Clause
19
Initial
function of the Authority
Mr.
Waterson:
I beg to move amendment No. 83, in
clause 19, page 20, line 35, leave
out ‘appropriate’ and insert ‘strictly
necessary’.
The
Chairman:
With this it will be convenient to discuss the
following:
Amendment
No. 84, in clause 19, page 21, line 2, leave out from
‘State’ to ‘which’ in line
3.
Amendment No. 20,
in
clause 19, page 21, line 11, at
end insert—
‘(2A) It shall
be the duty of the Authority to carry out their functions under
subsection (1) in such manner
as—
(a) appears to them
to ensure, so far as they are facilitating the implementation of any
such proposals, thatthere is effective co-operation in
relation to the implementation of the proposals between themselves, the
Pensions Regulator, the Financial Services Authority and the Secretary
of State; and
(b) does not
interfere with the existing provision of personal or occupational
schemes.’.
Amendment
No. 40, in
clause 19, page 21, line 11, at
end insert—
‘(2A) In
discharging its functions under this Part, the Authority shall publish
a report on how it can ensure that individuals who have money invested
in Personal Accounts and those considering doing so in future will have
access to generic financial
advice.’.
Amendment
No. 86, in clause 19, page 21, line 26, leave out subsection
(5).
Amendment No. 21,
in
clause 19, page 21, line 27, at
end insert—
‘(5A) In
discharging its function under this section, the Authority shall ensure
that its actions and advice support the following objectives for the
scheme—
(a) ensuring
that the overall outcome, taking account of the impact on the existing
market, is an increase in the number of people saving and the overall
amount being saved;
(b)
optimising levels of participation and contribution among the target
group;
(c) setting an
investment strategy in the best interests of
members;
(d) minimising burdens
on employers;
(e) minimising
the impact on other high-quality pension
provision;
(f) assuring
security of administration;
(g)
governing in the best interests of members and
beneficiaries;
(h) ensuring
that the board acts impartially, prudently, responsibly and
honestly;
(i) delivering
appropriate levels of
choice;
(j) achieving charges
that are fair and
reasonable;
(k) ensuring the
funds are invested in the best interests of the
members.
(5B) Her Majesty may
from time to time by Order in Council make provision for amending the
objectives set out in subsection
(5A).
(5C) No recommendation
shall be made to Her Majesty to make an Order in Council under
subsection (5B) above unless a draft of the Order has been approved by
resolution of each House of
Parliament.’.
Amendment
No. 22, in
clause 19, page 21, line 27, at
end insert—
‘(5A) In making
preparations and giving advice, the Authority shall seek to ensure that
the full costs of setting up and operating the scheme are covered by
charges to be made either to employers or to members and not met from
other
sources.’.
Amendment
No. 87, in
clause 19, page 21, line 29, at
end insert—
‘,
and such guidance must be reported to Parliament by an oral statement
made by the Secretary of State.’.
Amendment No. 23, in
clause 19, page 21, line 31, at
end insert—
‘(7A) Before
issuing guidance under subsection (6) the Secretary of State shall
consult—
(a) the
Authority;
(b) organisations
appearing to him to be representative of
consumers;
(c) organisations
appearing to him to be representative of
employees;
(d) organisations
appearing to him to be representative of
employers;
(e) organisations
appearing to him to be representative of the financial services
industry;
(f) such other
persons as the Secretary of State considers it appropriate to consult
in relation to the
guidance.
(7B) A draft of any
guidance proposed to be issued under this section shall be laid before
each House of Parliament.
(7C)
Guidance shall not be issued under this section until after the period
of forty days beginning
with—
(a) the day on
which the draft is laid before each House of Parliament;
or
(b) if the draft is laid
before the House of Lords on one day and the House of Commons on
another, the later of those two
days.
(7D) If, before the end
of that period, either House resolves that the guidance should not be
issued, the Secretary of State must not issue
it.
(7E) In reckoning any
period of forty days for the purposes of subsection (5) or (6), no
account shall be taken of any time during
which—
(a) Parliament is
dissolved or prorogued, or
(b)
both Houses are adjourned for more than four
days.
(7F) The Secretary of
State shall arrange for any guidance issued under this section to
published in such manner as he considers
appropriate.’.
Amendment
No. 38, in
clause 19, page 21, line 32, at
end add—
‘(9) Prior to
Parliament’s approval of proposals the Authority must evaluate
the effect of means testing on levels of saving in personal accounts
and its impact on returns in personal accounts and thereafter conduct
and publish evaluations
annually.’.
Amendment
No. 39, in
clause 19, page 21, line 32, at
end insert—
‘(9) The
Authority shall carry out a gender impact assessment of relevant
proposals regarding saving in personal accounts as specified in
subsection
(2).’.
Amendment
No. 65, in
clause 19, page 21, line 32, at
end add—
‘(9) The Authority
shall, no later than 1st April 2008, publish a strategy for maximising
participation in the new system of personal accounts in which it
shall—
(a) set out and
give full explanation of targets for participation in personal
accounts;
(b) identify at-risk
groups where auto-enrolment might risk very low rates or
return;
(c) outline contingency
plans for coping with the workload if participation is higher than
expected;
(d) outline its
strategy for maximising the participation among employees in small
businesses.’.
Amendment
No. 66, in
clause 19, page 21, line 32, at
end add—
‘(9) The Authority
shall prepare and publish a report, no later than 1st April 2008, on
measures it proposes to take to monitor the impact of the new personal
accounts scheme on existing occupational pensions provision and to
guard against levelling down.’.
Amendment
No. 67, in
clause 19, page 21, line 32, at
end add—
‘(9) The Authority
shall prepare and publish a report, no later than 1st April 2008, on
how it plans to establish and develop any necessary IT system and
reduce risks of IT problems with personal
accounts.’.
Amendment
No. 68, in
clause 19, page 21, line 32, at
end add—
‘(9) The Authority
shall prepare and publish a report, no later than 1st April 2008, on
the percentage of the target audience of personal accounts expected to
accrue returns from saving in personal account pension schemes
of—
(a) more than 100
per cent,
(b) 0-100 per cent,
and
(c) less than 0 per
cent.’.
Clause
stand
part.
Mr.
Waterson:
I hope that I shall not test your legendary
patience, Mr. Gale, but there is a great deal in the
amendments that I should like to deal with in appropriate detail. The
good news is that this is the last clause that need detain us for a
significant time, but it raises major issues that must be addressed.
Anybody who doubts that need only look at the front page of the most
recent edition of Parliamentary Brief, containing a very
unflattering set of photographs of the
Minister—
Mr.
David Laws (Yeovil) (LD):
Unshaven.
Mr.
Waterson:
He obviously works night and day. Images of
Richard Nixon with a 5 o’clock shadowdid for him. The
unfortunate headline reads: “Would you buy a pension from this
man?” I think it was Marilyn Monroe who said that any publicity
wasgood publicity, but there is a limit even to that
nostrum.
In this
group of amendments, we come on to much wider issues about the way in
which personal accounts function. The detailed stuff, as the Minister
will no doubt tell us at length, will be included in the next Bill.
However, by that time, the delivery authority will have spent a chunk
of its £21 million and will havenailed down some of the
parameters of personal accounts. It is important to draw the
Ministerand the Government out on the key issues in the
development of personal accounts. I make no apology for doing so, but I
shall try to be succinct. I shall look in detail at the amendments
before making some general points.
To put
everything in context, it is important to consider the views of the
ABI, which expressed concern about two fundamental issues that we have
raised time and time again. My hon. Friend the Member for Runnymede and
Weybridge (Mr. Hammond) and I raised them on Second Reading,
and I make no apology for doing so in Committee. First, the ABI said
that
“the
Delivery Authority should be required to take account of the potential
impact on the existing pensions market...in the detailed design of
Personal
Accounts.”
The
Government have not only failed to do so, but have taken a quantum leap
and increased the contribution cap. A few days ago, they announced
something of which we take an even more serious
view.
10.45
am
The second
concern of the ABI is
that
“the authority
should have a duty to ensure that Personal Accounts are designed to
focus on the target market (of low and middle earners), with an overall
aim of increasing both the number of savers and the total amount
saved.”
That is not some
semantic distinction. It is important, especially at this stage, to set
out what constitutes the success or failure of personal accounts. That
must be clearly understood before we embark on this great
adventure.
I shall
now turn to the amendments. Some of them are fairly minor; others are
more important. I shall begin with amendment No. 83. One might think
that it was only a slight change of words. The clause
says:
“The
Authority may do anything it thinks appropriate for preparing for the
implementation of, or for advising on the modification of, any relevant
proposals about personal
accounts.”
It is
difficult to think of a more sweeping set of powers for the authority,
which is newly emboldened, with£21 million burning a
hole in its corporate pocket. We want to turn down the volume a bit and
replace “appropriate” with “strictly
necessary”. The point of that is to ensure that those who run
the authority have a clear idea of what constitutes their
duties.
Amendment No.
84 is a probing amendment.Clause 19(2) says that
“‘relevant proposals about
personal accounts’ means proposals by the Secretary of State
(whether or not Parliament has given any approval on which their
implementation
depends)”.
We are not
entirely happy about that. Parliament should have a role in the
proposals at the relevant time, although there may be some good,
practical reasons why the Minister wants to pursue a different
course.
I believe that
amendment No. 20 is from the Liberal
Democrats.
Mr.
Waterson:
Ah, I beg your pardon. I would not want to sully
the reputation of the hon. Member for
Yeovil—
Mr.
Waterson:
—any more than is absolutely necessary, by
associating him with one of our
amendments.
The
amendment deals with the duties and responsibilities of the authority.
