Report stage in the Lords
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Baroness NoakesConservative- Quote
- moved Amendment No. 13:
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Lord McKenzie of LutonLabour- Quote
- My Lords, I thank the noble Baroness, Lady Noakes, for tabling these amendments. It gives us a chance to review again the matter she raised in Committee. I do not believe that we are apart in what we believe should be the outcome of these arrangements. I understand the noble Baroness’s concerns, but I can reassure her that the Government recognise how vital it is that the authority is seen as independent, that it operates with integrity, and that its processes are transparent to help build trust and credibility in personal accounts. We have obviously taken that very seriously when drafting the provisions in the Bill, and, in particular, in relation to the appointment of the non-executive members of the authority. The non-executive directors are the custodians of the Government’s process. They represent an independent check on the Executive. Part of their role is to ensure that the body, as a whole, is run with probity. In making such appointments, we are therefore following all appropriate guidance, ensuring that candidates declare any conflicts of interest at the earliest possible stage of the recruitment exercise to ensure the independence of the non-executive members. Paragraph 2 of Schedule 6 makes this process very transparent. The noble Baroness asked whether there should be one rule for the non-executives and another for the executives. If we accepted her amendments, we could equally ask why there was one rule for the executive members, who were employees of the authority, and another for other employees of the authority. The executive members of the authority are public sector employees, working full time for the delivery authority. While it will still be necessary for executives to declare a conflict of interest—indeed, the information pack for candidates makes that very clear—the issue is not the same as that of non-executives. As with all other authority employees, the contract of employment for executives will cover such things as conflicts of interest, and they will need to comply with the authority’s code of conduct for staff. That is the mechanism. It is also important to remember that the delivery authority will be run in line with the principles of good corporate governance, which includes ensuring that any conflicts of interest are properly declared, considered and recorded. Schedule 6(13) ensures that during all meetings of the authority, anyone who has an interest in any matter to be discussed must declare it, and that the declaration will be recorded. In addition, the authority will be required to have a register of members’ interests. Those measures offer reassurance that any interests will be dealt with appropriately by the authority. I hope that that has reassured the noble Baroness on that point. Clearly, conflicts of interests must be avoided in relation to executive and non-executive directors alike, but the route to tackle them for executive directors is through contracting arrangements, as for the rest of the employees of the authority. Turning to what constitutes a conflict of interest for the purposes of paragraph 2 of Schedule 6, we have defined a conflict of interest in sub-paragraph (6) as any interest, financial or otherwise, “which is likely to affect prejudicially the discharge by him of his functions as a member of the Authority”. The inclusion of other interests allows a wide range of factors to be taken into account when considering whether a conflict of interest exists. We consider that that would also include circumstances in which a conflict of interest may arise in relation to a person connected with a non-executive. We believe that the description in the Bill automatically encompasses that but goes further. Amendments Nos. 17 and 18 specify further what might constitute a conflict of interest for non-executive members. The former dictates that the interest of a person connected with a non-executive can constitute a conflict of interest. The latter refers to Section 252 of the Companies Act 2006 to provide a definition of “connected persons”. Although I agree with the spirit of those amendments, which seeks to ensure that the most vigorous criteria are applied when assessing conflicts of interest, the Government’s approach achieves that better—or equally. The paragraph will require the delivery authority, in making any future non-executive appointments, to follow the same procedure regarding potential conflicts of interests—under paragraph 2(5). So as it stands, in each case, that could include the interests of a person connected with a non-executive. I hope that that explanation will assure the noble Baroness that the existing provisions in the Bill concerning appointments and conflicts of interest are perfectly adequate. I have heard nothing in what she said that suggests that we are seeking a different outcome on this, but I believe that the way that the Bill is drafted is one route to achieving that objective.
