§ Mr. Kevin McNamara (Kingston upon Hull, North)
I should first declare an interest as a member of the Transport and General Workers Union and as secretary of the parliamentary group of Labour Members associated with that union.
Two factors are critically important for those who consider participating in a pension scheme. The first is that they view pensions as wages deferred for the future, after they have retired and must rely on what they have put aside or invested for their golden years. The second is that a pension scheme is held in trust by a company for those who have chosen to pay into it, for the benefit of its members and beneficiaries—not for the benefit of the company or the directors, and certainly not for the benefit of the Government.
In no circumstances should the fate of employees who have invested a portion of their hard-earned wages in such a scheme be abused. In no circumstances should money held in trust by a company on behalf of pension scheme members be hijacked for the company's use or to facilitate gain for anyone other than legitimate members of the pension scheme. It should certainly not be used as a sweetener for privatisation—a bribe for bids for public sector assets based on the principle, "Just look at the pension scheme surplus." After privatisation, approximately £1 billion has been taken from pension schemes, affecting approximately 1 million past and current public sector workers in various industries. After the 1990 theft from the bus employees' superannuation trust—BEST—pension scheme, as many as 80,000 retired bus workers are losing up to £20 a week of their pension entitlement.
On 6 September 1996, the pensions ombudsman ruled that the Government had unlawfully taken money, to the value of £168 million, out of the BEST pension scheme after privatisation of the National Bus Company. That scheme's rules stated that if the scheme were ever wound up any surplus should be divided among employees, up to the limit allowed by the Inland Revenue. The employer could receive a share only after employees had received the maximum to which they were entitled.
Prior to 14 November 1989, the scheme's original rule—rule 49(b)—stated that if a surplus were available on winding up:The excess shall he applied in providing additional amounts of annuities … for the benefit of all or any of the Beneficiaries.Many people joined the fund on that basis. They did not subscribe on the basis of providing the Government with a surplus to use for whatever ends they deemed fit, which is what has happened. The surplus was to be used for the benefit of those who had invested in the scheme—a point that the Government have ignored. Instead, the Government have used the funds as a sweetener for privatisation.
The manner in which the Government were able to achieve such a windfall—the history of which can be found in the ombudsman's report—was due to the amendment of rule 49(b). The BEST trustee was put under pressure to alter the rule by National Bus Company management, who told the trustee that unless the rule was altered the company would suspend its contributions to the fund.
258 In paragraph 72 of his decision, the ombudsman stated:The threat to exercise the power to suspend contributions was intended to persuade the Trustee to surrender powers which it held under the Scheme's winding up rules, powers which it was required to exercise in the best interests of the Scheme's members.In the face of such pressure, the BEST pensions committee had no alternative but to recommend that rule 49(b) should be amended so that the surplus would go to the employer. The amended rule stated:If any balance remains, the same shall be repaid to the company, except to the extent that the company agrees that part or all of the same may be applied in increasing benefits.After amendment of the scheme's rules, the Government and their allies launched a campaign of disinformation. Scheme members and Members of Parliament such as my hon. Friend the Member for Warrington, South (Mr. Hall), who questioned what had occurred, were told by the management, by Allen and Overy—solicitors for the pension fund—and by the Minister that the pension fund surplus had to be paid to the company. They were not told of the company's discretion in the matter, or that—in the fortuitous way in which these matters work out—any surplus would go to the Government when the company was wound up.
The information provided by the Government was incorrect, however, because the rules had been unlawfully amended and the surplus should have been used primarily for the beneficiaries' advantage. In my recitation of the facts, some people may think that I have understated the case and feel that events were more like daylight robbery. Many people believe the latter, and I share that view.
Paragraph 107 of the ombudsman's decision states that the amendment was unlawful and thatthe agreement to amend the winding up clause was obtained through a breach of the Company's duty of good faith and through a threat to commit a fraud on power".The Secretary of State has acquired all the company's liabilities and rights following the dissolution order and must therefore take responsibility for that breach of good faith and that threat to commit a fraud.
As rule 49(b) was unlawfully amended, questions must be asked about the accuracy of information provided to the Public Accounts Committee when it was considering bus privatisation. Did the figures provided to the Committee include the £168 million that the Government had unlawfully taken from the pension fund, and was the Committee informed that the Government had taken the money? As the money never belonged to the Government, was information on it included in their deposition to the Committee?
Another interesting aspect of the debacle is that after the scheme was wound up two trustees were appointed, both of whom were civil servants employed by the Department of Transport—the Department which had taken the money from the pension fund. Those civil servants were supposed to act in the members' best interests in recovering the £168 million—which, with interest, now totals about £200 million—from the Department of Transport. That was a very difficult situation to put them in as they were civil servants in that very Department.
§ Mr. McNamara
Or lack of trading in this case.
259 When requested to reveal information on any negotiations that had taken place to recover members' money, the trustees—on the instructions of their lawyer—refused to reveal any information, despite the fact that it is a breach of trust law not to supply such information to a pension scheme member who properly requests it. They were thus not only failing to pursue recovery of the money but withholding information from scheme members.
It is worthy of note that following a company search undertaken by my union's legal advisers, it was discovered that the trustee company, which was supposedly independent, was in fact owned by the Secretary of State for Transport. Since then, new trustees have been appointed within the Office of the Official Solicitor. Again, however, one might question their degree of independence from the Government and the speed with which they are advancing the interests of trust members.
§ The Minister for Railways and Roads (Mr. John Watts)
I must ask the hon. Gentleman to put it on record that he is not suggesting any impropriety on the part of the officials appointed as trustees. He will know that when the appointment was made, as the benefits had been insured, it was assumed that the company would have little or no business to transact. We asked the Official Solicitor to replace as quickly as possible those officials who, as the hon. Gentleman acknowledged, were in a somewhat invidious position, with trustees whom everyone can accept are independent. While the hon. Gentleman may wish to make allegations against me and my right hon. Friend the Secretary of State, I hope that he is not impugning the integrity of officials who, as he said, were placed in an invidious position.
