§ Motion made, and Question proposed, That this House do now adjourn.—[Mr. Kirkhope.]11.31 pm
§ Dr. John Marek (Wrexham)
I speak on this subject as a sponsored Member of the National Union of Rail, Maritime and Transport Workers. I speak on a day when the Secretary of State for Transport has announced an industry-wide effort to reorganise the British Rail pension scheme. I had intended to use this occasion to urge the Government to take that step, so I welcome his announcement and hope that the Minister, in replying to this debate, will give more details of his right hon. Friend's proposals.
My hon. Friend the Member for Streatham (Mr. Hill) hopes also to comment on the important matters that I am raising, which are important to many tens of thousands of workers. I hope that the Minister will explain whether his right hon. Friend the Secretary of State intends to issue a White Paper, will give details of the scope of that document and will say what class of employees will be included in any provisions.
There is a wider remit to this debate. It is about pension funds in the privatised transport industries, so we are dealing with workers in British Rail and in the bus and coach industry and with seafarers. Before dealing with my main points of concern, I remind the House that the transport sector is low paid. While not all employees in the sector are low paid, the sections of the industry which have been privatised contain, by and large, many low-paid employees. I hope that the Minister and hon. Members in all parts of the House agree that we do not want those employees, due to a deteriorating pension situation, to be thrown on to income support and become supplicants to the Department of Social Security. We want them to be in a position to make pension contributions and later to live on those pensions in their own right without recourse to DSS funding.
That being our desire, there must be something wrong with what is happening to pensions in Britain. We are familiar with the Maxwell fraud, but it goes further than that. There are frauds and near-frauds, but there are also perfectly legitimate ways by which companies can take money out of pension funds to the detriment of the pensioners-to-be. For example, the National Freight Corporation, Sealink, British Rail Engineering Limited and Travellers Fare have all been privatised, and the sales required that the pension benefits should be of equal, or better, value after privatisation. In fact, all those pension schemes now offer inferior benefits—and that is in spite of what the Government said at the time. Companies enjoyed pension holidays, and they introduced new schemes which gave them greater control. Transfer values tend to work against the transferee. That is one of the ways in which, I believe, companies cheat.
I will give some examples of bad cases. CityLink wound up its mirror image pension scheme and now offers personal pensions which exclude any employer contribution. That is not what employees were led to believe would happen, but it is what they now have to put up with. I hope that the Minister agrees with me that it is wrong. British Transport Hotels, when they were privatised, were all required to establish their own pension schemes, providing the same or better benefits. Some of those hotels have 891 changed hands several times, and many of the schemes have been wound up or closed to new entrants. Again, that is quite wrong and is against what was intended when the privatisation took place.
A worse case is that of Nightingale Coaches. For two years employees paid their contributions, but instead of putting the money into the pension scheme, the company pocketed it and used it for cash flow purposes. Then it ceased trading. Action is proceeding at the moment. Whether those employees will ever receive full pension benefit is a moot point. I do not think that they will. Clearly, that is wrong, and it has resulted directly from the Government's policy and action on privatisation. Here, I am not seeking to engage in a debate about whether the privatisation was right or wrong; I am simply drawing attention to what happened as a result of Government policy and action. The effects on many people's pensions have been unfortunate.
Recently the Devon General Bus Company decided that from 6 September it could no longer afford the benefits provided under its hourly and monthly pay schemes. The schemes will be closed to new entrants, who will be able to join another scheme providing only minimal benefits. The Southern National Bus Company is now enjoying its second pension holiday. The fact that such a holiday is available to the company but not to the employees is a matter that we could debate. Opposition Members regard it as something that is not right.
Then there is the recent example of the National Welsh Bus Company. It may be that more than £1 million is missing from the pension fund of the former National Bus Company subsidiary, National Welsh. Having gone into receivership at the beginning of last year, it has deducted employees' pension contributions from pay but has not put them into the pension fund. In south Wales, about 800 former employees have been told that the fund is unable to meet its liabilities. Again that is quite wrong but it is a direct consequence of the bus privatisation policies of the present Government and of the previous Conservative Administration. It is true that the pension fund of the former National Bus Company is safe, but that does not apply to recent contributions.