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- Baroness NoakesConservative
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- My Lords, I thank the Minister for that reply. He is absolutely right to say that there is nothing between us of substance on this; I was probing how it will work in practice. I dislike the distinction that the Government have drawn between the executives and non-executives. Normally, when the Government propose structures involving executive and non-executive members of the board, they do so claiming the virtues of the unitary system. The whole idea of the unitary system is that directors, whether they are executive or non-executive, are working on the same terms, in effect—it is just that some work there full time and some part time. It is unsatisfactory that the Government have diluted the concept of the unitary board. I have drawn attention to what I think is vague and lacking in clarity; for example, the extent of “other interest” in the Bill. The Minister thinks that it is adequately dealt with; I must let the Government live to rue the day if they have made a mistake in their drafting and not pursue it further today. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. [Amendments Nos. 14 to 18 not moved.]
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- Baroness NoakesConservative
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- moved Amendment No. 19:
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- Lord McKenzie of LutonLabour
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- My Lords, I am very happy to accept the amendment. On Question, amendment agreed to.
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The Deputy Speaker (Lord Lyell)Conservative- Quote
- My Lords, I advise the House that if Amendment No. 20 is accepted, I cannot call Amendment No. 21.
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- Lord McKenzie of LutonLabour
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- moved Amendment No. 20:
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Lord Oakeshott of Seagrove BayNon-affiliated- Quote
- My Lords, I listened carefully to that explanation. The fact that the word does not mean what most people think it means in a great string of other public bodies is neither here nor there. I was not impressed by that explanation, and I invite the Minister to think a little more carefully about it. “Gratuity” has a very clear meaning in English, and we should stick to the normal meaning when we are making legislation.
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- Baroness NoakesConservative
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- My Lords, I agree with the noble Lord, Lord Oakeshott. Many statutes are simply lifted from previous statutes and made according to the Victorian parliamentary draftsman’s handbook, which has not been updated to move with the times. The term “gratuity” is extremely old-fashioned. I would have been quite happy to concede previously that it has been used in other legislation. I am grateful to the Minister for considering the points that I made in Committee and responding on the pensions issue, which is extremely helpful. I simply suggest that some day someone must get parliamentary draftsmen to use modern language in today’s Bills when drafting corporate structures, which have moved on quite considerably from those that parliamentary draftsmen used to create even 10 or 15 years ago. I will not pursue that point today, but the Minister might like to do so. I am grateful to him for tabling the amendment. On Question, amendment agreed to. [Amendment No. 21 not moved.]
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- Baroness NoakesConservative
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- moved Amendment No. 22:
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Baroness Morgan of DrefelinLabour- Quote
- moved Amendment No. 23:
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- Baroness NoakesConservative
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- My Lords, I am delighted to support the amendment proposed by the noble Baroness. On Question, amendment agreed to.
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- Baroness NoakesConservative
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- moved Amendments Nos. 24 and 25:
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- Lord McKenzie of LutonLabour
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- moved Amendment No. 26:
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Baroness Turner of CamdenLabour- Quote
- moved Amendment No. 27:
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- Lord McKenzie of LutonLabour
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- My Lords, I am grateful to my noble friend for moving Amendment No. 27 and for speaking to Amendment No. 28.
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- Baroness NoakesConservative
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- My Lords, the Minister says that to all of them.
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- Lord McKenzie of LutonLabour
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- Indeed, my Lords. I always mean it. The amendments concern the investment policy for personal accounts. I will take the two amendments together as they both relate to investment objectives of the Personal Accounts Delivery Authority. Amendment No. 27 would require the Personal Accounts Delivery Authority to develop an investment strategy based on industry best practice, in particular in relation to the delivery authority’s approach to corporate social responsibility. Amendment No. 28 would require the objectives of personal accounts in relation to investment decisions and charges to be set out in the Bill. The December White Paper, Personal Accounts: A New Way to Save, set out a broad overview of the personal accounts scheme objectives, investment expectations and the charging structures. The Government’s response to the White Paper consultation published recently set out our intentions for taking forward the policy on these areas. It is a requirement of European law that pension schemes must comply with the “prudent person” rule and that investment decisions must be made in the best interests of members and beneficiaries. The personal accounts scheme will be a trust-based occupational pension scheme, run by trustees who will have a duty to comply with European and domestic legislation to manage the scheme in the best interests of members and beneficiaries. We expect that the Personal Accounts Delivery Authority will consider all manner of industry best practice, investment choices and engagement with stakeholders in developing the investment strategy for the scheme. I hope my noble friend will agree that it is therefore not appropriate to set out specific objectives for the delivery authority to follow as these would constrain its proper consideration of all investment choices. As I have stated on earlier occasions, our proposed Bill, planned for later this year, will set out the finer detail of personal accounts and the remit of the delivery authority. I can reassure noble Lords that we will have the opportunity at that point to discuss in greater detail the proposed plans for investments and charges. In those circumstances, I hope my noble friend will withdraw the amendment.
