HL Deb 19 May 1980 vol 409 cc651-720

House again in Committee.

Clause 38 [Initial government holding in successor company]:

Lord MISHCON moved Amendment No. 148: Page 36, line 8, at end insert (" and the Minister or his nominees shall at all times retain such a proportion of the said securities as shall give to the Minister a controlling interest by way of having a majority of voting power in the successor company ").

The noble Lord said: I wonder whether the Minister, having had a very well deserved but short respite, will look rather more favourably at this amendment than he otherwise would have done. I wonder whether the Committee can persuade the Minister and those who support him that, having achieved the main aim of the Bill— namely, that the National Freight Corporation shall be transferred to a successor company— and having achieved the opportunity for the private sector to invest in the successor company, it is the element of doctrinaire thinking carried to the absolute extreme not to retain at least voting control in the hands of the Government on behalf of the nation. The National Freight Corporation has over 30, 000 employees. Its assets are very considerable. At 31st December 1978 they amounted to £ 183 million. The corporation earned fervent praise from the present Minister when he did not hold his present exhausted position—




I am so sorry; I am corrected by my noble friend. I said "exhausted" position. I was thinking of the noble Lord, Lord Bellwin, when I used that word. I meant "exalted" position when I referred to the right honourable gentleman Mr. Norman Fowler.

I have specially worded the amendment so as to relate to the control of voting power— though the parliamentary draftsman might improve upon the wording— and not to 51 per cent. of the shares. I have done that on purpose so that there could be an issue of shares to the private sector, which would retain all the rights to dividends, profit and so on and would therefore encourage investment. But at least in the national interest the control would be vested in the Government, who would have the right to see what kind of board there was, and how the employees were protected. Indeed, the Government would even know how many people there were in the research department and in those circumstances might be rather more concerned about their future. What I suggest seems to be the right thing to do.

I hope that the Government do not wish to go down an extreme doctrinaire road and say, "Oh, no, it isn't just a question of denationalising or of giving free enterprise the opportunity. We are going to see that the nation has nothing to do with the running of what was a very successful enterprise in the past". It is in that spirit that I beg to move the amendment.


I cannot help feeling that the noble Lord, Lord Mishcon, is inadvertently misleading himself on this amendment when he refers "merely to retaining" voting power in the successor company. Surely, the voting power is the power when it comes to considering a company. To try to divide the voting power in terms of, say, the rights of interest in profits or capital interest is not possible, because those who have the voting power can always vote away the financial interests, be it by way of profits, dividend, or capital interest of the future shareholders.


I am sure that the Committee is not prepared to have a discussion on company law, which would bore it, even though the subject may be of interest to the noble Lord, Lord Morris, and myself. Quite obviously there is nothing to prevent the inclusion of a provision that the memorandum and articles of association cannot be altered unless a certain number of votes is cast— say, 75 per cent. Therefore, it is possible to include in the original memorandum and articles of association what are the rights of profits for the various holders of shares, and that is unalterable unless some other shareholders go in with those who have 51 per cent. of the voting control. I do not wish to continue this argument with the noble Lord, Lord Morris, but he may take it from me— I hope that he will— that it is quite possible to secure the rights of shareholders to dividends and profits as set out in an original memorandum and articles of association and still have 51 per cent. of the voting control.


If it is doctrinaire to wish to transfer control of the NFC firmly, fully and irrevocably to the private sector, then surely it is equally doctrinaire, from the other point of view, to wish to retain it as it is at present, or to retain a control. I take the last point of the noble Lord, Lord Mishcon; it is quite right by itself. However, in the context of what we are discussing here I consider that the point made by my noble friend Lord Morris is apposite.

I should not have mentioned this particular matter again today, but in view of the fact that the noble Lord very kindly has given me the opportunity so to do, I think that both he and the noble Viscount, Lord Simon, will be interested to learn that I now do know the number of NFC people employed on R and D. The fact is that there are no people employed full-time on R and D by the NFC. I think that that information will comfort the noble Viscount, Lord Simon, in that he will not have to be too worried about what will happen to those people. It may not comfort the noble Lord, Lord Underhill; but nor will it dismay him.

I should now like to proceed to try to answer the other points that the noble Lord, Lord Mishcon, made regarding the amendment. I do not wish once again to go over the Second Reading arguments, but I am convinced that there is no justification at all for state involvement in road transport, cold storage, removals, travel et cetera. As we see the matter— not in the same way as noble Lords opposite see it, yet equally categorically and clearly— state ownership has denied the NFC management the commercial freedom which is open to private sector firms. It has shielded them from the rigours of commercial disciplines, and the overall result has been a history of financial losses and commercial mistakes, the burden of which has been borne by the taxpayers. Thus, it is clearly in everyone's interest— that is, Government, taxpayer, and not least the NFC itself— to get the corporation out of the public sector altogether. The amendment proposed thus stands entirely in the way of Government policy. It is quite fundamental, and we must therefore oppose it.

Viscount SIMON

I have a good deal of sympathy, not with the principles of nationalisation, as the noble Lord, Lord Mishcon, knows, but for some provision by which the interest of the State could be in some way preserved, simply because they have the responsibility of having built up, through this organisation, this very considerable business with, as the noble Lord said, a large number of employees. I think he gave the number, but I do not remember what it was.


