposition parties’.

This is a neat little amendment that need not detain us for long—

James Plaskitt (Labour, Warwick and Leamington)

No, it clearly will not.

Nigel Waterson (Conservative, Eastbourne)

Unless I am severely provoked.

Like so many of our amendments, this is a blindingly straightforward statement of the obvious. Regardless of the syntax, clause 62(3) is eminently sensible and no doubt it will cast as wide a net as possible. However, I want to be clear that among those public authorities will be Opposition parties, especially this Opposition party. If one believes the opinion polls—I never do—we might have to implement all this in the run-up to 2012. The Minister made a crack earlier about the fifth-term review, a prospect that is beyond imagining. In any event, whoever is in power, it seems sensible that this should be a long-term project. It has massive implications for millions of our citizens, irrespective of who they vote for, or whether they bother voting at all. Therefore, it is very important that matters proceed on a consensual, cross-party basis. Normal relations have been resumed with Paul Myners and Tim Jones, and I am looking forward to regular and constructive meetings with them, which parallel those with Ministers, just to hear how they are getting on, and especially to hear about Mr. Jones’s famous review, although we do not want to go there again.

It is important to get the principle across, although I do not care whether it is in the Bill as long as the Minister says, “But of course.” If he approaches the amendment with his customary humility, he will realise that the term “Opposition parties” may one day include him.

James Plaskitt (Labour, Warwick and Leamington)

The amendment comes at an appropriate time, because it gives us a little light relief from what has been a serious debate for a considerable number of hours. I am interested to hear the hon. Member for Eastbourne say that he does not care whether the amendment is made to the Bill, because that is what his amendment calls for, but I shall address his point. To move an amendment and then say that one does not care whether it is included in the Bill, which is what the amendment was called for, is in today’s analogy known as a wafer-thin argument.

During the development of the policy, from the Pension Commission through to the White Papers, we have invited and welcomed to the debate the involvement and contribution of all stakeholders. We have had seminars, consultations and discussions, and as the hon. Gentleman rightly said, it all included Opposition Members. The situation’s long-term nature, and the broad agreement across political lines and other opinions, are critical to the success of pensions policy, and as we move towards the implementation of the reforms, developing and designing the infrastructure and the detailed legislation that will support it, we expect the Department, the regulator and the authority to continue with their open and transparent outlook, and to work collaboratively with stakeholders to deliver the best solutions, as they have done hitherto. There is no reason why they should depart from that at all.

Clause 62 demonstrates our commitment to that issue. It requires the authority to continue with that open approach as it carries out its work in designing and implementing the personal account scheme, and works with the regulator on compliance. Even without that statutory requirement, the authority already demonstrates its desire to be inclusive and involve stakeholders in the consideration of options. Paul Myners made it clear during the evidence sessions that the authority will be an open and transparent organisation that is available to anybody who wants to make representations to it. It has already established a consumer representative committee, whose members include Age Concern, the TUC, the Financial Services Authority, the consumer panel, the advisory services and Citizens Advice, among others. The group has a remit to provide advice to the authority on a range of consumer matters relating to the design and specification of the personal accounts scheme.

In all such consultation, I am sure that the authority will seek the views of Opposition Members; indeed, I understand that they have already had meetings with the authority, which I welcome. It has an essential part in securing an agreement about decisions that will affect employees in this country for many decades to come. I do not think that it is necessary therefore to state explicitly in the Bill the requirement for that engagement, and neither does the hon. Gentleman. Given that, I hope he will agree to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am grateful for that flash of consensus, and for the Minister’s mature and far-sighted approach to the amendment. On that basis, I beg to ask leave to withdraw the amendment.

Clause 63

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 49, in clause 63, page 29, line 30, at end insert ‘ as soon as is practicable.’.

This is a short amendment, which I can deal with expeditiously. The clause sets out that the Secretary of State will give the authority guidance or directions about the discharge of its functions. We are a bit iffy about the Secretary of State giving it directions, because it seems to be a back-door way of achieving what one of our earlier amendments tried to achieve, which was to ensure that in the Bill, the authority was obliged to follow, or comply with, its principles. We agree that it is right that any direction should be published, so all the amendment asks is that it be published as soon as is practicable.

James Plaskitt (Labour, Warwick and Leamington)

The authority will have operational independence and autonomy to create the infrastructure for personal accounts. It will be responsible for the specification, design, and the award of contracts for the systems and services associated with the scheme. This is a complex task which is critical to the delivery of the policy ambitions of the reform programme. It is vital that the authority’s responsibilities are clear, that it is effective in delivering those responsibilities, and that it manages its business and money properly.

