HC Deb 29 October 1985 vol 84 cc914-8

Lords amendment:No. 121, after clause 60, insert the following new Clause—Protection of employee benefits on transfer and divisions of bus undertakings— .—(1) In this section, as it applies in relation to the Passenger Transport Executive or (as the case may be) in relation to the Passenger Transport Authority for any passenger transport area—

and "the first transfer date" and the "the second transfer date" mean respectively the date on which the first transfer and the date on which the second transfer takes effect. (2) The Passenger Transport Executive for any passenger transport area shall have power to make, in such manner as they think fit, such provision as appears to them to be appropriate in connection with either the first or the second transfer for the maintenance to any extent of any concession, benefit or privilege of a description enjoyed immediately before the first transfer date by—
  1. (a) persons who then were or had been employed in such part of the Executive's undertaking, or of the undertaking of any wholly-owned subsidiary of the Executive, as was transferred on that date to the initial company; or
  2. (b) members of the families of any such persons.
 (3) Subject to subsection (4) below, the Passenger Transport Authority for any passenger transport area shall have power to make, in such manner as they think fit, such provision as appears to them to be appropriate in connection with the second transfer for the maintenance to any extent of any concession, benefit or privilege of a description enjoyed immediately before the second transfer date by—
  1. (a) persons who then were or had been employed in any undertaking or part of an undertaking transferred on that date to a company formed under section 60 of this Act; or
  2. (b) members of the families of any such persons.
 (4) Subsection (3) above shall apply to any concession, benefit or privilege of a description to which subsection (2) above applies. (5) Where provision for the maintenance of a concession, benefit or privilege of any description may be made under sub- section (2) or (3) above provision may instead be made, in any cases or classes of case to which that subsection applies, for the making of any payment or the provision of any other concession, benefit or privilege in compensation for he loss or (as the case may be) for any reduction or limitation of concessions, benefits or privileges of that description.

Read a Second time.

Mr. Stott

I beg to move amendment (a) to the proposed Lords amendment, in line 18, leave out from 'as' to 'enjoyed' in line 21 and insert— 'will guarantee, in connection with the first or second transfer, the maintenance of all concessions, benefits, privileges and pensions.'.

Mr. Deputy Speaker

With this we may discuss amendment (b) to the proposed Lords amendment, in line 30, leave out from 'as' to 'before' in line 33 and insert— `will guarantee, in connection with the second transfer, the maintenance of all concessions, benefits, privileges, and pensions enjoyed'.

Mr. Stott

It is important to examine exactly what their Lordships have done in amendment No. 121. The Government's response by the noble Lord Trefgarne to the amendments moved by Lord Banks appear to be reasonable, but on close examination a number of inadequacies are revealed. We can narrow them down to four. Let us first examine the financial liability. Any service by an employee within a superannuation scheme up to the date of transfer to the company is protected. It leaves aside the question of how the pension increases are to be funded in the absence of any central Government funding. There are two options. The first is for the company. If an employee is transferred to a company, the cost of funding pension increases from previous service could be borne by the company as a transferred liability from the executive. That would affect the company's ability to compete because the cost would be substantial.

The cost could be retained by the executive, but it would then become the first charge on the revenue grant from the authority as that would be the only source of income. That would adversely affect the ability to subsidise services and grant concessionary fares unless the Secretary of State allowed an additional amount above the EFL for that purpose.

Even though the gratuity schemes are covered by the amendments, no reference is made to former employees who retired before their employing authority brought transferred employees within the scope of superannuation. In some instances, these schemes have been unfunded and payments have been made by the executive out of general income. There is protection for any such scheme under local powers, but some have their origins in acquired undertakings.

It is expected that this liability will continue to be borne by the executive, but in some cases there might be no legal obligations to do so. With the pressure on the precept which will be the only source of funding for the executive, there can be no guarantee. The suggestion is that there should be some protection for retired employees in receipt of gratuities.

