The regulator has come under significant criticism in the wake of the Carillion affair. Sir Steve Webb asks if the flak it is getting is fair?
The recent joint report by two parliamentary committees into the Carillion affair had a long list of targets, including the management of the firm, its auditors and its advisors.
The report also didn't hold back in its criticism of the role of The Pensions Regulator (TPR), with MPs suggesting they had ‘no confidence' in the leadership of that organisation. It was even briefed to the press ahead of the launch that the report might call for the abolition of the regulator or its merger with the Pension Protection Fund, though the final report did not contain this recommendation. But is such criticism fair, or is it a case of everyone being wise after the event?
The first observation I would make is that the questioning by MPs of the current chief executive of TPR, Lesley Titcomb, was, in my personal opinion, unnecessarily personal.
The Committee chairs seemed shocked that she hadn't memorised a particular statistic they were interested in, and there was a sense that media-savvy MPs knew perfectly well that the ruder they were, the more media coverage they would get.
Given that Lesley Titcomb was not actually in post when most of the initial interactions took place between TPR and Carillion trustees, it seems harsh to blame her personally for the failings of TPR at the time. Very professionally, she resisted the temptation to point the finger at her predecessors, but the MPs should have been aware that others were at the helm when things were going wrong.
Second, the regulator is only able to use the powers that parliament has given to it, and TPR was clear in its evidence that it is seeking additional powers to take a tougher line when the scheme is not getting the attention that it deserves from a sponsoring employer. It can be hard for an arms-length public body like TPR to be critical of its sponsoring department; in this case the DWP, but MPs themselves (and past and present ministers) should also be held to account if the powers of those bodies are insufficient.
It is also the case that TPR is trying to achieve a range of objectives that are, at the very least, in tension with each other. For example, as well as trying to protect member benefits and to protect the PPF, the regulator has also been tasked with making sure the ‘sustainable growth' of the sponsoring employer is not unduly undermined by its actions. These are all things we as a society want to see achieved, and that is why I believe it is correct they are all explicitly listed as objectives for the regulator, despite the tension between them. But it is not an easy job to get the balance right, especially at a time of economic insecurity when keeping businesses going was a key priority of HM Treasury.
The select committee report is also clear that the true state of the finances of Carillion was far from clear even to the institutional investors who owned shares in the company. There is a strong suggestion from the report that the accounts painted far too rosy a picture and senior executives were still talking up the company just days before it folded. On this basis, TPR is far from uniquely culpable in the extent to which it may not have fully grasped quite how precarious was Carillion's financial situation.
TPR has rightly acknowledged it could have done more and moved more quickly, and it is good that steps are being put in place to implement changed ways of working. But in general in my conversations with schemes I hear broadly positive feedback on how TPR is evolving as an organisation, and the tone and content of the recent select committee report should not detract from the progress that is being made.
Sir Steve Webb is director of policy at Royal London
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