Calculation and payment of contributions
Paul Rowen: I beg to move amendment No. 95, in clause 31, page 13, line 14, leave out from within to after in line 15 and insert three months.
Again, this is a probing amendment, along the lines of the previous discussion. In clause 31 no period is specified in which payment should be made. We have suggested three months and I am interested in what the Minister thinks might be a reasonable timeframe. In the consultation we had, the lack of a time period for contributions to be paid was seen as an issue that perhaps should be looked at. I am easy about whether the Minister thinks it should be three months, six months or within a financial year.
Following on from the previous discussion, if nothing else, the principle that there should be a payment period within which or after which interest will be charged needs to be set down. If the Minister introduces the exception on interest it is important that we agree that payment is made within a certain period, after which the employer is liability for interest.
Andrew Selous: The hon. Gentleman has raised a good point. I am not entirely sure whether three months would be the right figure. Many of us get chased up a lot sooner than three months if we owe money, and rightly so in many cases. Provided, as we have debated, the payment is made with interest, it perhaps does not matter exactly what that figure is. The important point is that the payment is made and that it is made with interest, but the hon. Gentleman is right in that the payment needs to be chased up.
Mr. O'Brien: I have a lot of sympathy with the views expressed by the Liberal Democrats on this issue. Employees should not be disadvantaged by their employers failure to comply by not paying contributions on time. The compliance regime is designed to place employees in the position that they would have been in had their employer complied. Subsection (2)(c) proposes that after a set time period employers should be required to pay both their and their employees contributions. The hon. Member for Rochdale is right that various stakeholders, including Help the Aged and the TUC, have expressed an interest in this issue. Before we identify a periodthree months is the one for which I have some sympathyI want to discuss with the stakeholders, including business organisations, what the best period would be. I think the way forward on this is to allow us to consult properly before taking a final view, including about the appropriate length of time in question. We therefore propose that details should be consulted on and set out in secondary legislation when this issue has been further considered. In principle, I am with the hon. Gentleman. Although I will not commit the Government to it, I am even with him in thinking that three months sounds like a reasonable period. However, I want to hear all the arguments before I make a final decision, and I want the business community, as well as other stakeholders, to have a say. On that basis, I hope he will feel able to withdraw the amendment.
Paul Rowen: I am grateful for the Ministers assurance with regard to this issue. I know it will be welcomed by many groups, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 31 ordered to stand part of the Bill.
Fixed penalty notices
(h) the Secretary of State shall have the power to apportion such amount as the Secretary of State thinks appropriate of fixed penalty notice payments for the benefit of qualifying jobholders in circumstances where their employers are unable to pay the prescribed contributions..
The amendment is an attempt to open up the question of where the money paid in fixed penalty notices will
There are various times in public life when money is raised by fines or penalties of one sort or another. It is not always clear to the public where that money goes, what happens to it, or for what purposes it will be used. Amendment No. 145 is worded in a very wide way. It just gives the Secretary of State a permissive power to apply such moneys raised by way of fixed penalty notices for the benefit of jobholders, should he or she see fit to do so, at any time. It does not require the Secretary of State to do anything; it is purely a permissive power. On that basis, I would commend it to the Minister.
The Parliamentary Under-Secretary of State for Work and Pensions (Mr. James Plaskitt): The hon. Member for South-West Bedfordshire has had quite a good run with some of his amendments, but it has now ended, I am sorry to say. Let me explain why we are not keen on the amendment.
Clause 32 gives the Pensions Regulator the power to issue fixed penalty notices to persons who have failed to comply with compliance or contribution notices and the employer duty provisions. The primary role of fixed penalties is to act as a deterrent and, where necessary, sanction those who have not complied. The amendment gives the Secretary of State the power to decide which moneys arising from fixed penalties should be used for the benefit of qualifying jobholders. However, it is a long-standing practice that revenue from fixed penalties goes directly to the consolidated fund of the Exchequer, so that it can be used as appropriate on a full range of public services.
The regulator will not gain financially from the imposition of fines, and there will be no hidden incentives for their issuing. Importantly, this measure is fully in line with the findings of the Macrory review, separating revenue streams in order to eliminate all perverse incentives. The hon. Gentleman may know that we are taking forward the recommendations of the Macrory review via the Regulatory Enforcement and Sanctions Bill, which is currently at Committee stage in the Lords.