It was 35, 000.

Viscount SIMON

It is not at all unusual, I think, when an ordinary Companies Act company, to which the noble Lord, Lord Bellwin, referred, takes over another company, that some guarantee is given as to the employment of the staff of the company. I am just wondering whether there is any provision by which this can be safeguarded when the appointed day comes. The difficulty as I see it— and I speak entirely subject to correction, because I do not know the intricacies of the law— is that they will presumably be offered employment by a new company, but, as it is a new company, they will have to start all over again their period of service before they are entitled to redundancy payments if they are put off. Is there some arrangement— I have not discovered it anywhere in the schedule— by which the existing employees of a company are protected, or can the new company, acting according to their commercial judgment, just get rid of them all? This is the sort of question which worries me a little.


I am open to correction here, but I would have thought that there was no question of the danger which the noble Lord mentions. If the employment is taken over by a successor company, or another company, then they certainly also take over the responsibilities to the employees of that company as regards redundancy or whatever. I would have thought that that was absolutely so.


Perhaps I may briefly intervene, because I think the noble Lord said that one reason why the Government wanted to change their policy on the Freight Corporation was because it has made so many losses over recent years. I have been looking quickly at the report of the Freight Corporation for the last 12 months. There was a trading profit in 1978 of £ 20.1 million. This was an increase of £ 9.6 million over the previous year. Profit on trading has risen by some £ 30 million over the past three years. I believe that some five years ago there was a loss, but ever since, due to their forward-looking policy and forward-looking management, there have been consistent profits. Therefore, that appears to be a very bad argument that the noble Lord has put forward.


I would not think

it was a bad argument. I would suggest that the profit to which the noble Lord has just referred is the gross profit. Whether or not that is the profit before taking into account interest and other charges, I would very much question because my information is that the company is now breaking even overall. But I should like to say that, if it is breaking even or making a profit, then it is to the credit of all concerned, because it is in spite of the limitations which its present status imposes upon it, certainly not because of this; and I am sure that this will not be overlooked as a potential and possibility by the prospective purchaser.


I make only a brief comment, and it is this. I hope that nobody will be voting upon this matter, if a vote is in fact necessitated, on the basis of whether or not there is profit or whether or not there is redundancy. I think it is a general question of the need to have control of this corporation in the national interest by at least the percentage that I mentioned. I therefore hope that the Committee will feel that that is a principle that they ought to endorse. It is not one, I beg to assure the noble Viscount, which embeds within it the principle of nationalisation. That is not so at all; it is the very principle that I remember the noble Lord, Lord Lloyd of Kilgerran, mentioning on Second Reading was one with which he had the utmost sympathy.

8.15 p.m.

On Question, Whether the said amendment (No. 148) shall be agreed to?

Their Lordships divided: Contents, 31; Not-Contents, 64.

Bacon, B. Gosford, E. Ponsonby of Shulbrede, L. [Teller.]
Blease, L, [Teller.] Hale, L.
Boston of Faversham, L. Hall, V. Rhodes, L.
Brockway, L. Houghton, of Sovverbv, L. Stewart of Alvechurch, B.
Cledwyn of Penrhos, L. Kaldor, L. Strabolgi, L.
Collison, L. Lee of Newton, L. Taylor of Mansfield, L.
David, B. Llewelyn-Davtcs, L. Underhill, L.
Davies of Leek, L. Lovell-Davies, L. Wells-Pestell, L,
Donaldson of Kingsbridge, L. Maelor, L. Whaddon, L.
Elwyn-Jones, L. Mishcon, L. Wynne-Jones, L.
Glenamara, L. Peart, L.
Abinger, L. Balerno, L. Brougham and Vaux, L.
Airey of Abingdon, B. Bellwin, L. Caithness, E.
Ampthill, L. Belstead, L. Campbell of Croy, L.
Chesham, L. Gridley, L. Mowbray and Stourton, L.
Cockfield, L. Grimston of Westbury, L. Murton of Lindisfarne, L.
Cork and Orrery, E. Hampton, L. Orkney, E.
Craigavon, V. Hatherton, L. Orr-Ewing, L.
Craigmyle, L. Henley, L. Reigate, L.
Cullen of Ashbourne, L. Hereford, V. Renton, L.
de Clifford, L. Hornsby-Smith, B. Sandys, L. [Teller.]
De Freyne, L. Kilmany, L. Sharpies, B.
Denham, L. [Teller.] Kilmarnock, L. Simon, V.
Drumalbyn, L. Kimberley, E. Skelmersdale, L.
Ellenborough, L. Lloyd of Kilgerran, L. Swinfen, L.
Elliot of Harwood, B. Long, V. Teviot, L.
Faithfull, B. Lyell, L. Trefgarne, L.
Ferrers, E. McFadzean, L. Trenchard, V.
Fortescue, E. Macleod of Borve, B. Trumpington, B.
Gainford, L. Margadale, L. Vaux of Harrowden, L.
Glasgow, E. Morris, L. Vickers, B.
Godber of Willington, L. Mottistone, L. Wigoder, L.
Gowrie, E.

Resolved in the negative, and amendment disagreed to accordingly.

[Amendment No. 149 not moved.]

8.23 p.m.

