HC Deb 16 December 1994 vol 251 cc1369-76

Motion made, and Question proposed, That this House do now adjourn.—[Dr. Liam Fox.]

2.30 pm
Mr. Peter Hain (Neath)

Under the Coal Industry Act 1994, members of the mineworkers pensions scheme—the MPS—are given a legal right to transfer into its successor, the industry-wide mineworkers pension scheme. In small licensed mines, the transfer date is taken to be 24 December for members who are contributing to the MPS at that date. Under paragraph 3(3) of schedule 5 to the 1994 Act and in the Coal Industry (Protected Persons) Pensions Regulations 1994, statutory instrument No. 3070, contributing MPS members are granted the right to what is called "protected persons status". This means that contributing members of the MPS will have the statutory right to join the new industry-wide scheme and their employers will be obliged to participate and to pay contributions of about 10 per cent.

The secretary of the MPS, Mr. Paul Trickett, wrote in a letter on 1 November to one of my constituents who works in a licensed mine that protected persons status meant that your new employer must give you the right to join the IWMPS". He added: For employees of small mine licensees 'new employer' means your employer after the transfer date of 24th December 1994". Mr. Trickett has now confirmed to me, however, that a loophole in the legislation that none of us had anticipated—I was a member of the Committee that considered the Coal Industry Bill—means that some private mine owners are denying that right. Paragraph 27(e) of the Department of Trade and Industry consultation document "The Government's Proposals for British Coal Pensions after Privatisation" referred—admittedly briefly—to the rights of licensed miners. Those rights are now being betrayed.

Members of the MPS paying contributions are automatically eligible to join the new IWMPS, regardless of their employer's wishes, provided that they are members of the MPS at the transfer date. It appears that there is no formal right for employers to withdraw from the MPS, presumably because it was originally designed for the nationalised coal board and not for mines licensed under section 36 of the Coal Industry Act 1946, although the licensed mines had to maintain conditions equivalent to the nationalised industry until that stipulation was unilaterally withdrawn by British Coal in 1991, with the encouragement of the Government. Employers cannot renege on participation in the new IWMPS because of the very unusual legal right to protected persons status, which requires the employer to pay pension contributions to it. That is an admirable right.

The only way in which a private employer can circumvent the law and deny the right is to stop paying employee contributions. Apparently—though nobody seemed to be aware of it—the employer is legally able to withdraw paying employee contributions because there is no compulsion to provide a pension. No employer contributions have been made since the pensions holiday of April 1990, and it seems that some employers are determined to avoid paying the 10 per cent. employers' contribution to the new scheme because of the fierce pressures from the rigged market in coal in which they are competing.

Although my understanding is that under contract law employers cannot unilaterally alter an individual's contract, it appears that mine owners, simply by stopping employee contributions, can deny them their pension rights because they are not eligible members of the scheme at the transfer date.

It might be suggested that the miners concerned should enter into a voluntary arrangement, but voluntary contributions to maintain MPS membership are no good as they still need their employers' agreement to participate in the scheme and, clearly, that is not forthcoming.

At the end of last week, nine mine owners had given formal notice of withdrawal from the mineworkers pension scheme, but my information is that more are expected, especially in south Wales.

The two most devastating losses for the miners affected are, first, the continuance of life assurance, which produces a lump sum based on two years' average earnings to widows or dependants, together with the immediate payment of two thirds of pension. Instead of that excellent entitlement, miners who are blocked from joining the new scheme will get only a lump sum based on three times their deferred pension—a grossly inferior benefit, worth perhaps only half the current entitlement which, in any case, will erode over time because the old pension is effectively frozen, except for indexation.

The second loss—the incapacity pension, which was an important part of the old scheme—is perhaps more serious as it would assist injured or crippled miners. Members of the new industry-wide scheme would be able to carry over the rights under the MPS to trigger pension payments even if they were not aged 60. The amount would depend on length of service and grade. An injured miner would have received his pension immediately; he has now lost that right.

