HC Deb 09 July 1981 vol 8 cc693-700

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Berry.]

11.42 pm
Mr. John Wilkinson (Ruislip-Northwood)

I should like to raise the case of the British Rail pension of my constituent, Mr. J. I. C. Flint. Mr. Flint wrote to me about this problem almost exactly two years ago, on 18 July 1979. At that time he was on the point of receiving formal notice of termination of his employment from British Rail. He received that formal notice on 26 July 1979.

Mr. Flint joined the London Midland and Scottish Railway in 1942, as an engineering apprentice. When LMS was taken over and became part of British Railways—on nationalisation in 1948—he continued serving in British Rail. Mr. Flint joined the LMS railway for training as a professional mechanical engineer, and to do that he had to join as an engineering apprentice. He was 17 years of age when he joined, and as an apprentice was put on the wages staff. When he had completed all his training, he was transferred to the salaried staff. Thus, at the age of 23, he became eligible to join the LMS superannuation fund, which he did.

To achieve the normal maximum pension through the LMS fund, it was necessary to have been a member of the fund for 40 years. In Mr. Flint's case that meant that he could retire on full pension at any time after the age of 63. If, however, Mr. Flint had started as a junior clerk when he joined the LMS, he could have built up his 40 years of reckonable service by the age of 57.

At that time, in his earlier years of service on the railway, that matter seemed to him of no special importance as most people worked through to the normal retirement age of 65 and he had no special reason to think that he would be different. However, circumstances changed and British Rail had to shed staff and he found himself, at the age of 54, with every probability that he would be made redundant when he was 55. Under the terms of the redundancy agreement with British Rail he could have his pension made up to an equivalent age 60, but that was only 37 years in the fund and arose through no fault of his own.

Mr. Flint asked British Rail to allow him to buy added years in the fund. He knew others had been allowed to do that and had done so. However, in Mr. Flint's case British Rail refused. The grounds that British Rail gave were that it was a facility offered only to higher paid grades and that it did not allow back-dating to an age earlier than 30. I believe that to be unfair and discriminatory. I do not see why British Rail should give preference to higher paid staff.

The LMS pension fund was set up by an Act of Parliament—the London Midland and Scottish Railway (Superannuation Fund) Act 1924. That Act has, to my knowledge, been amended only once, in 1941, in a minor way. In schedule 12, which refers to added years of membership, there are stated the conditions that apply to my constituent's case: In the case of any salaried officer who has been or may hereafter be specially appointed on account of professional or other particular qualifications including a salaried officer transferred from the wages staff … the directors may at any time by resolution at the request of such member direct that such number of years I not exceeding ten) as the directors may by such resolution specify be added to the actual years of his contribution to the Fund or any superannuation fund of any company whose undertaking now forms part of the undertaking of the Company for the purpose of determining the superannuation and capital allowances". It cannot be said that LMS took over BR, as it was the other way round. LMS was subsumed in British Rail when the assets of the constituent companies of BR were vested upon nationalisation. But implicitly there is an obligation upon British Rail to meet in full the provisions of that schedule, albeit they have an element of discretion in them which is understood and the board is entitled to exercise that discretion.

My constituent quite properly and reasonably referred these matters to his superiors, and a long correspondence ensued. However, the correspondence had no satisfactory outcome, which led to the correspondence with myself. I took up the case with the chairman of British Rail, Sir Peter Parker. The first reply that I received was unsatisfactory. None the less, I shall summarise some of the points that he made.

First, it was stated: Mr. Flint retires on 28 December 1979, which is his 55th birthday and his pension will be based on the period of just over 32 years since 22 December 1947 that he has been a member of the LMSR section of the British Railways Superannuation Fund … Mr. Flint indicates"— and I have explained how he did that— that if he had started as a junior clerk rather than an apprentice he would have been admitted immediately to the Superannuation Fund. This is not strictly true as, with few exceptions, the former Railway Companies did not enter staff into the funds during the war and they were therefore in the same position as apprentices. There are, as a result, many personnel in Mr. Flint's position with unpensionable periods of employment at the beginning of their careers. Although this is unfortunate, with limited funds we are unable to do anything about it. I looked into the reply carefully and took my constituent's advice on it. In his advice to me Mr. Flint is clear that Sir Peter was giving me misleading information. First, it was right that Mr. Flint joined as an engineering apprentice in 1942, but he completed his apprenticeship and became qualified on 28 December 1945 and not in 1947, as stated in Sir Peter's letter.