§ Mr. McNamara
No, but I think I am entitled to question the speed with which they are processing the matter.
As matters now stand, members of the scheme have not received any of the pension fund surplus and many may die before their entitlement becomes available. Meanwhile, the Government have taken all the surplus and used it to subsidise the privatisation process.
In the case of the BEST pension scheme, the law is very clear: where a scheme states that a surplus must be distributed to the employees, that must be done. There is no question of the money being distributed elsewhere until employees have received the maximum entitlement under Inland Revenue rules. Altering the rules so that the employees no longer receive the surplus, following pressure from the company—and, thereby, from the Government—was unlawful. The ombudsman directed the trustee torecover the monies paid to the company on winding up, with interest at an equitable rate".Regrettably, the BEST scheme is not an isolated instance of Government fingers in the till. The ombudsman's decision on the National Bus pension fund is expected in a few months. It is also expected that the ombudsman will find that £30 million was unlawfully taken from that fund. The National Grid has already been ordered to pay £55 million—a very modest estimate as some commentators believe that the true figure may be as much as £500 million—to the employees' pension fund after similar complaints from members. The Government 260 have threatened to use a £55 million surplus in the Rosyth dock workers pension fund as a sweetener for privatisation. Rail companies plan to use a £500 million surplus in the British Rail pension fund, which existed prior to privatisation, for their own benefit.
Meanwhile, the TGWU, which is my own union, the National Union of Rail, Maritime and Transport Workers, the GMB, the Manufacturing, Science and Finance Union and others are investigating a series of complaints from members about what happened to pension funds when their industries were privatised. There are therefore a number of questions that I should like to put to the Minister.
It is most surprising that although the pensions ombudsman—a Government statutory appointee—has reached his decision, the Government, far from accepting what their own appointee has said, have turned to the trustees and said, "Sue us. Yes, we'll give you the money for your legal fees, but sue us." What message does that send to the nation about the Government's attitude? Their own appointee has found against them, so they play for time. A man who is distinguished in his knowledge of the law and of the industry finds the Government in "breach of good faith" and possibly committing "a fraud on power," but the Government, in order to delay matters, turn around and say, "Sue us." My first question is why should this matter be brought to court for resolution when the ombudsman has so clearly stated that rule 49(b) was unlawfully amended? What is the motivation for the employment of such an obvious delaying tactic? After all, the office of the ombudsman is a statutory appointment created by the Government. One might suggest that the delay can only be exacerbated by the fact that the current trustees work in the office of the Official Solicitor and the Government are reluctant to proceed quickly.
Secondly, why did the Secretary of State mislead and supply blatantly false information to a number of interested and connected parties on the subject of the surplus? Not only were the management of Allen and Overy—solicitors to the fund—guilty of such action, but so was the Department in asserting that the surplus had to be paid to the company without at any time revealing the role of the pressure put on the trustees to alter the rule. On a related point, may we also have information about what was told to the Public Accounts Committee?
Thirdly, will the Minister publish the correspondence between the Government and the trustees, who in theory should have been acting in the best interests of the beneficiaries and not delaying matters to assist the Government when they were in fact working for a Government Department? If the Minister will not provide that explanation, he must explain why not. Under the law, a beneficiary is entitled to be given the information that he requests on such issues. Further to that matter, will the Secretary of State give some indication of when he expects the trustees to be able to take action? Has he given the trustees any indication of the time scale envisaged by his Department?
Given all those facts, it is scarcely amicable to suggest a course of litigation, irrespective of the fact that Ministers expressed the hope that it willbe carried out in as co-operative and speedy a manner as possible".261 What facts contained in the ombudsman's report do Ministers not accept? Do they accept that the rule was altered? Do they accept that the ombudsman's report is an accurate statement of the law and of the Government's liabilities? If not, why not?
This is not an arcane dispute on an obscure point of law; it is a matter of great importance to thousands of pensioners who feel that they have had their pension funds filched to subsidise privatisation, making the Department of Transport the Robert Maxwell of the public sector. This is a debate not on the merits of privatisation but on how privatisation has been achieved at the expense of people who paid into pension schemes where the pension moneys in this case—and perhaps in many others and also perhaps in future cases involving British Rail—have been or might be used to bribe reluctant bidders to enter the marketplace to bid for public assets. Natural justice and the law demand that BEST pensioners should receive their full entitlements and should receive them now, not after further prolonged litigation.
§ 11.9 am
§ Mrs. Gwyneth Dunwoody (Crewe and Nantwich)
I apologise to you, Madam Deputy Speaker, and to the Minister for not having been here at the beginning of the debate. It is seldom an excuse in the House of Commons to say that things were going so fast that I was not keeping up with the excitement in the Chamber. What my hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara) is doing is tremendously important and I congratulate him.
It is not clear how the Government can so consistently think that they can get away with the most outrageous behaviour without anyone noticing. I often forget how brazen they are. Their sheer brass neck amazes me.
I am an individual member of the National Union of Rail, Maritime and Transport Workers. Many members of my union are busmen who are directly affected by the pension scam—I use the word scam advisedly, because that is what it is—but I must make it clear that I do not benefit from the pension fund, nor have I ever contributed to it. That does not mean, however, that I am not outraged that the Government's behaviour has been allowed to go almost unremarked.
Having set up a parliamentary commissioner—or ombudsman, as we call him for convenience—to look into the correct administration of the business of government, after a clear decision that their behaviour on the bus companies pension funds was not only bad administration but a total breach of faith, would any other Government in the world have said, "Thank you very much. We have taken note of what you have said. Now if you want to get your money back, you've got to sue us."?
Because of their incredibly narrow and tiny attitude towards the sale of state assets, the Government were prepared to use the pension funds of bus companies to encourage private companies to take over assets. They were then prepared to go to the trustees of the pension funds, knowing that the law puts them into a straitjacket—correctly; no one wants pension fund trustees to be able to do whatever they like—and tell them, "This is a deal you can accept or you can't accept. Either you commit suicide publicly or you accept a deal that says that we 262 take the assets and we tell you what you are going to do. If you don't like it, we shall make it impossible for you to continue." That is the sort of deal that was spelt out to the trustees. It does not matter how obscure the legal points are. I am not a lawyer, but I know a clear case of stealing somebody's assets when I see it.
