Pension Schemes Bill [ Lords ] (First sitting)

Stephen Timms Excerpts

Committee stage & Committee Debate: 1st sitting: House of Commons
Tuesday 3rd November 2020 Public Bill Committees

[Stephen Timms (East Ham) (Lab)]

I am very pleased to be serving under your chairmanship, Mr Stringer. Like others, I very warmly welcome this proposed legislation for CDC pensions, and congratulate Royal Mail, the CWU and everyone involved on the success of their joint efforts to achieve the statutory framework that is needed to deliver them.

My hon. Friend the Member for Feltham and Heston referred to the previous Select Committee on Work and Pensions report on CDC schemes, published in July 2018. That report said that CDC schemes had the potential to “transform the pensions landscape”, and it also commended Royal Mail and the CWU on the “ground-breaking agreement” they reached at that time. It added:

“To offer more good choices is entirely consistent with both pension freedoms and promoting retirement saving.”

The Royal Society of Arts has long supported CDC provision, and I want to bring to bear on our discussion some of the points it has made in welcoming this proposed legislation. It points out, as my hon. Friend has just said, that CDC schemes are likely to provide a much higher income in retirement—at least 30% higher, it says—than the alternative of individual saving and then buying an annuity, and that that improvement is achieved by sharing longevity risk and targeting higher asset returns than an annuity provider. The RSA believes that the Bill provides a good framework for introducing CDC schemes, noting in particular that the regulator will act as a gatekeeper to ensure that only well-designed CDC schemes can open. It suggests that authorisation requirements for opening a CDC scheme and the process to verify continuing viability should not be unduly cumbersome, and that there should be a proper balance of prescription in scheme rules and trustee, actuarial and regulatory oversight.

Unlike DB schemes, a CDC scheme cannot go back to the employer and ask for more funding, so CDC pensions do need to vary if things prove better or worse than predicted. Those variations in other countries where CDC schemes are in place can generally be accommodated by raising pensions by more or less than inflation, but after the 2008 crisis the Dutch reduced their CDC pensions by 2% on average, and in one of the Dutch schemes the level of pensions being paid was reduced by 6%. Understandably, that caused a furore, so people in a CDC pension need to know what might have to be done depending on what happens in financial markets in the future.

Does the Minister agree that this places a premium on effective communications with members of CDC schemes? During stable times, CDC payments may seem pretty reliable, as had been the experience in the Netherlands, where they were uprated each year in the expected way. For many years, the Dutch system had experienced no problems with that, nor had the potential for reductions been clearly explained to pensioners, so when the reduction came—2% on average, 6% in one case—it caused a lot of anger, for understandable reasons.

My hon. Friend referred to the model put together by Willis Towers Watson, I think at the request of the RSA, to model how a CDC pension would respond to the drop in capital values over the first quarter of this year. As she said, that model showed that the Royal Mail scheme would have been pretty robust. The Bill will allow the Royal Mail proposal to proceed, and other private sector organisations to create similar arrangements, but it does not allow for unrelated companies to work together to create a single CDC pension plan. Since effective pensions require economies of scale, that in effect excludes smaller companies from the legislation’s provisions, and from the option of a CDC—at least for now.

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[Guy Opperman]

I agree that large employers, such as Royal Mail, which employ nearly one out of every 200 full-time working employees in this country, will look at that and say it is a potential way forward.

Before I come to the hon. Lady’s point, I want to address DB briefly and make it clear that CDC is intended to offer a further pension-saving option for employers and their workers, should they wish to make use of it: it is for the employers and the workers to decide the type of benefit they wish to have via their occupational pension scheme. That has always been the right of the employer fundamentally, but also engaging with the employee. We specifically amended the subsisting rights provisions via clause 24 to prevent existing DB benefits in the scheme from being converted into CDC benefits. I hope that I have addressed in full the DB issue, which was also raised separately by the right hon. Member for East Ham.

[Stephen Timms]

I am grateful for the Minister’s reassurance on communications. Will good communications be a consideration for the regulator in determining whether a proposed CDC scheme should go ahead?

[Guy Opperman]

The short answer is yes.

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One of the reasons that the Bill is this size is that the first 51 clauses are for Great Britain, while clauses 51 to 102, which are a mirror image, apply to Northern Ireland. This is not a company-specific proposal; we have made the Bill sufficiently wide so that other organisations—the obvious ones being master trusts—can come forward and be included. I totally take the point that there is great eagerness to have smaller, multi-employer schemes take part on an ongoing basis, to see how they progress.