It is intended to ensure that the delivery authority takes account of
existing regulators and does not interfere with existing provision. It
is supplied and sponsored by the ABI, which tells me that it is based
on provisions in the Office of Communications Act 2002, so there is a
precedent.
Amendment
No. 40, to which I meant to refer, has been tabled by the Liberal
Democrats. We think that they have seen some sense, but I am keen to
listen to what the hon. Member for Yeovil says about it. We have all
received a brief about it. It is sponsored by the Resolution
Foundation, which does some excellent work, especially on financial
capability.
Amendment No. 86 seeks to leave
out subsection (5). We are not entirely clear as to why the authority
should not be allowed to borrow money; clearly it would be obliged to
pay it back. Circumstances in which the authority would borrow money
may not arise in its relatively short life, but I would be keen to hear
what the justification for that is.
Amendment No. 22 is again
designed to deal with any hidden subsidy for personal accounts. It is
intended to ensure that the authority does not make recommendations or
initiate work that would require the scheme to be subsidised by the
taxpayer. That is a perfectly laudable aspiration. Amendment No. 23 is
reasonably self-explanatory. It talks about the guidance to be issued
by the Secretary of State under subsection (6). It makes sure that the
Secretary of State will consult a variety of organisations such as
representatives of consumers, employees, employers, the financial
services industry and such persons as he considers appropriate to
consult in relation to the guidance.
I suspect that this is another
of those instances when the Minister will say, “Of course, we
are going to do this anyway so there is no need to put it in the
Bill.” We will retort, “Well, if that is the case, why
not put it in the Bill?” Let us get over that now. If that is
precisely what the Government intend to do, it seems eminently sensible
simply to put it in the
Bill.
I return now to
amendment No. 21. In many ways, it is the key amendment in this group.
It is designed to hold the Government to account over the functions of
the personal accounts system. Page 84 of the White Paper,
“Personal Accounts: a new way to save”, sets out the
objectives of the scheme which will be set in statute. Amendment No. 21
sets out almost word for word most of those objectives. We have taken
some poetic liberties here and there, but by and large these are an
updated version of those objectives, which the Government have promised
to set in statute.
Some of them
are beyond debate. They are perfectly obvious—to set an
investment strategy; to minimise burdens on employers; to assure
security of administration; to govern in the best interests of members
and beneficiaries; to ensure that the board acts impartially and so on;
to deliver appropriate levels of choice; to achieve charges that are
fair and reasonable; to ensure that the funds are invested in the best
interest of the members.
None of those aims would
require any major debate. Where it gets more interesting is our
proposed paragraph
(a):
“ensuring that the
overall outcome, taking account of the impact on the existing market,
is an increase in the number of people saving and the overall amount
being saved”.
That is an
important objective. If the Government are not prepared to accept it
with open arms, that is a major worry. It is perfectly possible to
envisage a scenario in which there are more savers but the amount of
savings overall has not increased significantly. Of course there will
be more savers, because there will be auto enrolment; many people will,
without making any conscious decision, be enrolled in the relevant
company scheme. We have long been in favour of the concept of auto
enrolment, but not in isolation.
Will savings themselves
increase? The savings ratio has almost halved since 1997 and it is set
out in the Turner report and elsewhere how important it is to get the
11 million or so people who are not saving adequately for their
retirement into the savings habit. A clear litmus test for the success
or failure of personal accounts would be an increase not only in the
number of people saving but in the overall amount being saved. Proposed
paragraph (b)
reads:
“optimising levels
of participation and contribution among the target
group”.
The Government
seem to have veered away from the target group recently, and we think
that it is important to bring them back to the original
concept.
Turner made
clear the people at whom we were aiming the reforms in terms of
personal saving for pensions. Page 48 of the White Paper
states,
“Personal
accounts are particularly targeted at the estimated7 million
people who may not be currently saving enough to give them an income in
retirement they are likely to consider
adequate”.
There is the
usual impressive array of charts. It goes on to specify a group that
tends to be younger, on moderate to low incomes, and also part-time
workers, all those who work for small employers and lower earners, a
high proportion of whom are women. That seems to us eminently sensible.
We made it clear on Second Reading and have repeated today that it is a
major concern of ours that we seem to be getting away from the target
group.
I also
particularly draw the Committee’s attention to the criterion in
(e), which is, “minimising the impact on other high-quality
pension provision”.
That
is a significant change from the wording in the White Paper, which
talks about “considering” the impact on other
high-quality pension provision. We do not think that that is anything
like strong enough. There has to be a clear commitment to avoiding an
impact on generous existing provision.
The issue of the contribution
cap is fundamental for us and to the process of building consensus
about the personal accounts system. The ABI has had a great deal to say
about the change from the £3,000 cap, which you remember,
Mr. Gale, was in the Turner report. Suddenly out of the blue
the Government produced a figure of £5,000 in their White Paper.
I will explain why that matters a lot in a minute, but I would be
fascinated to hear from the Minister where the figure came from. The
form of words at the time was that it was as a result of consultation,
but we have searched high and low in the pensions and the wider
financial services industry and we have yet to find anyone who will
admit to having suggested increasing the cap so sharply to
£5,000. It is a bit like trying to get people to admit to having
voted Labour at the last election, but I am not going to pursue that
argument.
The ABI
says,
“The
Government should set the cap for annual contributions to Personal
Accounts at £3,000—as recommended by the Pensions
Commission—instead of the minimum of £5,000 suggested in
the White Paper.
The
Government should not compromise the targeting of Personal Accounts by
including savers who currently have good pension
provision”.
It goes on to say that the personal
account is specifically aimed at the groups that I have already
mentioned—in sum, adapted to the target group—and in his
statement to the House on 12 December 2006, the Secretary of State said
that personal accounts should complement and not compete with existing
private pension provision. The Pensions Commission itself argued that
uncapped or higher levels of contributions to personal accounts could
distort investment markets and have damaging macro-economic effects. It
would be interesting to know whether the Minister has any concerns on
that
score.
The
ABI goes on to say:
“The White Paper shows
that, with a £3,000 cap, someone on the target income of
£15,000 a year would be able to increase their savings by
£2,200 pa above the minimum or default level of contribution.
Anyone on a salary of up to £23,750 would be able to more than
double their contributions...A cap of £5,000 would extend
Personal Accounts way beyond the target group”.
We agree with that statement, which is
our major concern here.
11
am
The ABI goes on
to say that
“this level
of cap would potentially extend Personal Accounts to nearly the entire
working population...ABI data from member companies suggest that a
cap of £5,000 would potentially capture 93 per cent. of the
current market for employer-sponsored money-purchase
schemes”.
I would be
interested to know whether the Government challenge that figure of 93
per cent. Finally, the ABI
concludes:
“As
the White Paper says, Personal Accounts should be‘a
valuable addition, rather than a competitor, to existing
employer-sponsored provision.’”.
However, I am delighted that
the Minister has put on record his willingness to reconsider his
position. In a report in the Financial Times on 17 January 2007,
he said that the Government would listen to argument if people thought
that the limit was too high. He said that they were very open to that.
At that same NAPF seminar, the Minister is reported as saying that the
delivery authority for the new system will be given “a legal
objective” to ensure that the impact on the existing market is
minimised. Well, we have done that for him with this elegantly drafted
legal objective, to which we hope he will sign up today.
The Minister should be under no
illusion about the concerns that this has stirred up, not just within
this Opposition Party—and I suspect that I might speak for the
Liberal Democrats as well, as we shall hear—but within the
industry itself. Stephen Haddrill, the ABI’s director general,
talked about the measures extending the scope of personal accounts in
“a rather stealthy way”, at the expense of the current
savings market and, potentially, that of the taxpayer. His deputy,
Stephen Sklaroff, said:
“We hope the Government
is not deliberately trying to fix the system so more money flows into
personal accounts so it can keep down costs to artificially low levels.
The raising of the contribution cap to target higher earners is
completely inconsistent with earlier pledges to target people on lower
incomes. Our industry cannot be forced to compete with a subsidised
system”.
Just
as the ripples of that announcement were beginning to dissipate,
something else slipped out only the other day that is causing just as
much concern.
Money Marketing reported on 1 February that at a Social Market
Foundation seminar in London—where I was also pleased to be
present—Mr. Robert Laslett, chief economist at the
DWP, was responding “to
concerns that low personal account contributions would become the norm
by suggesting the private sector could construct savings vehicles in
partnership with the scheme for people who want to save above the
contribution cap”.
ABI spokesman Jon French then
said:
“No
provisions for such a policy have appeared in Government documents. Any
blurring of the line between existing private provision and personal
accounts risks undermining both markets”.
So, again, was that just policy making on
the hoof from Mr. Laslett, or does it represent deep-seated
views in the bowels of the DWP about how the personal accounts system
should operate? It would be interesting to know because my judgment is
that the industry is not going to play if it is the latter—and,
perhaps just as importantly, neither will we.
I will explain why it is so
important that there is no “mission creep” in setting up
personal accounts. While they start off as a concept designed to target
those not saving at the moment, a point of view that we entirely agree
with and respect, we do not want to see a situation where some of the
best provision of private pensions in the world—despite the
depredations made under this Government—is itself undermined by
the law of unintended consequences which tends to run rampant through
attempts at pensions
reform.
I will now
refer to a research paper published by the ABI and prepared by
Deloittes on the issue of levelling down. For the uninitiated,
levelling down is the concern of people like me and many in the
industry that employers with existing generous pension schemes, looking
at significantly increased costs, based on auto enrolment, could with
some relief turn to the personal account system. We have seen 60,000 DB
schemes close already under this Government but we could
seemany more of them close on the basis that thereis
a Government-backed or Government-sponsored scheme which will do just
as well.