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- Baroness Turner of CamdenLabour
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- My Lords, I thank my noble friend for that comprehensive response. I appreciate that there will be an opportunity at some stage in the future to discuss investment and charges. In those circumstances, we can withdraw the amendments today in the confidence that there will be an opportunity for further discussion if that is necessary. In the mean time, I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. [Amendment No. 28 not moved.]
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- Baroness NoakesConservative
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- moved Amendment No. 29:
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- Lord Oakeshott of Seagrove BayNon-affiliated
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- My Lords, we on these Benches support the amendment in the interests of transparency—the favourite word of Ministers tonight, I notice. It seems to have overtaken, with a late run, the word “flexibility” in the ministerial briefing stakes.
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- Baroness Morgan of DrefelinLabour
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- My Lords, I dare not say that I am grateful to the noble Baroness for tabling the amendment, but I am delighted that we were able to have this discussion now. I hope that I can be flexible with my speaking notes so that I can try to address some of the noble Baroness’s concerns, which I appreciate are important. I stress that the Government have approached the development of proposals for personal accounts in a very collaborative and consensual way. I strongly believe that that approach is not going to change, and we will continue to work with the network of stakeholders that we have established. We will continue to be open about proposals set out in the White Paper, the consultation and the Government’s response. Our approach is to use the documents that are in the public domain and set out the proposals, combining that with the requirements on the delivery authority to produce an annual report and accounts, to have a management statement which is agreed with the DWP and is public, and to have a financial memorandum. These procedures and processes will create a situation in which the transparency required by the noble Baroness can be delivered. In Committee, noble Lords indicated that they would return to these topics on Report. The Bill seeks to establish a delivery authority to utilise the knowledge, skills and experience of the private sector to help the Government to understand the commercial and operational implications of policy decisions. In particular, the delivery authority will advise on specific products that comprise a financial, technical and commercial strategy. We want to introduce independent expertise at an early stage to ensure that our proposals are robust and can be implemented successfully. As Clause 33 indicates, the delivery authority will, during the initial phase, provide advice on relevant proposals as presented by the Secretary of State. As I have indicated, these proposals, including the December White Paper and the DWP’s recent response to the consultation on that paper, are already in the public domain. Furthermore, the debates on the Bill will provide and shape the context within which the authority will work. We continue to develop proposals prior to legislating for personal accounts in a proposed second Bill. In doing so, the DWP will utilise the stakeholder networks it has worked hard to establish, maintaining the open and consultative approach we have developed with interested parties. A good example of our collaborative working approach is the seminars we have held in conjunction with the PPI and other organisations. We will continue to listen to and engage with stakeholders as we take forward proposals for personal accounts. We cannot do this without having the level of transparency for which the noble Baroness is calling. We cannot achieve that engagement without working in that way. As the delivery authority takes up its role, it, too, will proffer advice on the proposals. But, unlike stakeholders, the authority will do so in an independent capacity and from the perspective of an organisation that will be tasked with creating the infrastructure for the scheme. We must bear in mind that, in particular, the authority will be considering the design of the infrastructure for the scheme and the preparations for the contracting of services necessary to set it up. To expose the nature of this work, as the amendment suggests, would put the delivery authority at a major disadvantage when it comes to negotiating contracts. Indeed, it would be likely to deter potential suppliers who would be denied confidentiality. I believe that this is one of the key problems with the amendment. This would clearly not be in the interests of the eventual members of the scheme. As I have indicated, the primary reason for bringing in independent expertise at this early stage is to advise on the viability of policy proposals and the scheme, including the commercial strategy for service contracts. Guidance is a term which describes one way in which the Secretary of State could communicate with the delivery authority about how it carries out its duties—it is not a method of curtailing the independence of the authority in providing advice on proposals. Much of this guidance will be uncontroversial, such as how the authority could present advice to the Secretary of State. However, the delivery authority will be required to produce an annual report and accounts, which is important in terms of transparency. That public document