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Pensions Bill

moved, as an amendment to Amendment No. 130EW, Amendment No. 130EY: 130EY: Before Clause 107, line 16, at end insert— ““and the provision would not add materially to such risks.”” The noble Baroness said: I am sure that all noble Lords will have an opportunity at some stage to respond to what the Minister has just said. We are grateful to him for putting that on the record. However, it does not change the fact that the Government are choosing to press ahead with the amendment notwithstanding the fact that it has not been properly consulted on. They did not expose Amendment No. 130EW to consultation. They received a large number of responses to their different consultation, many of which disagreed with the drift of what the Government were trying to do, but within days of the consultation ending they published their draft amendment, indicating that they had no intention of taking account of the consultation itself. We believe that it would be right for further discussion to take place on the basis of the Government having an open mind. But the Government have chosen not to have an open mind. We will therefore progress with our amendments on the Marshalled List, because it is important that the arguments put to us are properly recorded in Hansard alongside any consideration of the Government's own amendment. In our last Committee day, the Minister said: "““It would clearly not be appropriate to exercise the power””—" that is, this broad power in Amendment No. 130EW— "““… if it created serious new risks. I should like to reassure noble Lords that it is not our intention that by introducing provisions we materially increase such risks””.—[Official Report, 14/7/08; col. 1086.]" Those are very fine sentiments, but that is not what the new clause in Amendment No. 130EW proposes. That new clause focuses on producing regulations as if there are material risks either to the benefits of members of pension schemes or of compensation being payable to the PPF. We believe that it is quite possible that the regulations will increase both those risks and, therefore, that they should be properly considered in those terms before regulations are produced. Let us consider the risk to benefits of members of pension schemes. The CBI, for example, has pointed out to us that if further clearance applications are a result—and many believe that that will be the case if Amendment No. 130EW is in the legislation—there will be a considerably increased cost imposed on business to deal with them. The CBI estimates that each clearance costs between £50,000 and £100,000 as a result of the many advisers and valuation fees involved in putting together those applications. That will inevitably lead to a further hardening of view among managements of companies with defined benefit schemes, which will in turn accelerate the decline in defined benefit schemes. It is a question not of causing a decline in defined benefit schemes—they are in terminal decline—but of what the rate of decline will be. We have also had comments from people who are aware of how turnaround situations work. They say that these new powers potentially make turnarounds more difficult and will possibly hasten businesses being placed into insolvency. That obviously poses a risk to the benefits of members because the PPF levels of compensation fall well short of those within a defined benefit scheme. As I stated previously in Committee, while it is often said that the PPF gives 90 per cent cover, that is often down as far as 60 per cent and it is around 80 per cent on average. There is also the question of whether this power will help the retention of DB schemes, because the regulations might be used to impose additional liabilities on those who are able to lend financial support to employers struggling with DB schemes, merely through being connected with those employers. Employers with an attached DB scheme will find themselves unsaleable and unattractive investment targets. If that is the case, they will find it more difficult to find investment partners and, inevitably, the employer covenant reduces. As to the risk to the benefits of members of pension schemes, there is also a risk to the compensation being payable from the PPF. Again, those involved in turnarounds say that turnarounds and recovery will be more difficult because it will become more difficult to obtain new investment or to sell assets to pay off secure debt without being at risk under what are potentially the new rules. Clearance is not an answer in the turnaround situation because of time criticality. For example, you need to obtain refinancing in order to meet payroll obligations. We do not have an insolvency or turnaround regime which allows a lot of time for decisions to be made. If clearances are not pursued, further financing is just as likely not to be available and likely to accelerate the move of the employers into insolvency which, of course, will thereby increase the risk to the PPF of compensation becoming payable. The point I am trying to make is that it is entirely foreseeable that the new rules that have been postulated by the Government will increase the risks—both to members of pension schemes and of compensation becoming payable to the PPF. The only point of Amendment No. 130EW is that the Secretary of State should take into account those risks before issuing any regulations. That is what our amendment seeks to do. I beg to move.