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Pensions Bill

Listening to the debates on Monday evening and today—I am losing track of the Committee days now—I confess to a slight sense of déjà vu, to coin a phrase, to which noble Lords have referred. Back in 2004, I was rightly persuaded by the noble Lord, Lord Hunt, that there was a real issue of moral hazard in that Bill; and that, in establishing the TPR to avoid Maxwell-type rip-offs, we might tip over into preventing mergers, acquisitions and restructuring of companies. Those things would be highly desirable, both for the employees whose jobs might otherwise be at risk and for the health of British industry. The question then, as now, was how we assessed the balance between those risks and ensured that restructurings in good faith were not subsequently undermined by any rigid appliance of compliance rules by the TPR. With the help of the noble Lord, Lord Hunt, and other Members of your Lordships’ House, including the noble Lords, Lord Oakeshott, Lord Skelmersdale and Lord Higgins, we devised flexible and relatively informal clearance arrangements, which I understand—despite the cost which the noble Baroness suggested—have worked well, have not been abused and are welcomed as a way of offering comparative flexibility in a fast-moving scene, as well as appropriate scrutiny by TPR and security for scheme members. There are, of course, three objectives here. The point of this amendment is the process, mentioned by the noble Lord, Lord Oakeshott; namely, how we did it. As far as I can judge, the Government’s proposed procedure, as outlined by my noble friend, is broadly similar to the one we adopted in 2004, which all parties say worked well. There was a framework proposal in the Bill, reflected in Amendment No. 130EW, together with draft regulations that we worked on over that summer, on which there was extensive co-operation from your Lordships and extensive consultation with the industry. They were published and made available for formal scrutiny by this House. If necessary, we were willing to make further adjustment in the Bill, as my noble friend indicated. It is the case now as then—the noble Lord, Lord Oakeshott, was spot on on this—that new forms of pension activity, from bulk buy-outs to some of the BrightonRock issues that we discussed on Monday, have emerged which were simply not on the scene in 2004. Some nasty scenarios could emerge that we cannot yet predict or foresee. What Maxwell taught us—and the work of TPR, PPF and FAS has surely confirmed this—is that as far as possible we need to see around the corner, and if we cannot do that, we need at least to fence the precipice and not always rely on sending in ambulances after the event. TPR powers as they stand are not adequate to cover some of these emerging risks and address the new mark 2 version of emerging moral hazard issues. My noble friend will correct me if I have misunderstood this, but until recently there was broad consensus about how we move forward and general support for the Government’s draft regulations on which we are consulting. I am not sure why that broad consensus seems to have broken down in the past few weeks, although I suppose that some bodies, for example venture capital bodies, might find some aspects of the regulations irksome in a fast-moving world. I can see why they might argue that, but when set against the proper interests of scheme members and the like, one should not assume that they have the monopoly of the best interests of all stakeholders and players. Government and TPR, not any particular interest, always have to hold the ring between entirely legitimate but conflicting and competing concerns. The assumptions behind some of the comments by noble Lords in Committee on Monday therefore surprised me. They appeared to suggest that the Government were behaving unscrupulously and that they needed to be watched because they might introduce retrospective and unreasonable requirements. I thought that was an odd and unreasonable charge to make, because the Government are acting for all of us, especially the employees whose pension savings could be at risk. I believe the charge of bad faith should not be levelled at the Government, but at the occasional company or organisation that—I know: we were burnt by it—does not always behave with full probity and seeks to cut corners. Government are continually scrutinised, and rightly so. Emerging forms of pension structure, however, are not so scrutinised. For its regulation to be adaptive and flexible, TPR needs that head space of additional powers—that is what we are talking about—without being sure in what precise way they might be applied. It is no use waiting for future primary legislation. The old adage about closing the stable doors comes to mind, because, from my experience in 1995, in pensions legislation we are always one step behind. We need TPR to have generic powers that are properly scrutinised, following proper consultation of regulations, to cope with the unforeseen. Those regulations must have broad support. Since 1995, when I was first engaged in pensions legislation, we have always been fighting the previous war. Remember how long MFR lasted and how robust it turned out to be? Remember the unsuccessful efforts of some of us to get a central funding scheme, with the result that we had to invent the PPF five years down the line? If we had got the PPF when we called for it, it could have resolved the problems that FAS had to be invented to adjust. Governments of all persuasions, my own included, too often have been leaden-footed on pensions when crises emerge, because they do not have the head space of regulatory powers entrusted with an organisation such as TPR—it did not exist in 2004—to scrutinise in the public interest, on behalf of all of us, and to strike the right balance. My noble friend has listened. He has moved during these debates, for example on qualifying earnings, where sensible discussions are now taking place. I hope that those discussions will bring us to an amicable result. The amendments strike the right balance and are proportionate. I am perfectly comfortable with any assurances that my noble friend may wish to give tonight about retrospectivity, which I agree can be uncomfortable territory to occupy; clearance schemes; the offer to put further wording in the Bill, and the like. In pensions, the scenario, as the noble Lord, Lord Oakeshott, rightly said, is changing fast, and TPR does not have the head space in its regulatory powers at the moment to address those issues as and when they might arise. I urge the Committee not to follow the example of the Bourbons, who, I am sure noble Lords are aware, allegedly learnt nothing and forgot nothing. We know what happened to them.