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Occupational Pension Schemes (Levy Ceiling) Order 2009

I thank the Minister for the explanation of the changes. This is a timely moment to ask a few serious questions about the grave position in which the Pension Protection Fund finds itself. The most recent figures were that defined benefit pension schemes in this country, the universe which the Pension Protection Fund is set up to protect and the people who are paying the levies that we are discussing today, had a total deficit of £191 billion, which was up from £48.8 billion a year earlier. I remember well the passage of the then Pensions Bill 2004 when we debated these matters. I also remember well, in 2005, two academics, Anthony Neuberger and his colleague, David McCarthy, wrote an excellent and groundbreaking article in Fiscal Studies on the PPF. Their conclusion, with which I agreed at the time, was that there was a significant chance that the claims on the PPF, ""will be so large that the PPF will default on its liabilities, leaving the Government with no option but to bail it out. The cause of this problem is the double impact of a fall in equity prices on the PPF: it makes sponsor firms more likely to default, and it makes defaulting plans more likely to be underfunded"." It explained that when they go down, the black holes are bigger. In those debates, I challenged the Government—it was laughed off, but I ask them now whether they are equally confident—about whether the PPF would prove to be a leaky lifeboat sailing on uncharted seas. Never, in my darkest nightmares, did I fear that the economy and pension schemes would collapse in the way that they have over the past five years. In America, the model for the Pension Benefit Guarantee Corporation does not have an explicit government guarantee, but it has the US Secretary of the Treasury and the US Secretary of Labor sitting on its board. Everyone in America knows that that amounts to an American government guarantee. It is really a fiction for the Government to maintain, if they do, that this is an arm’s-length body. The cost of funding by the PPF levy is falling on an ever-smaller number of private sector defined benefit pension schemes, which are shrinking by the day. It is almost like an ever-bigger upturned pyramid resting on an ever-narrower base. Will the Minister review with his officials one specific and growing problem? In the past few months following the change in insolvency laws, there have been a great flood of pre-pack administrations in this country—phoenix administrations. He mentioned shuffling off pension liabilities. There is a rash of companies calling in the accountants and setting up a clever scheme whereby, in many cases, they shuffle off their pension fund and property liabilities. They then go into administration and come out again 10 minutes later with the same people in charge, having walked away from their pension liabilities. This serious abuse has developed in recent weeks. I have already taken it up in writing with the noble Lords, Lord Myners and Lord Mandelson, but there is a very significant pension involvement here and I hope that the Minister will also take it up with the noble Lord, Lord Mandelson, whose department is responsible. It is a matter of serious concern as it concerns not only getting rid of pension fund liabilities, but also, in the way it is operating in the commercial property market, it is gravely undermining pension funds and life insurance solvency because it undermines the rental income on which property portfolios depend. I, too, looked at the report of the debate in the Commons on 18 March. A request was made then for the calculations that have been made and to which the Minister, the right honourable Rosie Winterton, referred. The calculations might better be called scenarios as to solvency under different conditions in the PPF. She gave an undertaking to put them in the Library in so far as they were not "commercially confidential". I find it hard to see how calculations of that sort could be commercially confidential as they do not refer to individual firms. I hope, therefore, that the Minister can confirm that those forward calculations have now been placed in the Library so that we can all see them. This is a matter of great public concern. We need to see what the conditions and the assumptions are in order to hold a proper, open debate. In the debate in the Commons, Ms Winterton talked about liquidity. That is not the point. No one is suggesting that the Pension Protection Fund or individual pension funds in this country are going to run out of cash in the near term. The issue for pension funds, which are very long term, is not liquidity because they are not going to run out of cash in the near term, but that they go bust when they cannot meet their liabilities over the long term. That is the problem which people are so concerned about, and is why these calculations are so important. This is a very testing time for the economy, for pension funds and for the Pension Protection Fund. I encourage the Minister to be as open as possible in a debate that is very serious for the country as a whole.