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Points of Order

3.30 pm

Mr. Ray Whitney (Wycombe): On a point of order, Madam Speaker. On a number of occasions in recent months you have expressed your view on the failure of hon. Members to advise other colleagues of visits to their constituencies. I have to report that, on Sunday 2 July, the hon. Member for Glasgow, Hillhead (Mr. Galloway) visited High Wycombe. I learned about the visit a few days before it took place, but the hon. Gentleman did not seek to advise me.

That gross breach of parliamentary convention and courtesy by the hon. Member for Hillhead was compounded by the fact that he sought to address members of the Pakistan and Kashmiri community in High Wycombe on the subject of Kashmir, playing on their understandable concern about the desire for self-determination of the people of Kashmir--a subject on which I have collaborated and worked with them for the 17 years that I have been a Member of Parliament. In his speech, which descended to the lowest level of political muck-raking, the hon. Member for Hillhead seemed to display total ignorance of the record of policies of the Labour party on Kashmir. I seek your guidance, Madam Speaker.

Madam Speaker: The only matter that concerns me as a point of order is the fact that an hon. Member did not inform the hon. Gentleman that he was in his constituency. The House well knows my views on this matter. I have made them known many times. I have asked Members to comply, but as the hon. Gentleman and the House know, I have no authority to enforce these matters. It is simply a matter of courtesy that I would like to be observed.

Mr. D. N. Campbell-Savours (Workington): Further to that point of order, Madam Speaker. May I make it plain on behalf of myself and certain of my colleagues that we do not mind at all who comes to our constituencies? We do not require notice. I do not want anyone to write to me to tell me that they are coming to my constituency; any hon. Member of any political persuasion is welcome. We find it difficult to understand why Conservative Members are increasingly sensitive to the fact that people come to their constituencies, when it is a free country in free world, and they should simply grow up. Mr. David Winnick (Walsall, North) rose --

Madam Speaker: I take it that it does not relate to the previous point of order.

Mr. Winnick indicated dissent .

Madam Speaker: No--in that case, I must hear it.

Mr. Winnick: As you know, Madam Speaker, the decision is being taken today as to who is to be the Prime Minister in this Parliament. My point of order is simply that, as the media will be notified immediately a decision

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is reached, would it not be courteous for the House to be notified, too? Is it not another case where the media are notified, but we are not? We get our information from the press or television. I put it to you, Madam Speaker, that the Leader of the House should make arrangements now, so that, when the result of the ballot is known, whether or not there is to be a second ballot--and that is inconclusive today--the House should be notified officially. I hope that arrangements will be made accordingly.

Madam Speaker: That is a matter not for me but for the usual channels. The job of the Speaker is to see that our work and our Order Paper continue to be dealt with in the Chamber. The matter that the hon. Gentleman has raised is a matter for the usual channels, if they wish a statement to be made. I prefer to see that our business goes on. Hon. Members who wish to know the result need only take a few strides out of the Chamber and they will soon be told.

Mr. Nick Hawkins (Blackpool, South): On a point of order, Madam Speaker. When I returned to the House across Westminster bridge this afternoon, I was disturbed to note that long telephoto lenses, presumably belonging to members of the paparazzi, have been installed and are trained on the whole of the Terrace, including your private section of the Terrace. Is it within your powers, or within those of the Officers of the House, to do as members of the Metropolitan police do when they protect access to the House on the public highway, and to take steps to prevent that unwarranted intrusion within the precincts of the House?

Madam Speaker: I cannot accept that it is an unwarranted intrusion if individuals, whether private persons or people from the press, wish to take photographs of the Terrace. There is nothing that we can do about it. I shall certainly not be doing anything of which I would be ashamed if photographs were taken of me. Now can we get on with our business?

STATUTORY INSTRUMENTS, &c

Motion made, and Question put forthwith pursuant to Standing Order No. 101(3) (Standing Committees on Statutory Instruments, &c.),

Income-related Benefits

That the Income-related Benefits Schemes (Miscellaneous Amendments) (No. 6) Regulations 1994 (S.I., 1994, No. 3061) be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Kirkhope.]