Lord MISHCON moved Amendment No. 150:

Page 36, line 8, at end insert— (" () The securities which the Minister or his nominees determine should be offered for sale shall be in respect of the whole of the successor company and not of a subsidiary of the successor company").

The noble Lord said: I have the idea that the Committee may be in the mood for short speeches at this stage, and I therefore propose to make one in regard to an important amendment which deals with ensuring that the securities which the Minister determines should be offered for sale shall be in respect of the whole of the successor company and not a subsidiary of the successor company. I believe the best way of making a short speech— and, hopefully, an effective one— is to deliver to the Committee three short quotations, one from the Minister— and I am quoting from col. 1129 of the Second Reading debate on 27th November. … we are not going to be selling off individual NFC subsidiaries to the highest bidder. The whole purpose of this Bill is to enable us to sell shares in the enterprise as a whole. We want it to go into private ownership as a single entity, without any major change in size or range of interests ".

Mr. Higgins, a fervent and informed member of the party opposite on matters of transport, said in column 1190 that it was not right to break up the NFC and, if broken up, that it would have: … a traumatic effect on morale and [would discourage] senior management. The NFC would not [be] given a fair chance. The Minister has the right approach … [The employees] are concerned about their long-term job prospects".

My last quotation is from the speech of the Parliamentary Secretary in the Second Reading debate (in column 1243): We believe that the corporation makes sense as a whole. We are therefore selling it as a corporation and we are resisting pressures to sell off Pickfords and so on ".

I could not have said with more expressive power what this amendment seeks to achieve: namely, that it should be sold off as an entity, and not to the detriment, I am quite sure, of the nation, in bits and pieces. In those circumstances, I commend the quotations of the three representatives of the Government and look forward to being able to quote my noble friend Lord Bellwin (if I may so term him) as a fourth proponent of the same principle and therefore in favour of this amendment.


The noble Lord, Lord Mishcon, may quote me as a disciple with exactly the same views; but that is not to say that, because of that, we feel the amendment is necessary. The essential purpose of the Bill is to enable shares in the successor company to be sold to investors with the aim of transferring control of the enterprise as a whole to the private sector. The Government have repeatedly made it clear that they have absolutely no intention of bringing about separate disposal of subsidiary companies. But, in any case, the shares of the subsidiaries will be held by the successor company rather than by the Minister.

It is not possible to say whether at some future date the new company will wish to dispose of or acquire subsidiaries. At present, there seems no reason to forecast any disposals. Transfer of ownership of subsidiaries is a normal business activity in which the National Freight Corporation has already been involved. There is no difference at all between what the noble Lord, Lord Mishcon, is suggesting and what the Bill says. There is no necessity at all for this amendment.


There is nothing in the Bill which secures the principle of the amendment. I would remind the noble Lord that this amendment has nothing to do with endeavouring to stop the sale of subsidiaries in the years ahead. The amendment is quite specific. It says that the securities to be offered for sale shall be in respect of the whole of the successor company and not of a subsidiary ". And these are the securities which the Minister or his nominees will be selling. Therefore, it will be entirely in the Minister's hands. As I understand it— and I do not want to predetermine what the noble Lord may be about to say now— if the noble Lord is saying that this is a principle which the Government adopt, then one only wants to be able to give security to the employees (and to the nation, I may say) by having this properly incorporated in the Bill. I repeat that I am merely dealing with what the Minister does and not with what the future shareholders do.


I must confess I am not entirely with the point. The amendment, as I understand it, would add a new subsection to Clause 38 restricting the way in which securities of the successor company are offered for sale. The proposed subsection would stipulate that the securities offered for sale must be of the successor company and not of any of its subsidiaries. We are talking about the intentions of the Government in selling the NFC to the successor company. The quotations that the noble Lord read out, and which I have confirmed tonight, make it clear that that is the intention: that it will be sold to the successor company as a whole entity. But the amendment goes on to restrict the way in which shares of the successor company are offered for sale. That was not the same thing. I think our intention is the same; but as I understand the way in which the amendment is worded— and I am open to correction— it could mean that slight difference, which is all-important.

Viscount SIMON

With great respect, there is no question of selling something to the successor company. The successor company is created and then shares in the successor company are offered for sale. The object of Lord Mishcon's amendment is simply that they are offered for sale as they stand as shares in the company and not as shares in subsidiaries held by the company.


I am much obliged to the noble Viscount. That is quite right. When one figures through a process of course that is absolutely right. That is exactly the way it is intended. I still make the same point: namely, the amendment is not necessary because the intention is, as I have said, that the company be disposed of as a whole, in its entirety. Those were the quotations which the noble Lord read out and with which I concur.


I hope the noble Lord will be patient with me. If he concurs with every word of the amendment and merely has the point that it is unnecessary, I hope that in those circumstances he will not dream of opposing it. If intentions expressed in either House of Parliament were all that was necessary in order to govern the future events of this nation, there would be no point in having Bills or Acts of Parliament.

All I am trying to do is to enshrine in the Bill something which the Minister said he intends to do; the Parliamentary Secretary in another place said he intends to do; and the Minister has repeated both on Second Reading and now that the Government intend to do. I merely wish to give the security to everybody to see it in the Bill. I take it from what the Minister says that he does not oppose it being in the Bill.


