It is a pleasure to welcome you back to the Chair, Sir Nicholas.

I do not disagree a great deal with the general argument put forward by the Opposition spokespeople and the hon. Member for Ryedale, but I disagree with the new clause and the suggestion that we should legislate now, rather than having proper discussion and consultation before we start to legislate.

We are interested in conditional indexation and risk sharing. We welcome the work of the ACA and I extend my thanks to Ian Farr for attending the oral evidence session and raising what we all recognise as an issue with some potential. We need to identify precisely the extent and nature of that potential. However, because the issue is both important and complex, I am not prepared to rush through legislation for conditionally indexed schemes until we and stakeholders have had time to consider all the issues fully and to consult properly. We should bear in mind that Lord Turner said in his report that our pension system was possibly the most complex in the world. We need to be sure that we carefully consider any measure that would increase that complexity, which the new clause clearly would.

On a recent visit to the Netherlands, for example, one of my officials was told by a Dutch representative that the intricacy of the new conditional indexation system means that schemes are understood by fewer members than ever before—they have become more complex. One of our aims throughout the programme of reform has been to encourage people to take personal responsibility for saving for retirement. Adding complexity to occupational pension schemes would not sit well with that aim. If people are to take personal responsibility, it is important that they understand the scheme in which they are saving. Conditional indexation and risk sharing add to complexity, but they might be a necessary complexity. We need to look at the way in which we take the issue forward.

I do not disagree with the generality of the argument. I merely say that we should look at the issue with more care and consideration, rather than rushing through legislation now. First, we do not know enough about the impact of the proposals. At such a delicate time for defined benefit schemes, it would be irresponsible not to take a bit more time to assess and to be clear about the impact on existing provision and the potential impact on the members of such schemes.

As the hon. Member for Ryedale rightly pointed out, the move away from DB schemes has steadied recently. That has given us some time. I hope that the deregulatory proposals in the Bill will continue to produce that steadying so that employers know that there may be changes in the future that will help them. We are further looking at more deregulatory measures, but we are also putting forward in this Bill deregulatory measures that will be of assistance to them.

As David Yeandle, of the Engineering Employers Federation acknowledged in his oral evidence to us, there is limited interest among employers for risk sharing. There is not an enormous demand for conditional indexation. A number of other witnesses commented that more work should be done, and that any changes were probably not for this Bill. Jeannie Drake, who was also a member of the Pensions Commission, said:

“My immediate point on the conditional indexing is that it should be looked at rather than put in the current Bill.”——[Official Report, Pensions Public Bill Committee, 17 January 2008; c. 110, Q135.]

We do not want to add another layer of legislation if it might do little in practice to encourage continuing defined benefit provision. I take the point that in Holland, where there is a different culture in relation to pensions savings, they have not used conditional indexation very much. However, it is there as a fall-back position, if they should need it. I take that point, but that does not mean that our different culture might not result in employers taking a different approach. We just do not know what might happen, and I think that we need to find out a little more.

As the Government have always made clear, we are serious about encouraging good quality provision by removing unnecessary burdens. That was why we brought forward the deregulatory review. I realise that when the hon. Member for Eastbourne tabled the new clause and new schedule, he did so with the assistance of outside organisations, so I shall not comment too much on the drafting. There are some problems with it, but I take his point that it is not his job to get the drafting right. We are happy to do that, so I will not make that point. However, this clause would not be ideal if we were going to do implement such a proposal, and I am suggesting is that we should not do that just yet.

I am also concerned that the references citing the Netherlands as some sort of ideal example are not terribly helpful, especially given that the Financial Times last week highlighted the case of claims that were made in the Netherlands that a particular major international company, which is also very active here, had not been increasing its contributions to the appropriate level to target the payment of indexation genuinely. Although the board of that company denies any wrongdoing, the matter is now being taken forward in court. I make no comment about the accuracy of the claims and I use the example only to point out that this is not some sort of failsafe way to avoid controversy on employers’ contributions. On the contrary, it seems to be very controversial indeed.

Similarly, the proposals before us involve complex legislative changes to a number of different requirements. When I spoke to Ian Farr, he seemed to suggest that these changes could be brought about through limited amendments to our legislation. I am very sceptical about that. I actually think that we would be creating a new area of shared risk if we decided to go ahead in that way. That could well produce a whole series of legal complexities. This is an area of law that can be subject to quite a lot of litigation. Unless we get measures right and give them full and proper consideration, we are going to end up with rushed legislation that has not been properly consulted on.

I suspect that we will need not just a few tweaks to our legislation, but quite a careful setting out of a new area of risk sharing for pensions, which might be quite a complex area of law. In addition to the provisions tabled, there will need to be changes to a wide range of other measures relating to employer debt, scheme funding, surplus transfer values and disclosure. The impact of all the other changes that would be consequential on making this change would also need  to be given careful consideration. This is not the kind of radical legislative change that ought to be left to secondary legislation, so I do not accept that we can just put forward something broad and leave it all to secondary legislation. Such a measure would be quite complex and could be subject to litigation, so it would be better to include it in primary legislation.

I want to make it clear that I have listened to the ACA, the CBI, the NAPF, the EEF and others and that I value their important contributions, so I hope that the Committee will lend its support to a full consideration of the various approaches to risk sharing. I have asked my officials to undertake a detailed analysis of it.

I can also announce that we aim to issue a full consultation paper in June. We plan to allow 12 weeks for thoughtful and full responses to the issues. It is important that the issues are given full and proper consultation, and we will report on the consultation in the autumn. We can then take informed decisions that, I hope, will be built on a consensus after proper consultation. If we need to make primary legislative changes—we probably will—we will have to find a timetable to do so, perhaps in a fourth-Session Bill, subject, of course, to the will of the House.

I want to put on record my commitment to the process, because I see clearly the potential of risk sharing. However, we do not want to introduce something without a detailed consideration of the issues and a full understanding of the impact of the changes on scheme members. I therefore urge the Committee to lend its support to the consultation that I have outlined, in order to support perhaps the idea, but not this particular new clause.