Earlier, the Secretary of State referred to the employees' option. The Government intend to alter the local government superannuation regulations to allow company employees to be admitted to the scheme. That is the deemed option. The option is given to the company or local authority, not to the employee. If that option is not exercised by the employer, the employee's position could be adversely affected since the new scheme might not be as good as the local government superannuation scheme. Alternatively, the employers might not be prepared to admit the employees to the scheme on grounds of ill health or old age. In such circumstances, it could be impossible for the employee to protect himself by private arrangements. It is therefore important that the employee should have the right to opt.

God forbid that bankruptcy should occur, but one never knows. Bankruptcy is not covered. That might be acceptable in respect of new employees, but it could be grossly unfair to existing employees since it could affect previous service as well as service with a particular company. Employees with local authority sectors in transport undertakings work for organisations which cannot go bankrupt. Thus, they enjoy complete security. They organise their personal affairs accordingly. Their position is altered by the Bill and employees might now be unable to protect themselves adequately in the absence of a Government guarantee in respect of their superannuation rights.

A serious problem is revealed by our discussions on pensions and superannuation, not just for the National Bus Company and its employees but for the thousands of employees of the PTEs and municipal undertakings throughout the country.

I do not wish to press our amendments to a Division, but I hope that the Secretary of State will examine what I have said and perhaps devise a way of incorporating in legislation the spirit of what I have said.

Mr. Ridley

The hon. Gentleman has made a constructive, detailed and complicated speech which I shall try to answer as fully as I can. I shall be happy to supplement my reply with a letter, because some of his remarks were highly technical.

Before replying I shall say something about the Lords amendment which the Government recommend the House to accept. It was introduced by the Government to give power to PTEs and PTAs to provide for the continuance of staff benefits for employees of their bus companies who, as the result of deregulation or restructuring, might otherwise lose staff benefits—principally free or reduced price travel or, as the hon. Member for Wigan (Mr. Stott) said, gratuities.

Alternatively, it provides for compensation to be paid if the benefits are not to be continued. The intention is simple and limited. This proposed power will be complementary to the scheme-making process, allowing the arrangements for fringe benefits to continue so far as is practicable and for the negotiation of adequate replacements in cash or in kind when they are not.

PTE employees are currently all members of the local government superannuation scheme. They will have a benefit accrued in that scheme representing their service up to the time of transfer to the public transport company. I stress, as I said when we debated the last amendment dealing with pensions, that whatever arrangements are made for the future, transferred staff will be entitled to keep their accrued benefit preserved in the local government superannuation scheme, where it is now.

The hon. Member for Wigan asked what would happen if a company went bust. If the employees had accrued benefits with the local government superannuation scheme, they would be preserved in the event of the company going bust, up to the time of transfer. It is impossible to imagine that a local government scheme would go bust. That is a remote possibility only. No statutory provision is needed for that; it already exists in the rules of the scheme. That preserved benefit will be increased in line with prices until the person concerned retires and receives it as a pension. Thereafter, the pension, too, will be increased in line with prices.

It is important that I should make it clear that staff can keep their accrued benefit in their existing pension schemes and that it is covered, in relation to increases in the cost of living, in the way that I described. I again take issue with Bill Morris, who seemed to imply that that was not so. Talking about the strike, he said: The strike is not a strike against the Government. It is an argument with the employers. The employers have it in their authority to guarantee our members continued membership of the local government superannuation scheme. We want to make that absolutely clear. I do not want him to mislead bus men into thinking that in some way they are being taken out of the scheme for accrued rights. That is not the case, as I have said.

The hon. Member for Wigan asked about the cost of this to the local authority. The employees of PTEs and bus undertakings stay the same. Costs can be allocated by local decision to a PTE or a company. We have said that we will look at the GRE if costs shift between different types of authority. In any event, the pensioners are secure. Thus, thought is being given to that as part of ensuring that the local authority financial regime will accommodate what is being done.