Injuries and deaths in licensed mines are frighteningly high. In my constituency alone, two licensed miners have died in the past two years and one has been paralysed from the waist down. Serious injuries occur weekly. According to the Health and Safety Executive, the fatality rate in private licensed mines is 23 times as high as in British Coal mines. Miners are vulnerable people, yet the Government are allowing two crucial benefits to be destroyed.

Separate insurance cover is supposed to be statutory and to provide some protection, but in practice it is not always provided. I quote, for example, the case of Mr. Huw Jenkins, who was injured after a roof fall at Nantyglo mine near Blaengwrach in the Neath valley on 26 April 1994. He suffered such severe injures that he will probably never go underground again, yet his employer, T. J. Slee Ltd., had defaulted on its insurance cover, so Mr. Jenkins is now being denied the right to claim damages and loss of earnings under that insurance scheme. After the transfer, a licensed mineworker will lose all his rights as he will no longer be a member of a pension scheme.

There are 1,400 men employed in 137 private underground licensed mines, 900 of whom are in Wales. About 400 are in the Neath constituency and are employed in 35 pits—the highest number anywhere in the United Kingdom.

The Government have penalised a special category of people who are now without adequate life insurance cover or entitlement to incapacity pension. Those rights were fought and struggled for in the bitter pre-nationalisation years and they are now being swept away.

I ask the Government for three things. First, as the ultimate guarantor of the closed mineworkers pension scheme, the Government should make provision for existing life assurance and incapacity pension entitlement to be honoured, even though the miners are not able to transfer because of the manoeuvre into the new industry-wide scheme. If the Minister replies that there is no finance available, I shall tell him that there is plenty of money in the MPS because employers had a pension holiday from 1990, which, I am informed, was actuarially calculated to go on to the year 2001. So there is plenty of money—millions of pounds—and it would only be right to give the several hundred miners who are affected by the manoeuvre the protection that could be extended from the existing MPS, even when it is closed on 24 December.

The second proposal is that the Government should next week rush through amendments to the protected persons regulations to extend protection to licensed miners who have been penalised and affected. Thirdly, the Government should instruct the Coal Authority that when it issues new licences next in March, it must make them dependent on a company being a good employer. By that, I mean, as a minimum, providing decent pensions in the industry-wide scheme, with the insurance, incapacity pension cover and so on that goes with it.

Although I have focused on the problem of licensed miners because they are the worst affected, the problem goes much wider than them alone. After 24 December, all miners could be threatened in two ways. Either employers could simply default on membership of or participation in the industry-wide scheme because they might think it too expensive, or they could sack men and then re-employ them, but only on the basis that they withdraw from the industry-wide scheme.

The Minister might say that that is not the sort of thing that happens in Britain. He should let me take him around some of the small mines in my constituency where that happens regularly. Those are the sort of raw, almost cowboy-like conditions that the Government are bringing back to our mines. It will go well beyond the small private licensed pits into the ex-British Coal pits. Indeed Tower colliery, whose buy-out I strongly supported, will not be participating in the industry-wide scheme, probably because it is too expensive and because the miners did not have continuation of employment. They are not eligible for transfer from the MPS because they will not be members of it on 24 December as they are not working until next year.

I understand that in my area of south Wales, Betws colliery, which is under a management buy-out, will not participate in the scheme. I understand that management will contribute only 1 per cent. instead of 10 per cent. employers' contribution to a generous, decent pension. The problem could go well beyond the hundreds currently affected to hundreds and perhaps thousands more miners across the country, and not simply in south Wales.

It may be said that those miners should make their own private arrangements or depend on the state earnings-related pension scheme instead. Such an invitation would be an insult because they need the collective provision provided by an industry-wide scheme, with all its vast resources, which simply cannot be offered through personal pensions alone. Indeed, for personal pensions to compete with such protection and the benefits offered would require a contribution of at least 16 per cent. and possibly more to get anywhere near meeting the current provisions and protection offered by the MPS and its successor.