As with any non-departmental public body, accountability to Parliament for the authority’s performance and actions rests with the Secretary of State. Therefore it is right that there are provisions that allow the Secretary of State to give a steer, or indeed take action, if appropriate. The Department for Work and Pensions has a great deal of experience in the stewardship of non-departmental public bodies. Formally, we work within the guidance for Departments issued by the Treasury and the Cabinet Office, as well as drawing on our own centre of expertise. Informally, our approach is to maintain an open and constructive dialogue and to foster relationships so that any issues arising can be debated and resolved without recourse to legal process. Therefore, I hope that any formal directions would be unnecessary. However, we would be remiss if we did not cover for all eventualities.

Provisions for the issue of directions to public bodies are common practice. Similar legislation has been made for many other public bodies, including the Olympic Delivery Authority and the Learning and Skills Council. They provide reassurance to Government and Parliament that appropriate measures are in place to ensure that a public body works within its scope, does its job properly and manages itself to the standards expected from a public body.

Directions, by their nature, relate to matters that the Secretary of State considers to be of such importance that the authority should be required to comply with them—a serious failure by the authority to perform any of its functions, for example. I would like to make clear that the Secretary of State cannot issue a direction to the authority that either changes its functions or gives it a new function. The issue of a direction relates to the “how” not the “what”.

Directions will be issued in writing to the authority and the clause imposes a statutory requirement for them to be published. Directions issued to other public bodies are not always required to be published—that we have made that requirement here reflects the importance that we place on transparency in the governance of the authority. It is right that the Secretary of State should inform Parliament of how he has exercised that power. It ensures clear lines of accountability and allows for proper, ongoing scrutiny of the delivery of the reforms.

The amendment seeks to set in legislation the requirement for us to publish any directions made quickly. I assure the hon. Member for Eastbourne that any directions will be published without delay. Indeed, if we have to have recourse to such an intervention, we intend that the directions would be published as soon as they were made, subject to the necessary practical arrangements. I hope that meets the hon. Gentleman’s point and that he will feel able to withdraw his amendment.

Nigel Waterson (Conservative, Eastbourne)

That seems a satisfactory explanation, and on that basis, I beg to ask leave to withdraw the amendment.

Clause 64

Nigel Waterson (Conservative, Eastbourne)

I beg to move amendment No. 50, in clause 64, page 29, line 37, leave out ‘grants’.

Janet Anderson (Labour, Rossendale and Darwen)

With this it will be convenient to discuss amendment

No. 51, in clause 64, page 29, line 38, leave out from ‘which’ to end of line 39 and insert

‘shall include conditions about repayment and interest at commercial rates.’.

Nigel Waterson (Conservative, Eastbourne)

We are back to our old friends “grants” and “interest-free loans”—in other words, the level playing field. Perhaps the Minister could take as read what I said during debates on previous amendments trying to get at this issue. I hope that he will not take it personally if I say that I have found him a rather slippery customer when it comes to this issue. He has kept up a ferocious rearguard action, refusing to give any kind of commitment. Clearly he is the right man in the right job in the right Government at the right Department. Ferocious is perhaps not the right word for the hon. Gentleman, but he has given us not a jot of comfort about the possibility of a bung being given to PADA in the shape of a non-repayable grant or some dodgy loan, which would have to be repaid or which would not attract any interest, let alone at commercial rates.

Let us try again. I will go back a stage or two. In the regulatory impact assessment on the previous Pensions Bill, the Government set up a figure of £21 million for what they called the funding requirement of the delivery authority between 2006-07 and 2008-09. At the time, we tabled amendments trying to tackle what we then called cross-subsidisation and I asked for a breakdown of how that £21 million was going to be spent. In retrospect, I suspect that a lot of it has been spent or spoken for, so it would be nice to have a breakdown of where it has gone or is going. Perhaps the Minister will write to me about that.

In the debate of 1 February 2007, I asked what the limit was of the taxpayer’s commitment to the delivery authority. We are not Johnny-come-latelies on this issue, not that that has done us a lot of good. The then Pensions Reform Minister, now the Secretary of State, explained that in the longer term, personal accounts would be self-financing. That has been a mantra from the Department for some time up to the present day. Paragraph 18 of schedule 6 of the 2007 Act provided for the Secretary of State, subject to Treasury consent, to make grants to the authority out of the money provided by Parliament. The clause will replace that paragraph to extend the ways in which the Secretary of State may give financial assistance to the authority. The important word in that sentence is “extend”. Really, the Government are giving themselves more opportunities to shove money in the direction of the authority.

