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Baroness Hollis of Heigham moved Amendment No. 46:


Page 7, leave out lines 22 to 25 and insert:
("(b) a simple majority of members eligible and voting has supported such a proposal;").

The noble Baroness said: My Lords, with this amendment I should like to return to an issue that we discussed at Committee; namely, the balloting arrangements. Most pension schemes at present do not have a minimum of one third of trustees drawn from scheme members. Two-thirds of schemes have no scheme members at all. That will need to change once the Bill becomes law. There will be a presumption in favour of one third of trustees being drawn from scheme members unless there is general agreement that the present arrangements work well and should remain unchanged.

We do not object to that. Our problem is how that general agreement to leave matters unchanged is to be determined. The Minister insists that 10 per cent. of employees must signal that they wish to make a change. Why should they have to take the initiative to secure the rights bestowed on them in the Bill? We believe that the presumption should be on the employer who is seeking no change to ensure that he has support for his proposal. In other words, the employer who seeks to withhold rights should seek consent by ballot; those who wish to exercise their democratic rights should not first have to ballot in order to do so.

Why do we believe that it should be that way round? In Committee, in a remarkable reply which becomes even more remarkable when one re-reads it, the Minister said that the employer should be required to circulate information about the scheme and trustees and should attach a tear-off slip which scheme members could return if they wanted to trigger a ballot. If 10 per cent. did so there would be a ballot, the outcome of which would determine whether there were scheme members as trustees. The Minister said that that would reduce costs and friction. The exact opposite is true. As a species of sophistry that was a quite effective argument.

I have two points. First, employers have to circulate proper information together with a tear-off slip—a ballot paper on whether scheme members want a ballot. If 10 per cent. want a ballot there is a second ballot. Since when have two ballots cost less than one? If one makes that original tear-off slip the ballot costs are reduced and justice served. Having a ballot on whether to have a ballot is absurd, costly and time-consuming, unless the Minister's intention is to place hurdles in the way of those wishing to exercise their rights under this Bill.

On reflection, there is a difference between the one-ballot procedure which we seek and the two-ballot procedure which the Minister favours. The one-ballot procedure would presumably be a secret ballot in which scheme members would express their views free of pressure from the employer or their trade union. It would represent their true opinion. However, under the two-ballot procedure proposed by the Minister, scheme members who call for a ballot in order to have a ballot will presumably be identified by name, so it will not be

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a secret ballot. It becomes a "stand up and be counted" ballot in which scheme members face the potential annoyance of their employer or pressure from trade unions.

Why should those who wish to exercise their democratic rights be asked to put themselves into a confrontational position? It is simply not fair. I honestly do not see why the Government are doing this. The one ballot procedure which the amendment would restore is cheaper, because one ballot is always cheaper than two; confidential because one does not have to sign up in order to obtain one's rights; fairer; quicker and sensible. The Government's proposals are costly, confrontational and against natural justice. I beg to move.

Baroness Seear: My Lords, I support the amendment. This is a right which the members ought to have, whatever the size of the organisation. The intention in the Bill is that that right goes by default unless specific steps are taken in order for people to assert that right. We say that the right is there and that people should be able to operate it. The size of the scheme or the enterprise makes no difference whatever.

Lord Mackay of Ardbrecknish: My Lords, this amendment resurrects an issue which was defeated during the Committee stage of the Bill. In effect, it requires employers to hold a ballot of scheme members if they wish to opt out of the requirement to appoint member-nominated trustees, even where members may be perfectly content with their existing arrangements.

In our view it is not the means of consulting members that is important but how effective that consultation is; in other words, the statutory consultation procedure. I can assure your Lordships that the statutory consultation procedure we propose will leave members in no doubt as to their rights and options. We intend that it will require employers to hold a ballot if their proposals are rejected by a given percentage of members (possibly 10 per cent). Our proposals will not deprive members of the right to a ballot and if employers want to opt for a ballot at the outset as a way of avoiding the possibility of extra costs they will be free to do so. We see no justification for imposing the requirement of a ballot at the outset in all cases. However, we see considerable advantages, both to scheme members and to the employer, in the more flexible statutory consultation procedure that we are proposing.