With regard to wartime service, the issue is not one about staff who came in on a non-permanent basis during a period of emergency, even if they were made permanent at a later date and are still with BR. The point that I am taking up on behalf of my constituent is comparing clerks with engineers, and that issue was valid before, during and after the war.

I was suspicious about numbers, and wrote to Sir Peter asking him to state the facts and explain how many people would be eligible to buy extra years if those in Mr. Flint's position were given the right to do so. After a decent interval I received a reply, which again was interesting. Sir Peter said: Whilst the number of people in Mr. Flint's position is not known precisely, potentially it is not insignificant. If it is not known precisely, I am at a loss to understand how it can be potentially not insignificant. Also, how can the chairman be as clear as he was that: quite simply the current cash restraint on the Board prevents us, unfortunately, from contemplating any relaxation of our policy"? The matter of back-dating entry into the LMSR superannuation fund has no connection with whether Mr. Flint was to be made redundant or was merely retiring early. He was seeking to exercise what appeared to be his right, enshrined in legislation, to buy additional years regardless of his date of retirement simply because the rules of the fund allowed him to do so, and because entry into the fund was delayed by his training as a mechanical engineer, which he had to do as wages staff and not as a salaried employee. On the question of numbers, Mr. Flint suggested that probably fewer than 10 people were in the same potential situation.

These matters are so important that I wrote to the Under-Secretary of State because I was not satisfied. I could not take Mr. Flint's case to the Ombudsman, because one is not allowed to do that on the personnel management policy of a nationalised industry or on individual cases. My hon. and learned Friend replied: I am afraid I must first explain that Mr. Flint's difficulty with his pension is not a matter in which this Department can intervene. It is clear from the rules of the LMSR Superannuation Fund … that a decision on whether or not to grant added years is a matter for the British Rail Board alone. I am sure"— and I know that my hon. and learned Friend wrote this in good faith— that in considering their decision they will have taken account of all the relevant facts, to which I do not of course have access. We have seen that in a number of respects there was at least confusion over the relevant facts. By virtue of the fact that I have had to keep writing to the chairman, I doubt whether all the relevant aspects have been considered. My hon. and learned Friend continued: As you will appreciate it is not this Government's policy to intervene in the day-to-day management of the British Railways Board and the conditions and terms of service are very definitely such an area. That being so"— —my hon. and learned Friend concluded— Mr. Flint's pension, so far as this Department is concerned, must remain a matter between Mr. Flint and the Board. I received a further letter in the spring of last year, which showed that my constituent was still dissatisfied. He did not think it right that discretion should be exercised favourably for those on higher salary ranges while those more lowly paid did not have such a discretion. As for the financial constraints, the British Railways Board never satisfied me, at any rate, as to how many other people could potentially exercise this right. The Board was niggardly and unimaginative and I think that my constituent was hard done by. That is why I had no alternative, but to have recourse to this Adjournment debate.

11.59 pm
The Under-Secretary of State for Transport (Mr. Kenneth Clarke)

I congratulate my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) on his good fortune in having the Adjournment debate this evening and on his persistence in pressing the case of his constituent, Mr. Flint, about whose pension entitlement I know that my hon. Friend feels so strongly.

My hon. Friend has already said that I first came into this matter in February this year, when he wrote to me a lengthy letter setting out his constituent's case. He told me then that that letter followed correspondence that he described as a long and totally unsatisfactory battle with the British Railways board on behalf of his constituent. I wrote back explaining that in my opinion this was a matter entirely within the responsibility of the British Railways Board and that Ministers could not intervene.

My hon. Friend remains dissatisfied and he has taken the step, quite properly, of tabling the matter for debate this evening.

I have a high regard for my hon. Friend, with whom I have a friendly acquaintance, going back to well before we both entered this House in 1970. As he remained dissatisfied, I have made more inquiries into the case and examined it in more detail than I did when I replied to him before, when, as I said, I had no access to the facts.

