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A model of how a compensation package should be administered in the form of the Pension Protection Fund was noted in the Explanatory Memorandum. It will pay 100 per cent of benefits to any existing ill-health pensioners—there is probably none in the FAS yet. In the PPF, however, individuals can choose to draw that compensation before normal pension age. They must be at least 50, and payments are actuarially reduced to take account of the fact that compensation will be paid for longer. That is the case even where a person claims their pension early on ill-health grounds. Last year, a parliamentary Answer explained how this works: once the PPF has assumed responsibility for a scheme, any scheme member may take early payment of their compensation from age 50 subject to actuarial reduction.
Surely the FAS is also a compensation scheme, and there must be a strong case for it operating on similar grounds. What would be the cost of treating people retiring early through ill health in exactly the same way regardless of whether they are covered by the FAS or the PPF?
I am also grateful to that superb campaigner on behalf of all pensioners, Dr Ros Altman, for one or two further questions. First—the Minister touched on this—what is now the position of solvent employer schemes? In particular, how many will not qualify? Specifically, is the Desmond scheme in Northern Ireland now included?
Secondly, the annuity factors used by the Financial Assistance Scheme to convert transfers out of the scheme into equivalent pensions do not appear to have reflected the pensions being given up. The Government Actuary’s Department has used factors which seem to result in the assumed scheme pension being higher than it would actually have been, therefore the FAS payments are lower. This may seem a technical point, but it could cost seriously ill people real money.
Moreover, why are the Government refusing to backdate payments for those who have already been ill for many years, only making payments from 2008 or when notified, whichever is later? The FAS seems to be taking the hardest line possible against such people. These are issues of ill health, which lies at the centre of this regulation.
Finally, why on earth has it taken so long to begin bringing together the administration of the Pension Protection Fund and that of the Financial Assistance Scheme? We on these Benches have been calling for that since the first Pensions Bill in 2004. We did not see the case for separate bodies then, and the dismal record of incompetence and delay by those administering the Financial Assistance Scheme since then has proved us right. These are enabling provisions. What will happen to bring the administration together, and when?
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Lord McKenzie of Luton: My Lords, I think I just discerned support for these regulations in all of that.
The noble Lord, Lord Oakeshott, is absolutely right that I should have covered the short notice in my opening remarks; I apologise. As he recognised, we want to get this through before the summer Recess, so that we can begin to make the ill-health payments, in
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The noble Lord, Lord Skelmersdale, asked about costs and whether they were gross or net. They are gross costs: gross of tax and benefits. A net figure would be a discount of a quarter to a third of that gross figure; that is a ballpark figure. He also asked how interim payments would work for FAS ill-health claims. Interim payments on the grounds of ill health work in the same way as initial payments for FAS. They are appropriate when schemes have not completed wind-up and the final figures are not known. He also asked about annual upratings and FAS being increased by 2.5 per cent. These things are not included in the social security benefit order, so it is not in an uprating order. The 2.5 per cent he referred to relates to the cap on indexation, an outstanding issue that we will look at in later regulation.
Both noble Lords asked why the period for ill-health payments was five years. We understand, as noble Lords have done, that campaigners have called for more generous ill-health provision. We are sympathetic to campaigners’ concerns about ill-health benefits in a small number of particularly difficult cases. We continue to work closely with them to see if we can resolve the issues.
Lord Oakeshott of Seagrove Bay: My Lords, the Minister has not answered the basic question of why it was five years.
Lord McKenzie of Luton: My Lords, the draft provisions provide for claims within five years of the normal retirement age. This goes beyond the commitment provided in December 2007 to provide help to members over 60; we have done more than we committed to at the time. This approach ensures that all members who meet the ill-health qualifying conditions have an opportunity to receive early, reduced ill-health payments in the five years before their normal retirement age. As I said, as part of the consultation we invited representations on behalf of any members who are unable to work due to ill health and who are not covered by our extended proposals. The noble Lord, Lord Skelmersdale, asked me about the full buy-out cost. I missed the full import of his question. Perhaps he will take the opportunity to ask it again when I have tried to deal with some of the other points that he raised.
The noble Lord, Lord Oakeshott, referred to annuity factors. They are used in the FAS to calculate the amount of annuity a member could have received if they had not taken their share of remaining scheme funds in some other way, such as a transfer value or a lump sum during wind-up. The factors seek to approximate as closely as possible the amount of annuity that the trustees could have purchased under bulk annuity terms for that amount of funds, so they need to be kept under regular review and updated as necessary to ensure that they are broadly in line with market rates. The Government Actuary’s Department recently produced revised draft factors, and we consulted the pensions industry before using them.
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The noble Lord, Lord Oakeshott, also asked about the Desmond scheme. There are two kinds of situation here. One concerns solvent employers with schemes that are not fully funded, which arise from issues around buy-out arrangements and whether a full buy-out cost had to be applied. These regulations deal with those situations. The Desmond situation is where the employer has become insolvent but the wind-up of the scheme started later than April 2005. We need to deal with that in primary legislation and the relevant provisions are, or will be, in the Bill which we are discussing with great joy. We have identified three schemes in this latter category. Many more schemes were identified in the former category. I cannot put my hands on the relevant figure, but I am happy to write to the noble Lord, if that will help.