Question agreed to.

Dr. John Marek (Wrexham) rose --

Madam Speaker: Does the hon. Gentleman have a point of order?

Dr. Marek: I wish to speak on the order of consideration motion for the Pensions Bill, Madam Speaker.

Madam Speaker: We have not yet reached that stage.

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Orders of the Day

Pensions Bill [Lords]

As amended (in the Standing Committee), considered .

Motion made, and Question proposed,

That the Pensions Bill [Lords] , as amended, be considered in the following order, namely, new Clause 22, new Clause 3, new Clause 23, new Clause 1, new Clause 2, new Clause 15, Amendments relating to Clause 164, Clause 7 and Clauses 16 to 21, new Clause 21, new Clauses 11 to 14, new Clause 7, new Clause 9, new Clause 10, new Clause 17, new Clause 19, new Clause 20, Amendments relating to Clauses 125 to 133 and Schedule 4, new Clause 6, new Clause 4, new Clause 5, new Clause 24, other new Clauses, other Amendments.--[ Mr. Hague .] 3.37 pm

Dr. John Marek (Wrexham): I apologise for having stood up to speak too early, Madam Speaker, but it is always better to be early than to be late. Once one is too late, there is nothing that one can do about it.

I want to draw the attention of the House to how curious the order of consideration is. Normally, as the House knows, Government new clauses come first, then Opposition new clauses and other new clauses. After that, we go through the amendments normally. However, this time, Madam Speaker, you will see that we are to start with Government new clause 22, then move to new clause 3, tabled by the Opposition, and then return to another Government new clause, new clause 23. Then we are to deal with new clause 1, another Opposition clause, and then new clauses 2 and 15, followed by amendments relating to clauses 164 and 7.

We shall not come to new clauses tabled by hon. Members other than the occupants of the Government or the Opposition Front Bench until we reach new clause 21, Madam Speaker--the fifth debate, according to your selection. I find that curious, but there is a reason for it. The occupants of the Government and the Opposition Front Benches have got together to ensure that all the new clauses and amendments on war widows and their pensions, and on frozen pensioners, will not be considered until after 10 o'clock tonight.

I could use various adjectives to describe that arrangement, and it does not help the House when Ministers and Opposition spokesmen get together in that way. Hundreds of hon. Members have signed early-day motions about frozen pensioners and war widows' pensions but now find that, because of collusion between the occupants of the two Front Benches, the amendments and new clauses dealing with them may not be reached until the early hours of the morning. [Interruption.] Will Ministers, instead of chatting across the Floor of the House to the Opposition Front-Bench spokesmen, consider that matter? The House would appreciate that, because some of the early-day motions have been signed by 200 or 300 Members. Could not the debate on those subjects have been taken, if not in prime time, at least in time when hon. Members will be here? That is the least we could do for war widows and reserve pensioners.

I do not suppose that what I have said will make the slightest difference between hon. Members on the two Front Benches, but I register my objection to the way in which we are proceeding with--and the ordering of--the Bill.

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Mr. Phil Gallie (Ayr): Surely hon. Members should be present when the business comes before the House. If the hon. Gentleman and the 200 or 300 Members thought the matter important enough to sign the early-day motion, they should be here tonight when the business is discussed.

Question put and agreed to.

New clause 22

Hybrid occupational pension schemes

`.--(1) In spite of anything in sections 9 and 12 of the Pension Schemes Act 1993 (requirements for certification and determination of basis on which scheme is contracted-out), the Secretary of State may by regulations provide, where the pensions provided by an occupational pension scheme include both--

(a) such pensions that, if the scheme provided only those pensions, it would satisfy section 9(2) of that Act, and

(b) such other pensions that, if the scheme provided only those other pensions, it would satisfy section 9(3) of that Act, for Part III of that Act to have effect as if the scheme were two separate schemes providing, respectively, the pensions referred to in paragraphs (a) and (b).

(2) Regulations made by the Secretary of State may, in connection with any provision made by virtue of subsection (1), make such modifications of the following Acts, and the instruments made or having effect as if made under them, as appear to the Secretary of State desirable: the Social Security Contributions and Benefits Act 1992, the Pension Schemes Act 1993 and Part I of this Act'.-- [Mr. Arbuthnot.]