I am in perpetual correspondence with the Minister. I sometimes feel that it would save a lot of time if we had a direct line between his office and mine, because I am constantly questioning him on the behaviour of the Department of Transport in relation to other people's assets. The Minister knows that the pension funds were built up by contributions from some of the poorest paid members of the industry. The transport industry does not overpay those who work long hours in difficult conditions. I assure the Minister that busmen and buswomen are not among the multi-millionaires of the United Kingdom. Their assets, built up slowly over a long period by them and their employers, were used as large bags of sweeties to encourage people to come in and take over the assets of the state bus companies.
The Government's behaviour raises all sorts of questions. Would any other organisation say, "I'll use your money to tell you to sue me."? The Government are using taxpayers' money to enable the Government to be sued. At every level, coming and going, the taxpayer pays. That is a basic fact, in case anybody had not noticed. It is not the Government's money; it is the taxpayer's money. They constantly tell us, "Oh, we don't have any money, it belongs to the taxpayers." It certainly does. What is the Department doing with that money? It says, "The ombudsman has found against us, but we have no intention of carrying out what the ombudsman has said unless we are sued." Where is the money for that legal process to come from? From the taxpayer. We have a violent circle of complete nonsense, in which the taxpayer is supposed to pay.
My hon. Friend the Member for Kingston upon Hull, North raised some detailed and important points, and I have no intention of repeating what he said. The Government's effrontery amazes me. They have an extraordinary ability to take my breath away. They continually do things that I though that no one would have the nerve to do, and then they do it again. To quote a classic case, I wrote to the Minister just before Christmas asking him about the pension funds of a number of different establishments—the National Bus Company, the British Airports Authority, the privatised ports and British Rail. I hope on another occasion to be able to spell out in detail that what the Government have done to the busmen is nothing compared with what they have done to people in the rail industry and some others.
Yesterday, when it became known that this debate would take place this morning, by some strange coincidence, I received a long and detailed reply from the Minister. I am grateful to him and I am sure that there is no connection between the two facts. It is worth putting some of his comments on the record. He said:Ownership of the trustee company, NBC Pensions Trustee Limited, passed to my Department as part of the arrangements in the late 1980s … It was believed at the time that—with payment of pensions secured through the purchase of insurance—the company would have little or no substantive function. Two officials of the Department were appointed to be Directors of the company. However, it remained a separate legal entity with its Directors required to act independently in carrying out their duties to the company, which also retained its own independent legal advisers.263When the Pensions Ombudsman issued his draft determination … steps were taken within the Department to ensure that those officials who were Directors of the company were separated from, and took no part in, the Department's consideration of this subject.The Minister intervened on my hon. Friend the Member for Kingston upon Hull, North, saying that he hoped that there was no question of our criticising individual civil servants. Of course there is not, nor has there ever been, but the Minister knows that one of the strongest arguments that the House has with the City of London on any kind of control of funds is that there should be clear distinctions in any company, regardless of day-to-day operation, between the activities of anyone with a vested interest in operating on both sides of the fence. That is why the House has frequently had to change legislation on directors' functions in recent years.
This is not a new issue—it is plainly on the statute book and it has been argued time and again, but the Government are saying, "We will have two of our members appointed as directors. They will not have any connection with the people next door. We will not influence them. Indeed, we will not even know the legal opinions that have been given to them." I have much more faith in individual civil servants than I have in the Minister—I hope that he does not take that too personally. It is extremely difficult for people outside to understand the duality of function of those employees of the Department. It would have been far better if the Government had been prepared to arrange a different structure.
Why are there no trade union representatives of the work force among the trustees? What is to stop the Minister from accepting trustees from the Transport and General Workers Union and the RMT, which have members who have contributed to the scheme and are directly affected by the decisions? Indeed, who will reimburse the unfortunate man who brought the case? As far as we know, he has been pushed aside without being reimbursed. In effect, he has been told, "Thank you very much. We have seen all that and we shall put it right in so far as we are forced to do so, but we shall do no more unless we are pushed into a corner." It is clear that when the Government realised that all state organisations had large pension funds, they said to private buyers, "We can discuss certain matters openly, but you must bear in mind that all these establishments have very large pension funds to which you will have access after the sale." Some rail franchises were based on the assumption that private companies would get their hands on pension funds after taking over the franchise. It is nothing new for the Government to incorporate in their sales policy access to other people's assets.
The Government have offered no explanation. Does not the fact that an individual hon. Member has had to raise the subject in private Members' time to allow a full debate on the Floor of the House demonstrate the Government's attitude? They are certainly not prepared to go into detail in their own time and spell out the implications of their action.
Whatever important and detailed questions are raised this morning, the Minister has to answer one basic charge. The Government sold the bus companies knowing that they had large pension funds. They made a proposition to the trustees of those pension funds that they knew they could not refuse. It was almost a Mafia-style proposition. When it was accepted, individual members of the fund 264 objected, and one took the case to the ombudsman. It then became clear that the Government's action was wrong—not accidental or a bit bent around the edges, but wrong.
So what did the Government do? Did they come to the House and say, "We are terribly sorry, but we got it all wrong. We are sorry about that and we will put it right. We shall appoint independent trustees and return the money. We admit what we have done and we shall pay the money back with interest"? They certainly did not. It was not that simple. In effect, this bankrupt Government said, "We are hanging on to every damn penny before the general election. It is very simple. If you want your money back, you will have to sue us. You will have to sue us with taxpayers' money although it is taxpayers' money that needs to be returned." That is so outrageous and disgraceful that I can hardly believe that the Government are seriously suggesting it.