will include details of the authority’s work, the issues it has advised on and the progress it has made towards delivering its remit. As I suggested earlier, the authority will also be subject to normal non-departmental public body scrutiny and accountability arrangements. The management statement and the financial memorandum, which will be public documents, will provide a clear operating framework. As I have said, these documents will be agreed with the DWP. I fully accept the spirit in which this amendment was tabled. I stress again that we are, and will continue to be, committed to maintaining the consensus that has been our over-riding approach in developing our proposals for personal accounts. This will not change once the authority is in place. Our White Paper response document quite clearly indicates our expectation that the delivery authority will act in an open and consultative manner. Indeed, in his foreword to that document, the Secretary of State was unambiguous in stating: “The last year has seen tremendous progress in building consensus on a new foundation for long-term savings. We must now go further in deepening that consensus around the details of personal accounts. The coming year could be the most important in getting this right”. I hope that I have reassured the noble Baroness that, in taking forward proposals for personal accounts, we and the delivery authority will be open and transparent in our proceedings. However, as she will readily appreciate, we must also consider the sensitivities around commercial confidentiality that I mentioned. I hope that the noble Baroness will consider withdrawing her amendment.
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- Baroness NoakesConservative
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- My Lords, I thank the Minister for that comprehensive reply and the noble Lord, Lord Oakeshott, for his support for my amendment. If I had not heard the Minister’s final sentence, asking me to withdraw the amendment, I might almost have thought that she was agreeing with exactly what I was trying to achieve. If the delivery authority is to be as committed to transparency as the Minister would have us believe, why can we not include in the Bill a provision that states that its proposals will be laid before Parliament? I accept that there exists a body of proposals at the moment, but other proposals could arise later, which may or may not be made available. Neither of us is interested in the administrative guidance on how to lay out advice to the Secretary of State—that is not important. What is important is the extent to which guidance is given that constrains or affects the way in which the issues are to be developed. The Minister said that commercial confidentiality was the key and that the authority would deliver the design of infrastructure, which was not appropriate to be in the public domain. However, that is not what my amendment dealt with. It dealt with the proposals and the guidance that the Secretary of State gives to the delivery authority. It was not aimed at advice going in the opposite direction to the Secretary of State—we debated that in the context of the Freedom of Information Act amendment in Committee. The amendment is about being open and transparent not just with stakeholders but also, importantly, with Parliament, which does not want to lose sight of the development of the scheme as it progresses. The Minister has not addressed the transparency issues that I raised. It is such an important issue that I wish to test the opinion of the House.
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- Lord McKenzie of LutonLabour
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- moved Amendment No. 30:
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- Baroness NoakesConservative
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- My Lords, perhaps there is no point in having a Committee stage if I just table amendments, not move them and the Government think about them in this way—this is a magic way of getting through a Bill. I thank the Minister for considering my amendment that I did not move in Committee. On Question, amendment agreed to.
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- Lord McKenzie of LutonLabour
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- moved Amendments Nos. 31 and 32:
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- Baroness NoakesConservative
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- moved Amendment No. 33:
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The Earl of NortheskConservative- Quote
- My Lords, I support this amendment. My noble friend referred to gateway reviews. I am going to bully the Government with a specific question about that until I am blue in the face. Normally, with gateway reviews the Government claim commercial confidentiality. I signally fail to understand why the traffic-light system of gateway reviews should be subject to commercial confidentiality. That simply tells us—Parliament—whether a particular IT project is subject to a red, green or amber light.
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- Lord Oakeshott of Seagrove BayNon-affiliated
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- My Lords, I thank the noble Baroness, Lady Noakes, for remembering my question in Committee. I am afraid that I still feel on balance that six-monthly reports on this project are too frequent. The identity cards project is such uncharted territory, and it is far more complex and far larger than this. Six months is a reasonable period in the ID cards Bill but in this regard it rather smacks of pulling up the plant frequently to see whether it is growing. I am afraid that I do not support the amendment.