Paul Rowen: I understand that that is a general rule, but it is not always the case. With speed cameras, for example, a proportion of the money raised is put to the benefit of the local authority for developing traffic management and safety schemes. Given what we are dealing with, an obvious possibility would be to develop hardship schemes when there are problems.
Mr. Plaskitt: I am not certain that that is a parallel, which might become obvious if we see what Macrory says. The hon. Gentleman will be familiar with what I cite, but I am going to put it on record.
Macrory recommends that we have seven principles for penalties. The seventh is germane to the argument:
It is important that regulators do not have targets for different types of enforcement actions or any correlation with salary bonuses or similar incentives. This might incentivise staff to pursue certain enforcement actions inappropriately.
He goes on:
I would emphasise that regulators should not retain the revenue from Monetary Administrative Penalties, or exercise any control over how that revenue should be spent.
Those points are relevant. Macrory reinforces the argument in a way that will help hon. Members later on:
I want to avoid creating any perverse financial incentives for regulators that might influence their choice of sanctioning tool. This view is already entrenched in relevant section of HM-Treasurys Consolidated Budgeting Guide and I echo their views on the separation of revenue streams in order to eliminate perverse incentives.
Finally, he says:
I have also emphasised that regulators must avoid creating perverse incentives (such as staff appraisal criteria) that will encourage the use of financial penalties without regard to the regulatory outcomes to be achieved.
Given that here we are dealing with pensions and company contributions to pensions, which are therefore related to the other questions, and that, in implementing Macrory, we are pursuing his recommendations specifically on the issue, going down the route suggested by the amendment would take us in the wrong direction. The compliance regime is designed so that jobholders are not put at any sort of disadvantage. Where an employer is non-compliant, we are designing the regime based on the principles that employers are not better off by not complying, and jobholders are not worse off because their employer failed to comply. We do not want any risk-perverse incentives coming in. If we stick with the principle that sanctions of that nature come directly to the Consolidated Fund and there is no question of the regulator distributing them in any way, we can remain consistent with that principle. That is important for both this measure and that on sanctions regimes in general, which is being considered in the other place. Given that, I hope that the hon. Gentleman will withdraw the amendment.
Andrew Selous: The Minister has explained where the money is going to go, which was not clear from the Bill. I am grateful for the Minister pointing to the Macrory review, with which I am somewhat familiar in other contexts. I accept what he says about that and about perverse incentives. We probably all agree that the Consolidated Fund of the Exchequer is not a bad place for the money to goespecially at the moment, given the state of Government finances. With that in mind, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 32 ordered to stand part of the Bill.
Clause s 33 and 34 ordered to stand part of the Bill.
Review of notices
(f) a notice under section 72 of the Pensions Act 2004 (c. 35) (provision of information)..
The amendment was tabled because it appeared that the list of notices to which a review may be applied appears to have left out the notice cited in clause 33(1)(d):
a notice under section 72 of the Pensions Act 2004...(provision of information).
I am sure the Minister will tell me there is a very good legal reason for that being left out, but I was curious when I compared clause 33, which sets out a full list of different compliance notices to which escalating penalties apply, with clause 35, in which the notice in clause 33(1)(d) has been left out. I am sure that I am about to be reassured by the Minister, but I thought that the issue was worth raising, as it is certainly not clear to me.
The Pensions Regulator has the power to review all notices of issues as part of the new compliance regime. These are compliance notices, third-party notices, unpaid contribution notices, and fixed and escalating penalty notices. The Pensions Regulator will have the power to confirm, vary or revoke notices, or to substitute a different notice if it feels that is appropriate. Cases in which sanctions for failure to produce information have been applied incorrectlyfor example, if the required information had actually been providedwould therefore be corrected through the review process.