I know that the Government have no great moral commitment, but it would be nice if they took a moral stance in respect of such matters. The Minister is very nice and amiable. I am sure that he is a very honest fellow, but, by heavens, he has a funny Government sitting around him taking some very strange decisions. This morning I should like him to say, "Sorry about that, but we got it all wrong. Far from asking anybody to sue us, we shall rapidly bring the matter to a conclusion. We shall reimburse the individual who brought the case and appoint trade union trustees so that the interests of the work force will be covered in future. We apologise not only to the bus companies and their work force, but to the House of Commons." That would be a very unusual phrase for the Government to use, but it is extremely important. They should say, "We apologise because what we did was wrong. The ombudsman has said that it was wrong and we are sorry." If they did that, some of us would be so astounded that we might end up having seizures, but they would do something to restore the incredibly damaged standing of an incredibly tatty Government. When they do that, I shall come to the House and pay tribute to the Minister and his colleagues, but until then I repeat that the Government are guilty of the outrageous misuse of other people's funds and they should be ashamed.
§ Mr. Eric Martlew (Carlisle)
First, let me declare an interest. At the last general election I was sponsored by the Transport and General Workers Union, many of whose members belong to the pension fund that we are debating. I shall sit down if the Minister accepts the invitation offered by my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) to come to the Dispatch Box and promise to put the matter right today. He obviously does not wish to do so.
I have been in public life for 25 years. When I first entered public life, I was an angry young man. I am glad to say that I am still angry. My constituency is the hub of Cumberland and the south of Scotland for the bus companies, so many of my constituents have worked in the industry for many years. They were never paid a great deal of money even when the industry was nationalised. They now work for Stagecoach, and I suspect that they are paid considerably less. However, they provided an excellent service and they paid into the pension fund.
I have a letter from my constituent, Mr. Reay, who paid into the pension fund from its inception in 1974 until it was wound up in 1987. He expects the money that the 265 Government took illegally to be returned to him and the other 40,000 pensioners. He is right. Morally, the Minister has no argument.
The Government took the money illegally, and now they are delaying giving it back. Everyone in the Chamber realises that, when the case goes to court, the Government will be found to have acted illegally and the money will have to be paid back. There has already been a 10-year delay, and some pensioners have died. The Government have taken a cynical approach. They realise that, if they delay another two years, more pensioners will die. It is a disgrace. I am not as charitable about the Minister as my hon. Friend the Member for Crewe and Nantwich. He could get up and say, "We were wrong. The ombudsman said we were wrong and we shall pay back the money." It seems that that will not happen.
Before nationalisation, Carlisle had several bus companies—the Ribble, the United and the Cumberland—which were amalgamated into the National Bus Company. My constituents and 40,000 others paid into the pension fund. Now, we have a private monopoly, Stagecoach, which is now bidding for the Regional Railways franchise and the west coast main line. Stagecoach could end up with a monopoly on public transport in the region. Perhaps that is for another debate, but it is a significant consideration because Carlisle is a railway centre and there is concern that what has happened to the bus pension fund may happen to the railway pension fund.
The Government are not doing the honourable thing. The £168 million could come out of the Treasury's contingency fund. There would be no problem with that—such is the purpose of the contingency fund—but because the Government are deeply immersed in asset stripping other former nationalised companies, they realise that this could be the tip of the iceberg and that hundreds of millions of pounds might have to be returned to pensioners.
I have received many letters on the subject. Some are from traditional Conservative supporters who will not be voting Conservative at the next election. The Government are in their dying days. They could do something honourable before they go. After the general election, the Minister will not be dealing with the matter from the Dispatch Box. I certainly hope that an incoming Labour Government will resolve the matter. The Government have behaved like a very shady double glazing company—
§ Mr. Martlew
Indeed. The Government have taken the money without providing the service, and they have been caught out. Trading standards officers would write to any organisation that acted in such a way and say, "Look, you are wrong. You should give the money back." The Government are telling pensioners, "Yes, we are wrong, but we are not going to give you the money back. If you want it, you have got to sue us for it."
How can we expect any other organisation or private pension company that is found to be in breach of regulations by the pensions ombudsman to take any notice of such a judgment when the Government, who set up the 266 system, refuse to? The Government have undermined the ombudsman system. I hope that they realise that the significance of the matter goes far beyond the case before us. Other organisations will ask why they should take any notice of the system when the Government do not. The matter reminds me a little of the Deputy Prime Minister admitting that he used to delay his payments when he worked in the private sector. Such behaviour sets the wrong example to the rest of the country.
I am very angry, my constituents are very angry and there is no excuse for what has happened. There is no doubt that it is immoral. People who are not receiving a fantastic pension to start with have paid in money. They were low paid workers and they are receiving very low pensions—the standard of living of some of them is just above the social security level and actually saving the Government money. Why can the Government not accept that the money should be given back to the pensioners to enable them to spend their retirement in some comfort? The matter concerns people and the right thing to do. The Government are a disgrace.
Although we should not have needed today's debate, it has given the Minister the opportunity to put everything right and to be thought of as an honourable man who has done the decent thing. There are 40,000 people out there who would applaud him if he stood at the Dispatch Box today and said that the Government are wrong, that they are sorry, that the delay of 10 years is unacceptable, but that they will end the delay, put the matter right as soon as possible and ensure that the bus pension fund pensioners get the money that they deserve.
§ Ms Glenda Jackson (Hampstead and Highgate)
I apologise to you, Madam Deputy Speaker, the Minister and my hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara) for not being in the Chamber when the very first word in this extremely important debate was uttered.
I congratulate my hon. Friend not only on securing this Adjournment debate, but on being so instrumental in introducing for the very first time on the Floor of the House what, as my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) pointed out, can only be termed the debacle of the bus employees superannuation trust pension scheme.
I intend to be brief because much that needs to be said about the Government's drab, indeed squalid, treatment of the BEST pensioners and pensioners of other privatised industries has already been defined in passionate detail by the extraordinarily wonderful speeches made not only by my hon. Friend the Member for Kingston upon Hull, North but by my hon. Friends the Members for Crewe and Nantwich and for Carlisle (Mr. Martlew). They all spoke in great detail about what has produced this debacle—and with great passion on behalf of their constituents.