I contend that pensions are deferred pay. They are part of the contract between employees and employers—employees agreeing to contribute part of their pay, and employers agreeing to contribute an additional amount. It is quite wrong that companies should be able to cheat, either through fraud or through changes in pension schemes. It is wrong that employees should not get what they expect. Employees have a right to have their pension funds managed properly. They have a right to know that their weekly or monthly contributions go into the fund. They have a right to know that, on retirement, they will receive benefits that have not been eroded. Funds should be managed in the interests of the employees—not in the interests of the company. Unfortunately, money has been stolen from former employees of National Welsh and of Nightingale Coaches. Money has also been stolen from employees of companies which have changed the rules or taken contribution holidays.
I am pleased at the announcement by the Secretary of State for Transport of an industry-wide scheme for British Rail employees when, or rather if, the railways are 892 privatised or franchised. I say "if" because there is no general acceptance of the Government's proposals. Will that scheme be open to new entrants after franchising or privatisation? Will it be open to outside employees? The Government intend to franchise London's buses, but how that will be done is another issue. Will there be franchises for different routes, such as Nos. 88, 12 or 53 which pass the House? If after three years the franchisee decides that he cannot make a profit and gives up the route and his employees are engaged by another franchise operator, the only sensible course would be to have a nation-wide scheme or extend the BR scheme to allow people who are not BR employees, perhaps bus workers, to join.
The Goode committee was set up as a result of the Maxwell scandal and will produce a considered report addressing some of my other concerns. Will the Government act quickly on that report to ensure that there is statutory provision for the setting up of pension funds, that contributions go to the fund and that it is managed properly in the interests of fund holders so that they receive what they expect when they retire? They should not have to put up with lame excuses that the money is not there but has been used for other purposes or fraudulently spirited away. The Government have a duty in these matters. Tens of thousands of people want to know what the Government intend to do. They should act as quickly as possible.
§ Mr. Keith Hill (Streatham)
I am grateful to my hon. Friend the Member for Wrexham (Dr. Marek) for his generosity in permitting me to participate in this debate on these important matters. I welcome the statement on pensions today by the Secretary of State for Transport. In some respects, it seems to meet the requirements of British Rail pension fund members and their representatives and has ended the powerful sense of uncertainty and anxiety which has built up on the subject in the past few months. It will be necessary, however, to study the Secretary of State's precise words in print and to examine in detail the consultation document on pensions promised within the next two weeks.
I especially welcome the commitment to an industry-wide railway pension fund. That proposal, which is the preferred option of the railway trade unions, was first mentioned by me in a speech in Standing Committee on the British Coal and British Rail (Transfer Proposals) Bill in June. The Government Whip nods. I am glad that he remembers my contribution in Committee. At that time, the Minister for Public Transport said that he would give careful attention to the proposal. I am grateful to him for his response and I am happy to have played a modest part in what seems to be a successful outcome to the representations.
The model for the industry-wide scheme is the Electricity Act 1989, which provided protection for past service so long as members remained in their respective schemes during and after transition from the nationalised electricity undertaking to the new privatised electricity companies. We shall have to confirm that that is the model that the Government will use for the railways. If it is, and provided there are long-term guarantees for the integrity and maintenance of the value of benefit, that commitment 893 will be an important reassurance to railway workers in a period of understandable anxiety as the railways are privatised.
Regrettably, however, the Government still seem intent on excluding future recruits to the proposed new franchising companies from the industry-wide scheme. I very much hope that the Government will display a further degree of open-mindedness on the issue.
If, as will presumably be the case, the franchisee will be required to sustain, at the same level as British Rail formerly did, the employer's contribution to the industry-wide scheme, it seems quite unfair that new employees, working side by side with longer serving railway employees, should not enjoy the same level of benefits. Equity surely demands that employees doing similar work, in identical conditions, making the same contribution to the success of the company, should be entitled to equal pension benefits. That arrangement operates in the shipping industry; it should apply in the railway industry as well.