Brought up, and read the First time.

The Parliamentary Under-Secretary of State for Social Security (Mr. James Arbuthnot): I beg to move, That the clause be read a Second time.

Madam Speaker: With this, it will be convenient to discuss also Government amendments Nos. 82 and 83.

Mr. Arbuthnot: New clause 22 will allow occupational pension schemes to contract out on the basis that they hold contracted-out benefits accrued on both a defined benefit and defined contribution basis. My hon. Friend the Member for Beaconsfield (Mr. Smith) tabled an amendment in Committee on this issue. I undertook to consider it with other representations, notably from the occupational pensions joint working group, which has raised related issues.

The new clause and amendments that I have tabled will increase the flexibility for hybrid occupational pension schemes to contract out, and meet in full the concerns expressed by my hon. Friend and the occupational pensions joint working group. I commend them to the House.

Mr. Adam Ingram (East Kilbride): I wish to point out that it is a strangely worded new clause. It starts out with the phrase: "In spite of anything in sections 9 and 12".

That seems to me to be unparliamentary language. I should have thought that something more appropriate could have been put in its place. But that is not the point that I wish to make.

In Committee, when the issue was considered, the Minister said: "Were we to make a change to the current arrangements, we should need to be sure that we could safeguard the position of individuals. For example, we should almost certainly need to introduce new rules to ensure that the value of accrued GMP rights

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could not be eroded under any of the proposed new arrangements. It would be necessary to consider, in the light of those new rules, whether the change still seemed desirable."--[ Official Report, Standing Committee D , 15 June 1995; c. 666.]

I simply ask the Minister to give an assurance that that matter has been taken into account and that the guarantee will apply--that there will be no loss to accrued guaranteed minimum pension rights. I also raise a point on the contracting out arrangements that will apply to differing schemes. Would it not be appropriate to give a guarantee that the better arrangements should apply in those circumstances, because, where two different schemes are in operation, the less favourable arrangement could apply, which would affect the individuals? It would be helpful if the Minister could explain further the underlying purposes behind the new clause, and deal with the concerns that he himself raised in Committee.

Mr. Arbuthnot: We did consider those points, and we are confident that the protection that the hon. Gentleman has asked for is there. The point of the new clause is to provide a helpful flexibility, so that both defined contribution basis schemes and defined benefits schemes can be included within the same scheme. It is not always possible to say which of those would necessarily be better, because they have very different characteristics and benefits available at the end.

So the answer to the first point is yes, but on the second point, it would not really be possible to do that.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

New clause 3

Central discontinuance funds

`The Secretary of State may, after he has consulted organisations appearing to him to be representative of employers and of employees, by regulations make provision as to--

(a) the establishment of one or more bodies corporate, to be known as central discontinuance funds,

(b) the circumstances and the manner in which the trustees of an occupational pension scheme to which section 48 applies and which is being wound up may transfer the scheme's assets and liabilities to a central discontinuance fund established under this section, (c) the regulation of the administration of central discontinuance funds established under this section and the management of their assets.'.-- [Mr. Dewar.]

Brought up, and read the First time.

3.45 pm

Mr. Donald Dewar (Glasgow, Garscadden): I beg to move, That the clause be read a Second time.

This is an innocent-looking new clause; it is also short, which is a virtue, and written in plain English. That marks it out from a large acreage of a Bill that, as a result of our efforts in Committee--or perhaps I should say the Government's efforts--has swollen by some 30 pages and a good handful of clauses.

Although deceptively simple, however, the clause revisits one of the most complex and difficult parts of the new provision. It was discussed extensively in Committee, but I make no apology for returning to it now. I had hoped

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that we would have a good deal of time in which to think about it, and particularly for the Government to think about it, but that did not happen; Report stage has arrived very quickly. Nevertheless, I think it important for us to canvass again what are very important and far-reaching arguments.