[Stephen Timms]

Can the Minister raise our hopes that perhaps in the next 12 months or so, there might be regulations that allow multi-employer CDCs to be set up?

[The Chair]

Could the Minster be brief, as that moves us into a debate on clause 47, which comes later in the agenda?

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[Seema Malhotra]

It is a pleasure to respond to the Minister’s comments. I thank him for laying out the Government’s thinking on the clauses and amendments in this group. I will speak to Government amendment 6 and briefly to amendment 25, tabled by my right hon. Friend the Member for East Ham.

I thank the Minister again for his speech and the arguments that he has laid out for seeking to remove the amendment tabled by the noble Lord Sharkey and cross-party colleagues in the other place, which was agreed by peers in June. The Minister commented that, in his view, some of the concerns could be addressed by the implementation of clause 18. I want to come back to why I am concerned that may not go far enough; perhaps this will be an issue of ongoing debate as the Bill proceeds, and in regulations.

The amendment included by those in the other place was very considered. It spoke about

“the requirement that trustees make an assessment of the extent to which the scheme is operating in a manner fair to all members”.

I believe that is the additional wording in the Bill. It is a very considered amendment, which could only be useful in keeping on the agenda of trustees the important analysis that should take place in relation to decision-making—to be sure about the best possible input and considerations in relation to the performance of the scheme for all its members.

I alluded in my opening remarks to the considerable insecurity that we face as a nation, exacerbated by the impact of covid-19 and its disproportionate impact on different groups and different generations, in terms of the economy and levels of employment and therefore saving into pension schemes. People’s personal finances are likely to be under great strain in the coming years. Not only is there that insecurity, but it is increasingly difficult to encourage young people to save for retirement, with all the other cost pressures in life—paying off debts, for example, or the fact that, at the moment, the average age at which they will purchase their own home is around 34. There are considerable pressures on the personal finances of the next generations, as they plan ahead for their lives.

Thinking about our institutions and how we continue to consider and embed intergenerational fairness should be on Parliament’s radar in all our work. In that context, we see unprecedented public policy challenges in ensuring fairness between different groups in society—from those in hard-hit industries, such as aviation and hospitality, to those affected by the way education is being delivered in the times in which we are living, which could continue beyond the next few months into the next few years, with all that uncertainty. We have also seen that black, Asian and minority ethnic communities have been hit harder by the health and economic impacts of this terrible virus. We can look at income today, but we are really talking about income tomorrow, and the impact on tomorrow of savings today.

It is incumbent on the Government to think about fairness between generations, and how we can stop young people bearing the brunt of the uncertainty and hardship caused by the economic havoc that we are experiencing right now. The impact on them could go unchecked in the medium and longer term. Concern about intergenerational fairness was raised by many respondents to the Government’s consultation on the Bill’s provisions.

Clause 27, as amended in the other place, sought to deal with some of those concerns. It effectively acknowledges that there may be a divergence in interests between different cohorts or sets of members in CDC schemes. Importantly, it does not compel any particular kind of action, but requires trustees to consider fairness and assess the extent to which the scheme is fair to all members. To Opposition Members, that is a very sensible suggestion, and we struggle to understand why it should be controversial for the Government.

I appreciate that the Minister outlined some comments from the CWU and others about the interpretation. He also mentioned treating people in the same way and his interpretation of the current wording of clause 18, which I was just reviewing. If there are different considerations in relation to levels of savings, other ways of joining a scheme or different circumstances, it may be necessary to look differently at different cohorts. Treating people fairly may not always mean thinking of them as the same. When we are thinking about fairness, we may need to be a bit more nuanced in our consideration of different needs and circumstances, and the potential impact of a decision on all cohorts.

Perhaps a different way of interpreting the amendment that was made in the other place would be to see it as enhancing the intention behind clause 18. I repeat that the amendment did not compel any particular kind of action, but made it more explicit what trustees should consider. Baroness Stedman-Scott, the Parliamentary Under-Secretary, said in the other place:

“I welcome the sentiment behind the proposed amendment; it is something to which we want to give further consideration. We need to give careful thought to how such reporting might work in practice and would want to work with trustees, administrators and the regulator to ensure that any such requirement is proportionate, appropriate and clear. We would also want to consult on any such approach to make sure that it is effective. I reassure all noble Lords that we will give this matter careful consideration. Should we need to bring forward such a requirement in regulations, we already have sufficient powers in existing legislation to require schemes to report on fairness in CDC schemes if warranted.”—[Official Report, House of Lords, 30 June 2020; Vol. 804, c. 605.]