I regret to say that, much as I should like to help my hon. Friend and his constituent, I am not able to come up with an answer that will meet the case that he puts forward. I shall go into the matter in some detail, as I am now fully apprised of all the facts. The basic position—I shall have to repeat what I said in my letter to my hon. Friend—is that this matter falls within the day-to-day responsibility of the British Railways Board and is not one in which the Government can have any responsibility.

Having looked at the facts with which the board has provided me, it seems to me that British Rail is entitled, within the rules of the pension fund, to adopt the policy that it has adopted and is perfectly entitled to exercise its discretion in the manner in which it has.

If my hon. Friend is pressing—as he is very strongly—for British Rail to exercise its discretion in a way that is more favourable to his constituent, that would involve British Rail and its pension fund possibly in considerable expenditure, not only towards Mr, Flint but towards many other people with similar cases that could be argued. Frankly, there is no way in which the funds can be found for such expenditure, either from the pension fund or from British Rail's own resources. That is the disappointing outline of the case, and I shall hope at least to satisfy my hon. Friend that that argument is sustainable in more detail.

I shall not deal at great length with the general relationship between the British Railways Board and the Secretary of State for Transport in regard to the day-to-day management of the railways and the way in which that relationship impinges on pension entitlements. The relationship between the Secretary of State for Transport and the British Railways Board, under all Governments since the railways were nationalised, has been essentially an arm's length one, and all Governments have taken the view that it is not for the Government to interfere in the day-to-day management of the railway.

It is, of course, possible for controversy to exist on the question where the general policy oversight of Government ends and day-to-day management begins, but I must repeat to my hon. Friend my view that any Government would have to say that the pension entitlements of individual employees of the railways very definitely fall within the realm of day-to-day management. It is the board that has the expertise in this field, through its large pensions department, staffed by professional people to whom it can turn for advice.

The pensions are admimistered after discussions that are held between British Rail and the management committees of the pensions funds. Those committees include representatives of the work force and the trade unions as well as representatives of the management and advisers on the investment policy of the fund.

The pension entitlement of individual employees, just as any other terms and conditions of the employment of individual employees of the British Railways Board, must fall within the realm of the day-to-day management of the railway and are not matters in which Ministers could intervene.

Given my hon. Friend's deep dissatisfaction with the position concerning his constituent's case, I have not allowed the matter to rest there. British Rail has not sheltered be hind anything and has provided me with the information upon which I can explain the policy which it has adopted.

With regard, first, to the board's pension arrangements in general, one can only say that they are exceedingly complex. Indeed, I have made that statement in the House on several occasions before, because, in a quite separate context, the British Rail pension arrangements have been raised in two pieces of legislation, even in the short time that we have been in office since 1979.

The reason why the pension arrangements are so complex is that the board has inherited and has continued to manage a large number of pension schemes from the old, independent railway companies, including the London, Midland and Scottish Railway, which was nationalised in 1948. Since that time, it has gone on to establish new schemes. It is significant and relevant to this case that in 1967 there was set up the British Railways (Wages Grades) Pension Fund, which gave many tens of thousands of wages grade employees the opportunity to participate in an a occupational pension scheme for the first time. Before that it was largely salaried staff who had pensions. At the last count, the board was managing about 60 different schemes, although many of them have long been closed to new entrants.

At the end of 1980 the board employed a total of just under 240,000 staff. Although I do not have the precise figures, the vast majority were members of one or other of the pension schemes. Benefits were in payment to more than 120,000 pensioners. I quote those figures to demonstrate the immense task that British Rail's pensions department and trustees and management committees of the funds have undertaken in sorting out everyone's pension entitlement. To discover the pension entitlement of any individual pensioner among those large numbers of people and large numbers of schemes, one has to examine the rules of the particular pension fund itself. That is the case over the whole field of occupational pensions, both in the public and private sectors. Entitlement depends on the rules of the scheme.

Mr. Flint's case rests on the rules of one fund—the London, Midland and Scottish Railway superannuation fund. My hon. Friend has gone into the case in some detail. Mr. Flint entered the employment of the London, Midland and Scottish Railway Company in 1942, at the age of 17, as an engineering apprentice, which was then a wages grade. At that time, no pension arrangements were made for wages grade employees in Mr. Flint's position, a fact of which he was presumably unaware. At the age of 17, he was probably not much concerned. Like any 17-year-old, as my hon. Friend remarked, he was probably expecting a full lifetime career ahead of him.