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- Lord McKenzie of LutonLabour
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- My Lords, noble Lords will be aware, as has been said, that this amendment was debated in Committee. Several points were raised then, from different sides of the Chamber. The noble Baroness, Lady Noakes, justified her need for more reporting because the Government have, she said, “a poor record of delivering new IT systems”.—[Official Report, 11/6/07; col. 1515.] There was also some concern that if the costs of the scheme were to be covered through some form of government subsidy, this would be unfair to existing pension providers. I do not think that that point has been pushed this evening. The delivery authority is being set up to engage the necessary expertise to advise on the delivery of personal accounts within a framework set by government. Of course I understand the concerns expressed here today. The Government's track record of delivering on large-scale IT projects has not altogether been a happy one. But it is sometimes easy to forget the track record of the routine work of this department—the DWP ensures that state pensions are paid every week or month to around 10.5 million pensioners in the UK and a further 1 million who live outside the UK. In this initial advisory phase, as we have said throughout the consultation on personal accounts, the delivery authority's sole source of financing will be the Department for Work and Pensions, from grant in aid. As such, the department will be required to report on its accounts in the usual way. I am not sure that a requirement to report on public expenditure in connection with personal accounts—from the point at which this Bill is passed, and every six months thereafter—would help to ensure that the necessary IT for the personal accounts scheme is delivered. Six months is incredibly frequent; it will be a job-creation scheme for accountants. In this initial phase, the authority will also provide advice and consider proposals on the most effective way to finance the scheme. It has been suggested by some in the industry that any form of government subsidy would distort the market for pension provision. That is not our intention. We recognise that the personal accounts scheme should not receive state support—that gives it an unfair competitive advantage over other pension providers. We intend the scheme to be self-financing in the long run through membership charges. However, in the short term, there are likely to be costs arising from a number of activities, such as acquiring the necessary IT and testing it, before the scheme receives any revenue from membership charges. Some respondents to our consultation on personal accounts suggested that members, “should not bear an unreasonable burden of the start-up costs of the scheme”. Others were concerned that any taxpayer subsidy would create an imbalance in the market for workplace pensions. We are considering a range of funding options for the personal accounts scheme. The optimal financing solution will require balancing our commitment to those who are not covered by existing pension provision—the 7 million who are not saving enough—without adversely impacting on the market for pension provision. We are all well aware of the constraints on the government purse and the need to be accountable to the taxpayer. Provisions in Schedule 6 require the delivery authority to report annually on its performance and financial position—a requirement that applies equally to other non-departmental public bodies. The delivery authority will be required to provide a report to the Secretary of State, certified by the Comptroller and Auditor General, for examination and approval. I see no benefit in adding further burdens to the comprehensive regime of financial accountability that already exists. The income and expenditure, public or private, associated with the personal accounts scheme, beyond the delivery authority's advisory phase, is not a matter for the provisions in the Bill. It is our intention to bring forward further information on the funding options we are considering in a subsequent Bill, subject to the will of Parliament. There will be further opportunity for your Lordships to examine that information. I therefore urge that the amendment be withdrawn. This is not an attempt to withhold any information, but if we are asking for six-monthly financial reporting with 10-yearly projections as well as all the other routine reporting that needs to take place, that really is way over the top. The noble Lord raised the issue of gateway reviews and their availability. I am not particularly excited on that issue, but I shall look into the matter and perhaps write to him.
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- Baroness NoakesConservative
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- My Lords, I thank all noble Lords for taking part. I am sorry that the noble Lord, Lord Oakeshott, thinks that six months is too short. I feel that a 12-month backward-looking report which the Minister said was on offer—an annual report that by definition looks backwards—is nothing like a substitute for keeping an eye on what is going forward. I do not believe that it is a job-creation scheme for accountants, because if the delivery authority is doing its job properly, it will have long-term projections which are constantly kept under review. This is just a matter of transparency, yet again. The system needs to be—and we all want it to be—up and running by 2012. There is high potential for it not to be plain sailing. It may not be as complicated as the ID card scheme, but transactionally it may be more complex as it has to cope with enrolments, people changing employment, and people investing in different kinds of funds and changing them over time. Transactionally, it is quite a complex scheme. If it starts to get out of control, it may need more money to fix it, and who will meet that cost? Will the state meet it or will it be a burden on the scheme? Or it may not be delivered, which we do not want. Transparency— keeping a view on how this is developing—is one of the important ways in which one can help it to be delivered. However, I recognise that there is no support for the amendment this evening, which is a great pity because it would have been nice to test how many of the 70 are still in the House. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. [Amendment No. 34 not moved.]
