Pensions Bill

moved Amendment No. 36: 36: Schedule 9, page 131, line 26, at end insert— ““3A In section 90(3) (revision of codes of practice), at the end insert ““except that the Regulator may not revise the whole or any part of a code issued under subsection (2)(aa) before the expiry of 2 years from the first issuance of a code under that paragraph.”””” The noble Baroness said: My Lords, Amendment No. 36 would insert a new paragraph into Schedule 9, which, in turn, amends Section 90 of the Pensions Act 2004 on statutory codes of practice. Paragraph 3 of Schedule 9 introduces the welcome requirement for a code of practice for the circumstances in which the regulator expects to issue a material detriment contribution notice under the provisions introduced by the Bill. The draft code of practice has already been issued by the regulator and that, too, has been useful. I do not know when the code will be issued in its final form. Presumably it will be early next year, as it is retrospective to April this year. Perhaps the Minister can update the House on the likely timing. My amendment says that, once the code has been issued, it should not be revised for two years. The aim is to provide some stability for those who need to navigate commercial transactions so that they do not run on to the rocks of the contribution notice regime. I am sure that the Minister will be aware that a contribution notice is regarded by companies and their advisers as something to be avoided if at all possible. The commercial world hates uncertainty and wants a reasonable understanding of what the rules are so that business can be planned and executed in a reasonably secure way. There is quite enough change and uncertainty in markets and in commercial life in general without their having to cope with a constantly shifting regulatory environment. I think that that is a commonplace in terms of what constitutes better regulation, to which the Government are, of course, signed up. I am aware that the existence of a code of practice does not the prohibit the regulator from issuing a contribution notice under new Section 38A but, as the Minister has reminded us on several occasions, the regulator must act reasonably and should therefore depart from the code only in unusual circumstances. That is why certainty as to the code is important in its own right. I was prompted to table the amendment by the Government’s recent consultation on Section 75 and employer debt, which was announced by a DWP Minister at a CBI breakfast a week or so ago. Its contents have been made available to a number of organisations, but it is has not been made available publicly, even to the Official Opposition. However, we are resourceful people in the Opposition and we have got a copy. The consultation document makes the point that any change to the employer debt regime would be targeted at those who provide a strong covenant. It goes on to say that the regulator would use its anti-avoidance powers, including the new material detriment powers, to protect members’ benefits and the PPF. So far, so good. The following sentence in paragraph 14 of the consultation document caught the eye of one of my contacts: "““Indeed the Government considers that such regulatory intervention may be appropriate when a reorganisation would have a detrimental impact on the pension scheme (for example such as a weakening of the employer covenant or the employer’s obligations to the scheme)””." This reference to simple ““weakening”” of the covenant seems to be at odds with the quite clear sets of circumstances set out in the code of practice. The nearest equivalent in the code of practice is about the, "““severing of employer support for the scheme so that employer support is removed, substantially reduced or becomes nominal””." It has been generally understood that ““severing”” is much more dramatic than ““weakening”” and certainly more than we would expect to find in most routine company reorganisations, which is where the employer debt provisions have caused a problem and led to the consultation under Section 75. Will the Minister confirm that the consultation document does not represent a shift in thinking on the use of the material detriment provisions? Alternatively, are we expecting the code to say that company reorganisations more generally that involve a weakening will be included within the code? Either way, certainty is required. When the Minister responds, perhaps he will comment on why the Section 75 consultation is such a big secret. I hope that he will recognise the business community’s legitimate concerns for certainty and stability that lie behind the amendment. I beg to move.