I hope that the Minister will continue to keep this issue under review, because we think it is very important for the sustainability of fairness and confidence in schemes. The very considered wording that was proposed and passed in the other place could help the Government in securing the intended outcomes that he described as being behind clause 18. Perhaps he can provide more detail on his plans to incentivise trustees to assess and report on the extent to which CDC schemes are operating in a manner that is fair to all.

My right hon. Friend the Member for East Ham may make a few comments on amendment 25, which is intended to require pension schemes to send information on the diversity of the trustee board to the pensions regulator. We believe in the value of this amendment, which is also supported by other colleagues—the SNP in particular. It is important to ensure that there is a diversity of voices in decision making. The debate about diversity on public and private boards comes in cycles. Diversity on public boards was considered under the last Labour Government, with quotas for diversity in recruitment. This is not a party political matter; a lot of research shows that diversity in decision making leads to better and safer sustained outcomes.

When looking at public funds, for example, the diversity of needs should be understood at the decision-making table. We do not need to rehearse the arguments for ensuring that different voices are represented at decision-making tables, whether that relates to gender, those with disabilities or those from particular minority communities.

The same is true of boards in the private sector. Research undertaken by business schools shows that diversity on decision-making boards has often led to considerably better returns on investment, and indeed shareholder returns. There is no sustained, credible argument that not having diversity on boards leads to better business outcomes.

I do not understand why this would not be an important consideration. Amendment 25 simply says that pension schemes should send information on the diversity of the trustee board to the Pensions Regulator. I am sure my right hon. Friend the Member for East Ham will share more information about how trustee boards are less diverse than other boards. That cannot be right for boards that have an increasingly important role in decisions about funds and investments, and about inclusivity and fairness.

This is not only an important consideration in terms of social justice; it is about the performance of the schemes. It is about recognising the importance of having diverse voices and voices that are representative of those within the schemes and those who may benefit from the schemes in the future. This is a matter of obvious importance that should not raise concerns, and it should be included in the Bill.

[Stephen Timms]

I apologise for raising clause 47 in the previous debate; I probably should have waited until now. I am glad we had that debate and I welcome the Minister’s assurance that regulations to enable multi-employer CDCs will come forward within the next year.

I will confine myself in this debate to clause 46 and amendment 25, which stands in my name on the amendment paper. I am grateful to the hon. Members for Airdrie and Shotts and for Gordon for adding their names to it, and to my hon. Friend the Member for Feltham and Heston for the important points she has just made in favour of it. I thank ShareAction for its work on this topic and for the briefing it has provided.

We are all familiar, as my hon. Friend has just reminded us, with the criticism that there is insufficient diversity among directors of FTSE 100 companies. There has been progress, but the Government targets are going to be missed and there is still a long way to go among major company boards. Some 68% of board members are male and only 7.4% are from black, Asian or minority ethnic backgrounds. That proportion falls to 3.3% in the most senior board positions: chair, chief executive and finance director. Only just over half of boards have any ethnic minority members at all.

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[Ms Karen Buck (Westminster North) (Lab)]

I ask my right hon. Friend to confirm my understanding, which is that when we talk about diversity, we are not simply talking about it being a good thing to have a range of different experiences and backgrounds; all the evidence from across the commercial sector is that diversity increases performance because of the range of perspectives that it brings to bear.

[Stephen Timms]

My hon. Friend is absolutely right. She and I took part in a debate on a similar issue around 10 years ago, on the Welfare Reform Bill. She is right on this point, and that is an argument that I want to come to in a moment.

I hope the approach that I am advocating will be applied to other pension trustee boards in the UK in due course, because according to a report on diversity published in March by the Pensions and Lifetime Savings Association, which we used to call the National Association of Pension Funds, 83% of pension scheme trustees are male; 50% of chairs of trustee boards are over 60; a third of all trustees are over 60, while only 2.5% are under 30; 25% of pension schemes have trustee boards that are entirely male; and only 5% of schemes have a majority of female trustees. This is a particularly stark picture if we look at the make-up of pension scheme trustee boards at the moment.

As the Pensions and Lifetime Savings Association comments:

“It seems clear that occupational pension scheme trustee boards have generally not implemented robust diversity policies as effectively as FTSE 100 boards”.

[Ms Eagle]

I thank my right hon. Friend for making points that are difficult to argue against. What effect does he believe the age of pension fund trustees is likely to have on the intergenerational fairness points that I pressed the Minister on in our previous discussion?