As we have just been reminded, there is pressure of business, so I shall not rehearse the history and travel through the intricacies of the widely differing opinions that have been expressed; but I think that it would be helpful to summarise the progress that has been made since the original suggestions of the Goode committee.

In shorthand, as it were, Goode recommended that, at all times, the assets of a pension scheme should be in a state to meet all liabilities, on the assumption that that scheme would be wound up. It was a matter of transfer values, and the transfer of cash equivalents. The aim, with which none of us would disagree although the practical problems of achieving it are manifest, was total security. Since then there has been considerable to-ing and fro-ing, along with many learned conferences and, I fear, many boring speeches; but I accept that the Government's position has moved considerably.

We reached a compromise--if that is the right word--which stands in the name of the hon. Member for Bournemouth, West (Mr. Butterfill), in that he was the perhaps unwilling recipient of a long and complex letter which has given him an ersatz immortality, and the arrangement has been referred to as the "Butterfill compromise".

The Government said, in effect, that, in the calculation of their pension liabilities, the larger pension funds would be able to take into account 25 per cent. of the calculation based on equities rather than gilts. That was intended to lighten the load to some extent, and to confer some flexibility. It was also agreed that the time within which pension funds must meet the various benchmarks set out by the Goode committee would be lengthened considerably.

The compromise certainly helped, in that it was given a reasonably friendly reception, but many doubts remained--and, if anything, grew. The Confederation of British Industry, for instance, was unhappy with the arrangement, reflecting a wide range of concerns felt throughout industry. There was also a complex debate between actuaries and between the various pension funds, involving their representative body, the National Association of Pension Funds.

We secured another important change--a presentational change, at least: the minimum solvency requirement became a minimum funding requirement. That, however, did no more than change the label on a product that has incurred consistent and increasing criticism. The trouble is that we are involved in a revolving door argument. We are trying to make compatible two basically incompatible aims: total security, and a wish not to inhibit unreasonably the management of funds in the scheme in the interest of maximising benefits for members. To be fair, I believe that that was recognised on both sides of the Standing Committee.

The hon. Member for Beaconsfield (Mr. Smith), for example, rather uncharacteristically--I do not say that sarcastically; he does not often think that it is required--expressed considerable sympathy with my view, at least in the context to which I have referred.

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The trouble is that, the more one compromises on security in the interests of growth, the more insecure the prospects become, and vice versa. We are left with an uneasy compromise and a Government--this may be unfair to them--who, at the end of the day, have said, "We have been pushed and jostled, we have agonised and worried, we have come to a conclusion, we have settled at a point in the scale, and we will not change it again. We have had enough, and we are going ahead on the basis of the argument at this stage."

I shall briefly try to invite the Minister--I suspect that it will be a hard job, but I intend to put my best foot forward--to reconsider the issue. Of course, he knows--the title of the new clause tells us--the burden of my plea.

There has been a strong feeling that we should be moving away from the winding-up principle, involving transfer values and cash equivalents, and towards valuing the system. We should be assuming that pension schemes will continue. We should value them on a continuing basis, and move towards a contributions basis with that in mind.

The actuary to the scheme should be invited and asked to draw up a schedule of contributions, the aim of which is to ensure that, at all times, the assets in the scheme keep closely in touch with--and I hope, in the majority of cases, up to 100 per cent. up to--the safety level outlined in the Goode committee report.

There is no doubt that, with the minimum funding requirement, there is a possibility that people may coast and allow the asset valuation to drop, and to sag, if I may use that metaphor, below the safety point, no doubt with the well-intentioned view that, at some point in a year or two, they can put in a major cash injection and save the position.

The trouble, of course, is that, if disaster strikes, we get a point where winding-up comes just when the sag is at its deepest. As a result, people may find that what they thought were well-protected and safely guarded assets are, at least in part, missing, and that their pension promise has unfortunately gone with the wind. Obviously, we are anxious to avoid that.