A section 72 notice, as set out in the Pensions Act 2004, is a notice requiring trustees, scheme managers, employers and others who appear to hold relevant information to provide specified information to the regulator. The important point is that this is an evidence-gathering power only. It gives the regulator the power to require from the person information that is relevant to the exercise of its functions. It is not a sanction in its own rightthat is the difference. A separate notice has to be issued to penalise those who fail to comply with a section 72 notice. We therefore do not consider it appropriate to have a review process under clause 35 for people served with a section 72 notice.
Allowing a review process for section 72 notices could impair the regulators efficiency when gathering information. In our view, it is inappropriate to allow people to hinder the notices use by invoking procedures for review and appeal. It is, however, necessary to give a safeguard to someone who is at risk of being penalised for refusing to comply. Fixed penalty notices under clause 32 and escalating penalty notices under clause 33 may be issued for failure to comply with notices requiring the production of information issued under section 72 of the 2004 Act. As I have explained, review is already available at the point at which anyone may face sanctions for failure to provide information. Given that, I hope that the hon. Gentleman will agree to withdraw the amendment.
Andrew Selous: I like to think that these little exchanges are causing the odd shaft of sunlight to come down on some more obscure parts of pensions legislation. I am sure that people who follow our proceedings carefully will have been very enlightened by what the Minister had to say. I am grateful to him, and I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 35 ordered to stand part of the Bill .
References to the Pensions Regulator Tribunal
Andrew Selous: I beg to move amendment No. 147, in clause 36, page 16, line 17, leave out may and insert must.
The clause deals with references to the Pensions Regulator tribunal. My hon. Friends and I tabled the amendment because we heard strong, heartfelt pleascertainly from the representatives of employers organisations during our evidence sessionsthat the compliance and enforcement regime should be proportionate, with the big stick used only when really needed. Given the wording of clause 36, it strikes me that giving the Secretary of State a discretionary power on how he or she might constitute a tribunal and the manner in which the tribunal would be called would not give employers the reassurance that they need that they will have the right to go to a tribunal.
Some time ago, one of our older and wiser colleagues put it to me that summary justice without the right of appeal is the hallmark of a dictatorship. While I would not suggest that ministerial motives go quite so far, the serious point is that while we all back a tough compliance regime, it must be fair. Those employers who are being hauled up, perhaps for inadvertent errors, must have rights. It might be that the business is incredibly busy, that the order book is overflowing, that there are staff problems, or that the matter has genuinely slipped their minds. The right to go to a tribunal should be absolute, which is why I query the word may and think that must should be inserted.
Paul Rowen: I hope that the Minister can give us some indication of why the word used is may and not must. We all accept that the compliance regime has to have a light touch and to be fair. The impact assessment sets out the three clear areas in which the regime has to meet standards.
The other side of the coin is missing, however, although I accept that this will not happen in the vast majority of cases. I am surewe have seen the figuresthat most employers will operate the scheme without problems. However, there will be a small number of employers with whom there are problems, and the compliance regime is meant to deal with that. Equally, there might be compelling reasons why that employer has not met his or her obligations, so allowing him or her the right to a tribunal is the appropriate way forward.
I hope that the Minister can respond favourably. Given the consensus that has been developed so far, the slight change from a three-letter word to a four-letter word might help to get more widespread support for the measures in the Bill.
Mr. Plaskitt: I am grateful to those who have contributed to the debate. It might be helpful if I clarify a few points first.
The Pensions Regulator is funded by a levy on pension schemes. That levy is used to pay for a range of activities. We do not believe that the funds raised by the levy should be used to cover the costs to the Pensions
There were queries at one point about the issue of funding, so I want to respond. On the question of may versus must, the may in subsection (1) refers to making regulations. There is also a right to appeal in subsection (1). I hope that that covers the point and that the hon. Member for South-West Bedfordshire will withdraw the amendment.
Andrew Selous: Having heard the Ministers assurance that anyone who has come before the Pensions Regulator has the right to go to a tribunal, I am happy to withdraw my amendment. The wording of clause 36 was not clear to me, but having heard the Ministers reassurance, I am entirely happy to beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
(4) The Secretary of State shall publish a report on the funding of the Pensions Regulator Tribunal for references made under this section within 12 months of the section coming into force..