There is a difference here, a difference of interpretation or understanding. The fact is that the Minister will never own any shares in the subsidiary company at all. Therefore, there can be no question of his disposing of them. Maybe that is where we are at slightly cross purposes. The shares will be held by the successor company, not by the Minister. I would have thought that was it. What I will say is that if it should prove to be based upon what the noble Lord has said— I cannot accept the amendment as it is— that the effect of the amendment will be the same as the Government's intention, while my understanding is that it is not, of course I will come back with it to the noble Lord.


The Minister is saying— this is how I have understood him— that if the amendment on further consideration means what I have said it means tonight, then it will be an amendment that will be accepted by the Government; if it is capable of another interpretation he may have to have second thoughts. If that is the understanding between us, then I am perfectly prepared not to press the amendment tonight and to see exactly

[Amendment No. 151 not moved.]

Clause 38 agreed to.

how on further examination the Minister finds his interpretation on advice.


Not quite. On that basis, I could not accept it. The basis is the one that I have said. If it should prove to be that the wording of the amendment means contrary to what I think it means, that it in no way inhibits the Government's intentions in this matter, then of course we shall accept it. But only if it should do that. I will gladly say, as I said a moment ago, that of course we will look at it.

8.35 p.m.

On Question, Whether the said amendment (No. 150) shall be agreed to?

Their Lordships divided: Contents, 35; Not-Contents, 63.

Bacon, B. Hale, L. Rhodes, L.
Blease, L. Hall, V. Sefton of Garston, L.
Boston of Faversham, L. Houghton of Sowerby, L. Simon, V.
Brockway, L. Kaldor, L. Stewart of Alvechurch, B.
Cledwyn of Penrhos, L. Lee of Newton, L. Strabolgi, L. [Teller.]
Collison, L. Lloyd of Kilgerran, L, Taylor of Mansfield, L.
David, B. Lovell-Davis, L. Underhill, L.
Davies of Leek, L. Maelor, L. Wells-Pestell, L.
Donaldson of Kingsbridge, L. Mishcon, L. Whaddon, L.
Elwyn-Jones, L. Peart, L. Wigoder, L.
Gaitskell, B. Ponsonby of Shulbrede, L. [Teller.] Wynne-Jones, L.
Glenamara, L.
Gosford, E.
Abinger, L. Elliot of Harwood, B. Margadale, L.
Airey of Abingdon, B. Faithfull, B. Morris, L.
Ampthill, L. Ferrers, E. Mottistone, L.
Auckland, L. Fortescue, E. Mowbray and Stourron, L.
Balerno, L. Gainford, L. Murton of Lindisfarne, L.
Bellwin, L. Glasgow, E. Orkney, E.
Belstead, L. Godber of Willington, L. Orr-Ewing, L.
Bessborough, E. Gowrie, E. Reigate, L.
Brougham and Vaux, L. Gridley, L. Renton, L.
Caithness, E. Grimston of Westbury, L. Sandford, L.
Campbell of Croy, E. Hatherton, L. Sandys, L. [Teller.]
Chesham, L. Henley, L. Selkirk, E.
Cockfield, L. Hereford, V. Sharpies, B.
Cork and Orrery, E. Holderness, L. Skelmersdale, L.
Craigavon, V. Horsnby-Smith, B. Swinfen, L.
Craigmyle, L. Kilmany, L. Teviot, L.
Cullen of Ashbourne, L. Kimberley, E. Trefgarne, L.
de Clifford, L. Long, V. Trenchard, V.
Denham, L. [Teller.] Lyell, L. Trumpington, B.
Drumalbyn, L. McFadzean, L. Vaux of Harrowden, L.
Ellenborough, L. Macleod of Borve, B. Vickers, B.

Resolved in the negative, and amendment disagreed to accordingly.

8.43 p.m.

Lord MISHCON moved Amendment No. 152:

After Clause 38, insert the following new clause: (" Laying of Memorandum and articles of association of the successor company . Before the appointed day the Minister shall lay before both Houses of Parliament an order containing the memorandum and articles of association of the successor company to the National Freight Corporation.").

The noble Lord said: Again, I hope I can be brief. I understood the Minister to say that there would be a full opportunity for Parliament to see the memorandum and articles of association of the successor company, and indeed to debate them if necessary. If that is confirmed by the noble Lord, I have no need to proceed with this amendment. I shall be happy to withdraw it.


Yes, I am pleased to confirm that that is so. I, too, have a set piece to say but I feel perhaps in the circumstances there is no need to deal with that. It will be as I said previously: the memorandum and articles of association will be made available and a copy will be put in the Library of the House before the appointed day. Unless the noble Lord wishes me to expand on the point, I shall be quite happy not to do so.


I am quite happy with the Minister's assurance, and beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

[Amendment No. 153 not moved.]

Clause 39 [Transitional provisions with respect to reserves, etc.]:

[Amendment No. 154 not moved.]

Lord MISHCON moved Amendment No. 155:

Page 37, line 16, at end insert— (" (6) Notwithstanding any other provisions of this Act, any tax losses which before the appointed day were available to the Corporation shall not for the purposes of the Taxes Acts be available to the successor company, ").