I always make a point at Committee stage of referring to the explanatory notes at least once because there is bound to be some poor devil who has spent half a lifetime drafting them. As the explanatory notes helpfully say in paragraph 189:

“It allows the Secretary of State to provide finance to the Authority in connection with its functions, for example, through grant or loan. Any of the finance may be subject to conditions.”

Perhaps “Don’t spend it all at the same shop” might be one of those conditions because there certainly seem to be no conditions about interest, repayment or anything of that sort.

The impact assessment makes the point that during its advisory phase, the authority is being funded through grant in aid. In paragraph 3.80 it says that

“in the long run, the personal accounts scheme is intended to be self-financing”.

We still have not got anywhere near finding out what the Minister thinks long term means. Also, rather interestingly, in the same document, the Government say in paragraph 3.81:

“At this stage in the development of the personal accounts scheme the Government cannot publish its estimated cost due to commercial confidentiality and the potential risk that doing so could influence the commercial process.”

I do not begin to understand that. Surely it would be more relevant if there was an issue about who they were going to spend the money on in terms of who they were going to buy expertise, services, equipment or whatever from. For them simply not to be able to produce any estimate of their overall costs due to commercial confidentiality seems to me to be simply trying to hide behind the words rather than being open and transparent.

Perhaps as well as pursuing my traditional arguments about grants and loans I could ask the Minister to be a bit more open and frank about the ongoing costs of the PADA than his impact assessment appears to want to be. Will he particularly deal with the issue of where the £21 million has gone or is going? While we are about it, I referred this morning to the £6 million plus that has already been spent on consultants in the development of personal accounts, according to a written answer provided by his colleague, the Minister for Pensions Reform, the other day. Perhaps I could also have a breakdown of that figure, allowing for any commercial sensitivities that might be involved.

James Plaskitt (Labour, Warwick and Leamington)

We are back on some fairly familiar ground, in respect of where we were this morning. The hon. Member for Eastbourne wanted me to take his contribution for read. I could perhaps say the same about mine, but I will not. I will once again revisit the issues about PADA funding.

Clause 64 amends schedule 6 of the Pensions Act 2007 to extend the ways the Secretary of State may fund the authority in carrying out its functions. In addition to grants, the Secretary of State may provide loans, guarantees and indemnities to the authority, which may be subject to conditions. This clause is linked with clause 61, which allows the delivery authority to borrow money.

I should like to reassure members that any costs arising from the authority’s work in relation to implementing the personal accounts scheme will be recovered from the revenue from membership charges. However, it is important to draw a distinction between the work the authority will be doing on the implementation of the scheme and other work it will be taking forward. As the Committee is aware, the Government are already funding the authority. This reflects its current role to provide advice to Government on the operational implications of policy. It is right that Government should meet the cost of that advice.

The hon. Member for Eastbourne asked me to say more about the £21 million allocation. He will know that it was an early estimate of the cost of establishing the delivery authority. The estimate was made even before the appointment of the chairman and chief executive. We currently anticipate that PADA will achieve its grant-in-aid status later in the current financial year. At that point it will be sufficiently well established to start incurring costs on its own account and to pay for these from its grant in aid. We have so far provided around £10 million in support for the creation of PADA. That figure is correct up to December 2007. I hope that that gives the hon. Gentleman a little bit of extra information.

This Bill will also extend the authority’s remit so that it can work with the Pensions Regulator to support the delivery of the systems that will enable employers to comply with their new duties. This will benefit all those eligible for auto-enrolment into any qualifying scheme, not just the members of the personal accounts scheme. It would not be right to require personal account scheme members to pay for this aspect of the authority’s work. We want to retain the flexibility to fund this activity in the right way, most probably through grant in aid from the Government.

Amendments Nos. 50 and 51 would remove that flexibility. As the hon. Gentleman knows, no decision has yet been made on the best approach to financing the personal accounts scheme in its initial stages. It will be for PADA to consider the options available to provide initial finance for the scheme, and then make recommendations to the Secretary of State on the best possible approach. However, this work can occur only once the authority’s powers have been extended through this Bill, when it is able to take the next steps towards implementing the scheme.

I should like to reiterate that if any degree of Government support is involved to help the scheme get up and running, then it will be fully compliant with European requirements on competition and state aid. It is common practice to take broad powers to finance a non-departmental public body that will be tasked with the delivery of a major project such as personal accounts. Again, as I said in respect of a similar discussion this morning, it is important at this stage that we do not second guess the outcome of its work or restrict the authority in its considerations.