Both noble Lords asked why the PPF’s provisions could not be adopted more fully sooner. I remind them of the sequence of events. Andrew Young’s report charted the way forward for us. Part of his remit was to look at engagement with the PPF. Greater engagement with the PPF needs to be undertaken to see what expanded role it might undertake. We have given a power for it to provide advice. I hope that I have dealt with everything apart from the full buy-out cost, which the noble Lord raised. I missed the full import of his question. I hope that he will ask it again and I shall see whether I can help.
Lord Skelmersdale: My Lords, the noble Lord did not answer my point regarding payments which were already being made for ill-health retirement from schemes before they were taken over by the FAS. There must be some. I hope that such payments will not be terminated by the scheme if they are already in payment. That is a rather more important question than the one about lump-sum payments.
Lord McKenzie of Luton: My Lords, I can confirm that that is the position. If ill-health payments are being provided by the scheme, this measure would not disturb any of that. I hope that that reassures the noble Lord. I ask noble Lords to support the Motion.
On Question, Motion agreed to.
Housing and Regeneration Bill
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Consideration of amendments on Report resumed.
Clause 10 [Restrictions on disposal of land]:
Baroness Hamwee moved Amendment No. 12:
The noble Baroness said: My Lords, this amendment would add to the clause concerning restrictions on the disposal of land a reference to a general or a specific consent from the Secretary of State. In Grand Committee, we were told about the general consent which applies in the case of local authorities. The very helpful and long compendium letter which the Minister sent to interested Peers described this process. I will not read it out. However, I have requested that the Minister
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Lord Dixon-Smith: My Lords, my Amendment No. 13 is grouped with this amendment. It relates to a subject that we debated fairly thoroughly in Grand Committee. We got what I would call a reluctant no, but very often what a community could pay for a bit of land is considerably less than its value on the commercial market. That is a reality. We have to be sure that there is flexibility so that where there is a real gain to the community there is some way of dealing with that situation. We thought we ought to repeat this amendment at this stage to see if we can persuade the Minister that a slightly more positive attitude to it would be helpful.
Baroness Ford: My Lords, I hope the Minister can clarify a couple of points for me. The nature of urban regeneration is that a large proportion of time is spent assembling land for projects. Sometimes that can be just as tricky and complex with very small parcels of land as it is with much larger sites. My experience was that from time to time English Partnerships disposed of land at less than top whack for good reasons. Sometimes it was part of a land swap with a developer where it was advantageous to the public purse to dispose of a particular bit of land at less than best consideration because the swap was more valuable in the great scheme of things. Sometimes we were disposing of a community-related asset that was a legacy from the old new towns. Sometimes we were dealing with a ransom strip. I shall not go into huge detail, but there is a range of circumstances where it is important that the accounting officer of the organisation can make a judgment, particularly over small parcels of land or parcels of land that are part of a land swap. It is important that he retains the flexibility to do that within the general Secretary of State consent, which is how we have operated in the past.
Can the Minister reassure me that we are not overdoing this and that not every single, tiny parcel of land that might be part of a swap or be otherwise disposed of or brought into a project at less than best consideration now requires the Secretary of State’s consent? I understand that the powers delegated to the accounting officer of the organisation go up to £20 million only and everything above that goes to the department and on to the Treasury in the normal way. I would have thought that in the normal course of events the accounting officer could reach that judgment within an overall direction from the Secretary of State. I would be grateful for some clarification—if not this evening, in writing—because as a result of the amendments that have been accepted, we now have a sensible regime, but if we go any further we could end up unintentionally fettering the organisation in a practical way.
Lord Bassam of Brighton: My Lords, the noble Baroness has invited me to put on the record our response, and I am happy to do that. We are committed to developing a general consent to make clear the circumstances under which the Homes and Communities Agency may sell land at less than best consideration
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As noble Lords will know, the extent to which the Homes and Communities Agency should be able to make decisions regarding the disposal of land at less than best consideration has been the subject of extensive debate during the passage of the Bill. It is our view that, in the majority of cases, the agency should be empowered to dispose of land in the manner that best enables it to pursue its objects. We accept that this may not always mean selling land for the highest price, but we also accept that there must be appropriate and adequate safeguards in place to protect the public purse. The Bill currently contains a provision at Clause 10 precluding the Homes and Communities Agency selling land at less than best consideration without permission from the Secretary of State, but it also contains a provision at Clause 50 empowering the Secretary of State to give consent in general or specific terms. These provisions mirror those that apply to English Partnerships.
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As I have said, we intend to publish for discussion with stakeholders a document setting out the Secretary of State’s general consent to the Homes and Communities Agency for the disposal of land at less than best consideration. That document will set out the general circumstances in which we suggest that the Homes and Communities Agency could dispose of land at less than best consideration. For any disposal of land that did not meet the terms set out in the final version of that document—the general consent—the Homes and Communities Agency would have to obtain the Secretary of State’s specific consent. It will set out, at a high level, the circumstances in which the disposal of land for less than best consideration would not require the specific consent of the Secretary of State.