The noble Lord said: Amendment No. 155 deals with the question of tax losses and any tax losses being taken for the benefit of any purchaser. The Committee may feel that it is a very, very wrong principle that the taxpayer should suffer as a result of private enterprise making profits in the future on the acquisition of this company in the market by being able to take advantage of losses made in various subsidiaries in the past by the National Freight Corporation. It seems to be a most insidious way of dealing with out tax affairs and I hope the Committee will regard it as such. I must say I was somewhat amused, if the Committee will forgive my saying so, on reading the contribution made by the honourable Member for Faversham on the 22nd Sitting of Standing Committee "H" on this Bill, on 14th February, at col. 1634. The honourable Member said, and I quote: If it is to begin life as a free enterprise company "—


It is a convention in this Chamber— and I myself have been called to order on this particular one— that only Government Ministers may be quoted from Standing Committee and not Members of another place.


I am most grateful for the correction. I am in some difficulty, because the Minister in fact answered him and to quote the answer of the Minister without being able to quote the contribution to which he made the answer is rather difficult.


I think the solution is that they are allowed to be paraphrased.


I am most grateful for the help I am getting from all sides, which is really most courteous. May I take it in this way. The honourable Member for Faversham made a reference to the happy position in which a future purchaser would be by being able to take advantage of these tax losses, and the Minister, the Parliamentary Secretary, Mr. Kenneth Clarke, replied as follows— I am quoting from column 1644: My honourable friend the Member for Faversham raised a specific point about tax losses and the position of the new company. He has touched on a very pertinent point, to which I am not able to give an instant answer ". After that it was made quite clear in Committee by the Minister— and I think at the Report stage, too— that there would be an opportunity to take advantage of tax losses in subsidiary companies where that business was carried on, as against future profits of that individual subsidiary company. It is a principle that I am asking the Committee to deal with. As I said, it seems absolutely wrong that the ordinary taxpayer should have to pay more, if I may put it this way, in regard to his tax liabilities by virtue of a purchaser here being able to take advantage of tax losses inside the National Freight Corporation's subsidiaries.


I believe this amendment springs from a misconception which I understood had been cleared up in another place. It seeks to withhold from the successor company any tax losses which before the appointed day were available to the NFC. But as my honourable friend in another place spelt out in Committee— and I would refer here to Hansard of 21st February, column 1785: I think I am in order as he is a Minister— tax losses made by NFC subsidiaries, principally National Carriers, are available to be set off only against future trading profits of the same business. There is therefore no way in which another company can buy a controlling interest in the successor company and in some way use NCL's past lax losses to offset future profits in another subsidiary or another part of the business. These tax losses therefore cannot be considered as some kind of asset which a purchaser might wish to acquire so as to avoid paying taxes on his other businesses. To accept this amendment would be to create a positive tax disadvantage for subsidiaries of the successor company which would not otherwise exist.

If the amendment were to become effective, companies such as the NCL would not be able to set off past tax losses against future trading profits. Their competitiveness would suffer and prospects for both the companies involved, and their employees, would be severely worsened. I cannot believe that this is what the noble Lord, Lord Mishcon, wishes to see and, in these circumstances, I wonder whether he would care to withdraw his amendment.


If I may say so with great respect, the noble Lord merely repeated what I had, I hope, properly told the Committee was the position as explained by the Minister; that is, that tax losses would be available to be set against future profits only within the subsidiary that had made the losses. But my point is that if that subsidiary is taken over by private enterprise, as is envisaged here, that means that previous tax losses can be taken advantage of. One either agrees with this principle or one does not. But the facts are as I stated them. I was not under any misunderstanding, and I hope that the Committee was not. The principle still remains the same. I think it wrong and I ask the Committee so to decide.

On Question, amendment negatived.

Clause 39 agreed to.

Clause 40 agreed to.

8.52 p.m.

Lord MISHCON moved Amendment No. 156:

After Clause 40, insert the following new clause: (" Avoidance of asset stripping .— (1) It shall be unlawful for the successor company or a subsidiary of the successor company to dispose of any interest in land which forms part of the undertaking of the Corporation without the written consent of the Minister. (2) The Minister shall not give his consent under subsection (I) unless he is satisfied that the proposed disposition would not constitute a transaction of an unusual nature for the successor company or the subsidiary in question of the successor company to enter into having regard to the activities (being activities which relate to the transport of freight) in which the successor company or the subsidiary is engaged at the time of the proposed disposition and which would constitute a transaction which would not be reasonably necessary for, or which would be contrary to, the purpose of those activities. (3) A consent given under subsection (1) may be given subject to conditions, including conditions enabling the Minister to require the proposed disposition to be made in favour of such person as he may nominate provided that, in the case of such a nomination, the disposition is to be made on terms reasonably comparable to those which the successor company or subsidiary could have obtained if the disposition had been made to a willing purchaser buying at arm's length on the open market. (4) In this section "subsidiary" has the same meaning as in the Companies Act 1948.").

The noble Lord said: Again, I hope to move this amendment briefly, in spite of the fact that it is a long one. It seeks to ensure that land and buildings owned by the successor company, as a result of the take-over from the National Freight Corporation, shall not be sold off in the future destiny, whatever it may be, of this company. In other words, it is a protection against asset-stripping.