The pensions ombudsman's report into the handling of the BEST trust scheme prior to the privatisation of the National Bus Company makes grim reading. The ombudsman uses the phrase "a breach of trust" of which pension fund members were the victims. He refers to the then pension trustees as being "threatened" and of "big sticks" being wielded. He talks of "fraud" andan improper use of power",267 all with the Government's full knowledge and consent.
My hon. Friends the Members for Kingston upon Hull, North, and for Crewe and Nantwich referred to the role that the trustees have played. It is true that the ombudsman's report finds against them and the company. It is equally true, however, that Ministers were on hand as every threat was made, every ultimatum was issued and every amendment was made to the pension arrangements of up to 80,000 National Bus Company employees. It all occurred without the knowledge or consent of those employees.
My hon. Friend the Member for Crewe and Nantwich referred to insider trading. The activity defined in the ombudsman's report would normally be associated with the cut-throat City takeover battles of billion pound multinationals. Fraud, breaches of trust, threats and unlawful activity should have no part in the pension arrangements of men and women who, having worked hard all their lives, seek nothing more than security in their well-earned retirement. Let us be clear, the pensioners who are the subject of today's debate are not seeking charity. They are not scrounging. Nor are they asking for handouts. As employees of the former National Bus Company, they gave years of dedicated service, believing—indeed, trusting—that, having worked for their pension entitlements, they would be theirs by right.
We are engaged today in a debate on the bus employee superannuation trust not only because of the actions of the trustees or the company, but because of the actions of Ministers. My hon. Friend the Member for Kingston upon Hull, North said that this debate was not about the merits of privatisation, but he would agree with me that the Government's dogmatic dependence on privatisation and their antipathy towards anything prefaced by the word "public"—be it public transport, public good, public interest or public welfare—directly threatened the future of the BEST scheme. The Government's dogma of privatisation directly led to the activities described in the pensions ombudsman's report and resulted in a loss to the BEST pensioners of at least £168 million.
What did such a dogmatic policy of privatisation and deregulation, which cost the BEST pensioners so much, achieve for the bus industry and the passengers who depended on it? Bus wars on our streets, a 30 per cent. drop in passenger journeys and a 21 per cent. increase in fares. The policy was costly not only for BEST pensioners but for the entire country.
As hon. Members have said, not only have BEST fund members seen the pension fund that they worked so hard to build pillaged by the Government; there is the £30 million that has been removed from the National Bus pension fund, the £55 million from the National Grid employees' pension fund, the £55 million from the Rosyth dock workers, the £500 million from the British Rail pensioners' surplus—the list is almost endless. Time and again, the pension rights of Britain's workers have been used to sweeten the bitter pill of Tory privatisation policy.
Indeed, only this week, the dead hand of privatisation began to hover over the pension rights of another set of public transport employees. The London Transport pension fund is valued at more than £2.5 billion, and more than 90 per cent. of London Transport's 18,000 employees are members of the scheme, yet they too see the pension entitlements that they worked for under threat—not from the vagaries of the equities market, but from the Government.
268 In the light of the BEST beneficiaries' experience, what guarantees are there for the members of the London Transport pension fund? Will their fund be protected? Will any surpluses be safeguarded? It is not an exaggeration to say to every London Transport employee that the next time they see a Conservative poster with gleaming red eyes, they should remember the gleaming blue eyes that are focused on their pension fund. If the BEST pensioners could not trust the Government with their pensions, why should LT's pensioners?
What does it say about this Government that privatisation, the cornerstone of their political agenda over the past 18 years, had to be built on the ruined dreams of hundreds of thousands of public sector workers throughout the country? Ministers talk of privatisation as their great policy success, but what sort of success is it that cannot be guaranteed without depriving those who have worked all their lives for their country of the pension entitlements their country promised them?
Ministers talk of an economic miracle, but it would seem that the economics were based on that old miracle otherwise known as the three-card trick, with British pensioners as the victims. Those pensioners did not work exclusively for themselves. They were not the fat cats who donate so much to the coffers of the Conservative party. They did more than just table a couple of questions for a month's pay. In working for our nation's public industries, they worked for us all, for the entire nation.
The ombudsman's report on the BEST fund refers to a lack of trust. The trust those pensioners and other public sector workers placed in the Government that, once their work was completed, they could rest in comfort and dignity, has been grossly betrayed.
§ The Minister for Railways and Roads (Mr. John Watts)
Historians, like Opposition Members this morning, have the benefit of hindsight when commenting on past events. The House will appreciate that with litigation in prospect on the recent determination by the pensions ombudsman I have to weigh my words carefully in replying to this debate.
It may help the House if I describe the background to the decision taken in 1986 on the best way to protect the accrued pension benefits of NBC employees.
The bus employees superannuation scheme was what is called a defined benefits scheme: that is, the rules of the scheme defined the benefits that are expected to be payable to the member. It is important to note that, even in a defined benefit scheme, the benefits for employees specified in the rules are not unequivocally guaranteed by the employer. The trust deed and rules of the typical defined benefit scheme allow the employer to refrain from paying contributions that cannot be afforded or are higher than necessary.
The unilateral right of the employer to suspend or terminate contributions to the scheme is necessary, not only because of the risk of the company being faced with severely unfavourable circumstances but because of the risk that the trustees might demand a higher level of contributions than was reasonable.
The privatisation of the NBC 10 years ago differed from earlier transport privatisations in that it involved the privatisation of a nationalised industry into a large number 269 of separate units, rather than as a whole. The NBC had two pension funds. The larger of these, covering the majority of NBC employees, was called the bus employees superannuation trust and is the subject of the pensions ombudsman's recent decision. The funds had built up large accrued liabilities in respect of employees' past service with the NBC or its predecessor companies.
There was great debate and concern during the passage of the Transport Act 1985, and during discussion of the detailed arrangements for the privatisation, about how these accrued benefits for past service would be secured. The question was, following the demise of the NBC, who would stand behind the funds if they had insufficient assets at some future date to secure benefits or—if the funds were not to be continued—what alternative arrangements should be entered into to secure benefits.