It is crucial
to bear in mind one simple truth. Although it is important—in
fact essential—to encourage non-savers into saving for their
retirement for all the right reasons, levels of contributions envisaged
in Turner and set out in the Government’s personal accounts
proposals, as we have seen them so far, will not deliver a particularly
comfortable retirement for most people. For many employees currently in
schemes with relatively generous contributions and relatively generous
benefits it would be a step or more backwards to move to personal
accounts.
Stephen
Hadrill says in the introduction to the ABI research paper, prepared by
Deloittes:
“The
Government has said it expects such levelling-down to be minimal but
the research presented in this report paints a very different picture.
One in four employers who currently contribute over 3 per cent of
earnings to employees pensions said they would introduce a new lower
rate of contribution. This represents reduced employer pension
provision for 2.4 million
employees.”
Without
going into enormous detail, I would certainly commend this document to
the Committee. It makes certain key findings: that the average employer
contribution rate for existing members is 6.2 per cent
and the average employee contribution rate is 3.8 per cent. Twenty-three
per cent of employers who have a pension scheme claim that their
response to the reform programme will be to close the scheme to all or
some employees, and 7 per cent. claim that they would reduce
contributions for new and/or existing staff. Some 30 per cent are as
yet unsure of their response. Of 24 per cent of employers who are
currently making contributions, over 3 per cent say they will offer a
lower contribution rate than the one that they offer their staff
generally in their open pension
schemes.
Andrew
Selous (South-West Bedfordshire) (Con): Does my hon.
Friend agree that it would have been useful had the author of this
Deloittes report been able to come and give evidence to this Committee,
so that we could tease out some of the very serious issues that this
report alludes to?
Mr.
Waterson:
I do not disagree with my hon. Friend and it
would have saved me from giving at second hand the views of the people
who have prepared these and other reports. We have already had a
discussion about oral evidence and written evidence—not that I
have noticed a torrent of written evidence so far but no doubt some of
it is on the way—but the key sentence is
this:
“This
represents reduced provision for 2.4 million
employees.”
There
has been a lot of misinformation about levelling down. This is not a
concern about some Big Bang that from one day to the next people will
close schemes and move to personal accounts. It is put rather well in
the report when it
says:
“And over
time job turnover is likely to increase the amountof
levelling-down. Employees who leave schemes with high contributions are
unlikely to be eligible to participate in schemes with such high
contribution rates at their new
employer.”
That
is the concern: a gradual erosion of existing provision over and above
that which has already happened and is happening as we speak.
Finally, on this particular
point, an excellent document produced by the National Association of
Pension Funds in December called “More Savers, More
Saving?” talks about some of the same issues as the Deloitte
report. The document talks about the need to encourage more people to
save, which is what the entire scheme is about, and about a worst-case
scenario, which could see a substantial reduction in
contributions:
“total
employer and employee contributions could be almost£10
billion higher if there is no levelling down compared to our worst case
scenario.”
James
Purnell:
Does the hon. Gentleman recognise that neither
the NAPF nor the Government think that the worst-case scenario will
materialise? Even that worst-case scenario is a significant increase in
the amount of savings compared with today. More importantly, in that
document or another, the NAPF makes a number of recommendations to
prevent levelling down, all of which the Government are, I think,
looking to implement—apart from one, a new form of tax relief
for the schemes. Is the hon. Gentleman saying that the Conservative
party is committed to that extra tax
relief?
Mr.
Waterson:
No, I am not saying that. I am flagging up the
concerns of the industry. I am delighted to hear that the Minister is
on the case. When he has more time, in his own speech on the group, no
doubt he will tell us in more detail whether he accepts the concerns,
and if not, why not? Precisely what are the Government doing to avoid
the trap set out here? It is true that the NAPF set out some ideas, one
of which is the good pensions mark, which would distinguish existing
NAPF-type employer schemes—generous current schemes—from
others. That is an excellent idea, although more of the detail would be
interesting. The Minister might have something to say on
that.
I will quote one
other thing from the NAPF report, which ties in with amendment No.
21:
“The
Delivery Authority for Personal Accounts is officially tasked with
taking account of the impact of the new regime on existing provision in
its recommendations for the design of Personal Accounts to
Ministers”—
that
is what they are saying should happen and that is the point of the
amendment.
I will move
on to deal with the more minor amendments, while making it absolutely
clear that, for us, the key amendment in the group is
amendmentNo. 21. Subject to what the Minister has to
say—I appreciate that there are a lot of points to
cover—we would like to see a clear commitment from the
Government, or we might feel obliged to press the amendment to a
vote.
From the sublime
to the ridiculous—amendment No. 87 also talks about guidance,
which we say ought to be reported to Parliament by the Secretary of
State through an oral statement. We think that only reasonable. On
reflection, I am prepared to accept the Minister’s assurance of
a written statement, perhaps, but I think that Parliament should be
kept abreast of things, if at all
possible.
I mean no
disrespect to the hon. Member for Yeovil if I touch on the Liberal
Democrat amendments only briefly—as I know that he will not. I
think that the thrust of amendment No. 38 is not totally different from
that of some of the stuff that I have been saying, being concerned
about the effect of means-testing on the levels of saving, which I
shall say a little about in a moment. However, we will be having a
fairly substantial debate later in our deliberations, so I will leave a
lot until then. Amendment No. 39 and the gender impact
assessment—who could disagree with that? Amendments Nos. 65 to
68—publishing a strategy on anticipation of the system of
personal accounts is perhaps a different way of coming at the same sort
of issues that I have been tackling in my comments. Amendment No. 66
would require the preparation of a report to monitor the impact of the
new personal accounts, which again seems eminently sensible. Amendment
No. 67 is on IT and makes what seems a useful suggestion, and we have
no difficulty with amendment No. 68, on the target
audience.
11.15
am
Before I
conclude I should say that I am emboldened because the NAPF supports
the principle behind amendment No. 23, which is an important amendment
on issuing guidance. I hope that that will make it more palatable to
the Minister. It also supports amendment No. 20.
I return to whether the scheme
will succeed. As avid readers of Parliamentary Brief will know,
Mr. Steve Bee, who is quite an expert on such matters and
seems to be stalking the Minister in cyberspace through their
respective blogs, says, as the sub-headline puts it, “Sorry,
Minister, but you just cannot sell a pension plan which comes with a 40
per cent. tax on savings”. While I appreciate that there is some
difference between him and the Minister on how to define a tax, Steve
Bee says that under the pension credit system, some people will be left
just £11.70 a week better off than someone who has not saved for
their retirement. He
writes:
“That
is slightly more than a 40 per cent. tax on saving and is exactly why
millions of people on modest earnings should be very wary indeed about
your proposals for a National Pensions Savings
Scheme.”
I wish to leave
means testing aside at this stage, because we can have a much wider
debate on it later under one of the new
clauses.
Mr.
Bee says that personal accounts will be an “advice-free
zone.” He
writes:
“Consumer
protection must be built into the thing just as it is within our
existing pension
system.”
That is another
concern, and one that we mentioned most recently on Second Reading.
There are consumer protections issues to consider. For example,
Which? has been keen to brief the Committee about the possible
scrapping of rule 64 by the FSA in its current review. It states that
it
“could lead to
consumers not having access to a low-cost pensions product in the
run-up to Personal Accounts which would disadvantage low to medium
income earners and potentially undermine trust in the pensions
system....The removal of rule 64 contradicts the government
objective of more people saving more for their retirement between now
and 2012. Consumers would not receive written justification from a
financial adviser concerning any recommendation for a pension
product that is more expensive than a stakeholder
pension.”
There are
concerns there and, although I appreciate that it is a Treasury matter,
the Minister might be able to tell us where people have got to on the
matter.
Finally on
advice, we are pleased that Mr. Otto Thoresen of AEGON has
been appointed to run a financial capability taskforce, as I believe it
is called. That is important, because various groups are affected: the
target group, who must remain the focus, and people who would not be
well advised to enrol automatically into personal accounts. They might
have low income or high credit card debts that they would be much
better advised to pay off. The wonderful phrase “generic
advice,” which gets kicked around and is what I understand Otto
Thoresen will focus on, is an oxymoron. Generic advice cannot be given
to people who need the specific advice that they should not be
automatically enrolled as it would be to their disadvantage. That is an
issue that Mr. Bee deals
with.
The central
issue is the cap and losing sight of the target group. We have been
doughty warriors in the battle for consensus on many issues, but this
is a sticking point for us. The proposals contain the potential for
mission creep. So I urge the Minister to confirm that, as has been
reported, he is willing to think again. Otherwise, those proposals
could well be the rock on which the good ship consensus finally
founders.
Mr.
Laws:
Mr. Gale, welcome back to the Chair. The
hon. Member for Eastbourne rightly took some time over his, and indeed
our, amendments. He mentioned a rock on which the consensus might
founder—the rock that might hole the ship. I must say that there
are a number of different rocks on which that consensus might come into
trouble, all of which are related to clause 19. So, as he anticipated,
I shall take a little time over our seven amendments.
I know that the Minister would
not want me to gloss across my amendments. However, I shall make a deal
with him. If he gives me full time and very good answers, I promise to
whiz through, or not even speak to, the next 10 clauses. The more
helpful his answers, the quicker I shall be over the next 10
clauses—that is quite a carrot. Already I can see notes being
passed to him—no doubt people encouraging him to be as helpful
as possible.
We have
tabled seven amendments to clause 19, and I want to describe them
briefly, but rapidly, in a logical order. Then I want to discuss some
of the important issues that sit behind them. Amendments Nos. 38 and 68
sit together to some extent. The former
reads:
“Prior
to Parliament’s approval of proposals the Authority must
evaluate the effect of means testing on levels of saving in personal
accounts and its impact on returns in personal accounts
and...publish
evaluations”.
