§ 4.7 pm
§ The Parliamentary Under-Secretary of State for the Environment (Mr. Colin Moynihan)
I beg to move amendment No. 89, in page 162, line 20, after 'who', insert—'(a)'.
§ Mr. Moynihan
The purpose of the first two amendments, Nos. 89 and 90, is to secure the future of pension payments of former officers or employees of the Water Research Centre, the Water Authorities Association, the Water Industry Training Association, British Water International Limited, the International Association on Water Pollution Research and Control and the International Water Supply Association, known collectively as "the admitted bodies".
As has already been announced, the water authorities superannuation fund will be administered from the transfer date by the National Rivers Authority, and this arrangement includes the second fund for the admitted bodies. The amendments proposed to clause 163 allow the Secretary of State to make orders designating the admitted bodies so that the powers and duties of the Secretary of State under that clause are extended to apply to their fund.
The purpose of the other three amendments in the group is to allow discretionary payments made by water authorities by analogy with pension payments and the unfunded pensions administered by the Severn-Trent water authority to be continued after privatisation of the water industry. These unfunded payments can be divided into three categories.
In addition to their obligations under the local government superannuation scheme, water authorities currently pay certain non-funded discretionary awards including gratuity awards, injury allowance, retirement compensation, added years pension enhancement, and a number of other benefits and associated pension increase payments to their own former employees and to employees of antecedent bodies.
They are also responsible for pensions and pension increase benefits to former National Water Council employees and board members and former water authority chairmen and members. These payments, except for a small proportion of non-funded discretionary awards, are administered by the Severn-Trent water authority and the cost recharged to each authority according to the incidence of payment or according to a statutory formula.
The second category is that of pension payments made directly by water authorities. Some pension payments are 31 made directly by water authorities, unlike those in the previous category which are administered by the Severn-Trent water authority, and the costs shared between authorities.
Then there is the important group of payments made by local authorities. Local authorities currently pay pensions increases, allowances and gratuities in respect of former employees whose employment functions were transferred to the water industry in 1974, and then recharge the cost to the water authorities.
Our objective in these amendments is to ensure that no pensioner is disadvantaged by the act of transfer of liability from a water authority to its successor company and that the responsibility for payment is clear both to the recipient and to the body which will be responsible for payment.
The amendments therefore provide broad powers to make regulations to encompass all people or classes of people in respect of whom such pensions and discretionary payments are made, and to impose a duty on the National Rivers Authority and on successor companies or nominated holding companies to continue to make payments awarded by water authorities.
Regulations which impose requirements on companies may be met only while the companies are wholly owned by the Crown. The administration for the first category of payments—that is, discretionary awards largely administered by Severn-Trent and unfunded pensions administered by Severn-Trent—will be transferred to the National Rivers Authority.
The amendments provide that the Secretary of State will be responsible for providing the funds, out of money supplied by Parliament, for payments made by the NRA, and the administration costs. In the other two categories —where local authorities make payments in respect of former employees and then recharge the cost to water authorities, and where water authorities are making pension payments directly to pensioners—the responsibilities for payment are clear to those concerned.
I see no reason to disturb those arrangements. On transfer date, those responsibilities will pass to the successor companies under schemes made under schedule 2 to the Bill. These amendments are designed to ensure that no pensioner is inadvertently disadvantaged by the transfer of liabilities.
§ Mr. Peter L. Pike (Burnley)
The Minister is making the position clear for existing pensioners. Does he agree that it is equally important for the Bill to include provisions to ensure that existing and future employees enjoy the same protection? That will not be the position.
§ Mr. Moynihan
I disagree with the hon. Gentleman's conclusion. He wants the Government to introduce proposals which will secure pension arrangements for those who retire in the future as good as the current pension arrangements under the local government superannuation scheme. We have repeatedly given assurances that a mirror image scheme, which we discussed at length in Committee, will not be approved by the Secretary of State unless it gives proper effect to the Government's commitment to provide employees with the same benefits.