Mr. Dennis Skinner (Bolsover)

rose—

Mr. Hain

I shall give way to my hon. Friend, who, as a former miner, is very experienced in these matters.

Mr. Skinner

I thank my hon. Friend for allowing me to add to his comments about the miners who have been treated so shabbily, not only in his constituency but throughout the British coalfields. When Budge takes over with his shaky financial set-up, there are bound to be problems. It is a scandal that miners in Wales and elsewhere are being treated in this way when they have been digging coal from the bowels of the earth. When someone comes to the House from another job, as many of us do, we have the option of transferring into a very lush pension scheme, even though the pension scheme in our previous occupation was miserly by comparison. Why cannot the miners be treated in the same way as Members of Parliament?

Mr. Hain

My hon. Friend has a good point. As he knows from first experience of when he did a much more dangerous job than he now does, the miners do a dangerous job. They have made a contribution over the years. Members of Parliament get feather-bedded pensions. That goes to show that the Government are interested only in protecting those at the top of society and that they ignore those at the bottom, particularly the wealth creators who struggle, risking their own lives and limbs year in, year out to dig coal.

The Minister may say that miners should consider taking out their own personal pension. I pointed out earlier that that would require a contribution from the employee of at least 16 per cent. That is beyond the means of miners whose earnings are low and, more important, very uncertain. Many of them do not know almost from week to week whether they will be employed. The old British Coal circumstances, in which continuity of employment was relatively guaranteed—until the Tories took over—no longer apply. Many of the miners exist in a twilight world of casual, temporary and sometimes brutal employment.

I have already exposed in the House the way in which some unscrupulous mine owners have illegally exploited their work forces, illegally denying them proper payslips, making them work the Christmas break, sacking then re-employing them to avoid paying holiday and sickness benefits and so on. That attack is even invading pension rights now.

The Government are blatantly betraying the rights to a decent pension, to life assurance cover and to incapacity benefit for miners who work in some of the most dangerous conditions in Britain. This sordid episode is a dress rehearsal for what coal privatisation means in practice. The Government should be ashamed of themselves and of their dishonesty in failing to spell out the consequences for licensed mineworkers when they took the Bill through the House.

Coal privatisation clearly does not mean new opportunities, new hope and new prosperity, as Government rhetoric would have it. It means old misery, old tragedy, old bitterness returning to our mining communities: Victorian conditions with a vengeance.

2.46 pm
The Parliamentary Under-Secretary of State for Trade and Technology (Mr. Ian Taylor)

First, I congratulate the hon. Member for Neath (Mr. Hain) on obtaining this Adjournment debate on a matter that clearly is of great concern to him, particularly as there are 35 licensed mines in his constituency employing 400 people. Therefore, it is right that he should attempt to clarify some of the issues. I hope that I shall be able to satisfy him on many of the points that he raised. If I do not have time to cover all of them, I shall enter into correspondence with him to provide further explanations.

The hon. Member for Bolsover (Mr. Skinner) was, as usual, in his place, making life dangerous for us even at the Dispatch Box. I do not want to get dragged into the pension schemes that are available to Members of Parliament.

Mr. Skinner

It is a fair comparison.

Mr. Taylor

It is not, for purely technical reasons of the nature of the transfers, but I shall not go into that now. I think that the hon. Gentleman was attempting to make a different point, not a technical point.

Clearly, the decline in numbers of people working in mines has been going on for decades, under whichever Government. It is always important to safeguard the interests of those who will no longer be employed in the industry as well as those who continue to be employed. Many of the licensed mines have had their own separate arrangements for pension schemes for a considerable period. It is not as if it is something that has just arisen.

The hon. Member for Neath raised three particular points. I shall endeavour to deal with them in my reply. The Government have always recognised that in drawing up new pension arrangements for members of the mineworkers pension scheme and the British Coal staff superannuation scheme after privatisation we should, above all, safeguard the benefits that the schemes confer on their members and their dependants.