As some hon. Members will recall, there were strong demands for the Government to give a formal guarantee of the funds. To have done that would have meant that the Government assumed a greater responsibility for the fund than the employer had done in the past.
However, the Government recognised the strength of feeling behind the demands and the need to provide reasonable protection for members' accrued benefits. There were lengthy discussions in which the NBC, the trustees of the funds—including trade union representatives—and the Government all took part and in which all sides had the benefit of legal and actuarial advice in considering the options for achieving that aim.
In those discussions the Government offered an undertaking, which, though short of a formal guarantee, would involve the NBC making funds available to cover any deficiency in the fund at the date it was wound up following an actuarial valuation on a reasonable and prudent basis.
Against that background, a number of options were considered at the time, including for example the possible continuation of the funds as "closed funds". The point to note about a closed fund is that there is no employer standing behind it with the consequent risk that the assets of the fund have to stand alone in meeting its liabilities.
We should bear it in mind that the trustees in 1985–86 were faced with great uncertainty about how far the fund's assets would be sufficient to meet its obligations to members. Although an interim valuation of the fund, available to the trustees at the end of 1985—just before the relevant decisions—indicated the possibility that the fund was moving into surplus, the last full formal valuation, available at the beginning of 1985, had shown the fund to be in deficit.
It is not unreasonable or surprising that the trustees in making their decisions placed great value on arrangements which secured members' accrued benefits against these uncertainties.
A clear and very relevant illustration of the general uncertainty the trustees faced is what might have been the consequences for the fund of the stock market collapse of October 1987, when the value of equity investments fell by 30 per cent. Fortunately for the bus employees fund it had already changed the emphasis of its investment policy 270 from equities to index-linked gilts, but only as a consequence of implementation of the 1986 decisions and ahead of the purchase of insurance.
§ Mrs. Dunwoody
I am interested in this argument because the Government used the closed fund without any difficulty in certain other privatisations. Is the Minister really suggesting that it was not made clear by the Government to the trustees that if they did not accept what was on offer, the Government would cease to pay the contributions? If that was the case, was that not simply straightforward blackmail?
§ Mr. Watts
Not at all. The trustees had the option of taking the view that the fund would have adequate assets to meet its liabilities and to continue it as a closed fund. However, as I have been explaining, because of the uncertainties about the fund's ability to cover the future liabilities, the trustees opted for the insured option which guaranteed the accrued benefits for members of the fund, to their advantage.
Those concerned in 1986 concluded that the balance of advantage was with an option which involved using the fund to purchase annuities from an insurance company. That meant that an insurance company would assume the obligations of the two funds, including the payment of pensions to individuals, in return for a capital payment from the funds' assets.
The insurance option was therefore explored. One of the further issues that had to be considered was the basis of indexation of accrued benefits up to the point when the pension was in payment. The existing rules of the bus employees superannuation trust provided for indexation on the basis of equivalence to changes in national average earnings. However, there was great uncertainty about whether insurance companies would be willing to underwrite at any realistic price insurance on that basis because of the uncertainty it involved.
It was possible to envisage insurance on the basis of indexation linked to a formula of retail prices index plus a specific figure, which might turn out in practice—as did turn out generally to be the case—to be as beneficial as, or even more beneficial than, a link to national average earnings.
I can now outline for the House the main elements of the agreement, the deal or the scam, as Opposition Members have described it, reached between the trustees of the fund, the NBC and the Government in 1986. It had four essential elements: the accrued benefits of members would be secured by the purchase of insurance and the fund would be wound up; to facilitate the purchase of insurance, the rules of the fund would be changed to provide for indexation of accrued benefits at RPI plus 2.25 per cent., if insurance on that basis could be purchased more cheaply than insurance on the basis of a link to earnings; the Government's undertaking, which I have already mentioned, to make good any deficiency in the fund at the date of wind-up; and finally, and crucially for subsequent events, it was agreed that that undertaking would be balanced by a change in the fund's rules which 271 provided that should there be a surplus in the fund at wind-up, that surplus would be paid to the NBC and thence to the Government.
§ Mr. Martlew
Why was it necessary to include a clause to provide that any surplus should go to the Government rather than the pensioners?
§ Mr. Watts
It was necessary because otherwise the agreement would have been a one-way bet at the expense of the taxpayer for the pensioners involved in the fund. In that case, if the fund was in deficit, the taxpayer would step in and provide funds, but if the fund was in surplus—having already secured the accrued benefits by insurance—that benefit would also go to the pensioners. That would have meant the Government stepping in—as the hon. Member for Crewe and Nantwich (Mrs. Dunwoody) said—and using the taxpayer's money to secure greater benefits for the pensioners than had ever been available to them under the original terms of the scheme.
§ Mr. McNamara
Surely the whole point at issue is that the agreement would not have been necessary had not the Government set out on their course of action. Under the old scheme, it would have been possible for the trustees to go back to beneficiaries and the contributors and say that they were in difficulties and then the problem would not have to be dealt with in such a way. That option was removed by the Government's decision to privatise. In fact, it is the Government who are on a two-way bet in their favour, not the beneficiaries.
Is the Minister saying that he does not accept the ombudsman's statement that there was a fraud and that the trustees were subject to coercive action by the Government? In that case, he is saying that he does not accept the ombudsman's findings.
§ Mr. Watts
It is precisely because we do not agree with the decision of the pensions ombudsman that we believe, and are advised, that there are important matters to be considered at law and that is why we have acted as we have. The hon. Gentleman is right to say that if we had not privatised NBC, none of the changes would have been necessary, but he must accept that the trustees, in fulfilling their obligations to the members of the fund, had to take as a given the fact that the industry was being privatised, and that NBC—the employer that had been contributing to the fund—would no longer exist and, therefore, had to agree arrangements that secured the benefits for pensions in payment and for those whose pensions were deferred.
§ Mr. McNamara
The ombudsman found that the Government effectively told the trustees to accept the conditions or the Government would not make contributions. He did not find that the Government were not capable of making contributions.