I assume, of course, that existing scheme members will retain total freedom to remain in the industry-wide scheme for as long as they so choose. If, however, as may be the case, they choose to enter an alterntive scheme arranged by the new franchisee, it is essential that copper-bottomed guarantees should be enshrined in law to ensure the long-term viability of the alternative scheme. In particular, there must be an appropriate mechanism to ensure that the liabilty continues to any subsequent franchisee.
As my hon. Friend the Member for Wrexham has demonstrated, it has been the all-too-frequent and painful experience of employees in privatised transport industries that attractive new schemes, initiated at the moment of privatisation, have collapsed after the second transfer of ownership. In other words, the transfer value of the scheme must be organised on an actuarial basis with the assurance of adequate funding to sustain the scheme, and there must be similar guarantees to protect the pension rights of employees in the event of failure of the franchisee.
The Secretary of State's statement also embraced the position of current pensioners under the British Rail scheme. I especially welcome the Government's rejection of the possibility that present pensioners should become the responsibility of the franchising companies. That would have been to place at intolerable risk the moral and legal rights of a large number of pensioners who, in many cases, have given a lifetime of service to the railway industry and now derive a modest reward for that service.
The Secretary of State seemed to outline two alternative arrangements for the future of the pension fund, and we shall need to look at that proposal with great care. What is paramount, however, is that the assets of the fund should be ring-fenced to protect the individuals concerned: we want no corporate raids from the Treasury.
While I am speaking of the Treasury, I add a special plea that there should be no undermining of the small, historic pension schemes inherited from the original railway companies. Those funds benefit from a topping up from the Treasury under the terms of the Transport Act 1980. They still have a large number of beneficiaries. It is essential that the protection of the 1980 Act should be maintained for them.
I hope that the Minister will be able to offer reassurance on that subject and on the ring-fencing of the larger British Rail pension fund. I hope that she will also undertake, on 894 behalf of the Government, to extend the proposed industry-wide scheme to new recruits to the privatised railway undertakings.
With those specific qualifications, I repeat my welcome for the announcement that we have heard today.
§ The Parliamentary Under-Secretary of State for Social Security (Miss Ann Widdecombe)
I congratulate the hon. Member for Wrexham (Dr. Marek) on securing this Adjournment debate and the hon. Member for Streatham (Mr. Hill) on his interesting intervention.
There are two difficulties in replying to the debate. The first is that much of the material quite properly raised by hon. Members concerns the responsibilities of my right hon. Friend the Secretary of State for Transport. I hope that hon. Members will be patient with me when I say that I cannot enter into detailed discussions on what he may or may not have in mind as a result of his announcement this afternoon. However, I undertake to draw specifically to my right hon. Friend's attention the particular points that hon. Members have raised, and I am sure that he, or one of his Ministers on his behalf, will respond to them in so far as it is possible at this stage.
My second difficulty is that the parts of the debate that concern my responsibilities—namely, the protection of occupational pension rights—are also subject to an independent review by Professor Goode, as the hon. Member for Streatham pointed out. It would be quite improper for me to pre-empt what Professor Goode might decide to do. However, I will undertake to ensure that the remarks made specifically about protection for scheme members on transfer of schemes are drawn to his attention.
§ Miss Widdecombe
I shall come to that. I was asked a pertinent question about how quickly we would react.
My third difficulty is this. Such is the availability of NHS dentistry that I have had three dental operations in as many weeks, and for that reason I may sound a bit peculiar.
We expect Professor Goode to report in the summer. We have given two undertakings. The first is that if at any time in his deliberations—before he produces his report —he should by any chance conclude that a particular measure could be taken that is so urgent that it should be taken out of context with the rest of his report, the Government will consider implementing it ahead of any general Bill that we might introduce to meet the professor's general recommendations. So far we have had no indication that that is likely to happen, but the undertaking was given very clearly by the Secretary of State and would be honoured if the situation arose.