Amendment
No. 68 would require the Government, before 1 April 2008, to describe
what proportion of the target audience for personal accounts would
receive returns, and sets out target bands. I shall come back to why we
think that that is so
important.
Amendment
No. 40 deals with the important issue of the financial advice offered
to those intending to invest in personal accounts. The hon. Member for
Eastbourne has touched on that already. Amendment No. 39 would require
the authority to carry out a gender impact assessment of proposals for
personal accounts and participation. Participation is dealt with by
amendment No. 65 as well. Amendment No. 67 deals with the
Government’s IT system and whether the computer can say yes to
the complexities of personal accounts or whether problems might arise
as a consequence of the sheer ambition of the project. Finally,
amendment No. 66 deals with the issue that the hon. Gentleman spoke
about for some time—levelling down and the protection and
encouragement of existing occupational pension
provision.
I know that
the Minister is keen to leave until the debate on new clause 2 the
issue of means testing and returns on personal accounts, but I cannot
decouple them from a discussion on how the system of personal accounts
should be established. Unfortunately, we have not had the seminar on
means testing and returns that we were promised at the beginning of our
proceedings, and neither have we had an indication of when it will take
place—I hope that we will have one this morning. Some of us had
hoped that it would be during the Committee’s proceedings, but
it seems that it will run beyond
them.
That means,
unfortunately, that there is a great deal of disagreement over the
level of the means
testing.
James
Purnell:
It will be on 28
February.
Mr.
Laws:
I am grateful to the Minister. I shall clear my
diary immediately for that major event of 2007. I just hope that I am
available on that day.
James
Purnell:
I hope that it does not clash with the hon.
Gentleman’s seminar.
Mr.
Laws:
I shall move my seminar to ensure that it does not,
and so that there is no tension over which the Minister should attend.
Notwithstanding the clarification of the date, we still do not have
much clarity about how many people will be means tested in future. That
is enormously important, because people’s views about whether
they should invest in personal accounts will differ according to
whether they are likely to be subject to the types of withdrawal
touched on by the hon. Member for Eastbourne. As we know, the Pensions
Policy Institute has a much higher figure for the proportion of people
who are likely to be subject to means testing in future—45 per
cent. or more in 2050—and its band of prediction for the
proportion of people on means testing is very wide. It ranges
from50 to 55 per cent. in 2020 to 30 to 65 per cent. in 2030,
so there is an enormous band of
uncertainty.
James
Purnell:
Does the hon. Gentleman accept that the PPI says
that the 65 per cent. figure is based on a collapse of private saving,
and therefore on a scenario in which the White Paper policy has
entirely failed, rather than on one in which it has
succeeded?
Mr.
Laws:
Yes, of course those are the bounds. However, they
indicate that the PPI thinks that the Government’s estimate of
about 30 per cent. or 28 per cent. is the absolute lowest that it could
be, and that the range of uncertainty means that the figure could be
much higher.
The
other thing that I am keen to find out is whether the Government have
assessed what proportion of the personal accounts target audience will
be subject to means testing. Our assumption is that the figures that we
have cited are flattered by the inclusion of people such as Members of
Parliament and chairs of big private-sector industries who are never
going to be worried about means testing and will never come under it.
Perhaps we should expect that those who are likely to be auto enrolled
into personal accounts will be those on the lowest incomes, who might
be at the greatest risk of ending up on means testing in
retirement.
We would
like to find out not only what a credible consensus figure would be for
means testing but what proportion of the personal accounts target
audience is particularly at risk. That is important because Lord
Turner’s intention was that people would have a powerful
incentive to save in the personal accounts, in that they would get
£2 for every £1 that they put in. That sounds rather like
an echo of the Liberal policy of 1911, which is obviously where the
Government have stolen this great idea from. I notice that Lloyd
George’s version was rather more generous than two for one; it
was 9d for 4d. Hon. Members might be interested to know that employees
put in 4d, the employer added 3d and the state 2d, which goes to show
that people always get just a little bit more under a Liberal
Government. That also gave certainty about what the returns were going
to be. People had the security of knowing that if they put in a small
amount, it would turn into something much larger. That is very
attractive to those on low incomes and those with a great aversion to
risk—they do not want to put all their money into
Chinese equities, but they do want a powerful incentive to save. I agree
that getting £2 for every £1 put in is a powerful
incentive. During the
Second Reading debate, I was trying to find out how many people could
be expected to get that return when the Secretary of State responded by
saying:
“We
believe that the vast majority of peoplewill be able to look
forward with some confidence to receiving £2 back for
every £1 put in.”—[
Official Report, 16
January 2007; Vol. 455, c. 665.]
I then pointed out that that reassurance
seemed to be contradicted by the estimates that had been produced by
the Department in its very helpful research report “Financial
incentives to save for retirement”, in which the Government are
clear that
“the system
that we propose, in combination with the introduction of personal
accounts, will see the large majority of people ... expecting a payback
well in excess of £1 plus inflation for every £1 that
they save, subject to factors such as investment growth and
fluctuations in annuity
rates.”
11.30
am
Andrew
Selous:
Does the hon. Gentleman agree that one key factor
in this discussion is the length of time involved? Doubling
one’s investment over one’s entire working life is one
thing, but many people in the financial markets would say that one
should aim to do that every seven years or
so.
Mr.
Laws:
The hon. Gentleman makes a fair point, as ever. The
time period is extremely important. But we will go on to demonstrate
that not only is the time period relevant to the return but other
characteristics are too. They include how much a person’s time
in work is broken; how much time they end up taking off for caring work
or looking after their children; whether they are self-employed;
whether they are high or low earners and whether they will be renting
property in retirement and therefore affected by the withdrawal of
housing benefit if they are on low income. All of those factors will
affect their returns from personal accounts.
Very helpfully, the
Secretary of State, after the passing of one or two notes from the
officials’ box, got up again on Second Reading to clarify his
initially quite clear-cut statement that the vast majority of people
could expect this £2 for £1 return. He
said:
“Let me
clarify the issue. I am advised that a large majority of people with a
good work history, saving from the age of 25, can expect a payback of
about £2 per £1 in 2012. Of course, that crucially
depends on for how long they contribute to the scheme. ...these
figures are for illustrative purposes only.”—[Official
Report, 16 January 2007; Vol. 455, c. 692.]
So suddenly, what had seemed to
be an assurance relevant to the vast majority of people, was relevant
only to a particular group of the vast majority who are expected to go
into personal accounts. What we have on the record from the Department
is something far less encouraging. Instead of the two for one pledge,
one for one is all that can be made. We also have the clarification
that it will be difficult for anybody to advise individuals on what the
returns will be prior to going into these accounts, because there will
be a lot of uncertainty about the factors that will determine the
return. That is made clear in the Government’s paper.
The Pensions Policy Institute,
as ever, has produced some incredibly helpful calculations based on a
whole series of different individuals from different income groups and
different caring and work experiences. It published them in a very good
paper entitled “Are personal accounts suitable for all?”
in November 2006. Some people will get quite good returns from personal
accounts. To take a random example, a woman aged 25 in the ninth top
decile of earnings with a full national insurance record and large
other savings, based on the investment returns that the PPI has used,
can expect to get a return of something like £3.43 for every
£1 invested. That does not seem a bad return at all. But going
to the other extreme, a woman aged 55 who is self-employed and in the
first income decile will get 5p back for every £1 invested when
means-tested benefits are taken into
account.
James
Purnell:
Does the hon. Gentleman recognise that people who
are self-employed will not be automatically enrolled into personal
accounts?
Mr.
Laws:
Yes I do. But I also recognise that there are other
groups of people who are not self-employed and who are very vulnerable.
We can cite some of them here. I also recognise that the Government are
seeking to ensure that as many people go into personal accounts as
possible. I am sure that the Government would not automatically want
the self-employed not to be included in this aspiration to ensure that
more people had second-tier
savings.
James
Purnell:
The only other high-risk group mentioned by the
PPI is people who are on housing benefit in retirement. Would he advise
people who are 25 who think that they may be on housing benefit
in50 years’ time not to save because of
that?
Mr.
Laws:
Well, that is the point. I am not sure what advice I
could give to those individuals. I have talked before about the man in
the pub in Yeovil. The person in my mind in relation to this debate is
not necessarily the man in the pub in Yeovil but the woman working in
the office in Yeovil, either late in her career, or early in her career
for that matter—the person who might even work in the office of
the hon. Member for Eastbourne or my office if they did not have a
parliamentary pension scheme covering them.
I am trying to anticipate, if
those individuals came to us as moderately informed people in relation
to the pensions debate, could we give them clear and unambiguous advice
about whether they should be in the personal accounts rather than out
of them? I am not sure whether I could confidently give advice to some
of those categories of people at the
moment.
James
Purnell:
To give them that certainty is the hon. Gentleman
therefore proposing to abolish housing
benefit?
Mr.
Laws:
No, I am not proposing to abolish housing benefit. I
am suggesting that the cost of the Government not having the resources
to deliver a better basic state pension is a large number of people on
means-tested benefits. The Minister is entitled to
point out to me that our proposals would be considerably more expensive
than his but I am entitled to point out to him that there is a cost to
his lack of financial generosity, which is to have a huge number of
people on means-tested benefits and therefore to have less clarity
about what the returns will be.
We have already seen that the
Secretary of State could not guarantee for the majority of people that
they were going to get a £2 for £1 return, because
although people will get their employee contribution paid in and their
employer contribution paid in, although they will receive an employer
contribution if they are in employment and not self-employed, and
although they will obtain tax relief they will also lose tax on the way
out. They will lose the charges. They may lose some of the means-tested
pensioner benefits. They may lose housing benefit and they may lose
council tax benefit, so they will go up one escalator and in some cases
they will go down another escalator. That is why many of the people in
the pensions industry and beyond are worried about the extended
means-testing.