§ Mrs. Dunwoody
Before the Minister moves on, will he spell out again exactly what he said—that he does not agree 272 with the ombudsman's decision? That statement is more important than even some of the details we are now discussing. Is he really saying that a Government Minister does not accept the independent opinion of the Parliamentary Commissioner, commonly known as the ombudsman, whose office was set up to examine independently the behaviour of Government Departments? If that is the case, it is even more important than the misappropriation of funds for bus pensions, because the Government would be setting a precedent that could cause them enormous difficulty.
§ Mr. Watts
The decision that the pensions ombudsman made was directed to the trustees. I advance no opinion on the decision that the ombudsman reached regarding the trustees, but I do not accept the varied and wild accusations that have been made by Opposition Members today that the Government are guilty on the basis of the ombudsman's findings about the conduct of the trustees. Important legal issues remain to be resolved and, in our view and on advice, we believe that they are best resolved in the courts.
§ Mr. Watts
The trustees in question are those who were the trustees of the NBC fund, not the trustees appointed after the dissolution of NBC. They comprised representatives of the management of the company and of the trade unions. I cannot give the hon. Gentleman a detailed list at the moment, although if he would like that further information I will seek to secure it for him and I will write to him.
§ Mr. McNamara
Under the terms of the privatisation, did not the Government accept all the responsibilities for 273 what went before? Those were the terms. The Government accepted all the liabilities and all the responsibilities in the Bill. Therefore, the Government stand as accepting the responsibility for the fraud on the beneficiaries and the coercion of the trustees.
§ Mr. Watts
I find that an extraordinary argument. The Government accepted that they would guarantee that the fund at its dissolution had sufficient money to secure the benefits due to existing pensioners and to those who had an interest in deferred pensions. I refute the hon. Gentleman's comments absolutely.
The House will want to note that the aim of the agreement was to secure members' benefits on a satisfactory basis—in short, to provide security for pensions in payment and deferred pensions and certainty for the trustees in the discharge of their responsibilities. It is important to recognise that the agreement achieved that aim. There is no question of the agreement being a pretext for a raid on the funds, because—at the time the decisions had to be made—the most recent complete valuation had shown the fund to be in deficit. It was because of the uncertainty in the minds of the trustees about whether the fund had adequate assets to meet its future liabilities that they sought to reach an agreement with the Government on the best way to secure those benefits.
It is also important to note that the agreement balanced the Government's undertaking—that, in the event of a deficit, the scheme would be placed in funds—with a mechanism, through the rule change on the use of a surplus on wind-up, to ensure that safeguards would be in place to ensure that the taxpayer did not take on a liability only to find that the fund was in surplus. That was a prudent and reasonable safeguard and, if it had not been put in place, the pensioners would have enjoyed a one-way bet at the taxpayer's expense. It was agreed at the time that the mechanism was an appropriate element in the agreement and achieved the aim of securing members' accrued benefits.
I find it difficult to accept any argument that the members of the fund were the losers from this agreement. On the contrary, they gained the security and the certainty that represented, and a basis for the indexation of accrued benefits which—as it has turned out for the vast majority of members—have been more generous than would have been the case if the link had just been to national average earnings.
The agreement that I have just described was set out in a statement to NBC employees in June 1986. It was signed on behalf of the company by its chairman and on behalf of the trustees of the two pension funds by the chairman of the NBC pensions committee—on which, of course, there were union representatives. That statement outlined the belief of the NBC and the trustees that the arrangements entered intowill provide the necessary protection for payment of accrued benefits—including the attaching index-linking".The statement also explained the factors that underlay the agreement reached. I refer in particular to two of the points made there. The statement refers to NBC's obligation to the Government—in effect, its obligation to the taxpayer—not to fund surpluses in the funds in the period running up to NBC's dissolution. It also refers to 274 the trustee's recognition of the volatility of the market value of investments securing the benefits provided by the funds, the obligation resulting from the fact that benefits were index-linked and the fact that NBC itself was to be dissolved in a relatively short period. That sums up the kernel of the agreement—it balanced the obligations of all the parties involved, and it balanced security for members' accrued benefits on a satisfactory basis with the, at that time, uncertain possibility of a surplus in the fund being available for payment to the NBC.
I shall now move on to subsequent events. Following the agreement that I have just described, bids were invited from insurance companies. As a result, the liabilities of the funds were covered through insurance with Standard Life, who took on responsibility for the payment of pensions to individuals, and the funds themselves were wound up. I should emphasise that these liabilities have been, and continue to be, met in full.
The House will recall that, in the second half of the 1980s, there was a period of general growth in investment income. The assets of the bus employees superannuation trust were part of this general growth. As a result of this and other factors, the fund at wind-up was in substantial surplus. Under the agreed rule changes that I have already described, a surplus of £103 million after tax was paid to the NBC and passed to the Government in 1990. Some time later—in 1992—a complaint was made to the pensions ombudsman alleging that the trustees of the fund were in breach of trust and not acting in the members' best interests in entering into these arrangements.
It is this complaint that the pensions ombudsman has recently upheld, and following that decision, he has directed the trustees to take all practicable steps to obtain the return of the moneys received by my Department from the bus employees superannuation trust. It is important to note that his determination was directed to the trustees and makes clear that he has not carried out an investigation, nor made a determination, with respect to the National Bus Company or my Department.
Since the Department was not a party to the determination, the option was not available for the Government themselves to test its validity at law by appealing against it to the High Court. Instead, following the determination, the trustees wrote to the Department to ask for our proposals for repaying the surplus or, if the Department was not prepared to repay the surplus, for financial resources to seek its recovery through the courts.
This is not the time nor the place for the detailed legal arguments about the basis for the pensions ombudsman's decision, but, following the approach from the trustees, we have taken legal advice on the complex issues raised by the determination. This is a changing and developing area of the law. Judgments made since 1986—when the decisions I have outlined were made—may have to be taken into account. However, the advice available to us is that there are good grounds for seeking to put these matters before the courts.
