Draft Pensions Regulator (Employer Resources Test) Regulations 2021
(3 years, 5 months ago)
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The Chair
Before we begin, I remind Members that Mr Speaker has stated that the wearing of masks is encouraged. Hansard colleagues will be most grateful if Members could send their speaking notes to hansardnotes@parliament.uk.
The Parliamentary Under-Secretary of State for Work and Pensions (Guy Opperman)
I beg to move,
That the Committee has considered the draft Pensions Regulator (Employer Resources Test) Regulations 2021.
It is a great pleasure to serve under your chairmanship, Ms McVey. The draft regulations were laid before this House on 28 June. It is the mission of this Government to make pensions safer, better and greener, and the Pension Schemes Act 2021 has definitely taken things forward. It strengthens the powers of the Pensions Regulator, and fulfils our manifesto commitment to take action against those who think that they can plunder the pension savings of hard-working employees.
The draft regulations provide essential details on the new employer resources test, which forms part of the Pension Regulator’s contribution notice regime. The regime enables the regulator to demand that money is paid into a pension scheme from those who have caused detriment to the scheme. A recent example is Dominic Chappell, who was ordered to pay £9.5 million by the regulator into the British Home Stores pension schemes. The new employer resources test that the draft regulations relate to will enable the regulator to overcome existing challenges of assessing the act, or failure to act, that has affected the financial strength of the sponsoring employer and therefore its ability to support the scheme, rather than damaging the scheme directly.
With the new provisions, we will also avoid the associated challenge of having to assess the future likelihood of members receiving their accrued benefits. In addition to looking at the health of the employer, the regulator also has a focus on the scheme, where it is required to assess the reduction of material compared with the scheme’s estimated section 75 liability. We remain committed to ensuring that there should be no place for those who put workers’ retirement savings at risk. The draft regulations will play a vital role in enhancing the regulator’s ability to protect pension scheme members, and I commend the regulations to the Committee.
Matt Rodda (Reading East) (Lab)
It is a pleasure to serve under your chairship, Ms McVey. It is important that the Government encourage people to save for their retirement. Indeed, Ministers have a duty to stand up for people who have worked hard and saved all their lives. It is vital that Government and regulators have the power to take action against the small number of employers who fail to pay their share into workers’ pensions. At times, those powers have been too weak or underused. In some cases, Ministers have failed to use them. We have all seen some appalling cases where thousands of pensioners and workers were left without adequate pensions. Such scandals must simply not be allowed to happen again.
Given that context, I welcome the new, stronger powers. However, I have several questions about how they will work and whether they will be used quickly and effectively. The draft regulations are designed to clearly define an employer’s resources in the context of the employer resources test so that the regulator can more effectively use its contribution notice powers. I note that between the introduction of contribution notice powers and the passage of the Pension Schemes Act through Parliament, those powers were used only once. That seems to be an error worth correcting, especially in the light of the difficulties faced by various high-profile pension schemes over the past few years, after the employers collapsed.
The Opposition support giving the Pensions Regulator the powers that it needs to safeguard pension schemes, which is why it is so important that we get today’s regulations right. Some experts have raised concerns about profit being used as a measure of resources, as the Department intends via the draft regulations, rather than the alternative measure of a firm’s net assets. The experts worry that the corporate sector will be further disincentivised by the new regulations to offer defined benefit pensions, which are already vanishingly rare for today’s younger workers.
The Department for Work and Pensions argued that profitability was less subjective than using net assets, covenant value or covenant strength. I seek assurances from the Minister that that decision was taken with the wider consequences on the future for defined benefit schemes in mind, and that he will address any potential decline in defined benefit schemes that comes as a consequence, either by revisiting the regulations or by taking other steps.
I will move on to some broader issues. First, these further powers could be seen as part of wider increased reliance on regulator to help run pensions policy. Over recent years we have seen the regulator take on a host of new responsibilities. How many more staff will be needed to take on the new role? We must ensure that the regulator has the necessary resources and be aware of its recent increased influence when taking future decisions.
Secondly, the Government have justified the Secretary of State determining the details of employer resources tests in regulations, rather than in primary legislation, as they may need to be changed over time. As we all know, the pensions industry works to very long timeframes, so does the Minister foresee the need to make alterations? How will he ensure that all parties have the notice they need to plan for them?
