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

Baroness Sherlock Excerpts

Wednesday 21st October 2020 Lords Chamber

[Baroness Sherlock (Lab) [V]]

My Lords, I thank the Minister for her explanation of these regulations, and all noble Lords for their interesting contributions. I was also pleased to hear the Minister clarify the situation regarding the Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) Regulations 2020—I will call them PPF No. 1, if that is okay—which we debated on 14 September. I understood from the Minister that the problem was that DCMS made regulations in August that, in effect, meant that the PPF No. 1 regulations no longer applied to charitable incorporated organisations.

I have just gone back to the proceedings of 9 October, when we debated the Charitable Incorporated Organisations (Insolvency and Dissolution) (Amendment) (No. 2) Regulations 2020. When she introduced them, the noble Baroness, Lady Barran, explained that her department had decided that it would simplify the moratorium regime, so it disapplied provisions that it felt were unnecessary, including Section A51 of the Insolvency Act 1986, which gives the power to make provision for regulations relating to pension schemes. Unfortunately, those were the very powers that the DWP had used to extend the PPF moratorium provisions to CIOs.

The noble Baroness, Lady Barran, went on to say that

“DCMS will bring forward legislation, when parliamentary time allows, to enable these provisions to apply to CIOs. In the meantime, we do not anticipate there being any practical impacts on stakeholders whatever.”—[Official Report, 9/10/20; col. 847.]

Were those the regulations that had the effect of excluding CIOs from some of the provisions of the PPF No. 1 regulations? If so, why did DCMS press on and let Parliament debate them 12 days ago, rather than repealing and replacing them? After all, the noble Baroness, Lady Barran, said that it already had to reissue them once, owing to a mistake in the version that was laid, so it presumably could have done so again. I realise the Minister might need to ask DCMS, but I would be grateful if she did. Could she then write to me? Also, where are we now? Is it the case that, right now, the provisions of PPF No. 1 do not apply to CIOs? How long will that last? What are the consequences of that gap?

However, we are debating the Pension Protection Fund (Moratorium and Arrangements and Reconstructions for Companies in Financial Difficulty) (Amendment and Revocation) Regulations 2020—or PPF No. 2 for my purposes. I understand that the PPF No. 2 regs are needed not because of that earlier difficulty, but because the Treasury has extended the remit of the Corporate Insolvency and Governance Act to apply to most co-operative and community benefit societies, and to credit unions, so the regulations ensure that the PPF covers those bodies that are now within the scope of the moratorium provisions of the Insolvency Act. This is complicated further by the fact that the original version of the PPF No. 2 regulations contained an error due to an omission in the Treasury regulations, so this is now in fact PPF No. 2, version two.

I am grateful that I got to the bottom of these complications. I will not make an issue of it, but I wanted to get it on the record because it feels important to have an audit trail of how we ended up here. However, these episodes reveal, first, three steps of drafting problems, and secondly, a failure in interdepartmental communication. What steps can be taken to ensure that DWP, or indeed other departments, find out in good time if another department is laying legislation that impacts on their own powers or provisions? Have the Government reflected on whether they are investing adequately in ensuring that departments have the resources needed for the process of drafting and cross-checking secondary legislation, or indeed primary legislation?

However, we are happy to support these regulations, since it is of course important that the PPF can step in and use its powers in the interests of the pension schemes of co-ops, community benefit societies and credit unions. But I will ask a couple of questions, including on an issue that I think other noble Lords have touched on. The moratorium provisions and, therefore, the scope of the PPF, will apply to co-op and community benefit societies, with some exceptions. Could the Minister clarify what the exceptions are? How confident is she that all the bodies to which the moratorium provisions of the Insolvency Act apply are now definitely within the PPF’s scope? If any are not, or are found later not to be, what is their legal status?

Turning to broader questions, I will be very interested to hear the answer to the question raised by my noble friend Lady Drake. This is potentially a very serious issue. We need clarity as to how the regulator could act and which legislation takes precedence in the circumstances she described. It is essential that pension funds and pensioners can always benefit from the protection that Parliament thought it had afforded them.

The PPF’s position was raised by several noble Lords, including the noble Baronesses, Lady Ritchie and Lady McIntosh. Given the state of the economy and the risks to so many employers, what assessment has the department made of the strength and stability of the PPF and its ability to deal with what is coming down the track? What mechanisms are there for keeping that under careful and constant review? How will Parliament be kept informed? Noble Lords have asked about this whenever we have had the opportunity. Can the Minister think about how best she can give Parliament the ongoing assurance needed that the PPF will be able to do its job? It is incredibly important to pension funds and pensioners across the land that this agency works, and Parliament needs some assurance on that. I look forward to her reply.