I do
not want to quote him too often because he will get carried away by the
extent to which we rely on him in this Committee, but there is also an
excellent article by Mr. Steve Bee in yesterday’s
edition of Pensions Week, where he says at the
beginning:
“I
was looking through the January issue of the Financial Services
Authority’s newsletter for financial
advisers”—
as we
all do—
“when I
noticed the reference made to means-tested benefits and the giving of
advice”.
He quotes an
extract from that advice from the Financial Services Authority to
financial advisers. It
says:
“Means-tested
state benefits factors that impact on the advice you give will vary
from product to product and customer to customer. However, one factor
that you may want to consider taking into account is whether a product
will affect the customer’s entitlement for means-tested state
benefits. Principle nine imposes a broad requirement for a firm to take
reasonable care to ensure the suitability of its advice...You may
wish to consider the impact of your financial advice on means-tested
benefits in communicating with some of your
customers”.
Then Mr. Bee cites a
bad example of a firm that recommended a low-premium pension to someone
in their late 50s with no previous pension provision. The point that he
makes in his article
is:
“This does
beg the following questions about the care that will be taken as people
are auto-enrolled into pension saving by the legislation the government
is proposing:
Will
those auto-enrolled into saving in personal accounts be advised on the
impact on their entitlement to means-tested benefits? Will older people
with no previous pension provision be advised not to save in a personal
account?”
He goes on to
cite another couple of considerations. He says in conclusion—it
is worth quoting because the issue is
important:
“The
fact, though, that this is important enough to be brought to the
attention of financial advisers by the regulator indicates it will
surely be even more important for the DWP to take great care when
distributing personal accounts to its target market of people on low to
medium levels of income. If, however, the government cannot give
assurances to those about to be swept into pension saving that the same
level of care will be taken in regard to the suitability issues that
are required of financial advisers, then perhaps people should be wary
about getting caught up in the
scheme”.
James
Purnell:
Is the hon. Gentleman’s position that if
there is any means-testing in the system, automatic enrolment is not
justified?
Mr.
Laws:
No. The Minister knows that that is not our
position. It will be considerably more dangerous if, as may well
happen, 50 per cent. or more of the target audience for personal
accounts is subject to means-testing for the next three, four or five
decades, as there will be a rampant risk of mis-selling, which we
should be concerned about. That risk could be more easily contained and
financial advice could more easily be given if a much smaller group of
people were to be means-tested.
The Minister knows that the
proposals advanced by the PPI and others for a more generous universal
pension would involve means-tested levels south of10 per
cent., not north of 50 per cent. That is why the issue of financial
advice is so important. We know that the Government are ploughing on
with the scheme as it stands on the basis of a low basic state pension
that will not be indexed to earnings for many more years, and which
will therefore continue to shrivel in relation to average incomes. That
is why we tabled amendment No. 40, which the hon. Member for Eastbourne
was kind enough to mention, and which he indicated that his party
generally supported.
The amendment was suggested by
the Resolution Foundation, which encourages the provision of generic
financial advice. The foundation has been working closely with the
Treasury to establish mechanisms to ensure that there is generic
financial advice for people on low incomes in future. The amendment
would require the new Personal Accounts Delivery Authority to report on
how people can access generic financial advice in connection with
personal accounts.
In
a helpful note to me setting out some of its concerns about the issue,
the foundation asked that Ministers clarify three points—first,
that information alone about the impact of means-testing and returns in
personal accounts will not be enough. The foundation
said:
“Ministers
should make a clear commitment that generic financial advice will be
available in connection with personal accounts in line with the
recommendations of the Work and Pensions Select Committee and of the
Treasury Select
Committee.”
Will the
Government ensure that better generic financial advice is available to
people on low incomes for all their savings products? Obviously, the
more such advice is available the more it will reduce the risk of
people saving in personal accounts who should not be doing so, or doing
so only after very considerable
thought.
Secondly, the
foundation
said:
“Ministers
should also make clear that the provision of generic financial advice
will be one of the issues the Authority should consider during the
first phase of its work, and provide assurances that this will be
reflected in the executive powers and responsibilities due to be
outlined in the second Bill”.
That Bill is expected at the end of this
year.
Thirdly, the
foundation suggested, reasonably, that the delivery authority’s
work should be closely linked to the work on financial advice that the
rest of the Government are undertaking.
On 15 January, in a Treasury
document entitled “Financial Capability: The Government’s
long-term approach”, the Government set out their aspiration to
provide high-quality generic financial advice and established the
feasibility study that the hon. Member for Eastbourne discussed
earlier. Could the Minister explain how those two things will lock
together and reassure us that they will lock together in time to
provide the relevant financial advice for people who are saving in
personal accounts? The Minister himself commented on the issue in his
speech to the Social Market Foundation on 30 October, when he
said:
“It would
be up to the individual to decide whether they remain in a personal
account. The test for
us—
that is, the
Government—
“in
this will be whether we can give simple generic advice to people about
whether they should do
so.”
I want
briefly to discuss two other issues. First, it would be useful to hear
the Minister’s response to the amendments that deal with
participation, which is covered by the clause. That issue includes
people’s perception of the returns from the accounts and the
impact of means-testing, but there will also be concerns about groups
that are liable to be left out and possible incentives for certain
employers to discourage certain groups from taking up personal
accounts. Just as there are concerns about people taking up accounts
who should not do so, there are concerns about people who may be left
out because of the way in which personal accounts are presented to
them. I hope that the Government will respond to
that.
11.45
am
Secondly, I
should like to mention levelling down, to which the hon. Member for
Eastbourne referred. He is right to make a big deal about the issue,
although there has been considerable falling down of contribution and
coverage levels for DC and DB pensions over the past few years. That is
the general background.
None of us wants personal
accounts to become the automatic route of choice for most employers in
this country, because they provide a basic minimum level of saving. The
evidence that was given to the Workand Pensions Committee on
17 May 2006 by Mr. Waddingham contained a powerful warning
against getting too obsessed with personal accounts at the expense of
other
provision:
“NPSS
is a good idea, it will help many people, but I am terribly worried
that we might see a public sector with very good salary-related
pensions and a private sector just with a relatively low-level money
purchase NPSS, and I am saying, ‘Please, could we not have help
to encourage the good employers to do something in the
middle?’”
Of
course, we want to see priority given to including in second-tier
pension provision those individuals who are not included at the moment.
That is even more important for us than it is for the Government,
because we do not want a world in which the state is in second-tier
provision. It is particularly important that second-tier provision
works; otherwise, people will be reliant only on a basic state
pension.
The hon.
Member for Weston-super-Mare pointed out the other day that there is
nothing intrinsic to DC schemes that means they give low returns; if
people make high contributions, they can have good returns. The sad
fact is, however, that the switch from DB to
DC schemes has been associated with a decline in
contributions. It is easy to see why, because it is the final salary
element of DB schemes that derives high contributions. Moving away from
a final salary link can therefore lead to lower contribution
rates. We risk ending
up with quite unequal pension coverage between the private and the
public sector, and perhaps also between the affluent and the less
affluent. I have noticed, not only in the public sector but in some of
the private sector schemes, that the people who are most affluent and
most capable of making decisions about investment risk are more likely
to be in defined-benefit schemes and have high employer contribution
rates. There is a slightly eccentric relationship, which is the
opposite of that which we might want, between high contributions and
high risk and the types of groups that are covered. Mr.
Waddingham is right to point out that many low and middle-income groups
might end up with a system of personal accounts where the total
contributions could be quite low, where the risk will be quite high in
relation to their understanding of the risk and where there will be no
great certainty about what the pot will realise on maturity. We only
have to look in the Sunday newspapers to see the scepticism among
people in the high-income groups about investing in
pensions—with all the uncertainties there are perceived to be
and their desire to invest in housing instead—to understand how
difficult it will be to get many people to invest in the personal
pension accounts.
I
am interested to hear the Government’s argument about levelling
down. In fairness to the Government, at Second Reading two different
positions were put from the Conservative Benches about the
£5,000 cap. There was the position of the Front Bench, which is
clearly very uncomfortable with the £5,000 cap, but there was
also the view of the hon. Member for Grantham and Stamford
(Mr. Davies), who pointed out that it was totally improper
for the Government to meddle in the freedom of people to invest however
much they wantin personal accounts. He thought this was
totally unnecessary Government interference in free
competition.
Andrew
Selous:
I have great respect for my hon. Friend the Member
for Grantham and Stamford and it is worth putting on record for the
Committee that he is not a member of the Opposition Front
Bench.
Mr.
Laws:
I quite agree with that, as I indicated in my
comments. He has been known for some time in the Conservative Party and
elsewhere for speaking his mind very candidly on issues that are not
always Conservative Front Bench policy. He did, however, raise an
interesting point, and one which might be an instinctively Conservative
point or distinctively Liberal point even, that giving people the
freedom to invest in their personal accounts as much as they want to
without excessive regulation might be a principle that we would also
want to think about.
I am interested to hear the
Government’s views in relation to the £5,000 cap. I am
interested to know whether they think there may be some people who
would want to make lumpy contributions in particular years and whether
they want to create the freedom for that. Perhaps more significantly,
the issue is whether it is the cap that is fundamental to encouraging
decent occupational provision in the future.
I think what the Conservative
Party is saying is that, if you set that cap too high, it will be all
too easy for firms to simply dump their own pension scheme into the
personal accounts when they might otherwise have kept some other better
scheme. While I understand that point, it may be that those same
employers wouldhave chosen simply to downgrade their level of
contributions to the benchmark Government level, even if the pension
was not in the personal account itself.