Finally, some stakeholders fear that the threat of an increasingly complicated and wide-ranging set of regulatory powers could lead to legitimate business activity being caught up and punished or to firms being overly cautious. The Government must commit to communicating clearly with the business community and stakeholders about the regulator’s role and powers.
In summary, Britain should be the best place to grow old, but to make that a reality we need to develop the Pension Regulator’s anti-avoidance powers. We must do so with care and with an awareness of the broader context. I hope the Minister will take my points on board, and I look forward to hearing his response.
Guy Opperman
I am grateful for the hon. Gentleman’s support for the principle of the regulations. I can assure him that the Pension Regulator and I have engaged extensively with stakeholders over the past three years during the build-up, passage and implementation of the Pensions Schemes Act 2021.
As for the regulator’s staffing and resources, the hon. Gentleman will be aware that its budget has effectively increased by 100% in the past five years. Although it is quite clearly adjusting to the new burdens in the 2021 Act, at the same time some issues have lessened. For example, auto-enrolment occupied a massive part of the regulator’s time when it was launched in 2012, but it is now not such a large issue.
Regulations are always kept under review, and the hon. Gentleman and I can happily discuss them on an ongoing basis. As for the profit before tax measure, he is correct that we have provided the regulator with a tool to make a simple snapshot assessment of the impact of an act, or the failure to act, by an employer. It was selected for measuring the resources of an employer because the term is widely understood by the industry and the regulator and, on that basis, it was shown to be an appropriate test.
As for ensuring that defined benefit schemes continue, the whole purpose of the DB White Paper and the 2021 Act is to ensure that this Government continue to support DB and members with a DB pension. Aside from DB, we are also developing the third way—not to be too Clintonian in the matter—with collective defined contribution pensions, which represent a genuine alternative for employers, employees and unions. I commend the regulation to the Committee.
Question put and agreed to.
Draft Environmental Authorisations (Scotland) Regulations 2018 (Consequential Modifications) Order 2021
(3 years, 5 months ago)
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The Chair
Before we begin, I remind Members that Mr Speaker has stated that the wearing of masks is encouraged. Hansard colleagues would be grateful if Members could send any speaking notes to hansardnotes@ parliament.uk.
The Parliamentary Under-Secretary of State for Scotland (David Duguid)
I beg to move,
That the Committee has considered the draft Environmental Authorisations (Scotland) Regulations 2018 (Consequential Modifications) Order 2021.
It is a pleasure to serve under your chairmanship today, Ms Fovargue. The draft order was laid before the House on 8 June 2021, and I am pleased to have the opportunity to discuss environmental regulation for Scotland, especially in relation to the serious matter of radioactive substance control. The order will provide environmental protection to Scotland by ensuring that legislation required to implement safety standards for protection against dangers that arise from exposure to radiation is extended to the offshore sector.
If the draft order is not taken forward, two different regulatory regimes will continue to operate in Scotland for radioactive substances in onshore and offshore areas, and the order will ensure that a high level of environmental regulation for radioactive substance activities is maintained in Scotland. As local environmental matters are largely devolved in Scotland, I am glad to be discussing today legislation which represents an excellent example of this Government’s commitment to strengthening the devolution settlement and delivering for the people, businesses and industries of Scotland.
This statutory instrument, known as a Scotland Act order, is made as a consequence of the Environmental Authorisations (Scotland) Regulations 2018. The Scotland Act 1998 and the subsequent Acts of 2012 and 2016 have devolved significant powers to Scotland. Scotland Act orders are a form of secondary legislation made under the 1998 Act and are used to update, implement or adjust Scotland’s devolution settlement. The order before us today is a section 104 order, which allows for necessary or expedient legislative provision in consequence of any provision made or under any Act of the Scottish Parliament or secondary legislation made by Scottish Ministers. In this instance, provision is required in consequence of the previously mentioned 2018 regulations.
The 2018 regulations introduced a single integrated framework for environmental authorisations in Scotland for activities around radioactive substances. The regulations repealed the previous framework regime in Scotland, which was provided for in the Radioactive Substances Act 1993. The purpose of the draft order before the Committee is to ensure that the 2018 regulations have the same extent as the 1993 Act previously did. To that end, the order makes consequential amendments to article 4 of the Civil Jurisdiction (Offshore Activities) Order 1987 and section 7 of the Continental Shelf Act 1964. In both cases, amendments are being made so that the legislation refers to the 2018 regulations, not the repealed 1993 Act. The changes will deem installations in the offshore area to be part of Scotland insofar as they apply to radioactive substance activities.