The minimum solvency requirement has problems in terms of expense. As at present drawn, it assumes a substantial shift from equities to gilts, even after the compromise to which I referred has been taken into account. There is an argument about the costs. I do not want to go into that, because we did so at some length in Committee. But briefly, if I remember correctly, the Minister takes the view, based on the cost compliance memorandum, that the shift will be between £5 billion and £12 billion over a period. He put that at a cost to funds of between £300 million and £400 million over a 12-year period. That is a substantial sum of money and shift, and should not be shrugged off, but it is challenged in any event. The CBI is unsure whether its sample was as big as the Minister would have liked, and whether it was conducted before the adjustment was made to the formula, but it talked in terms of a £1.9 billion cost over 10 years. Even allowing for the adjustment, clearly those are substantial costs.

My real concern is that, even now, the minimum funding requirement flatters to deceive, and has the inherent dangers to which I have referred. I did not look up the actual reference, but I clearly have in my mind an

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exchange between myself and the Under- Secretary of State for Social Security in Committee on independent custodianship. The burden of his argument was that such custodianship should not be introduced because it flattered to deceive, to use a phrase that I have just mentioned: it offered or appeared to offer guarantees, or it would be seen and understood to offer guarantees that it could not offer. That was one of the main reasons why the Under-Secretary of State, with the aid of his hon. Friends, successfully resisted in Committee the introduction of independent custodianship.

If that is a decisive argument in that case--I understand it, although I do not accept it--and if that is the opinion of the Under-Secretary of State, it seems to me that that opinion should be transferred into the aspect that we are discussing under the new clause, and that he should consider carefully whether there is a danger of inviting the public to assume that there is a guarantee when no guarantee exists.

I accept that it is difficult to offer a guarantee; on that we are united. However, I believe that the contributions approach--a contributions approach that would be joined to a central discontinuance fund--holds out promise of genuine progress and improvement. I argued that alternative approach in Committee, and the Under-Secretary of State remained unconvinced. I hope that, in the intervening time--that was one of our earlier debates in a lengthy consideration in Committee--he may have had some second thoughts. The clause is not revolutionary. Some of my hon. Friends would say that I am not noted for revolutions, but in any event it is not revolutionary. It has been drawn sensibly in terms of enabling legislation, asking the Minister to consult and, by regulations, make provision for

"the establishment of one or more bodies corporate, to be known as central discontinuance funds".

It does not try to pretend that it can draft the framework and regulations at this stage, from the Opposition Benches--that would be arrogant and counter-productive. It is better, on this level, if the Minister is prepared to entertain the argument.

The shift to the contribution basis makes sense. It would make it easier for people to keep in line with the pension promise and the liabilities they shoulder. The central discontinuance fund is an important safeguard-- although I accept that there are arguments on both sides--because it assumes that, rather than compulsory winding up or continuing in a closed scheme, there is the option of handing the assets over to the central discontinuance fund and continuing to operate the scheme under its auspices.

We thereby get away from the present position, in which, if an unexpected disaster arises or if there is a shortfall, there may be no option but to wind up. As the Minister knows, there have been one or two outstanding examples of that happening, and substantial percentages of accrued rights have had to be written off. I emphasise that I would expect the central discontinuance fund to operate on the basis that it takes over the assets and then calculates what it can afford to undertake, given the yield of those assets and their likely history in its hands.

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There is no doubt that that continuity is advantageous. Winding up has the unpleasant side effects that I mentioned. With a closed fund, there are difficulties concerning trustees, administrative costs tend to be great, and there is little opportunity for growth.

I emphasise that the central discontinuance fund would arise only where the employer has gone to the wall. Self-evidently, if the employer continued to trade, the employer would still have to shoulder the pension promise. If there were fraud, the central discontinuance fund would not arise, because the compensation scheme set out in the Bill would take charge. However, there are substantial arguments for a central discontinuance scheme in cases where the employer has gone to the wall.

As I understand it, there was in the mind of the Minister of State one especially substantial argument against a central discontinuance scheme-- the fact that the Opposition, who are proposing that scheme, were hopelessly over-sanguine about the possibility of a deficit emerging. I quoted Watsons, the well-known firm of actuaries, to suggest that it was a comparatively remote possibility, and one that would be eminently manageable and easy to cope with.