So that the Committee should know what it is dealing with, I ought to say that the assets of the National Freight Corporation at 31st December 1978 were £ 183 million, of which some £ 58 million— that is, about one-third— represented land and buildings. There is a note to the accounts which states that the market value is in excess of book value. I cannot guide the Committeee— no doubt the Minister can— as to the present value of the land and buildings, and this will have to be in any prospectus when it is floated off to the public. As I said, the intention is to stop asset stripping, which I think would be the wish of the Committee. That is the reasoning and the thought behind this amendment and I beg to move.


This new clause would impose an intolerable limitation on the commercial freedom of the new company. There is no reason why the company should wish to dispose of any property on a large scale. But it is essential that it can take advantage of any opportunities to dispose of property no longer required, as and when these arise, without going through the laborious procedure of seeking ministerial consent in the way that the new clause proposes. Such restrictions could prevent any negotiations from ever being completed. Disposal of redundant property is a normal part of everyday commercial activity; indeed, the NFC does it now without prompting any controversy. The whole purpose of the Bill is to ensure that the new company, as from the appointed day, has the commercial freedom enjoyed by any private sector company. This new clause would be entirely inconsistent with this and for that reason we cannot accept it.


All I can say in regard to that is: if the Minister feels that it would be a wrong principle for asset stripping to take place, would he not agree that, at least, an undertaking by the Government at this stage that that would be discouraged would meet part of the point of this amendment?


As the noble Lord knows, I am at all times anxious to be helpful. Indeed, throughout all the 150-odd amendments that we have discussed we have, in the main, been so. But we are now talking about fundamentals on which there is clearly a difference of view between noble Lords opposite and we on this side. There is nothing wrong with that; we knew it at the time of Second Reading. It was said so and it is so.

But if you talk of asset stripping in the emotive sense and, at the same time, consider the point I made a moment ago— namely, that it is normal commercial practice for any company which has properties or anything else which may be surplus to its requirements, as the NFC finds to be the position at the present time— you would not call that asset stripping. Or would noble Lords describe as asset stripping what the NFC now does, in the normal course of its business, when it sells some property or land? They may say that it is that in the use of the term, but it is part of the normal commercial and, presumably, logical process. All we are wanting to ensure is that the successor company which takes over is not so restricted that it cannot operate in a normal open, commercial way. For that reason, I say, again, that I am not able to be as helpful as the noble Lord would like.

On Question, amendment negatived.

8.57 p.m.

Lord UNDERHILL moved Amendment No. 157:

After Clause 40, insert the following new clause: (" Compensation for loss of employment etc. . — (1) The Minister shall by regulations provide for the payment by the Minister or by such person as may be prescribed by or determined under the regulations of compensation to or in respect of any person who is, or prior to the making of the regulations, has been in any employment as may be so prescribed and who suffers loss of employment or loss or diminution of emoluments or pension rights or worsening of his position which is attributable to any provision of this Act or any instrument made under this Act. (2) Regulations made under this section may— (a) include provision as to the manner in which and the person to whom any claim for compensation is to be made, and for the determination of all questions arising under the regulations, (b) make different provision for different classes of persons and for other circumstances and make or authorise the Minister to make exceptions and conditions, (c) be framed so as to take effect from a date earlier than the making of the regulations, but so that regulations having effect from a date earlier than the date of their making shall not place any individual in a worse position than he would have been if the regulations had been so framed as to have effect only from the date of their making.").

The noble Lord said: This amendment is to protect the overall conditions of service of staff on the transfer of ownership of the National Freight Corporation. A very powerful case could be made out for this, but in view of the time I shall be extremely brief. It has been longstanding practice, when employees are involuntarily transferred from one employment to another, that provision should be made for compensation in various circumstances. For example, under the Railways Act 1921, many of the smaller railway companies were amalgamated into four companies, and the Act specifically provided for compensation in the event of any employee having his conditions of service worsened. Similarly, in the Transport Act 1947 there was provision for compensation when the railway companies were taken into public ownership. As your Lordships will recall, this principle has been extended far beyond the railway industry and legislation protecting the interests of employees was introduced by the Conservative Government when they brought in local government reorganisation in 1973. Therefore, the principle is one which is accepted. The same provision was made in 1968, when the British Railways Board was divided into three parts.

To sum up, the purpose of this amendment is to include provision for compensation for staff who, if transferred to the employment of another organisation as a result of the sale of shares, suffer loss of employment or a worsening in their general conditions of service, compared to those they would have had if they had remained with the National Freight Corporation or the successor company. It is a principle which has been accepted before. It was accepted and written into the Local Government Reorganisation Act, and we should like to see this amendment written into this Bill. I beg to move.


The concern over this issue, while fully understood, is, in my view, entirely misplaced. Employees have no cause to fear the transfer of ownership to the private sector. The Government believe that by taking advantage of the greater commercial freedom available in the private sector, the company will be assured of a secure and prosperous future. This will help to ensure greater job security for employees. In any case, the proposal is wholly unacceptable on the point of principle. It entirely contradicts one of the fundamental aims of the Bill, which is to free the National Freight Corporation from stifling restrictions and impositions of precisely this kind. It is essential that the rights and obligations of the successor company should from the outset correspond to those of any Companies Act company without any of the special obligations that now apply to the National Freight Corporation as a statutory corporation. Only then can the company compete on fair and equal terms in the free market.

