Pensions Bill

moved Amendment No. 92GA: 92GA: Clause 35, page 17, line 7, leave out subsection (4) and insert— ““(4) The amount of any financial penalty imposed under subsection (1)(a), (b) or (d) must not exceed £5,000. (4A) The amount of any financial penalty imposed under subsection (1)(c) is, subject as follows, to be 50% of the total of the amounts referred to in subsection (4B). (4B) The amounts are the amounts specified under section 33 (unpaid contributions notice). (4C) If a financial penalty as calculated under subsection (4A) would be less than £100, the financial penalty specified in the notice shall be that amount. (4D) If a financial penalty as calculated under subsection (4A) would be more than £5,000, the financial penalty specified in the notice shall be that amount. (4E) The Secretary of State may by regulations— (a) amend subsection (4A) so as to substitute a different percentage for the percentage at any time specified there; (b) amend subsection (4C) or (4D) so as to substitute a different amount at any time specified there. (4F) If the employer on whom the notice is served, within the period of 14 days beginning with the day on which the notice was served— (a) pays any amount required under section 34 above, and (b) pays at least half the financial penalty, he shall be regarded as having paid the financial penalty.”” The noble Lord said: I shall speak also to Amendments Nos. 92JA, 93, the Question whether Clause 36 should stand part, 106ZA and 106ZB. The operative part of all this is Amendment No. 92GA. It is unusual for a Member of the Opposition to produce quite as detailed a piece of drafting as I have done, but my amendments are based on a provision in the Employment Bill, which recently passed through this House and is proceeding through another place. I make it very clear for the avoidance of doubt that I will not press the amendments; they are intended to probe DWP Ministers’ approach to compliance and contrast it with that of their colleagues in a different department. In the Employment Bill, the Government seek to amend legislation dealing with employers’ compliance with the national minimum wage, as the Department for Business, Enterprise and Regulatory Reform apparently feels that the current penalty is unclear and not a sufficient deterrent. On these Benches, we had no strong objections to the Government’s plans. There is evidence of wilful non-compliance; the measures were consulted on fully; and the result is a clearly defined penalty with an incentive for employers to make good their arrears quickly. Unfortunately, none of the good practice evident in the Employment Bill seems to have made an appearance in the Pensions Bill. Clauses 35, 36 and 51 represent a marked departure from the principles on which DBERR based its compliance legislation. My amendment therefore brings forward those aspects of the Employment Bill that the Minister would do well to consider in this case. DBERR agreed with many of the respondents to its consultation, including the CBI, chambers of commerce and the Forum of Private Business, that using a multiple of arrears was a sensible, proportionate way to enforce compliance, hence my new subsection (4A). This Bill, under DWP’s aegis, has failed to ensure proportionality and does not provide clarity. Its provisions instead would allow penalties to be arbitrary, inconsistent and disproportionate to the non-compliance. I have no doubt that the Minister will bring forward his favourite word, ““flexibility””, when defending the non-specific nature of these penalties. Perhaps he will suggest that in cases where it was clearly a mistake on the part of the employer rather than wilful non-compliance there should be no penalty at all. If he were to make that argument, I would be in complete agreement, but my amendment would in no way force the regulator to impose a penalty in the event of any non-compliance. The employer would already have ignored a contribution notice under Clause 33 before Clause 35 comes into play, and even if this had happened, subsection (1) does not force the regulator to impose a financial penalty if it does not feel that it is warranted. I sincerely hope that it is the regulator’s intention to be very light handed when imposing financial penalties. The employer duties set out in the Bill will be many and varied and, as we have heard, are not even close to being fully defined. The number of unintentional breaches may be very high as employers, particularly in small businesses, struggle to absorb the burden that the legislation will place on them. To impose penalties on them for breaches that they have every intention of rectifying would be both unfair and counterproductive to the long lasting success of auto-enrolment. For this reason, DBERR, and my amendment, would ensure an incentive for prompt repayment: a 50 per cent discount for making good any arrears or paying any penalty promptly. Perhaps the Minister will criticise my amendment and, therefore—I presume—his colleagues in DBERR, for not providing a suitably large deterrent. The upper limit specified in my amendments is £5,000 rather than the astronomical £50,000 in the Bill. DBERR’s consultation specifically addressed this issue. It pointed out that only 3 per cent of cases investigated in 2005-06 would have required a penalty higher than £5,000, and it felt that they were so serious as to be better dealt with by criminal prosecution. Moreover, the government documentation also highlights concern that a disproportionate civil penalty would breach Article 6 of the ECHR. Why is this concern not felt by Ministers in the DWP? For those reasons, DBERR also considered carefully, and then rejected, any thought of an escalating penalty. The best way to deter the worst offenders was again stated to be through criminal prosecution. Clause 36 of this Bill instead sets out an extraordinarily open-ended escalating penalty. My two amendments to Clause 36 highlight two aspects of this flexibility. First, the clause does not limit the regulator to using the escalating penalty only in proven cases of non-compliance. My amendment would make certain that a fixed penalty had been ignored before allowing its use. Secondly, there is no upper limit whatever in this clause. For the daily limit of £10,000, we could be seeing enormous sums, easily capable of bankrupting a business, becoming due in a very short period. My amendment therefore follows my line of thinking about Clause 35—that it would be sensible to involve the courts in extreme cases of non-compliance. As I said at the beginning, these are essentially probing amendments designed to give the Minister an opportunity to explain his approach. We have not heard so much about joined-up government in recent months as we used to, but I assume that the Government would still wish to be thought of as reasonably consistent across their departments. I look forward to hearing his response. I beg to move.