The issues that the National
Association of Pension Funds and Mr. Waddingham raise in
their evidence are rather more fundamental to trying to encourage and
incentivise businesses in the future to keep on with better schemes,
both DC schemes with higher contribution rates and DB schemes. In an
interesting section in his evidence, Mr. Waddingham talked
about whether we could make DB schemes in the private sector useful
again in the future, perhaps by having much lower accrual
rates—perhaps 1 per cent of salary for each year of service;
whether we could make them career-average rather than final salary to
make them cheaper; whether there were things the Government could do to
encourage risk sharing between employees and employers. There are
already many private sector companies that are sharing the longevity
risk so that people who live longer will end up with a reduced pension
if they live longer than the actuarial estimates.
In all of these ways,
the Government may be able to facilitate the process by which, over
time, we get back some of the DB schemes of the private sector. I think
that would be a good thing.
James
Purnell:
The hon. Gentleman knows we are carrying out a
regulatory review and a number of those suggestions have been made to
it. We will consider these and come back to him in due course. Given
that the hon. Gentleman has said that he does not thinktax
relief is particularly effective at encouraging contributions, will he
make it clear that he is not proposing that there should be extra tax
relief for DB
schemes?
Mr.
Laws:
I do not know which bit the Minister was referring
to when he said that I said tax relief is not effective in encouraging
contributions. He may be anticipating a debate that we are going to
have on new clause 29 or something like that. I think as a whole tax
relief for employees is very effective in incentivising those in the
higher-income groups, perhaps not the lower-income groups. I would,
however, ask him to keep an open mind about any measures that he can
take to incentivise employers to stay in better-quality pension
provision, including DB, and to consider the cost that may be borne by
employers in introducing those schemes, including regulatory costs. I
would not want to see a system with an unlevel playing field against
the personal account. The Government should be seeking to do whatever
they can to keep good-quality employer schemes in place. That may be
about far more than whatever the level of the cap is, which might be an
issue of relatively low importance, although prominent in the
debate.
Mr.
Gale, I have obviously kept on speaking until the hon. Member for
Eastbourne could return with his coffee. Now that I see him back in his
place, I can
conclude by looking forward to hearing the
Minister’s responses. If he is encouraging, maybe the next few
clauses will be faster than clause
19.
The
Chairman:
Order. I am afraid that Lord Nelson has had his
outing for the morning. I have to say to the hon. Member for Eastbourne
that hot drinks and food are not allowed in Committee. I am afraid he
will have to take his coffee outside. Saying so saddens me, because I
am sure we would all like one, but it is not
permitted.
I
understand the importance of the means-testing debate. The Minister
indicated to me that he intended to deal with the issue under new
clause 2. In return, I have indicated that the Minister may do
either/or but not both. I do not think which makes a great deal of
difference to the satisfactory discussion of the Bill, save
this—new clause 2 might fall to the guillotine on Thursday
afternoon. That matter is entirely in the hands of the Committee, not
of the Chairman, but I felt obliged to make the Committee aware of
those circumstances, because it is for the Committee to pace and
negotiate, not the
Chairman.
Mr.
Waterson:
On a point of order, Mr. Gale. Might
I help the Committee, despite boiling hot coffee on my fingers? My
intention, although I touched briefly on means-testing, was to focus
the debate on new clause 2. Famous last words, but I have every
confidence that we will have time for a debate on the
issue.
The
Chairman:
That is helpful. If the hon. Member for Yeovil
is prepared to take an equally constructive approach, we might make
rapid
progress.
Mr.
Laws:
On a point of order, Mr. Gale. I am happy
to have a second bite at means-testing on new clause 2, as I am being
encouraged to. However, perhaps the Minister would say something in the
current debate about the linked but slightly separate issue of returns
from personal
accounts.
The
Chairman:
I had better leave it to the Minister to decide
what to
do.
James
Purnell:
We started with a threat, I think, from the hon.
Member for Yeovil that if we did not address the point
seriously—
James
Purnell:
—then he would filibuster the remaining
amendments. As a consequence of my failure to address his points, I was
particularly looking forward to him extending the debate on what the
short title of the Bill should be. We are now reversing that, and I am
making him an offer. If he progresses speedily, then he will be able to
get my argument in full. The point about incentives to save is
generally linked to the argument that I want to make about
means-testing. I have a genuinely substantive offer to make to him. I
hope that he will take the assurance that I will be returning to his
general points under new clause 2, although I will answer a couple of
specifics here.
This has been an important
debate and several important issues have been discussed. It is right to
do so, as personal accounts go to the heart of the policy area.
Personal accounts and automatic enrolment are probably the most radical
parts of what the Pensions Commission recommended. It is good that we
have scrutiny of the issues. I am sure that we will continue to debate
the issues we have discussed today over the months to
come.
Clause 19
provides for the delivery authority to advise the Government on
relevant proposals. What seems like many sitting ago, we started off by
saying that the authority will not be making a bunch of decisions
without consulting the House, which is a guarantee—or
safeguard—that I hope the Opposition parties will accept. All
that the authority will be doing is advising us. If there are then
proposals that require parliamentary approval, which we think there
will be, we will come back to the House to
consult.
12
noon
As you know,
Mr. Gale, subject to the will of Parliament, we hope to
introduce the second Bill on the issue in the next Session. That will
give us all a fantastic opportunity to go through all these debates
again, and I hope that it will be under your chairmanship—I know
that you are looking forward to it. We may seek to change the Standing
Orders between now and then, so that the hon. Member for Eastbourne can
go and buy us all coffee when the hon. Member for Yeovil stands up, and
does not have to resort to burning himself to stay awake. I am not
furthering my chances of avoiding such debates, am
I?
Mr.
Laws:
I am writing my speech
now.
James
Purnell:
This is a mixture of procedural and substantive
amendments. I intend to go through the procedural ones first and then
deal with the others.
The first is amendment No. 84,
which would leave out the words that make it clear that
“relevant proposals about personal accounts” include
those that have not yet been approved by Parliament. We sought to
include those words for the avoidance of doubt, so that expenditure
conventions are not breached. The delivery authority has no
decision-making powers relating to the implementation of personal
accounts; it is to advise us on policy options. It would not,
therefore, be sensible to limit its advisory role to proposals that
Parliament has already approved. In fact, if the authority is to serve
its purpose, the Government need to take account of its advice, so that
we can ensure that our proposals have been properly scrutinised by it.
Given that the role of the delivery authority is to advise us on
proposals that we hope to bring to the Committee, and that the
amendment would vitiate the purpose of the authority, I hope that the
hon. Member for Eastbourne will be convinced that it would be sensible
to withdraw the amendment.
The hon. Member for Yeovil
introduced amendment No. 67 on IT by saying that it is to do with
concerns about the Government’s computer—but this will
not be run on the Government’s computer. The whole point of
having a delivery authority and a personal accounts board is that
people will not buy a pension from me;
they will get it from the personal accounts board and the providers that
it enlists. That applies also to the IT side of things. We recognise that getting the
IT right will be a critical factor in the success of personal accounts.
Discussions with pension providers and administrators have made that
even clearer. It will be for the delivery authority, in due course, to
draw on its private sector expertise to make contracts for the personal
accounts scheme and to manage its delivery.
John
Penrose (Weston-super-Mare) (Con): Have I got it right? Is
the Minister saying that this is more likely to work because it is not
directly controlled by the Government?
James
Purnell:
I am saying that in the matter of providing
personal pensions, the Government do not claim to have direct
expertise. Therefore, we are setting this up, as recommended by the
Pensions Commission, at arm’s length from Government, drawing on
private sector expertise rather than trying to provide it through the
national insurance
computer.
John
Penrose:
I think that I am reassured, but I am not quite
sure. I am just worried that the principle might then be extended to
other Department for Work and Pensions IT systems. If the Minister
thinks that that is a good idea, is it something that we should bear in
mind for other IT developments at the
DWP?
The
Chairman:
Minister, I do not think that you should go too
far down that road.
James
Purnell:
The projects at the heart of the DWP’s
delivery of benefits and pension entitlements are things in respect of
which it is proper for us to take the lead on contracting and policy
delivery. Of course, we deliver most of those through the private
sector through a contractual relationship. The National Audit Office
recently complimented the Pension Service on its delivery of pension
credit. It is not true that all Government IT projects are disastrous.
With that final controversial statement, I shall turn back to the
amendments.
Which IT
systems are used to deliver personal accounts will be determined by
suppliers within their overall proposals, and proposals will follow
current best practice within IT. That includes reusing existing
equipment where possible and using commercial off-the-shelf packages,
although there will be a role for innovation there as well. The key
point is that it will be for the providers rather than the DWP to
decide and lead on that. We cannot be certain which IT solutions
providers will propose and which will represent the best value for
money. On current plans, we would not expect to select any suppliers
before autumn 2009. So, on the technical detail of the amendment it
would be premature to publish a report in April 2008, which could
prejudice our commercial proceedings. However, I think that the
amendment was probing rather than specifically intended.
The hon. Member for Eastbourne
has sought, through amendment No. 83, to restrict the
authority’s ability to perform functions by replacing the word
“appropriate” with the words “strictly
necessary”. In the context of the advisory body that we seek to
establish, we are worried that this amendment would make it difficult
for the authority to decide whether it is permitted to offer advice to
the Government at all. If the advice would be, for example, merely
useful rather than “strictly necessary”—and not
about something that we must do—then the amendment would prevent
the authority from having the ability to advise us. That cannot be
right, and I am not sure that there is a burning concern about this
issue. The fact that they will be advising us and, again, that the
Department will be taking any decisions is, I hope, a sufficient
safeguard. Amendment.