This is very much a probing amendment that was tabled to get more information from the Minister. He has already partly answered how the tribunal is to be adequately funded. A lot of people have talked about making sure that the Pensions Regulator is adequately funded. We will have that discussion when we come to chapter 5, which deals with the regulator and the way in which it will operate. Particularly regarding the run-up period and beyond, I would like to know what the Minister sees as the funding requirement for the tribunal, and how he will ensure that the funding is made available.
As I said, the Minister has already partly answered the question, but I will be interested to hear what he says because we want employers to have the right to go to that tribunal. We also want to ensure that it has enough resourceshuman or whateverto enable adequate and speedy dealings with any issues arising, especially in the initial stages following the introduction of the Bill. The worst thing that could happen would be a backlog of cases before the tribunal that were not resolved, because that would affect not just the employer, but the employee. That would have an impact on the success of the scheme and could well increase the costs. It is important that, in the initial stages, the tribunal is adequately fundednot just financially, but with the human resources to ensure that anything put before it is dealt with speedily.
Andrew Selous: I agree with the sentiments expressed by the hon. Gentleman. I understand exactly where he is coming from. In our previous debate, the Minister reassured the Committee that anyone who wants to go before the tribunal will be able to do so. The only question that remains is for me is to ask the Minister for an assurance that that will happen in a reasonably timely manner and that that is being factored into the Governments plans. We all know that justice delayed can be justice deniedthere might be adverse publicity for an employer who has been hauled up before the Pensions Regulator. If employers want to go to the tribunal, it is important that we know that they can, but they should be able to go reasonably speedily and, as the hon. Gentleman said, they should get a proper service when they get there.
Mr. Plaskitt: I appreciate the points that both hon. Members have made. I understand why they are seeking such assurances and I will now try to give them. However, I will say a little more by way of explanation, because there is an interaction between what we are doing in the Bill and the decisions already taken and envisaged in the Tribunals, Courts and Enforcement Act 2007. If I can, I will explain the interrelationship between the two.
While the Bill names the Pensions Regulator tribunal as the appellate body to hear appeals under this regime, we do not envisage that it will actually perform that function. That is because by the time appeals under the new regime are ready to be heard, we anticipate that the functions of the Pensions Regulator tribunal will have moved into the new tribunals structure, which is being set up under the 2007 Act.
Section 3 of 2007 Act establishes new first-tier and upper-tier tribunals. Once the provision is in force, section 30 of that Act will be used to transfer the functions of the Pensions Regulator tribunal to the new arrangements. It is envisaged that the functions relating to the new duties introduced from 2012 will go to the first-tier tribunal. Given the likely nature of appeals under this regime, we feel that that tribunal is indeed the more appropriate appellate body, because it will be the first-instance tribunal for most jurisdictions, and most appeals from original decision-making bodies will commence in that tier. We anticipate that the functions will transfer to the new arrangements in 2009, subject to the completion of recommendations on tax appeals modernisation work outlined in the Governments consultation paper on implementing part 1 of the 2007 Act.
The amendment proposes that we produce a report on funding the Pensions Regulator tribunal for references made under this regime. I understand the concern that has been expressed that the Pensions Regulator and the tribunal should each be adequately resourced for their roles in relation to this work.
We are working with the Pensions Regulator to develop the new regime and to assess the costs and resources required to undertake the new compliance functions in general. As I have said, we envisage using the first-tier tribunal. However, we expect the approach on funding
The hon. Member for South-West Bedfordshire raised a point about timeliness. Part of the reason why the Government are implementing the tribunals reform system under the 2007 Act is to try to deliver exactly that. I want to reassure him and the rest of the Committee that we are committed to funding this mechanism in such a way that it can act speedily.
Andrew Selous: I might have missed this, in which case I apologise to the Minister and the Committee, but I am not entirely clear about where the funding for the tribunal will come from. I am not sure whether the Minister said it was from the Consolidated Fund, or whether it will come from any part of the pensions contributions that are made.
Mr. Plaskitt: No, it will not come from the contributions. I tried to make that clear, but I will reiterate that. Now that I have clarified that and addressed the other points raised, I hope that the hon. Member for Rochdale will withdraw the amendment.
Paul Rowen: I am grateful for the Ministers clarification, which was very helpful. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 36 ordered to stand part of the Bill.
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