[Stephen Timms]

My hon. Friend makes an important and interesting point. If we are to be confident that these new scheme trustees will make decisions that are fair to both the working members of the schemes and to pensioners, it is important that the voices of working age members should be taken fully into account in the trustee board’s decisions. She makes a good argument about why diversity, specifically in respect of age, is important in this context.

It is not as though there is no evidence that diverse trustee boards do a better job. My hon. Friend the Member for Westminster North has just reminded the Committee that there is a substantial, growing body of evidence that diverse company boards make more effective decisions than homogeneous boards. We have talked about age, but we should not forget that the gender pensions gap, which is nearly 40%, is almost twice the size of the gender pay gap. The issues here are stark.

The Pensions Regulator commented on diversity in trustee boards for the first time last year:

“Our view is that pension boards benefit from having access to a range of diverse skills, points of view and expertise as it helps to mitigate against the risk of significant knowledge gaps or the board becoming over-reliant on a particular trustee or adviser. It also supports robust discussion and effective decision making.”

Amendment 25 would require those who put boards together to report to the Pensions Regulator on steps to ensure diversity considerations are taken into account in the recruitment of the trustee board, with regard to age, gender and ethnicity. I know that the Pensions Regulator has set up an industry working group to consider this issue, as part of the consultation that the Minister referred to, and to raise the profile of it. However, to be effective, that group needs data, and this amendment would help to provide it. I think the result of the amendment would be not only greater fairness but better trustee decisions. I commend the amendment to the Committee.

[Richard Thomson (Gordon) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Stringer.

I will confine my brief remarks to amendments 6 and 25. I listened carefully and with interest to what the Minister said about the rationale for trying to withdraw clause 27 from the Bill. I agree that with him that in trying to come up with a legal definition of fairness, it will always be nebulous. There are clear difficulties around that, which is why I do not think the initial intention behind the clause was to provide absolute legal clarity.

I was reassured to a large extent by what the Minister said about the steps that would be taken to set up CDC schemes—by definition, schemes that are obviously unfair will not pass approval. The difficulty I have with that argument is that all that is being asked in clause 27 is that there is a requirement for trustees to make an assessment and nothing further. It is useful to have a process of self-challenge and continuous improvement, looking at aspects of the schemes that are directly under their control and that they can directly influence and alter. It is good to always have that consideration of whether the scheme is operating as fairly as possible for all present and future members and those taking benefits from it. My question to the Minister is, very simply, where is the harm? Even after taking on board all that he says, I still do not see the harm that lies in the Bill as it stands.

Moving on to amendment 25, I hear exactly what the Minister says about the requirement that already exists on trustees to be fit and proper people. My observation is that there are many potentially very fit and proper people who do not currently find themselves on boards, advisory committees or any of the governance structures around pensions, and who could nevertheless make a very good contribution to the running of those schemes.

Speaking from personal experience, prior to being elected as the Member for Gordon, I was a councillor in Aberdeenshire. Through that role, I was one of the Convention of Scottish Local Authorities nominees to the Scottish local government pension scheme advisory board, whose representation was equally split between employers’ representatives, of which I was one, and trade union representatives. The trade union representatives were all extraordinarily capable and represented quite accurately the diversity of the scheme members whose interests they were there to represent. In all honesty, the employers’ representatives perhaps did not represent that quite so well. I played my own part in skewing that representation.

The requirement to report back on the membership characteristics is a very useful tool in trying to understand whether all that is reasonable is being done to ensure that trustees and those in positions of governance on pension schemes are as representative as possible not just of the membership, but of the interests of the membership, and that we are giving as many people as possible the opportunity to fully skill up, participate and play the role that they can do. As things stand, we are missing out on the talents of many fit and proper people. Again, I do not see the difficulty in simply recording and reporting that information as part of the cycle of continuous improvement and self-reflection on whether we are achieving all that we seek to do.

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[Stephen Timms]

I am very grateful for the support that has been expressed and for the points that the Minister has made. I take his point that there is a consultation under way. I very much hope that the regulator will decide to require information on diversity from the schemes that are set up, and that it will continue to do so as the trustee board develops. However, at this stage I will not press the amendment to a vote.

Clause 46 ordered to stand part of the Bill.

Clauses 47 and 48 ordered to stand part of the Bill.

Schedule 3 agreed to.

Clauses 49 to 51 ordered to stand part of the Bill

Clause 52

Collective money purchase benefits and schemes

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 53 to 57 stand part.