Obligations of the kind proposed in the amendment could involve the company in an open-ended commitment. It would be a severe burden; it would be a deterrent to investors. The need to make provision for this type of compensation is long past. The staff will have the benefit of the substantial protection afforded to all employees in both the public and the private sectors by the Employment Protection Acts. There is no reason at all why employees of the company should have any special protection beyond what is available to all employees.

As for the point on the Bill representing a removal of the protection already given to employees in earlier legislation, this is not so. The legislation provides in Schedule 6, paragraph 4, for the company to take on the compensating functions now carried out by the National Freight Corporation under the Transport Holding Company Act 1968. I fear that once again we cannot accept the amendment.


I am sorry that the noble Lord cannot accept the amendment. His reference to the schedule related to the obligations at present existing; it has got nothing to do with the position of employees who are to be transferred as a result of the disposal of the National Freight Corporation. I am sorry that the noble Lord used the words "stifling restrictions" because we are talking about compensation for employees who suffer not as a result of anything that they have done but as a result of legislation passed by Parliament. What we are endeavouring to do in the amendment is to protect their interests in the same way as noble Lords opposite undoubtedly supported similar provisions in the Local Government Act.

If it is being suggested that when one is dealing with the public service, conditions should be of a higher character than when one transfers to a private shareholding, it is a suggestion which I am sorry that the noble Lord should make. Previous legislation throughout the whole

Clause 41 [Funding of relevant pension obligations]:

9.11 p.m.

Lord MISHCON moved Amendment No. 158: Page 38, line 1, leave out ("may, with the consent of the Treasury ") and insert (" shall ").

of the railway industry and its subsidiaries has made this provision; it has been in past legislation and it is an important aspect of industrial relations, which very shortly we shall be considering in this House. I am sorry that the noble Lord cannot accept the amendment. It is a question of great principle and I cannot withdraw the amendment.

9.3 p.m.

On Question, Whether the said Amendment (No. 157) shall be agreed to?

Their Lordships divided: Contents, 30; Not-Contents, 65.

Blease, L. Gosford, E. Ponsonby of Shulbrede, L. [Teller.]
Boston of Faversham, L. Hale, L.
Brockway, L. Hall, V. Sefton of Garston, L.
Cledwyn of Penrhos, L. Houghton of Sowerby. L. Simon, V.
Collison, L. Kaldor, L. Strabolgi, L. [Teller.]
David, B. Lloyd of Kilgerran, L. Underhill, L.
Davies of Leek, L. Lovell-Davies, L. Wells-Pestell, L.
Donaldson of Kingsbridge, L. Maelor, L. Whaddon, L.
Elwyn-Jones, L. Mishcon, L. Wigoder, L.
Gladwyn, L. Peart, L. Wynne-Jones, L.
Glenamara, L.
Abinger, L. Elliot of Harwood, B. Morris, L.
Airey of Abingdon, B. Faithfull, B. Mottistone. L.
Ampthill, L. Ferrers, E. Mowbray and Stourton, L.
Armstrong, L. Fortescue, E. Murton of Lindisfarne, L.
Auckland, L. Gainford, L. Orkney, E.
Balerno, L. Glasgow, E. Orr-Ewing, L.
Bellwin, L. Godber of Willington, L. Reigate, L.
Belstead, L. Gowrie, E. Renton, L.
Bessborough, E. Gridley, L. Sandford, L.
Brougham and Vaux, L. Grimston of Westbury, L. Sandys, L. [Teller.]
Caithness, E. Hatherton, L. Selsdon, L.
Campbell of Croy, L. Henley, L. Sharpies, B.
Chesham, L. Hereford, V. Skelmersdale, L.
Cockfield, L. Holderness, L. Swinfen, L.
Cork and Orrery, E. Hornsby-Smith, B. Teviot, L.
Craigavon, V. Kilmany, L. Trefgarne, L.
Craigmyle, L. Kimberley, E. Trenchard, V.
Cullen of Ashbourne, L. Long, V. Trumpington, B.
de Clifford, L. Lyell, L. Vaux of Harrowden, L.
Denham, L. [Teller.] McFadzean, L. Vickers, B.
Drumalbyn, L. Macleod of Borve, B. Wynford, L.
Ellenborough, L. Margadale, L.

Resolved in the negative, and amendment disagreed to accordingly.

The noble Lord said: I hope to earn a slight amount of popularity in the Committee by speaking to Amendments Nos. 158 to 164 and doing it briefly. As I understand it, this clause refers to road-based obligations of the NFC under pension schemes. It provides that if on the offer for sale there is a deficit in the funding of the relevant pension obligations the Minister may, by various methods, make up the funding. The amendment aims, in view of the fact that the employers may be in jeopardy in private hands (as would not be the case in a public corporation) to make it mandatory upon the Minister to hand over with the pension fund obligations being properly covered and not conditional, among other things, upon the amount the Minister receives for the relevant securities that will be sold. The requisite sum to fund the obligations is to be jointly determined under these amendments by the Minister and the trustee of the funds. I hope that this idea will commend itself to the Minister, and I beg to move Amendment No. 158.