The 2018 regulations introduced a new regulatory framework for activities using radioactive substances and modernised radioactive substances legislation that had been in force for over 50 years. The coming into force of this order will therefore bring consistency and efficiency to the regulation of radioactive substances in Scotland, meaning that all the advantages brought in by the 2018 regulations will now also apply offshore. The amendments are also important because they allow the 2018 regulations to implement fully the new safety requirements of the Euratom basic safety standards directive. These measures are required to ensure safety standards against dangers that arise from exposure to radiation, and the elements outlined by the BSSD cannot be fully implemented until this order comes into force.
The territorial extent and application of the draft order is Scotland, as it amends only the 1987 order and the 1964 Act in their application to Scotland. That legislation has already been amended in similar way for England and Wales.
In summary, this draft order supports a strong environmental framework and relevant safety measures in Scotland for radioactive substance activities. By amending article 4 of the 1987 order and section 7 of the 1964 Act, we are ensuring that the 2018 regulations have the same extent as the 1993 Act did previously in Scotland in relation to the offshore area. The instrument has the support of both of Scotland’s Governments. The need for this order and its contents have been agreed by both the UK and Scottish Governments. It is positive to see us all working together deliver for the people, businesses and industries in Scotland, and I commend the draft order to the Committee.
Ian Murray (Edinburgh South) (Lab)
It is a great pleasure to be in a Committee with you in the Chair for the first time, Ms Fovargue. Labour does not oppose this rather complex draft order—I was trying to keep up with all the abbreviations, and I will not ask him to read them out again. However, I do have several important questions to pose to the Minister.
First, the draft order obviously defines the environmental authorisations framework for radioactive substances, but will the Minister confirm whether the 2014 White Paper on independence falls under “radioactive substances”?
Secondly, and more seriously, the Scottish Environment Protection Agency experienced a major cyber-attack last year, with its chief executive saying it will take many years for it to recover. Will the Minister assure me that both Governments are working together to ensure that SEPA can fully recover, because it will obviously take responsibility for these important regulations north of the border?
Finally—this is not directly related to the draft order, but it is important because the Minister did talk about dangers and mentioned Euratom—what work is ongoing following SEPA’s announcement that it would take no action temporarily if there is a non-compliance issue that related to EU exit or covid-19? Will he update the Committee on what action the Government are taking to ensure that that is very much temporary and that any occurrences of non-compliance with the regulations, rare though they may be, will be dealt with rather harshly?
David Duguid
I thank the hon. Gentleman for his comments and questions.
I am not in a position to comment on the SEPA cyber-attack, but I suspect that both the UK and Scottish Governments are working with SEPA and other bodies in all areas at potential risk of cyber-attack. However, I can find out more about that and write to the hon. Gentleman.
More generally on SEPA, although it specifically operates in Scotland, it engages routinely with the relevant regulatory bodies and industry groups right across the UK for obvious reasons. Radioactive substances do not just travel back and forth from onshore to offshore in Scotland, but in some cases from offshore in Scotland to offshore in England, for example.
The hon. Gentleman also asked about the dangers of the 2014 White Paper on an independent Scotland, although it is probably best that I do not comment on that too much. I do not think it would be classed as a radioactive substance under the regulations, but I might be tempted to agree with him on its potential danger.
I thank the hon. Gentleman for his valuable contribution this afternoon. Through our amendments to the 1987 order and the 1964 Act we are facilitating the continuation of a strong environmental framework and robust safety regulations for activities relating to radioactive substances in Scotland. We are ensuring that references to the aforementioned legislation are amended to refer to the 2018 regulations instead of the 1993 Act, ensuring that installations in the offshore area are deemed to be part of Scotland for the purposes of those regulations insofar as they apply to radioactive substance activities. Importantly, they represent a step towards implementing safety standards for protection against the dangers that arise from exposure to radiation and, as I said, the BSSD provisions cannot be fully implemented until this order comes into force.
The order demonstrates this Government’s commitment to strengthening the devolution settlement. It shows Scotland’s two Governments working together for its people, businesses and industries and will ensure that Scotland is operating a single regulatory regime both onshore and offshore in line with the approach in other parts of the UK. I therefore the commend the draft order to the Committee.
Question put and agreed to.