We arrived at these proposals following a consultation exercise in June last year, when we received a great many comments from pensions professionals, schemes and employers asking us not to make a ballot an automatic requirement. Those respondents were concerned about the inflexibility of such a requirement. They were also concerned that an automatic ballot could enable a vociferous or disaffected minority to overturn otherwise satisfactory arrangements.

We have listened carefully to those views and, on balance, we agree with them. A ballot is inflexible. Members can either approve or disapprove. On the other hand, under our proposals, the employer would be able to test the water and find out members' views before committing himself to a full ballot. He could then, if

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appropriate, rethink and perhaps modify his proposal to meet members' concerns before putting his revised proposal to a full ballot. I would also argue that a "10 per cent. objection process" could prove to be a more favourable arrangement from a member perspective. It is I think inevitable that some scheme members will be apathetic whatever consultation procedure is used. However, it would clearly be easier to achieve a 10 per cent. objection against an employer's proposal than to obtain majority disapproval at a ballot. If a ballot then followed as a direct result of a 10 per cent. objection, members who were originally apathetic might actually take more notice.

To some extent, the noble Baroness rather assumed that every scheme would go to a ballot. I do not think that that would be the case. Therefore the suggestion that our proposals will place extra cost on schemes by requiring an objection exercise and then a ballot does not hold water. It would be the case only where members object to the proposals. If the employer wishes to rethink and submit other proposals, then a ballot would still not be necessary. If members do not object, there will be no need for a ballot and such schemes will have been spared the extra expense that a formal ballot would involve.

I believe that a rigorous statutory consultation procedure which directs that all pertinent information must be given to members and leaves the choices to them is the best way to protect members' interests.

At first sight, an automatic ballot may appear attractive. However, it does mean that a disaffected minority could be the only ones who bothered to vote, thus producing an unbalanced or unrepresentative result. We believe that a full disclosure of proposals and sound directions by way of the statutory consultation procedures are the best way to protect members' interests. While there is nothing in our proposals to prevent a ballot at the outset, our arrangements will allow employers an opportunity to gauge members' views, and, if necessary, to make the kind of alterations to the scheme which their members require. If the required proportion of members object to the employer's proposals, then those proposals must be put to a full ballot.

I believe that the position that we take up is a more flexible situation which leaves it in the hands of the members to decide whether they wish to go so far as to have a ballot. It allows the employers to modify their schemes in the light of the representations that they receive. Many schemes, as my noble friend Lord Pearson of Rannoch mentioned earlier, are quite small and are perfectly satisfactory. Their members will be perfectly satisfied with them. They will not need to ballot. Our procedures allow for that situation as well as for the other situation in which members are very unhappy and at the 10 per cent. level can trigger the kind of ballot which the noble Baroness would like to apply to every scheme.

Baroness Hollis of Heigham: My Lords, again I find the Minister's reply quite baffling. I should be surprised if he believes most of it himself.

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Does the Minister believe that when the employers send out the first information as part of the statutory consultation procedure it will be full, complete and in such a form that members can make up their minds? I assume that the answer is yes, otherwise the employers would be failing in their duties. Does he believe that when the employers send out that information they will have to include a piece of paper asking whether the members seek a ballot? In the light of what the Minister said at Committee stage, I assume that the answer is also yes. Therefore what will have happened? The employer will have sent out all the information required on which to make a decision. He will have sent out, secondly, a piece of paper on which a disagreement would have to be registered. The only two differences between that and a full-scale ballot is, first, that returning the paper would not be confidential. The Minister did not address that point. Secondly, there would be the minor cost of counting the responses. That is all. To avoid the minor cost of counting the response on that first consultation exercise, the Minister proposes to go to the cost of a second ballot. That is absolutely absurd. Does the Minister really seek to persuade the House that two ballots are cheaper than one? Does he really seek to persuade the House that the Minister's scheme will require such modifications that he needs time in which to consider, consult and modify before he goes back to the members a second time? Should he not have done that before he first sent out the ballot paper?

I invite the Minister to respond to some of these points. I must say that of thin answers tonight, this is one of the thinnest. Does the Minister believe that two ballots are cheaper than one? Does he believe that members will not have the full information at the first ballot? Does he think that more confrontation or less will arise as a result of people having to put their names to the ballot, it therefore being no longer secret? I invite the Minister to reply.


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