In 1947, Mr. Flint was appointed to a salaried post. That post was superannuable and on 22 December that year he was admitted to the appropriate pension fund for his new grade—the LMSR superannuation fund. He left the service of the British Railways Board in January 1980 under its redundancy and resettlement arrangements. His pension entitlements in the LMSR superannuation fund are thus based on 32 years' membership.

As my hon. Friend clearly explained, Mr. Flint now wishes to purchase additional years pension benefits to make up his entilement to 37 years—the number that he would have had if he had started his career in a post that was superannuable. He contends that British Rail should allow him to purchase such additional years under rule 12 of the LMSR superannuation fund rules. The relevant rule was accurately quoted by my hon. Friend. It makes clear that the board—the successors of the old LMS—has discretion to allow such additional years to be purchased.

It is clear from the rule that the managers of the pension fund and British Rail have a complete discretion whether or not to allow the puchase of additional years. They may grant added years, but it is for them to decide. It is, I fear, not possible to challenge whether that was a valid rule when it was first created, or to challenge on the question why the LMS did not allow its wages staff to enter a fund whereas the salaried staff did back in 1940s. One has to go back to criticise the management of the then LMS and the then prevailing pension arrangements. It is far too late to correct them now. It is only a discretion, and British Rail is within its rights not to allow the purchase if it so decides.

My hon. Friend asks why the board should consider refusing a request. Why does it not exercise its discretion? The answer, given by the board, is, simply but fairly, money. Rule 12 of the fund states the sums which the member of the scheme must pay in the event that he is allowed to purchase additional years. It says: The Company shall also contribute a like amount on his behalf. In other words, for every added year that the board grants, it incurs a cost. If Mr. Flint was the only person in his position, I am sure that the board would be more than willing to grant the additional years. He is not.

The board has been able to give me some estimate of the number of people in a similar position. It estimates that in 1974 there were about 30,000 people in various superannuation funds in precisely the same position. The board could not afford to grant added years to all those employees who started in non-pensionable wages grades and later transferred to the salaried staff. The funded pension scheme has never had sufficient funds to provide for those additional benefits, so it would have to fund them now. As I have said, there were about 30,000 people in that position in 1974.

The board has not automatically dismissed the idea of granting any years to anybody. It has considered what it can afford from its own resources and developed a policy that allows it to cut its coat to suit its financial cloth. Using the power of discretion that the rule allows it, the board works on the basis that it will allow a maximum of 10 added years or such lesser number as would take the member's notional date of entry to the fund back to his thirtieth birthday. For staff in the senior officer or higher grades the board takes the notional date of the entry back to the member's twentieth birthday. This is day-to-day management and I do not comment upon that policy. I am not in a position to do so. It seems that the board must have a policy to restrict fairly severely the financial consequences of granting additional years to anybody. It has to select priorities. It has chosen its priorities and Mr. Flint disagrees with its decision.

The board had to be as fair as it could be among various groups. If it were to make an exception of Mr. Flint and grant him added years, it would I am sure feel morally obliged to treat similarly its many other employees or ex-employees in the same position. That would in itself be expensive. Could it in all conscience do that without treating similarly the many thousands of wages grade employees to whom I have already referred who had no pensionable service before 1967 though their employment may have stretched back many years before that? Mr. Flint is luckier than some of them. He was able to transfer from a wages grade to salaried staff and he has at least 32 years' pensionable service.

There are 133,000 other employees who were in the wages grades before 1967 who the board estimates are excluded from between 20 and 25 years of service before that year. That is non-pensionable service by the prevailing rules of the fund.

I am sorry to disappoint my hon. Friend. I fear that it would be expensive to make an exception of Mr. Flint. Many others would be involved if the board exercised discretion in this instance. The board is entitled to exercise discretion. It has had to consider the funds that are available. The issue is outside the responsibility of the Government and I cannot offer to intervene.

Question put and agreed to.

Adjourned accordingly at 12 minutes past Twelve o' clock.