The new arrangements for the British Coal pension schemes will achieve that in the first place by ensuring that accrued entitlements from past contributions are guaranteed within the existing schemes. An absolute guarantee from the Government will ensure that there is always enough money in the funds of the existing schemes to pay accrued entitlements. The guarantee improves previously existing provisions by guaranteeing full RPI-linked increases in pensions. In addition, members will be able to benefit from valuation surpluses. The Government have also undertaken to honour in full British Coal's obligation to make "additional contributions" in respect of early and enhanced pensions awarded from the schemes.

I will make it clear, because there has been concern over this point among scheme members, that the level of provision subject to the Government guarantee of index linking is the amount of an individual member's pension entitlement at privatisation, including previous cost-of-living increases and improvements out of surpluses awarded before privatisation.

Members of the mineworkers pension scheme and British Coal staff superannuation scheme can leave their pension entitlements from past contributions in the existing schemes if they choose. Those entitlements will be secure and will benefit from the Government guarantee.

The arrangements for new industry-wide schemes will safeguard benefits from future employment by ensuring that British Coal employees who are transferred to new employers as a result of privatisation will be able to continue to accrue pension benefits equal to those available in the existing schemes. Employee contribution rates will remain unchanged.

The privatisation legislation gives "protected person status" to employees contributing to the existing schemes at the date of their move to the new industry-wide schemes. That obliges the new employer to give transferred employees a right to join the new scheme and ensures that benefit provisions cannot be worsened.

The new pension arrangements were established after lengthy consultations, including the issue of a consultation paper. There has been extensive parliamentary scrutiny by the House and by the Lords. The hon. Member for Neath mentioned that he played a part in that scrutiny. The arrangements were agreed down to the finest detail over several months of negotiations with the trustees of the existing pension schemes. The Government have endeavoured to keep Parliament and industry informed throughout.

The new arrangements have been welcomed in Parliament and by the existing scheme trustees as safeguarding the pension entitlements of past and present British Coal employees. The main concern expressed by the hon. Gentleman relates to the position of employees of small-mine licensees. I repeat that I fully understand his constituency interest in that matter.

Employees of small-mine licensees will be entitled to join the industry-wide scheme only if they are members of the mineworkers pension scheme at the time that British Coal is privatised in late December. In practice, many small-mine employees are unlikely to have that entitlement.

Small-mine licensees are already operating in the private sector. If they participate in the MPS, it is likely to be because until the 1980s licensees were required by British Coal to participate in the scheme. More than 120 licensed operators participated in the past, but the number has fallen to 18 through withdrawals. That is the current figure—not one that might apply between now and the date that the hon. Gentleman mentioned.

Mr. Skinner

Will the Minister give way on that point?

Mr. Taylor

I must try to answer the hon. Member for Neath, given that the Adjournment debate was in his name.

Small-mine licensees are not, of course, being privatised—and their employees, in contrast to British Coal employees, are not being transferred to successor owners due to privatisation. As existing private sector operators, those companies have the right to consider withdrawing from the mineworkers pension scheme, as in the past. Their participation is not pursuant to any statutory obligation, although they must take due account of the terms and conditions of employment of their employees. There is no basis for the Government to force them to participate.

There has been a suggestion that the fact that small-mine licensees can choose to stop participating in the MPS represents a loophole in the new arrangements for the industry after privatisation. The hon. Member for Neath used that word, but it is not a loophole. It is only a continuation of the existing position for licensees already in the private sector. Participation in the new industry-wide scheme could not be made an obligation for the existing small-mine licensees.