§ Mr. Nick Hawkins (Blackpool, South)
If my hon. Friend makes contact with Professor Goode and with colleagues in other Departments—the Secretary of State for Transport and, perhaps, the Secretary of State for the Environment, who deals with local government matters —will she mention the points raised with me by the managing director of Blackpool Transport Services Ltd., in my constituency? They are not dissimilar to the points raised tonight by the hon. Members for Wrexham (Dr. Marek) and for Streatham (Mr. Hill). Will she follow up 895 the helpful reply that I received from my hon. Friend the Parliamentary Under-Secretary of State for the Environment in December? Perhaps if I write to her about the company's concerns—which were raised again in a letter that I received today, the managing director having heard about the debate—she will consider his anxieties about employees who were members of the local government superannuation scheme—
§ Madam Deputy Speaker (Dame Janet Fookes)
Order. This is a very long intervention in a short debate.
§ Miss Widdecombe
I think that I can anticipate that last sentence. I assure my hon. Friend the Member for Blackpool, South (Mr. Hawkins) that I will relay his remarks to the relevant quarters, and ensure that he receives answers to them if necessary.
Let me now deal with some of the specific points that have been raised. First, there is the question of contribution holidays. The purpose of a contribution holiday is not to undermine the rights of employees so much as to undermine revenue received by the Inland Revenue. Once a scheme has reached 105 per cent., it can attract tax liabilities. As a result, many employers choose to take a contributions holiday rather than meet that liability. Professor Goode will consider contributions holidays. I am sure that he will also consider the ownership of funds and the protection that is available to members who transfer schemes from one employer to another.
Under trust law, trustees are obliged to act in accordance with what is of the greatest benefit to the fund rather than to the employer or to existing employees. The duties of the trustees are to secure the best for the fund and always to act in its interests. I am sure that Professor Goode will consider whether that duty can be tightened in law to ensure that it is better discharged in some cases. In doing so, he will wish to consider the composition of trustees and the law that lays down their duties and obligations.
It would be wrong to leave the House with the impression that we examine occupational pensions law only when something goes wrong. It was nothing to do 896 with the Maxwell scandal that the Social Security Act 1990 provided for the restriction of self-investment by schemes and for a deficit on the winding up of a scheme to become a debt on the employer. That Act introduced the pensions ombudsman. Last year, we extended and strengthened the requirement on schemes to disclose information to members.
An Opposition Member—I am ashamed to say that I have forgotten who it was—raised the issue of information. It is important not only that individuals have rights of access to information about their scheme but that they are encouraged, as individuals or through their trade unions or representative bodies, to make such inquiries. People should understand that once they have joined a pension scheme they should treat it in exactly the same way as they would treat savings on deposit in a bank or some other account. We have an extremely successful pensions tracing registry in Newcastle, which is often asked to trace schemes going back 20 or 21 years with which members have lost contact. I urge anybody with an occupational pension to treat it as preciously as they would something under a mattress that they would check from time to time.
We all regret what was done by Maxwell. The only good that has come out of Maxwell is that it has drawn the attention of individuals to the importance of occupational pensions, whereas in the past there has been a tendency to take such schemes for granted.
I have every faith in Professor Goode and we shall react as soon as practicable to his recommendations. When he reports, we shall want to examine his proposals and to consult on particular aspects of them. There will be no undue delay in implementing anything that seems to us to be wise, reasonable, practical and in the interests of pensioners.
The vast majority of pension funds in this country are properly, securely and responsibly operated—only a few, which are known to the Occupational Pensions Board, are not.
I will ensure that hon. Members receive specific answers to the transport issues that they raised, which are not within my remit. I am satisfied that occupational pensions are, in general, very safe, a very good investment, are greatly to be encouraged and have added significantly, particularly in the past 10 years, to the retirement income of many people who otherwise would not have had that additional income above their state provision.
§ Question put and agreed to.
§ Adjourned accordingly at one minute to Twelve o'clock.