Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) Regulations 2020

Baroness Sherlock Excerpts

Monday 14th September 2020 Grand Committee

[Baroness Sherlock (Lab) [V]]

My Lords, I am grateful to the Minister for her explanation of these regulations and for her time in advance of today. I am grateful, too, to all noble Lords who have spoken, and I will be interested to hear answers to the many excellent questions from the noble Baroness, Lady Ritchie, the noble Lord, Lord Bourne, and many other noble Lords.

These are tough times. The UK is in recession, the economy shrank by a fifth between April and June, employers are facing unprecedented challenges, unemployment is sky high and there are widespread predictions of large-scale job losses coming down the track as the furlough scheme is wound down. Given those conditions, Labour supported measures in the Corporate Insolvency and Governance Act to help struggling businesses stay open, but it is crucial that when companies face financial difficulty, interventions are made in a way which protects the pension schemes. I pay tribute to my noble friend Lady Drake and all who worked with her in pursuing amendments to the Act when it was a Bill to protect pension schemes and strengthen the position of the PPF. We are seeing the fruit of that work start to emerge here today.

I can confirm that we welcome the regulations. If a company ends up in a moratorium situation or facing a restructuring, it must be right for the PPF to be able to exercise the creditor rights of a trustee of a DB scheme. That is essential to protect the interests of the members of a scheme, but also the interests of all those who pay in to the PPF or may one day need to call on it. The most appropriate benchmark for assessing those measures is surely the powers that the PPF has now in relation to insolvency events.

My noble friend Lady Drake has previously given excellent examples such as the case of Arcadia of how the PPF can act to protect members and in doing so protect the lifeboat itself. Ministers were pressed to mirror what happens in an insolvency in the moratorium, with the triggering of an assessment and all that flows from that, but they chose not to do it, so the concerns articulated today by my noble friend Lady Drake, the noble Baroness, Lady Wheatcroft, the noble Lord, Lord Flight, and others deserve good answers.

I realise that the corporate governance Bill was handled by BEIS and the noble Baroness, Lady Stedman-Scott, is a DWP Minister, but leaving aside the fact that she speaks for the Government, her department has responsibility for the PPF, so I should like to know how the DWP has looked at the implications of these regulations and the PPF in the round. How will Ministers give effect to the concession won by my noble friend Lady Drake and others in relation to monitoring the new processes and taking powers to make regulations to change the definitions of moratorium debt, and what role does her department have in the judgments made on that?

Secondly, what assessment has the DWP made of the potential risk to the PPF of the difference between its position in a moratorium versus an insolvency when it comes to voting rights and creditor standing? Thirdly, what assessment has the DWP made of the potential risk to the PPF, highlighted by my noble friend Lady Drake, of the new moratorium arrangements being gamed by lenders wanting super-priority status at the expense of the pension scheme? Crucially, given the state of the economy and the risks to so many employers, what assessment has the DWP made of the strength and stability of the PPF and its ability to deal with what is coming down the track?

This is a period of unprecedented challenge. It is right for the Government to do what they can to keep companies afloat and jobs alive, but the DWP also has a responsibility to ensure that the framework put in place to protect workers’ pensions does not let them down. If that is not done properly, it could jeopardise not only individual retirement plans but put the PPF lifeboat at risk, add extra burdens to levy payers and potentially risk the whole DWP strategy to drive up long-term savings.

We support the regulations, but the way they are done matters and the stakes are high. I look forward to the Minister’s reply.