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Pensions Bill

We have made clear, here and in the other place, the Government’s intention that the personal accounts scheme will be self-financing in the long term, through charges on members, and delivered at nil cost to taxpayers. However, as with most new enterprises, there will be periods when the scheme has an operating deficit. One possible source of financing for these costs could be borrowing, from either the private sector or Government or a mixture of both. The delivery authority is evaluating a range of funding options to enable it to make recommendations on the best way to establish and run the personal accounts scheme. However, no decisions, including whether any borrowing will be required, have yet been made. It is important that the delivery authority is given the time to complete this important work. We are determined that the scheme should deliver a good deal for scheme members through low charges, but this must be balanced against what is needed to ensure that the scheme is a viable proposition and our intention for the scheme to be self-financing in the long run. It is therefore vital that we do not restrict the options for financing the scheme at this stage, as Amendment 112Z would, as doing so could compromise the trustee corporation’s ability to get value for money. I reassure your Lordships that if the trustee corporation needs to borrow, it will need to comply with existing guidance and legislation and show that this provides value for money, just like any other NDPB. If a government loan is required, it will also need to be affordable, represent value for money to taxpayers and comply with European rules on state aid and competition. Amendment No. 112ZA would allow the trustee corporation to borrow and to invest money without consent from the Secretary of State. While Amendment No. 112ZB would allow the corporation simply to invest money without the Secretary of State’s consent, Amendment No. 112ZC would require the Secretary of State’s consent for any borrowing and investment that the trustee corporation makes. Between them these amendments cover almost all of the permutations that you could have. I therefore thank the noble Baroness for the opportunity to clarify the Government’s intention regarding oversight of the trustee corporation’s borrowing and investment activities. For an NDPB, it is normal for functions such as borrowing and investing to require the consent of the parent department’s Secretary of State, in this case the Department for Work and Pensions. This is because an NDPB’s expenditure is taken into account in its parent department’s budgets. The requirement for consent from the Secretary of State quite rightly provides a safeguard to ensure the wider interests of the taxpayer are taken into account, as well as the trustee corporation’s own objectives. In the case of decisions relating to borrowing, the trustee corporation would be responsible for balancing low charges for members against ensuring that the scheme is commercially viable. The Secretary of State’s consent is needed to ensure that their actions are also consistent with the sound management of public finances. In the case of investment, we would generally not expect the trustee corporation, as an NDPB—and therefore a not-for-profit organisation—to invest any money on its own behalf. Therefore, the purpose of Clause 66(4) is to ensure that, should the trustee corporation wish to invest any funds provided for its operation, it could do so only with the consent of the Secretary of the State. However, I assure noble Lords that this provision is not intended to compromise the independence of the trustee corporation. Although Clause 66(4) requires consent, Clause 66(5)—which was, I think, the clause that the noble Baroness asked about—ensures that the trustee corporation may act independently of Government, when acting as sole trustee of the personal account scheme. This provision would apply, for example, when the trustee corporation uses the power in Clause 66(3) to invest members’ contributions on their behalf. Investing members’ funds must be the responsibility of the trustee. It is right that Ministers should not have a role in these investment decisions. This is purely a matter for the trustee, acting in members’ best interests. The noble Baroness may press me on when the NDPB would invest other than on behalf of members. I suppose there could be circumstances where there might be a short-term surplus of funding. I have not really thought it through, but one can see that there are circumstances where the NDPB might invest on its own account, rather than for scheme members. I make it absolutely clear that the investment of members’ contributions is the responsibility of the trustee. It is not the responsibility of Government or the Secretary of State. I hope that has helped with these amendments.