We are told that the Government are less sanguine, although I think that it is fair to say that, when the Minister gave evidence to the Goode committee --the Pension Law Review Committee--he took the line that there was virtue in a central discontinuance fund system. However, the Minister certainly relied on his rather more pessimistic assumptions, and also talked about the American experience with the Pensions Benefit Guaranty Corporation.

I do not want to plunge into such technicalities on Report, when we have already canvassed them very heavily. I draw the Minister's attention to the fact that there is a substantial body of opinion that backs the approach that I take.

I do not for a moment deny that there will be critics on the other side of the argument. As always--this is perhaps a happy reference at this hour and place--there will be those who will stay with the devil they know even though they are unlikely to take much satisfaction from it. In any event, there is no doubt that there is a strong body of support for the approach that I am outlining.

4 pm

Mr. Tim Smith (Beaconsfield): Could the hon. Gentleman say whether we need regulations to make provision for the establishment of central discontinuance funds? Why should not the CBI set up its own central discontinuance fund pension scheme, to which the trustees of schemes that have gone bust could transfer assets and liabilities?

Mr. Dewar: That may be a private enterprise solution that commends itself to the hon. Gentleman, and I do not sneer at his proposal. However, there is a general assumption on both sides of the House, and clearly in the mind of the Minister, that where we are offering safeguards for the pension promise and building an essential regulatory framework as the guarantee of security after public confidence has been heavily shaken in the aftermath of the Maxwell scandal and, less

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dramatically, by the ravages of recession, which put many pension funds under pressure, such a fund should be on a statutory basis and supervised by the Government.

That is why we are in the business of minimum solvency or funding levels, and I certainly would not want to depart from that. I am told that it would not be too difficult technically for the Government to move on that within the framework of the Bill. That is why new clause 3 has been drafted as it has.

The hon. Member for Beaconsfield diverts me. I was going to point out to the Minister, as I come towards the end of my remarks, that the weight of opinion seems to be for my side of the argument, although not 100 per cent. behind me. The Minister recently paraded with great pride the Prudential insurance company and a memorandum from it. I am not sure that the arguments that it advanced were not equally valid against minimum funding levels. They were equally applicable in both cases. It was a reminder that perfection is hard to come by.

There is support for a central discontinuance fund, through a contributions approach, from the Trades Union Congress, which has worked extremely hard on the issue and found, as it pushed the argument along, that it was not travelling alone. We had a great deal of support in the House of Lords. I pay tribute to my noble Friend Lord Eatwell, who particularly espoused the cause. When he first brought it to me, I was somewhat cynical, but my enthusiasm grew as the argument progressed. The Pensions Management Institute, the PMI, strongly favours it, and a number of firms and important funds have said at least that they want it to be further investigated. I would especially like to draw to the Minister's attention the position of the CBI. I do not say that it is the fount of all wisdom-- it would regard me with considerable suspicion if I argued that case--but it has some experience, and has spent a good deal of time considering what is on offer and what seem to it to be the best options. The best and easiest thing is for me to remind the Minister of the briefing material--he probably knows it--that the CBI produced for this debate. I will read it only briefly into the record, as the Minister, ever-efficient, has the very text on his lap.

The briefing states:

"There is . . . concern among CBI members that the MFR"-- the minimum funding requirement--

"would become more restrictive--and thus costly--over time. There would seem merit, therefore, in giving further consideration to the idea of an on -going funding standard backed by a central discontinuance fund (CDF) or funds. This would allow the trustees, in cases where the employer becomes insolvent, to transfer the scheme's assets and liabilities to a CDF which would operate as a pension fund and could invest in equities as do on-going schemes. Members would be protected as the benefits produced by a CDF should prove higher in the long term than could be expected from the current alternatives", which are winding up or going on as a closed scheme.

The briefing continues:

"We would, therefore, support the addition of a clause which would enable, but not require, central discontinuance funds to be set up. This would facilitate the move to an on-going funding standard in the future if, after further study, it appeared the better proposal."

I accept that that is cautious. The CBI is not supporting the notion 100 per cent., but it makes it clear that it believes there are potential advantages, that the scheme should be considered and that machinery should be included in the Bill to allow progress along that route if,

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