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Occupational Pension Schemes (Levy Ceiling) Order 2009

The Grand Committee will be grateful for the Minister’s careful explanation of these two orders, especially the background to them. I have nothing to say about the background to these orders, but I might be tempted to say something when we get to the financial assistance scheme regulations. As for as the compensation cap provision, it is one of those things that come along like trains every year; perhaps, after the last debate and Question Time, trains are not an appropriate metaphor. Anyway, they come every year and they do exactly the same thing; they uprate by the level of earnings in the previous tax year, as the Government are obliged to do by the Pensions Act 2004, as the Minister said. It is one of the many orders that cause the bee in my bonnet to buzz furiously. I have referred to my objective of downgrading affirmative instruments of this sort many times before; indeed I have given evidence to Select Committees from time to time, but I will not labour that point today, except to say that in 2004 we should have made the first order affirmative and subsequent ones negative. Alas, that option was not open to us then, although I am glad to say that the position has now changed, at least as far as the DWP is concerned, and I commend it for that. All that I would say on that order is that it comes under the horticultural heading that I have referred to before of DDT which, parliamentarily speaking, stands for doing the decent thing. The main subject of this debate, therefore, is the levy ceiling order, as it was in another place last week. I suppose that I should not be surprised that in many cases in his explanation of that order, the Minister has rather shot my fox, but he was speaking so quickly that I did not quite take in the figures that he gave towards the end of his speech. I would be grateful if he would repeat them. As a rather green participant in the debates on the Pensions Act 2004, I still like to think of the PPF as a statutory insurance scheme for the underfunded pensions schemes whose sponsoring employers go bust. I am aware, of course, that Ministers have always denied this and have said that it is not a pension fund either. It is technically a compensation scheme. To me that is semantics. To all intents and purposes, since it behaves like an insurance scheme, therefore to me it is an insurance scheme. Unusually, it is an insurance scheme with two premiums: one to run the fund and the second a risk-based premium on schemes. We are concerned today with the latter. This risk premium, or rather the maximum amount that the fund can demand, has gone up by leaps and bounds since we first debated this annual order, and it is right that this is debated every year. For 2005-06, I seem to remember that the levy ceiling was set at £150 million. It has been raised again and again in subsequent years, and now, as the order makes clear, it stands at £863,412,967. I think that that is the exact figure, although the Minister faltered at that point in his speech. This seems to be a very precise sum. Will the Minister confirm that the odd pounds come about because of the increase in the average level of earnings of 3.6 per cent? Having got that off my chest, this sum of £863-and-a-half-odd million is more than double what was expected when we debated the Bill; that is for the full year after the first year. At that point, it was expected to be some £300 million a year. The Committee will appreciate that that was in the boom years, which of course the then Chancellor of the Exchequer abolished, as he did the bust years. Hubris, we find, has descended on him now that he is Prime Minister. Be that as it may, indeed is, the situation now is completely different. Unemployment is growing at the fastest pace ever recorded, and now, as the Minister told us last week, it stands at 2.03 million. Firms seem to be going to the wall almost daily—I hope that I am wrong about that—and I venture to suggest that most of them, if not all, will have underfunded pension schemes. While I appreciate that the levy ceiling has never yet been breached, will this last, or will we see the ceiling increasing yet again to, say, £1 billion by the end of this decade, which is only 12 months or so away? The Minister made some reference to that in his speech. Or on the other hand, is he as confident as his colleague in another place on Wednesday last, who gave the impression that there was plenty of money in the fund. If so, is the ceiling too high, or is it precautionary? How is it arrived at? That is where the Minister shot my fox on the figures I was going to ask him about. Will he repeat how close to last year’s ceiling the levy has got? How many schemes currently are within the fund and how many are in the queue? He illustrated how they have changed in the past two years, but I wonder whether I am alone in seeing the absolute importance of comparing from year to year. As I said, I expect the situation to get a lot worse over the next few years.