No 20 seeks a commitment on how the delivery authority will implement
the proposals on personal accounts. In particular, it asks that the
authority should take account of the Financial Services Authority and
the pensions regulator. Of course, it is quite right that personal
accounts should be properly regulated when they are delivered,
but—without wanting to sound too much like a broken
record—at this stage the issue is really between the Department
itself and the regulators. We have worked closely with the FSA and the
pensions regulator to develop policy in that area thus far; we will
continue to do so, while ensuring that the appropriate regulatory
structures are put in place at the right time.
In that context, Committee
members will know that we have established an independent review of
pensions institutions to examine how the functions of the FSA, the
pensions regulator and other bodies are aligned with our existing
pensions policy, reforms and market developments. The review will seek
to build consensus on the most efficient and effective way to arrange
those institutional functions; it will make recommendations in the
spring.
On
guidance—
Mr.
Waterson:
Just before we leave that point, I remember that
under the Pensions Act 2004, when we set up the Pension Protection Fund
and the regulator, there was some early stormy weather.
Ultimately,a protocol had to be agreed on the relative
responsibilities because of gaps in the legislation.Does the
Minister envisage similar protocols, or recommendations on them,
emerging from the review that he mentioned?
James
Purnell:
We would not rule anything in or out at this
stage. It is for Paul Thornton to recommend on that. He is looking at
the general institutional landscape and—in structural and
process terms—whichever recommendations he makes are obviously
for him to make, rather than for us to pre-judge.
On amendments Nos. 23 and 87,
which are about the provision that enables the Secretary of State to
issue guidance from time to time to the authority, I want to reassure
the hon. Gentleman that we will be open and consultative in our work
with the delivery authority. We have tried, in the process of coming to
these proposals and those in the White Paper on personal accounts, to
involve him and the hon. Member for Yeovil and his colleagues in the
development of our policy. We will continue to do that, to hold a range
of seminars and to consult people widely. It would not,
however, be appropriate to tie down the relationship between the
authority and Secretary of State in the detail that is envisaged here.
For example, much of the guidance could be fairly trivial and we do not
see a strong argument for requiring all of it to be published.
The bigger concern is
about the requirement that such potentially ad hoc guidance be subject
to lengthy parliamentary consultation, which would impede the Secretary
of State’s ability to offer timely guidance.The
relationship between the Government and the authority will be based
around policy advice—we should not mistake it for a formal
relationship such as that which exists between regulators and the
Government. I can reassure the Committee that we will continue to be
open in our dealings with the authority, and I hope that that will be
enough to dissuade the hon. Member for Eastbourne from pressing the
amendments.
Amendments
Nos. 22 and 87 would, I think, make it possible for the authority to
borrow money, which is slightly at odds with the hon.
Gentleman’s earlier amendment, which would restrict the way in
which it spends its money. We are trying to tread a path between the
two sets of amendments, because we do not think that borrowing money is
appropriate at this stage. Grant in aid will be the authority’s
sole source of finance and we will set an amount to cover its costs in
full. However, at this stage, the authority’s spending will be
solely on delivering advice.
During the first stage,
expenditure will not require Royal Assent to the second Bill, but will
be aimed at developing policy and the legislative requirements in that
Bill. In that first stage, the Department’s ability to incur
expenditure will be consistent with existing powers. The proposed
second Bill will give the detailof our financing and charges
policy. We are still consulting on it as part of the White Paper and
look forward to the hon. Gentleman’s views as well as those of
the hon. Member for Yeovil. However, we think that such matters are for
the White Paper and potential next Bill, rather than for the Bill
before us.
I hope that
I have dealt with what might be described as the procedural amendments.
I shall now discuss the points of substance not relating to
means-testing, which I shall return to later. One of the key amendments
proposed by the hon. Member for Eastbourne would set down in
legislation the authority’s objectives. At this stage, that
would be inappropriate because we are still consulting on them. Indeed,
the delivery authority may want to advise us on those objectives. So we
resist the precise intention of the amendment, although he may have
tabled it largely in order to debate the issues, which I am happy to
do.
Different views
were expressed on Second Reading on the cap of £5,000 or
£3,000, as the hon. Member for Yeovil said,. The hon. Member for
Grantham and Stamford said that there should be no cap at all.
Opposition Front-Bench Members made it clear that our proposed cap was
too high. The hon. Member for Yeovil asked how we got to the current
position, so it may help if I explain. It was agreed that there should
be no transfers in or out of personal accounts, which meant that it
would be hard to combine, in one product, saving in a personal account
with saving in
another pension, if someone wanted to contribute
above the minimum rate. We looked at figures suggesting that, for those
wanting a replacement rate of 67 per cent., the £3,000 limit
would be insufficient for a proportion of our target group. He asked
for the evidence base for that. I can tell him that it is on page 113
of the December regulatory impact
assessment. White
Papers are intended to be consultative. Our policy of ensuring that our
proposals target low and medium earners was set out for the first time
in the White Paper and we are open to other views on our argument over
contribution levels reaching the replacement rate. The hon. Gentleman
is arguing that we should return to a lower cap, but he needs to
consider the fact that if people in the target group want to get to a
replacement rate of, say, two thirds, they may have to save outside
personal accounts and have two pension
products.
12.15
pm
Mr.
Laws:
I am grateful to the Minister for setting out how
the Government settled on the figure. Will he clarify what upper salary
limit they envisage for those who participate in personal accounts?
What upper level of income is being aimed
at?
James
Purnell:
Our target is as set out in the White Paper; the
system is aimed at people on low and median incomes. People outside
that range may decide to save in personal accounts, but they are not
the people whom we are targeting. They are well served by the current
market, which is successful for
them.
James
Purnell:
Maybe I can answer the hon. Gentleman’s
point before he intervenes. The people at whom we are aiming, as we set
out in great detail in the White Paper, are those on low and median
incomes. If the hon. Gentleman wishes to ask me where the information
is, it is in the White Paper RIA, not theBill
RIA.
Mr.
Waterson:
A dismal failure in the Minister’s
experiment in telepathy, there. Perhaps he could stick to allowing
interventions and we will make a lot more
progress.
I am sure
that he was quoting page 113 with total accuracy. Does he accept the
figures produced by the Association of British Insurers, which show
that almost 95 per cent. of existing pension savers would come within
the net if the Minister were to raise the cap to £5,000? If so,
does he believe that that would be a good
thing?
James
Purnell:
I have not seen any analysis to question that,
and we will consider it as an important piece of evidence when we
examine the responses to the consultation on the White Paper. I hope
that I have indicated that we have an open mind on the matter. We are
genuinely committed to being as consensual as we possibly can with both
the hon. Gentleman and the hon. Member for Yeovil, and we will happily
discuss the matter with them and others as part of the White Paper
consultation.
Mr.
Laws:
I am grateful to the Minister for giving way again.
He may want to return to this question in a second if he needs advice
or a calculator, but to save me
some mathematical calculation, will he make clear
what level of contributions somebody on median earnings will have to
make to breach the old cap of £3,000? How much will they need to
contribute to go above that and show that the Government need to go for
the higher
cap?
James
Purnell:
The RIA states that at the £3,000 cap the
medium earner would get a 67 per cent. benchmark replacement rate about
75 per cent. of the time. At £5,000 it would be closer to
certain that a medium earner could achieve the 67 per cent. replacement
rate. Those are some numbers, although not necessarily the calculation
that the hon. Gentleman asked for. If I can provide him with
information that is not on page 113 of the RIA, which I am sure he has
read, I will happily do so rather than risk another Dan Quayle moment
by trying to calculate rates of return in my
head.
To summarise the
matter of the £5,000 or £3,000 cap, I hope that I have
explained the genesis of our suggestion. It was about taking on board
the important point that people made to us—that the automatic
enrolment level of contributions was just a minimum and that we should
consider encouraging people to contribute above it. Given that there
were to be no transfers in or out, that led to an argument for a higher
cap than was suggested by the Turner commission. Concerns have been
raised and we are happy to consider them as part of the White Paper
consultation
process.
Mr.
Waterson:
I can tell that the Minister’s peroration
is coming on, but since he is trying hardto talk me out of
forcing a Division on amendmentNo. 21, which he has rightly
identified as the key amendment in the group, will he confirm that the
aim of the personal accounts system will be to increase not only the
number of people saving but the overall amount being saved? Does he
agree that that is a good yardstick of success or
failure?
James
Purnell:
Yes, we do think there should be an increase in
the overall amount being saved and we think that automatic enrolment
will bring that about. We are reluctant to place specific targets on
that and, like his party, I think that there is a view that targets
will need to be looked at in a more flexible way in future. On that
general point I certainly
agree.
In amendment
No. 65, the hon. Member for Yeovil seeks to require the delivery
authority in this initial, advisory stage to produce a report on
maximising participation. He is quite right to say that maximising
participation is critical to the success of the personal accounts
scheme. A key conclusion of the Pensions Commission was that a
voluntary approach would not be sufficient to raise participation to
the levels that we all believe are necessary. Automatic enrolment and,
indeed, the compulsory employer contribution, are critical to raising
participation rates further. We do agree, however, that automatic
enrolment is not sufficient, and we think that issues such as
marketing, providing people with good information, running the scheme
competently, and launching it with confidence are all important as
well. I am not sure that writing a report is absolutely critical to
that. We do think, however, that the general issue of maximising
participation is important. In that context, people who use the word
“mis-selling” need to be careful about
what they mean. We will have a chance to return
tothat debate later. We agree with the point
behindthe amendment that maximising participation is an
important part of the
policy. We have
debated levelling down a number of times outside this Committee, and
the hon. Member for Eastbourne knows that the starting point of the
policy is that it is levelling up. There is nothing in the current
legislative framework which requires companies to put any contributions
into people’s pensions. By having a compulsory contribution of 3
per cent, we will be levelling up to 3 per cent and, for the first
time, all employees will have access to the kind of employer
contribution that only those with occupational schemes now
enjoy.