The draft consent will set out a series of tests that deal with the public benefit and seek to protect the public purse as follows: first, any disposal at less than best consideration must meet the objects of the agency which incorporate a public benefit test; secondly, undervalue land sales must meet the value-for-money tests set out in Managing Public Money and the Green Book, which, as noble Lords will know, are Treasury publications that explain how accounting officers can take account of wider benefits when judging whether they are achieving value for money; thirdly, the disposal must not constitute state aid under Article 87 of the treaty of the European Union. This requirement would require the agency to either dispose of the land under an open and unconditional bidding procedure or rely on an existing exemption or approval which incorporates a public interest test.
To provide further protection for the public purse, the draft also places a limit on the maximum size of the unrestricted value of any transaction that the agency may undertake in these circumstances without
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Drafting the consent in this general way inevitably raises comparisons with the general consent available to local authorities when they wish to dispose of land at less than best consideration. This is not a fair comparison. Local authorities are required to seek consent from the Secretary of State when the difference between the restricted and unrestricted value of land sales is greater than £2 million. This means that if local authorities wanted to sell land worth £4 million for £1 million, they would have to obtain the Secretary of State’s consent. The HCA would not have to do that. However, if a local authority wished to sell land valued at £42 million for £40 million, it would be able to do so under the terms of its general consent. The HCA would have to seek the Secretary of State’s specific consent.
The monetary values for the HCA are likely to be higher because it is expected frequently to be engaging in large-value land transactions and its staff will have extensive experience and expertise in this field. Also, we are leaning towards total transaction values for the HCA, whereby for local authorities the difference between the figure that they could have obtained for the land and the figure they accept would determine whether they had to obtain the Secretary of State’s specific consent. As for local authorities, cases that do not fall within the general consent will need to be referred to the Secretary of State for a specific decision.
In general terms, a monetary value that can be attached to a wider public benefit—for example, a right to repurchase land for the selling local authority—should be included within the assessment. If the value attached to such wider benefits when added to the monetary value received gives a total equivalent to the best consideration which can reasonably be obtained, then no consent is required. If, even after including the value attached to wider benefits, the total does not reflect the best consideration which can reasonably be obtained, the specific consent of the Secretary of State will be needed. This will also be the case when it is not possible accurately to allocate a value to a wider public benefit, which we accept will sometimes happen. In those circumstances, it is entirely appropriate for the Secretary of State to make an assessment in order to ensure the appropriate use of public funds. The debate in Committee at times seemed to equate a requirement to seek consent with a prohibition. That is clearly not the case; the requirement to seek consent is in fact a means of ensuring a proper assessment of the facts of a particular case.
I hope that noble Lords see that this renders their Amendment No. 13 unnecessary. The amendment seeks to place in the Bill an obligation on the Secretary of State, when considering whether to give consent to the HCA to dispose of land for less than best consideration, to take into account the benefit to the community when such a disposal takes place. Of course, she will, but she will also take into account the cost to the
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My noble friend Lady Ford asked a question, to which the response is simply as follows. The powers that we seek to put in the Bill are similar to those that were in legislation governing English Partnerships. I assume that for those powers the same arrangements will pertain in relation to disposals of the sort to which she referred.
A question arose about consulting on the limits. The answer is that we are consulting on the limits of £40 million and £5 million in a general-consent approach. I hope that that answers a point that has clearly disturbed noble Lords.
Baroness Hamwee: My Lords, can the Minister give us an idea of the timetable for proceeding with this?
Lord Bassam of Brighton: My Lords, I do not know and I do not think that I will know in the time that it takes to get a note from the Box to the Dispatch Box. However, if the noble Baroness will be satisfied with me giving her an answer outside the Chamber, I shall be more than happy to oblige.
Lord Dixon-Smith: My Lords, perhaps I may ask the noble Lord a different question. Does he consider the record in Hansard to be publication? I should have thought that it might well be.
Lord Bassam of Brighton: My Lords, it is certainly a record and in those terms it has to be properly considered.
Baroness Hamwee: My Lords, perhaps I should speak very slowly as I am not sure that everything is winging its way quickly to the Minister. Of course, what I requested—the information that we had been circulated with—was put on to the record, so, to that extent, I am satisfied. He could not see the expression of the noble Baroness, Lady Ford, as he described some of the contents and, in particular, the limits. However, as he said, this is a draft that is being worked on for consultation and I think that he has already had a pretty hefty hint about some of the response to that consultation.
Lord Bassam of Brighton: My Lords, I had gathered that the subject of limits had caused a frisson of excitement, and that is why we thought it was useful to add the point about consultation on the limits. I am sure that that was appreciated. At present, we do not have a worked-out timetable but we will consider it as a matter of urgency.
Baroness Hamwee: My Lords, I am glad that I asked for that point to be covered. The House and, more particularly, those outside have benefited from the very practical contribution of the noble Baroness, Lady Ford. I beg leave to withdraw the amendment.
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