32 I think that the hon. Member for Burnley (Mr. Pike) would like these arrangements to have statutory backing for the future. We have made it clear that we do not believe that, in the context of privatisation, such statutory backing would be appropriate. It is via the trustees that we intend to pursue pension arrangements for the future. Given the commitment that I have given on behalf of the Secretary of State, I can absolutely assure the hon. Gentleman that the trustees will, almost by definition, have a duty to pensioners. They could be sued for breach of trust if they did not, through the mirror image schemes, provide for pensioners in the future the same position as is accorded under the current arrangements.
§ Mr. Tim Boswell (Daventry)
I appreciate that the debate on this point is going on a little bit, but may I ask my hon. Friend whether it is not the case that, from now, if any employee is at any time dissatisfied with his pension arrangements, it will be open to him, as a result of recent legislation, to take out a personal pension as an alternative? That is an important safeguard, and a further measure of what might be called comparative competition in this respect.
§ Mr. Moynihan
What my hon. Friend has said about comparative competition is an imaginative and accurate reflection. The possibility of opting out and joining a water plc scheme is very definitely there. What we are looking at today is the alternative for the employees who do not wish to opt out.
In Committee and on the Floor of the House, hon. Members have argued very strongly that mirror image schemes must provide employees with the same benefits. When the money resolution was being debated on the Floor of the House, we said that a substantial amount of money—a figure of up to £800 million was mentioned—may be necessary in order to meet the commitment that I have given today.
Amendment No. 91, to clause 183, is consequential. The clause provides the transfer date as the commencement date for schedule 23 generally. The amendment makes an exception of subordinate legislation, permitting it to be made in advance of the transfer date.
I very much hope that the clarification of what are detailed and technical amendments, and my responses to hon. Members who have intervened, have assisted the House. What we are debating are effectively peripheral pension arrangements, and I hope that the House will welcome the additional assurances that have been given.
§ Ms. Joan Walley (Stoke-on-Trent, North)
Opposition Members believe that no pensioner should be disadvantaged as a result of this legislation. Taking at face value the particular changes that the Minister has outlined, we should not wish to quibble at all. I agree with my hon. Friend the Member for Burnley (Mr. Pike) that the certainties for pensioners should be applied equally to those people who are currently employed by water authorities.
What I want to know, specifically, is whether those people who have been transferred from the water authorities to the NRA will get exactly the same kind of treatment as other employees, given that, in respect of the 33 sale of shares in particular, they did not get the same treatment. I should welcome some clarification from the Minister on particular points concerning those people.
§ Mr. Pike
The amendments in this group are obviously very important. They affect the rights of existing pensioners, some of whom used to work for local authorities when those bodies were responsible for water services prior to reorganisation in 1974. Of course, there are pensioners who have retired since then, and there are people who have earned a lot of pension. We understand exactly what the Minister's amendments seek to do. They go some way towards clarifying the Bill as it was debated in Committee.
The Minister was absolutely right about the key part of my intervention a few moments ago. The crucial difference, of course, is the statutory protection for those people who currently work in the industry and for those who may come into it in the future. Certainly, the amendments do not go as far in that direction as we should like. It may be that the fall of the guillotine at 5.30 pm will make it impossible for us to reach an amendment in the next group. I hope that the Minister recognises that both Opposition Members and some Conservative Members are genuinely concerned about this matter, as are the employees in the industry.
Ministers have referred to the mirror image pension scheme. They are confident that the trustees will be able to protect employees, but many of us doubt whether that will happen. If the Ministers were right there would be no argument, but people who have worked for many years in the industry fear that, when the Bill becomes law, the agreements will be changed, that the documents that provide for future pension provision will not be so good as they are now and that there will be no mirror image pension scheme.
If the Secretary of State and the other Ministers really wanted a mirror image pension scheme to put in place, they could easily amend the Bill and introduce a statutory requirement that there should be such a scheme. The Government ought to be prepared to move in that direction because it would meet the fears of those who work in the industry. The Government need to go further than they have already gone if they are to gain the confidence of the workers in the industry.