The Government
want to support good existing provision. I hope that I can deal with
this debate relatively quickly by saying yet again that we are pursuing
all of the suggestions that the NAPF has made, other than the
suggestion for a new and extended form of tax relief, which is a matter
not for this Bill but for the Treasury and general tax policy. In the
White Paper we proposed another range of measures, such as ensuring
that there is a simple exemption scheme, a ban on transfers in or out
and a deregulatory review, which will pick up the suggestions that the
hon. Member for Yeovil has made. We have not ruled anything in or ruled
anything out. There is also the possibility of a slightly longer
waiting period for schemes that are making much more generous
contributions.
We
accept the point that we need to do everything that we can to support
good employer provision, but at the end of the day it is for employers
to decide whether they want to make provision. We have researched why
employers provide schemes. They tell us that they do so as a way of
recruiting people and encouraging loyalty, and that they intend by and
large to continue to provide those pensions after the introduction of
personal
accounts.
Mr.
Laws:
The Minister said that this is levelling up, not
levelling down. In saying that, he sounded a bit complacent about the
levelling-down risk. Am I not right in saying that Lord Turner’s
commission indicated that this was one of the issues that Ministers
were particularly concerned about in discussions with the Pensions
Commission before settling on their
proposals.
James
Purnell:
That was before my time; I do not want to roam
into an area when I was not in post. I do not intend to sound
complacent. I am saying that we are looking in detail at a range of new
measures to encourage employers who are making contributions. We are
looking at a regulatory review, specific measures suggested by the NAPF
and a good pensions quality mark.
We are comparing the current
regime, in whichthere is no obligation for an employer to make
a contribution, to one in which there will be an obligation to make at
least a 3 per cent. contribution, if the employee is contributing. That
in itself will be a levelling up, to at least 3 per cent, and will
potentially help companies that are already providing company pensions,
because their competitors will have to make the same contributions.
However, beyond that, we want
to look at a wide range of other measures to support
employers in providing company pensions. At the end of the day,
companies will provide good company pensions if it helps them to
attract, retain and reward the people who work for them. That is the
fundamental reason why employers say that they intend to continue
providing good company pension
schemes. In amendment
No. 39, on the gender impact assessment, the hon. Member for Yeovil
makes a good point of principle. We think that legally a gender impact
assessment will have to be carried out on the next Bill. We recognised
the point by doing a gender impact assessment for this Bill, before it
was legally necessary. We agree with the general principle, but we
think that the assessment should be done by the Department rather than
by the delivery
authority.
The hon.
Member for Eastbourne raised a specific point in relation to
Mr. Bee’s comments. My point was that taxes normally
take money away from people, whereas means-tested benefits give people
more money. If one gave individuals the choice between being on
£120 a week with no means-testing or £137.50 with
means-testing, most people would choose £137.50. Our debates are
sometimes in danger of making it sound as if means-tested benefits
reduce the amount of money that people have, but actually they take
people out of poverty. That is something that we are very proud of
having
done.
Mr.
Waterson:
I can understand why the Minister accentuates
that part of the means-testing picture, but surely he accepts the
problem in this context, whether or not one calls it a tax. Let us not
call it a tax for the present purposes. There are two families, two
couples living side by side in identical houses; one family spend their
money on extra holidays or a boat or something, while the other save
for retirement. The ones who saved can be no better off at the end of
the day than the ones who have not saved at
all.
James
Purnell:
That would be true only if they were on 100 per
cent. withdrawal rates. As a consequence of the savings credit, the
proportion of people on 100 per cent. withdrawal rates has fallen
significantly—I think that it is 50 per cent. of what it was
under the Conservative Government. If the hon. Gentleman accepts, as I
think he does, that there will be some safety net in the system, then
there are two basic options. One can either have a very quick
withdrawal, but with more people on 100 per cent. withdrawal rates, or
a slower withdrawal, but with more people affected by the shallower
withdrawal rate. It is a balance between those two issues. That is
exactly why we introduced the savings credit. The NIESR, for example,
has said that we have achieved the correct balance, or that it is done
pretty much optimally, through the regime of the guarantee credit, but
with the savings credit rewarding people for their savings. That is a
debate to which we shall return on new clause
2.
The hon.
Gentleman’s final points were on the comments of Mr.
Laslett, our economist in the area. All that he was saying, I
understand, was that the private sector should work closely with us to
help raise participation rates and that there may well be opportunities
for it to do so within personal accounts.
That is one of the reasons why we were very keen to have branded funds,
for example. There may be potential
there. 12.30
pm
On generic
advice, we are very happy to look at the points made by the Resolution
Foundation, and I will make sure that I draw them to the attention of
Mr. Otto Thoresen, who is leading the generic advice pilot.
One thing is worth saying about what is said by the PPI, by Steve Bee
in his article and by the Front-Bench spokesmen. The issue will be
resolved through the advice that we can give people in the real world
and the decisions that they can make about their saving. We think that
we will be able to give people good incentives to save because, as we
have made clear, they will be able to have good returns over their
working life. We will return to that debate at a later stage, but I
hope that the fact that we are providing a pilot to look at generic
advice will reassure hon. Members that we understand the points that
are being made here and are acting on
them.
Mr.
Laws:
Is the Minister saying—it would comfort me a
lot if he was—that before personal accounts come in a system
will be introduced that will give free, generic financial advice to the
people who will invest in
them?
James
Purnell:
That is exactly the pilot that Otto Thoresen is
doing for us and the Treasury. It is an essential part of not just
making personal accounts work but helping people with their financial
planning overall. I am happy to arrange for the hon. Gentleman to meet
Mr. Thoresen so that he can discuss those points with him. I
do not want to make any specific commitments before the pilot reports,
but those are the areas that the pilot will look at. I hope that that
gives him the reassurance that he
seeks.
The hon. Member
for Eastbourne raised the issue of RU64, which is really the
FSA’s responsibility. It is an independent decision for it to
take. I understood the points that he made, but the FSA is an
independent regulator and it would not be appropriate for us to mandate
them from this Committee. I hope that that deals with the points that
have been made. It has been an important debate. We share the
objectives of most of the amendments. I hope that my comments have
reassured hon. Members and that they will not press their amendments.
If not, I will encourage my hon. Friends to resist
them.
Mr.
Laws:
I am grateful for the Minister’s
response.I shall look forward to getting the answers to my
questions on means-testing when we discuss newclause
2.
Mr.
Waterson:
The lack of caffeine has momentarily spoilt my
concentration. I am grateful to the Minister who has laboured long and
hard to try to reassure us. I have nothing much more to say on all our
relatively minor amendments. The key issue is amendmentNo. 21.
I am delighted at the Minister’s reassurance that he has an open
mind about the cap. I do not think that I could have left him under any
illusion as to how strongly we and others feel on this
subject.
The Minister talked about
levelling down really being levelling up. We have heard this before at
one of the interminable seminars. I did not believe it then, and I
certainly do not believe it now. Yes, of course, there is nothing in
law at the moment that makes good employers or any employers make the
provisions that they do. I accept that. But they do, and that is
presumably for the right reasons or for hard-headed reasons of
attracting the right employees and keeping them in post in the long
run. Equally, there would be nothing to stop them from levelling down
in the way that we have described once these reforms come in. In fact
there will be a positive incentive.
One interesting survey of
companies—perhaps the one to which the Minister referred—
suggested that many employers would not make any changes. It
subsequently emerged that the human resources directors of those
companies had been surveyed, not the finance directors. I have a
feeling that all over the country finance directors are doing their
sums. On top of all the extra burdens and costs that have been heaped
on pension schemes in the lifetime of this Government, finance
directors are doing their sums on what may be a potential doubling in
the number of participants under auto
enrolment.
James
Purnell:
We have looked into that point. We contacted the
chief executives and spoke to the human resources directors only when
specifically asked to do so by the company because they were the person
responsible for the issue. I am happy to write to the hon. Gentleman
setting that out
again.
Mr.
Waterson:
That would be very helpful. However, I do not
think that it deals with the genuine concerns expressed not just by the
Opposition Members but by people who know about these things in the
industry. A lot of research has been carried out by firms such as
Deloittes. I am pleased that the Minister will pursue the NAPF’s
suggestions as to how we can deal with the
issue.
We have an
overriding concern, however, about what I call mission creep, and the
target group. I was not wholly convinced by what the Minister said
about having got that point entirely on board. We need to return to a
situation in which the target group is firmly within the
Government’s sights, and in those of the delivery authority. I
am pleased with the clarification about what Mr. Laslett
said the other day. Of course, if that is what he meant, it is a
no-brainer; of course, the Government are going to need the help and
contribution of the private sector if the system is going to work. I
repeat what I said earlier about its being essentially a marketing
exercise.
On RU64, let
us see what the FSA produces. All that I would say on that is that I am
not going to press that amendment either, but it would be a somewhat
eccentric result of the reforms if consumers had less protection,
rather than more, at the end of the process.
I return to what I
said about the cap, which is an issue on which we see no need to
compromise. I will not, on this occasion, invite the Committee to vote
on amendment No. 21, but I urge the Minister to have it well in
mind—as his mind continues to be open—that consensus
matters because people need to know that
any Government-in-waiting take broadly the same view of the reforms as
the Government of the day. If the impression that that is not the case
were to grow, it would be bound to have a serious effect on the likely
success of the reforms. I am delighted that the Minister has an open
mind, and hope that eventually it will become closed but in the right
direction. I beg to ask leave to withdraw the
amendment.
Amendment,
by leave,
withdrawn.
Clause
19 ordered to stand part of the
Bill.
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