Given that advice, it is our duty to taxpayers—who would have to provide a very large sum if the pensions ombudsman's view were upheld—to ensure that the legal doubts about the justification for repayment of the surplus are fully resolved. With the funds wound up, the trustee company has no resources of its own to pursue litigation. As announced in a written answer to the House on 27 November, we have offered to pay the legal costs of 275 the trustees should they wish to pursue through the courts a claim for repayment, and they have recently replied that that is indeed what they wish to do. I give the hon. Member for Kingston upon Hull, North an undertaking that we are not imposing, nor seeking to impose, any delay in those proceedings. It would not be appropriate for us to indicate what we think the timetable should be—that is matter for the newly appointed trustees—but we shall do everything we can to facilitate an early resolution of the matters.
I hope that the legal action now in prospect will as speedily as possible provide a definitive resolution of these matters which can be seen as fair and reasonable. I believe that I have set out the reasons why the Government take the view that the arrangements entered into in good faith by NBC, the Government and the trustees of the fund in 1986 were for the purposes of protecting the interests of pensioners, that the arrangements have secured that objective and that the pensioners have received a better benefit from the fund under the arrangements entered into than if the fund had continued with its existing rules or as a closed fund.
I hope that the House will now understand why I did not accept the invitation—tempting though it was—to merely come here, say sorry and receive accolades from Opposition Members, but rather state that the matters should be considered by the courts. I am sure that when the courts make a decision, it will be important for pensions law in general. I have every confidence that that is the right course of action for us to take.
§ 12.5 pm
§ Mr. Eddie Loyden (Liverpool, Garston)
I doubt very much that the House will be convinced by the Minister's remarks. It was brought home to him by my hon. Friends that the Government undoubtedly were guilty, but he made no reference to the fact that the ombudsman found that the Government were responsible and made no attempt to argue the Government's case. Why has the Minister ignored the pleas from Opposition Members to meet the Government's obligations to the pensioners? That is typical of this Government.
I wish to point out to the Minister that those pensioners recently lobbied the Department of Transport to meet the Secretary of State. They stayed there for more than half an hour, but he sloped out of the building at the end of the day without meeting them. That shows how the Government react to the rights of working people and, in particular, to the issue of pensions. We have heard today a weak excuse from the Government, who are trying to avoid their responsibility and to ignore the advice given by the Parliamentary Commissioner. That sums up what the Government are about, and they ought to be condemned for the way in which they have dealt with this problem.
I declare an interest as a member of the Transport and General Workers Union.
§ 12.7 pm
§ Mr. Max Madden (Bradford, West)
First, I apologise for not being here for the beginning of the debate. That was partly due to the fact that the debate started earlier than scheduled. The debate is due to continue until 12.30 pm, and I wish to make some brief comments. Since I have been in the Chamber, I have shared the 276 dismay and concern of other hon. Members at the attitude demonstrated by the Minister to the decisions of the pensions ombudsman. It is without precedent, and quite shameful, for a Minister to come to the House and say that he is unwilling to accept the independent judgment of the pensions ombudsman. As I understand it—and as my hon. Friend the Member for Kingston upon Hull, North (Mr. McNamara) said earlier—the pensions ombudsman said that in this matter the Government had acted in a fraudulent manner.
The Minister seemed extremely reluctant to admit that the trustees of the fund were appointed by the Secretary of State for Transport immediately after privatisation. He is busily trying to shift responsibility away from where it should lie—squarely with the Department of Transport.
Lengthy litigation would create a considerable cost not only for the general taxpayer but for the bus pensioners, who are owed money but will have to contribute to paying for the expense forced on the nation by the Government's unwillingness to accept the independent judgment of the pensions ombudsman that the money should have been paid years ago.
I hope that the Secretary of State will not confirm the view expressed by the Minister but will consider the matter for himself. Is it the most prudent use of public money for the matter to be put before the courts? I believe that it is not.
The Minister has plenty of time—another 20 minutes—and I would be extremely grateful if he would tell us the expected cost of the litigation. How many hundreds of thousands, if not millions, of pounds will it cost? There are ramifications for other public industries. I understand that there are British Rail pensioners in precisely the same position, and there are important implications for other public sector industries that have been privatised as a result of the Government's dogmatic policies since 1979.
The chickens are coming home to roost, and unfortunately the cost is again falling on British taxpayers. The Government have lost those important public assets and they want to rip off British taxpayers for a second time by making them pick up the costs of legal action over matters that were an integral part of the legislation that was forced through the House some years ago with Government majorities of 100, ignoring all the criticisms and warnings from Opposition Members.
At that time, the Government, with their usual arrogance, steamrollered through those matters, ignoring every constructive criticism and legitimate question put by Opposition Members. As a result of that arrogance, the Government have some apologising to do. The Minister apologised to us for not apologising. I believe that not only the Minister but all his predecessors and successive Secretaries of State should do more than apologise: they should act on the independent advice of the pensions ombudsman.
There is no need whatever for litigation. The ombudsman's view should prevail and the money should be paid to those former bus employees who are undoubtedly entitled to it. That should be announced by the Secretary of State as a matter of urgency before the general election.
The Government should not shuffle off responsibility yet again. The litigation may not be resolved for years, so the Bill will fall not on this Government but on the next Labour Government. In the best interests of the British 277 taxpayer, British transport and the pensioners who used to work for those important public services, the Secretary of State should announce today that, having considered the matter and listened to the views expressed in this debate, he has decided that legal action is not necessary and that the money should be paid promptly, expeditiously and in full. That would be the sensible and honourable thing to do.
I declare an interest as a member of the Transport and General Workers Union, to which many of the former bus employees also belong. Like my hon. Friend the Member for Liverpool, Garston (Mr. Loyden), I attended the lobby at the Department of Transport in December with a large number of those former employees, who were eager to talk to the Secretary of State. Instead of having the guts to talk to us and explain why the Government were refusing to hand the money back, the right hon. Gentleman bowled through the lobby, undoubtedly to some chauffeur-driven lunch somewhere in the west end, where he would not be required to offer explanations for incompetence and dishonourable action.
I hope that the decision to embark on costly and lengthy litigation will be abandoned and that, as a matter of urgency, the pensioners will be paid the money to which they are undoubtedly entitled.
§ Sitting suspended.