A key factor underlying the issues debated today is that at present licensed operators make no contributions to the MPS because, like British Coal, they enjoy the benefits of a contributions holiday. Again, that is a point that the hon. Gentleman made. They will be obliged, however, to make employers' contributions of about 10 per cent. of employees' pensionable earnings to the industry-wide MPS if they participate in that scheme. That fact has undoubtedly contributed to recent withdrawals. I acknowledge that the hon. Gentleman mentioned a contributions holiday. I cannot go into the actuarial calculations, but he will know why it is that the contributions holiday in the MPS is not to be carried over to the new industry-wide scheme. That issue was widely discussed in the House.

The present contributions holiday is funded out of the most recent actuarial surplus of assets over liabilities in the MPS. The trustees of the scheme wanted the owners of the coal industry after privatisation to have no connection with it and for there to be no transfer of surplus out of the scheme to the owners. I believe that those wishes have commanded widespread support, not least in Parliament. The new arrangements comply with those wishes. It is inevitable, however, that if there is no transfer of surplus into the new industry-wide scheme, there is no basis for an initial employers' contributions holiday.

I should mention that under the original proposals put forward for discussion in the Government's original paper, the assets of the MPS would have been divided between the closed scheme for pensioners and deferred pensioners and the new industry-wide scheme for continuing employees. There would have been a bulk transfer of assets, including a share of the final surplus to the industry-wide scheme to fund the past-service entitlements of continuing employees. That would probably have enabled the new scheme to offer at least some reduction in employer contributions initially, perhaps attracting greater participation by small-mine licensees. There was, however, strong opposition to that aspect of the consultation paper proposals, from the trustees and British Coal among others. No voices were raised in support. I think that it is true to say that there has been relative silence from Opposition Members on that part of the consultation proposals during the process of discussion.

The House should not hide from the central fact that participation in the industry-wide scheme will be costly for most small-mine operators. In reality they have therefore had no choice but to consider their position. The hon. Gentleman will accept that if we forcibly imposed a burden on them—in fact, we would not be able to do that because they are private operators—they would probably find that it would be possible to employ fewer people in the industry.

Mr. Hain

Will the Minister give way?

Mr. Taylor

I shall not give way because I want to answer some more of the hon. Gentleman's questions.

The benefit structure of the MPS has improved over time and has become relatively generous over recent years. I take the opportunity of the debate to urge small-mine operators, if they have withdrawn from the MPS, to make or facilitate satisfactory pension arrangements. I understand that many of them are considering alternative pension arrangements that seem more appropriate to their operations than the new industry-wide scheme. I am told that Betwys Anthracite Ltd., for instance, has set up pension arrangements independent of the MPS.

We hope that small-mine licensees will remain in the MPS, but we understand from the scheme administrators that more of them may wish to withdraw, and we note that fact. As I said, they should ensure that there are proper pension arrangements in place. The industry-wide MPS is likely to have between 5,000 and 6,000 members. There are only about 100 members of the MPS who are currently saying that they may not participate. The proportion may not be as great in the hon. Gentleman's constituency.

The main participants in the industry-wide MPS will be the privatised regional coal companies. They are better placed to take on the contribution requirements of the industry-wide scheme because they were able to factor the cost of the scheme into their financing calculations when constructing their purchase bids. The hon. Gentleman must take carefully into account the differences in size and traditions between licensed mineworkers and the regional coal companies.

Given the time that is left to me in the debate, I shall write to the hon. Gentleman in detail about the various points on linkages and the disability payments that he mentioned. We understand his concerns and I also understand the specific issue that he raised about the Coal Authority. I take those points on board and shall write to the hon. Gentleman. We are concerned about those who work in the small licensed mines outside the British Coal scheme. We hope that the pension benefits will be put in place.

We accept that the hon. Gentleman has a strong constituency concern, but, overall, the pension arrangements for those who ate transferring from British Coal to the new privatised companies have been made sound. The Government's proposals for guaranteeing the scheme have met with widespread support. I hope that the hon. Gentleman feels that, in the circumstances, he will put pressure on the individual mine owners to ensure that they make proper provision for his constituents who work in the mines.

Question put and agreed to.

Adjourned accordingly at Three o'clock.