The private water companies may prove to be the biggest cause for concern. There is no guarantee that employees will be able to become trustees of the pension schemes, although the trustees ultimately decide these matters. After privatisation, pensions and conditions of service will have to be negotiated between employers and trade unions on behalf of the employees. Ministers have given us many assurances during our debates. I was assured in Committee that the Government would not approve any scheme that did not meet our fears. Unless the Bill is amended to meet those fears, our predictions will be fulfilled. I hope, therefore, that the Government will be prepared to meet the genuine fears of the employees in the industry.
§ Mr. Richard Livsey (Brecon and Radnor)
I welcome the amendments, particularly on behalf of former employees of the water authorities. In my constituency there are former employees of Severn-Trent and Welsh Water. I understand that the pension arrangements of 34 employees of Severn-Trent are different from those of other authorities. I hope that the Minister will take them into account.
§ Mr. Moynihan
I am happy to give the confirmation that the hon. Member for Brecon and Radnor (Mr. Livsey) has sought. Those differences will be taken fully into account and will be mirrored—hence the phrase "mirror image". I was passed a number of pieces of paper during the speech of the hon. Member for Burnley (Mr. Pike). I am slightly concerned that the collective age of the admirable experts who have assisted us throughout the passage of the Bill may be closer to retirement age than the collective age of the Opposition Front Bench spokesman and myself. With a bit of luck, our collective ages are still short of retirement age. That, however, has not denied us the opportunity to study this subject in great depth and to be able to respond without notes to the important points that have been raised.
It is appropriate to place on record a little more detail about the mirror image scheme. I understand the concerns of the hon. Member for Burnley. That is why we have sought new provisions to give the hon. Gentleman and others who are concerned about the scheme not being enshrined in legislation further reassurance.
It has been suggested that the Government's commitment to the preservation of existing pension rights and the adoption of future changes in the local government superannuation scheme in the mirror image scheme would be best ensured, as the hon. Member for Burnley said, by statutory provision. I mentioned earlier that that view does not accord with the principles of privatisation and has not been part of privatisation legislation.
It is customary in the private sector for pension schemes to be safeguarded under trust deed by trustees. This, therefore, is the way in which the mirror image scheme will operate. It would be anomalous to require a small number of companies in the private sector to be subject to legislative requirements for the running of a pension scheme for only some of their employees. We have repeatedly given assurances that the mirror image scheme will not be approved by the Secretary of State unless it gives proper effect to the Government's commitment that it will provide employees with the same benefits, including full index-linking, with the same level of employees' contributions at the transfer date.
It has always been our intention that water authority employees' pension rights should be safeguarded. We now propose that further security for future rights will be provided by the terms of the trust deed. We have agreed with all the chairmen of the water authorities to provisions which will give particular reassurance. These are, first, that the trustees of the mirror image scheme should include at least two representatives of members; and secondly, that while there remain potential beneficiaries of the mirror image scheme, it should not be wound up or its benefits altered if any trustee objects. Representatives of members are more appropriate than representatives of employees, because there will come a time when there are no employees in the scheme. They will all have retired but they will still be members of the scheme drawing their benefits from it.
I am specifically not requiring trustees to he representatives of trade union members, but I am not excluding that possibility if they happen to be appropriate 35 representatives of members. I am sure that hon. Members will agree that a pension scheme operated in this way will provide satisfactory assurance to employees who have chosen to transfer to the mirror image scheme.
NRA employees will continue in the local government superannuation scheme as if nothing had happened. In other words, there will be complete continuity.
I hope I have answered the two major points that have been raised.
§ Amendment agreed to.
Amendments made: No. 90, in page 162, line 21,, at end insert
(1A) The Secretary of State shall not make an order designating a person for the purposes of subsection (1)(b) above unless that person appears to him to be a person whose activities at any time before the transfer date consisted in, or were connected with, the carrying out of any function which is transferred by this Act or which corresponds to any such function or to any other function under this Act; and the power to make such an order shall be exercisable by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.'.—[Mr. Moynihan].