That schedule 4 be the Fourth schedule to the Bill.

Clauses 58 to 95 stand part.

That schedule 5 be the Fifth schedule to the Bill.

Clauses 96 to 99 stand part.

That schedule 6 be the Sixth schedule to the Bill.

Clauses 100 to 102 stand part.

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[The Chair]

I propose to put as a single question that clauses 53 to 57 stand part, that schedule 4 be the Fourth schedule to the Bill, that clauses 58 to 95 stand part, that schedule 5 be the Fifth schedule to the Bill, that clauses 96 to 99 stand part, that schedule 6 be the Sixth schedule to the Bill, and that clauses 100 to 102 stand part.

[Stephen Timms]

Would it be in order, Mr Stringer, for me to ask about clause 98 in this part of our discussion? It is the counterpart to an earlier clause and will introduce regulations to enable CDC schemes in Northern Ireland to be extended to include multi-employer schemes. Can the Minister reassure us that in Northern Ireland, as in the UK, the plan will be to introduce regulations to enable that within the coming year?

[The Chair]

That is not completely in order, but I will allow it.

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[Seema Malhotra]

We will not be making any further comments. We support the Minister on these clauses.

[Stephen Timms]

This part of the Bill gives new powers to the regulator, so it is worth recapping the problems that gave rise to the need for them. Most of the thinking here came from the joint work of the former Work and Pensions Committee—I pay tribute to my predecessor as its Chair, Frank Field—and the Select Committee on Business, Innovation and Skills, after the awful problems at two firms: BHS and Carillion.

BHS had two defined-benefit pension schemes. They were in a combined surplus of £43 million when Sir Philip Green bought the company in 2000. The surplus gradually declined and the schemes fell into a combined deficit in 2006, following the period when large dividends had been paid to members of the Green family. By the time of the sale of BHS in 2015, the value of the schemes’ assets was almost £350 million short of their liabilities. As the schemes fell into deficit, the BHS board repeatedly resisted requests from the scheme trustees for increased contributions.

In 2012-13, there were negotiations over a deficit recovery plan and they concluded with a 23-year recovery plan. At the time, eight years was the median rate for a recovery plan and 95% of comparable schemes had a recovery plan of less than 17 years. The plan we got in the case of BHS was for 23 years. The payments under that plan barely covered the interest on the scheme’s deficit and so the deficit continued to grow even while that plan was being followed.

The two Select Committees concluded that the Pensions Regulator had acted too slowly. Having received the 23-year plan in September 2013, it did not send the first information request to the trustees until January 2014. The Committee added, however, that the onus for resolving problems was on Sir Philip Green.

In the case of Carillion, it left a pension liability of around £2.6 billion. The 27,000 members of Carillion’s defined-benefit pension schemes will now be paid reduced pensions by the Pension Protection Fund—one of the biggest calls ever on that fund. I agree with what the Minister said earlier about the success of the fund, which was introduced by the previous Labour Government.

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[Neil Gray]

Amendments 19 and 20 are in my name and that of my hon. Friend the Member for Gordon, and for the reasons that other members of the Committee have outlined we support part 3 of the Bill. We are also incredibly supportive of the principles of clause 107, which introduces new criminal offences aimed at deterring occupational pension schemes, sponsoring employers or scheme trustees from engaging in wrongdoing in relation to their pension scheme. We would not table the amendments if we were not concerned, and if serious concerns had not been raised about the clause.

We think the clause will act as a strong deterrent against those who would wilfully run a scheme down, as we have seen happen in the not too distant past, and as was outlined earlier by the Chair of the Work and Pensions Committee, the right hon. Member for East Ham. However, the new criminal powers are wide-ranging and have the potential—I am sure it is unintentional—to criminalise routine behaviour by parties involved with pension schemes and those who are not directly involved at all, such as lenders and those doing business with a pension scheme’s employers. That could have damaging knock-on effects for the viability of the pension scheme, if those who dealt with it, or employers, deemed that that legal risk was intolerable.

We have been working with the Institute and Faculty of Actuaries, which the Minister previously quoted in his favour in relation to part 3 of the Bill, as it has serious misgivings about the impact that the clause could have. It suggests that a wide range of conduct has the potential to have a detrimental effect on the likelihood of scheme benefits being met, in which case schemes might fall foul of the proposed current wording of clause 107.