Nigel Waterson (Conservative, Eastbourne)

On the basis that we are moving from the stage where money is shelled out by the Department to it being shelled out by the authority itself, can I take it that there will at least be a written statement to the House when there is a grant in aid in excess of the £21 million that has already been earmarked for the authority?

James Plaskitt (Labour, Warwick and Leamington)

There are two things to say in respect of that. First, when annual reports are published, he will be able to see all sources of income to the authority. That is quite right and proper. I have already indicated that we have given the £21 million estimate for the setting up of PADA. I have tried to reassure him on that point. I have given him an indication of how much has been allocated to date. It is clear that within the existing financial year it will reach grant-in-aid status, after which it will incur costs on its own account. He can deduce from that timetable the information that he needs.

I stress that that does not mean that the specific powers that we are taking in the clause for the sources of funding will necessarily be used. They will simply ensure that the authority has the flexibility to identify the funding strategy that provides the best deal for its members. It would be wrong to fetter the development of the best funding solution by insisting on any particular approach. I also stress to the Committee once again that we have no intention of unfairly subsidising the personal accounts scheme.

My reassurances are similar to those that I gave this morning. I may anticipate what the hon. Gentleman thinks about them, but I hope that my explanation has reassured him of the Government’s intentions and made it clear why flexibility is important both for getting the best deal for members of the scheme and funding the authority’s activities. I hope that that is sufficient to encourage him to withdraw the amendment.

Nigel Waterson (Conservative, Eastbourne)

I am grateful to the Minister, who has built up a large bank of reassurances on similar matters today. It is late in the day, and I am in a generous mood, so I am prepared to take them at face value and put them in the bank myself. I hope that we will be kept posted of any significant shift in the amounts of grant in aid, and I can only reiterate the point that I have made a number of times that not just the official Opposition but the industry want a level playing field and no hidden public subsidy. I beg to ask leave to withdraw the amendment.

Clause 67

Nigel Waterson (Conservative, Eastbourne)

Briefly, I have a couple of points to make. The story begins with section 23 of the 2007 Act, which as far as I could make out had a narrow winding-up provision that would arise only if a particular condition was met. That condition, in subsection (3), was that the winding up was necessary

“as a result of the abandonment or modification of any relevant proposals about personal accounts”.

We seem to be moving on, but will the Minister confirm where we are in the present clause? It seems to take winding up to a new place, removing entirely the condition in the 2007 Act, which gave only narrow reasons for the dissolution of the authority by the Secretary of State, and make it much more straightforward.

We have always said, on this Bill and the 2007 Act, that we do not think the authority and its successor body should just morph seamlessly into one another. There are different sets of skills and challenges to starting a scheme and running it later on, and perhaps a different set of personalities would be needed. We would have to review that in due course. It is worth getting clarification from the Minister that that is what the clause is intended to flag up and the basis on which a winding up would be approached.

Will the Minister also confirm what seems to be clear: that the clause will give more flexibility for transferring assets not just to the Secretary of State, which was in the 2007 Act, but to another body, presumably the successor body?

James Plaskitt (Labour, Warwick and Leamington)

The distinction between the two bodies that the hon. Gentleman seeks is indeed clear. As we said, the clause will make adjustments to the current winding up provisions for the authority, as previously set out in section 23 of the 2007 Act. Those provisions included a condition for the winding up of the authority to be triggered if the next legislative stage, in which we are now engaged, did not happen. Clearly, that condition will become redundant once, subject to the will of Parliament, the Bill is enacted. Clause 67 therefore removes the condition and replaces it with a straightforward provision allowing the Secretary of State, by affirmative order, to provide for the winding up of the authority.

The authority will not be responsible for running the personal accounts scheme, as the hon. gentleman rightly identifies, but will instead be responsible for delivering the scheme infrastructure and business processes. Once that infrastructure is in place, the responsibility for running the scheme will pass to a separate trustee corporation. Equally, although the authority may assist the pensions regulator in building the systems for employer compliance, the regulator will be accountable for the operation of the compliance regime. As a consequence, the clause also extends the provision for transferring, on wind-up, the property rights and liabilities of the authority to allow them to be transferred to persons other than the Secretary of State—for example, to the pensions regulator.

Finally, when the authority is dissolved, the clause makes provision for the removal from statute of the legislation contained in this Bill as it relates to the authority.

I hope that that clarifies why the clause is in the Bill. I hope that I have reassured the hon. Gentleman and that he agrees that clause 67 should stand part of the Bill.