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Lord SkelmersdaleConservative- Quote
- moved Amendment No. 35:
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- Baroness Turner of CamdenLabour
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- My Lords, I do not disagree with the amendment, and I am sure that the noble Lord, Lord Skelmersdale, would not expect me to. I have a query on the wording, “pension contributions made or treated as made”. I worry about that a bit, because we know of plenty of examples where employees have alleged that they have made contributions but have in fact had contribution holidays and so on. While I would be quite happy if it just said “pension contributions made”, I feel a bit dubious about “treated as made”.
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- Lord Oakeshott of Seagrove BayNon-affiliated
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- My Lords, I congratulate the noble Lord, Lord Skelmersdale, on a novel and original idea, wherever it gets inserted into the Bill.
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- Lord McKenzie of LutonLabour
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- My Lords, I would like to thank the noble Lord, Lord Skelmersdale, for tabling this amendment. We share his concern that employees should be given appropriate information about their employer’s contribution to their pensions. However, I believe that the current arrangements meet these objectives. The Employment Rights Act 1996 entitles employees to receive a written pay statement showing their gross and net pay and itemising all deductions. The purpose of these provisions is to protect employees by ensuring that they know what deductions have been made from their pay and why. They can complain to an employment tribunal if they do not receive a statement, or if all the necessary information has not been given. The tribunal can order the employer to pay compensation if it finds that unnotified deductions have been made. The provisions therefore ensure that employees' pension contributions are shown on their pay statements. Employees have to be told when they join, or are considering joining, an occupational pension scheme how the employer’s contributions are determined and how the member’s contributions are calculated. In addition, members of defined contribution schemes—where the amount of money paid in is intrinsically related to the size of the pension they will get out—have to be told, on an annual basis, the amount of contributions credited to them in the previous year. Members of defined benefit schemes which are subject to the statutory funding requirements can request information on the schedule of contributions that the employer has agreed to pay. We feel that this level of information is satisfactory. We must be mindful of the burden on employers of having to re-cast their pay statements unless there is compelling evidence that harm would result from the absence of such a requirement. This may slightly disappoint the noble Lord, but I hope that he accepts the extent to which the basic issue he is pursuing is genuinely covered and feels able to withdraw the amendment.
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- Lord SkelmersdaleConservative
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- My Lords, I am grateful for the comments of the noble Lord, Lord Oakeshott, and the noble Baroness, Lady Turner. The reason that the words “treated as made” are in the amendment is so that it covers public sector pensions, where the money does not actually get transferred anywhere. It sits in a notional hole and gets paid out at the end of the employment. As for the Employment Rights Act 1996, by law the Minister is quite right. You have to have net and gross income put on the monthly, or even weekly, pay sheet. You have to put the deductions, first for tax and, secondly, for national insurance but, as far as I know, for no other purpose. If I am right, there is a very good reason for putting pension contributions on the pay sheet. I will not pursue the argument tonight. However, I would like to talk privately, perhaps to one of the Minister’s advisers, about this, as transparency on a weekly or monthly basis is very important. It will help to achieve what we are all trying to do, which is to set up a sensible pension scheme, especially for the lower paid.
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- Lord McKenzie of LutonLabour
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- My Lords, before the noble Lord sits down, I understand fully the thrust of where he is coming from. I very much take the point that we should fix a meeting outside the Chamber to see precisely where we are. If we need to do anything different to meet the noble Lord’s objectives, we will try to do so.
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- Lord SkelmersdaleConservative
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- My Lords, I am very grateful. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn. Clause 38 [Consequential etc. provision, repeals and revocations]:
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- Lord McKenzie of LutonLabour
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- moved Amendment No. 36:
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- Lord McKenzie of LutonLabour
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- moved Amendment No. 37:
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