The Institute and Faculty of Actuaries says, for example, that such conduct might include a Government entity terminating an outsourcing contract, where the contractor has a pension scheme; an employer giving employees a pay increase; a Government increasing corporation tax or business rates; a landlord increasing rents, where the tenant has a pension scheme; trustees or a scheme actuary granting an augmentation or increase to members without additional employer contributions; or a bank refusing to lend to an employer. That view is also supported by the Pensions and Lifetime Savings Association.

Our amendments would protect professional advisers from criminal liability for carrying out their role. That could be achieved in the Bill if the duties and responsibilities of an individual were considered when determining whether a person intended to commit an offence. The amendments would clarify matters in adding the question of negligence, which we feel is the intention behind the clause, but which is not explicit. They would also make it clear that a person’s role and responsibility should be considered.

The intended effect is not to change the policy aims of the legislation—far from it—but to clarify the extent of the powers and, in doing so, protect professional advisers from criminal liability for legitimately carrying out their roles. We therefore hope that the Government will accept the amendments.

[Stephen Timms]

I have listened with great interest to the case that the hon. Member for Airdrie and Shotts has been making. I have also been contacted by a reputable industry body, the Pensions Management Institute, as well as the Institute and Faculty of Actuaries, which has been mentioned. They expressed alarm about the consequences of clause 107, which the hon. Gentleman has raised concerns about.

I have seen, for example, letters to the Minister from the Joint Industry Forum, which is a genuinely cross-industry group. One is dated 11 December last year, and the other is dated 9 September this year. They suggest possible changes and discussions with officials about how the difficulties could be overcome. I hope the Minister will tell us what discussions there have been since those letters, to try to resolve the problem, and what his conclusion was.

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[Guy Opperman]

I would like to provide some reassurance on that particular point. I am acutely aware of it and have engaged at length with many different organisations. It is certainly not the intention to frustrate legitimate business activities where they are conducted in good faith. It is important, however, that where the elements of offences are met, no matter who has committed it, the Pensions Regulator should be able to respond appropriately. Any restriction of the persons would create a loophole for these people to potentially act in such a way.

The new criminal offences proposed in the Bill make it clear that an offence is committed only if the person did not have a reasonable excuse for doing the act or engaging in the course of conduct. Crucially, what is reasonable will depend, obviously, on the particular circumstances of the act, but the burden will be on the regulator to prove that the excuse was not reasonable. The regulator will be publishing specific guidance on these powers after consulting industry, but ultimately it is for the courts to decide that an offence has taken place, and, if so, the appropriate punishment.

The amendments also seek to remove the reasonable excuse defence—as set out in sections 58A and 58B—and replace it with a narrower concept of negligence. The existing defence of reasonable excuse is wider in definition than that proposed by the amendments. Therefore, the current defence provides more protection and a greater safeguard to potential targets. What is considered negligent is, in fact, specific and relies on case law—the law of tort, as I am sure the hon. Member for Airdrie and Shotts is aware—therefore introducing the concept of negligence would not help individuals to determine if what they were doing would be deemed negligent.

[Stephen Timms]

I have a real worry about this. Is the Minster saying that, for example, if a trade union successfully called for a higher pay rise than was initially offered, the company subsequently failed and there was a problem with the pension scheme, that the trade union would have to say that it had a reasonable excuse for pressing its pay demand? That seems a strange arrangement for us to be entering into.

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[Guy Opperman]

I am happy to write to the hon. Gentleman and set out the position in more detail. I come back to the simple point. If a trade union has a reasonable excuse for asking for a pay rise for its members, given their circumstances in an organisation, there is no reason why it should have any concern whatsoever. The starting point is whether someone has a reasonable excuse to progress a particular thing. If it is clearly part of normal business activities, I would not anticipate a problem.

[Stephen Timms]

I wonder whether the Minister would agree that it does seem very odd that a trade union making a legitimate pay claim might have to worry about whether it is committing a criminal offence because of some future damage to the pension scheme. I am very surprised that the Minister is putting in place measures that would have that effect.

[Guy Opperman]

This is in the context of the offence of avoidance of employer debt. We start with the very eloquent exposition that the hon. Member for Airdrie and Shotts gave on where employer debt arises and contributions are not made to pension schemes. One has to then look at the individuals and their approach. I do not believe that including a reasonable excuse defence will in any way hold back normal, traditional business activity. I can give that reassurance: traditional business activity would clearly include union work. This is clearly an issue that the regulator is very conscious of. On the one hand, we want a more robust approach. On the other hand, we want to ensure that normal business activity goes ahead. I believe that this is the appropriate way forward.