Pensions Bill

moved Amendment No. 36: 36: Clause 39, page 20, line 7, at end insert ““, and ( ) must not exceed 10% of the turnover of the employer (determined in accordance with such provisions as may be specified in an order made by the Secretary of State).”” The noble Lord said: My Lords, in Committee I tabled amendments to compare the penalty regime in the Bill with the much lighter regime that the Government have seen fit to impose for national minimum wage avoidance, about which we heard a little in the second Starred Question today. The Minister’s objections to those amendments have led to some changes in my approach, and I hope that my attempts today will garner rather more sympathy from him than previously. For example, I appreciate his argument that the regulator already has the power to impose a penalty of £50,000 so it would be inconsistent to reduce arbitrarily that cap for these penalties. We have therefore withdrawn our objection in this area; indeed, we have been so receptive to this that I have not even imposed a cap on the escalating penalty, although I still have severe reservations about giving such an unlimited power to the regulator. Instead I have addressed our concerns about the possible size of penalties in another way, again by using a technique found in existing legislation. The Competition Act 1998 sets out the penalties that could be imposed on businesses as a function of their turnover. That has many advantages. First, larger businesses, which could pay a penalty without much difficulty and could avoid obligations so as to save a great deal of money, can be hit with an appropriately high penalty. Secondly, at the other end of the scale, small businesses are protected from a disproportionate penalty that in many cases could shut them down altogether—I think everyone would agree that that would not be in the best interests of their employees or indeed the economy as a whole. Despite my attempts to address the Minister’s concerns regarding our amendments, I am sure that he will have found new reasons to oppose these—although I can indulge in optimism at least until I sit down. It is possible that he will object to the limitations these amendments will impose on the freedom of the regulator to impose the enormous penalty of £50,000. However, given that apparently neither the regulator nor his predecessor, Opra, has ever in 13 years’ existence imposed a penalty higher than £10,000, I cannot feel that this limitation will hamper the regulator in his duties. I do not feel that the limitation this amendment imposes on the escalating penalties will be difficult to live with either. The Minister pointed out in Committee that limiting Clause 40 would in effect cap the period within which employers are deterred from continuing to breach their duties. He spoke as though these penalties were the last resort. Of course they are not. A very comprehensive deterrence is still available in the form of prosecution through the courts. If an employer is not deterred by the time he has seen 10 per cent of his annual turnover become liable for confiscation, I feel that the best way to encourage his future compliance would be to expose him to the potential penalty of two years’ imprisonment. The precedents that the Minister highlighted in aid of this uncapped escalating penalty do not in any way justify what Clause 40 does. The Companies House regime, from what I can see, imposes a maximum penalty of £15,000 for a public company filing more than six months late for two years running. Somehow I doubt that any penalty regime under Clause 40 would find itself demanding only £15,000 after two years of non-compliance. Similarly, the claimed precedent of PAYE requirements does not stand up to scrutiny. The Finance Act 1994 limits the escalating penalty to the terrifying sum of £60 a day. It also caps this escalating penalty at the total tax liability. The noble Lord, being an accountant, would know that only too well. I would be perfectly happy with an uncapped escalating penalty if it were limited to £60 a day rather than the £10,000 we are looking at instead. I hope that these amendments meet with better success than their predecessors did in Committee. I beg to move.