As for the future, we shall not impose any pension arrangements on the public transport company. It would be strange if we did, because the whole point of setting up these companies is to ensure that they can be run as independent, free-standing concerns able to respond to local travellers' needs and local commercial circumstances. It is exactly on that sort of local managerial flexibility that the prosperity of the bus industry and its employees must depend.

Thus, we must leave the company free to negotiate pension arrangements with staff, just as it would negotiate any other term or condition of service — just as any other company is free to negotiate with its employees. We must not give the new companies an unfair disadvantage compared with their competitors. That point was made in the earlier pensions debate.

8.45 pm

I am in no doubt that the companies will be thoroughly responsible employers and do their best for their staff. The hon. Gentleman referred to ill health and old age. It is unlikely that any employer would set up a scheme which excluded his own staff. Most modern pension schemes have no health test, so it is good management practice which these companies should, as many companies do, seek to follow.

They will have the option to continue to participate in the local government superannuation scheme as far as transferred employees are concerned. We recognise that, and we shall make it possible by making the necessary changes to the relevant regulations. Thus, the PTE, with the agreement of the company, can arrange for continued membership of the LGSS for transferred employees. In other words, the Government are willing to make options available for local decision by the company and its parent.

The hon. Gentleman then asked why we could not allow individuals the choice of deciding whether or not to stay in the local government superannuation scheme. Individual choice would be inconsistent with the principles of the LGSS, and with most other occupational pension schemes, too. Apart from anything else, the decision has cost implications for the employer, and therefore for the financial success of the company as a whole.

The decision must ultimately be for management, but, as responsible employers, they would want to consult carefully the staff representatives. The hon. Gentleman will realise that in no occupational scheme is it an individual decision; it is a decision taken by the employer after discussions with his staff and maybe the trade unions.

I hope that those remarks are of help to the hon. Member for Wigan. I believe that he will agree that his amendment would not be appropriate. Accordingly, I hope that he will not press it.

Mr. Stephen Ross

I may have the position wrong because I am not an expert on pensions. If, under the local authority, the municipal bus services as they now exist are privatised and the new owner of the privatised bus company wishes to avail himself of the opportunity of remaining within the local government pension scheme, I gather that he can do so. In other words, it is entirely a matter for the proprietor.

However, if it is part of the National Bus Company, that situation will not apply because that company's pension scheme is to be would up and the accrued benefit will go to those employees who at the time of the winding up, are still in the employment of the National Bus Company or one of its subsidiaries. From then on they will be at risk if their new employer does not run a suitable pension scheme. Is that right or wrong?

Mr. Ridley

The hon. Gentleman was not right in his second point. If a local government bus operation became a company, whether or not it had private capital in it, the company could opt to stay in the LGSS. The accrued: rights up to the time of the transfer must stay in the local government scheme and be available.

With the National Bus Company there is no continuing pension fund, unless the trustees decide that they would like to do that. If the trustees were to decide not to take insurance but to continue to run the fund, they would be able to do that and to safeguard the assets which had accrued at the time of transfer. They would have to run it for perhaps another 50 years because people with service would still be drawing pensions from the fund in 50 Years' time. That is from where the desire for greater security came.

The privatised subsidiaries or companies from the National Bus Company could decide either to stay with such an arrangement, if it were to come into existence, and leave their pension business with that fund, or to set up their own funds for future service.

Obviously, they cannot decide to set up their own funds for accrued rights, but they can for the future. There is an analogy between both instances: for future service the choice is with the future company; for past service the choice is with the LGSS for local government bus operations and with the National Bus Company pension funds for past service with the NBC. The earlier arguments concerned how best to guarantee and give security to the accrued rights of the National Bus Company fund.

Mr. Stephen Ross

that is a clear explanation, and it is valuable that it will be on record.

Amendment negatived

Lords amendment No. 121 agreed to.

Lords amendments Nos. 122 to 130 agreed to.

Forward to