From this side of the Committee I can say that we are very much obliged to the noble Lord, Lord Mishcon, for dealing with Amendments Nos. 158 to 164 together. I am anxious to point out to the noble Lord, first, as I hold in my hand a copy of the Official Report of Standing Committee H, one particular matter. He will of course be aware that considerable discussion took place on these amendments relating to this clause and indeed later amendments, all of which (with the exception of Amendment No. 161) have been discussed in considerable detail in another place.

I say this in no sense in criticism, but what I am attempting to emphasise is that considerable care has been devoted in another place to examining the particular arguments. Where probing amendments have been withdrawn I think it could fairly be said at this stage that the details of the particular situation have been very fully discussed.

I think the point I should like to make further about amendments in this particular situation is this. Where an amendment has been tabled and called and spoken to and indeed resolved in another place one can say with some justification that it is a spent amendment. If, however, it is associated with a group of new amendments or there is a new aspect, I think we will naturally re-examine the position. But as my right honourable friends and honourable friends in another place have spoken to nearly all these amendments together, I think there is remarkably little we can add other than to emphasise particular aspects. I listened with great interest to Lord Mishcon's speech on Second Reading, and I have since then read it again. I know how much importance he attaches to this group of amendments.

I should like now to turn to the substance of Amendment No. 158 and say this. This amendment, we believe, would serve little purpose. It is the normal convention to require Treasury approval in financial legislation of this kind, and I see no reason to break with this convention. As part of the normal processes of government the Treasury would in fact be consulted anyway whether or not this was written into the Act. The change, therefore, from "may" to "shall" would have no practical effect, since the Minister would still retain discretion on the amount of payment. My right honourable friend's remarks in column 1806 in Standing Committee H on 26th February also refer to this.

In regard to Amendments Nos. 160, 162 and 164, if I may be permitted to speak to them together as the noble Lord, Lord Mishcon, has done so, I think I can consolidate my remarks and say this. The NFC's road-based pension liabilities stand at present to be discharged by the corporation out of revenue. The payments are currently £ 2-| million a year, which compares with the total turnover of the corporation of £ 480 million. The previous administration saw no call to support these road-based obligations, and I see no reason to question that decision. The position will, however, be rather different when the corporation comes to be moved out of the public sector. Investors might well be concerned if the balance sheet reflected pension fund deficiencies. Clauses 40 and 41 have therefore been included in the Bill to facilitate the sale of shares. Investors are likely to prefer to pay a higher price for NFC without the deficiencies rather than a lower price with the deficiencies. What we are, therefore, proposing is that a part of the proceeds of the sale should be set aside to fund those deficiencies.

However, it would not be desirable to write into the statute a requirement that funding should be complete. What constitutes complete funding would be a matter of actuarial judgment, and the judgement of actuaries in such matters can differ widely. Attempts to write a requirement of this kind into the statute could lead to unproductive litigation. I can, however, give the assurance that the Government intend that the amount of funding to be offered under this section will be sufficient to enable the actuaries to certify that the NFC's pension funds are in a satisfactory state.

On the individual amendments, No. 160 would delete subsection (3) from Clause 41. Subsection (3), as your Lordships are already aware, is one of the less important provisions in the Bill. It was included more by way of tidiness than anything else, since it secures that the power to apply the proceeds of sale to the funding of the road-based obligations is available even if the proceeds of sale fall short of the sum originally specified. It is, however, unlikely that we would ever wish to make use of the power, but I see no virtue in deleting it.

Amendment No. 162 would introduce a requirement that any payment made under subsection (4) should be sufficient fully to fund the obligation. As I have explained, what constitutes full funding is a matter of actuarial judgment, and it would not be helpful to write a requirement of that kind into the statute.

Amendment No. 164 would require the successor company to make payments to the funds to cover any difference between the payments made by the Minister and full funding. Apart from the problem of defining full funding, this amendment would be otiose and surplus. Clause 41 is concerned with the obligations of the successor company and its road-based subsidiaries. Because they are obligations, the successor company is already required to meet any deficiencies corresponding to them. The only question is whether they should be met by immediate lump sum payments, or by periodical deficiency payments, and on that the amendment is silent. The obligation will already rest with the company, so the amendment would achieve nothing.

I have not specifically spoken to Amendment No. 163 which I think my noble friend Lord Cullen of Ashbourne may wish to speak to separately. However, I can assure the noble Lord, Lord Mishcon, that we regret that we cannot accept his amendments.


I think that it would be very sensible if I were able to study what the noble Lord has said when I read the Official Report, and then see if there is any further step that ought to be taken in the other stages of the Bill. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 159 to 164 not moved.]

Lord BELLWIN moved Amendment No. 164A: Page 38, line 41, leave out ("specified in") and insert (" for the time being within ").

The noble Lord said: I spoke to this amendment when we dealt with Amendment No. 145A. I beg to move.


I am not quite sure that the Minister is right. He may be right, but in view of the hour, I think that both of us had better see what the situation is after we read the report of the proceedings. We can deal with the matter, if necessary, later on.

On Question, amendment agreed to.

Lord MISHCON moved Amendment No. 165:

Page 38, line 43, at end insert— (" (7) National Freight Corporation pension schemes other than the relevant pension obligations defined in sections 41 and 44 of this Act shall continue to operate and shall not be worsened by the successor company.").

The noble Lord said: Happily I can, once again, be very brief. This amendment deals with pensions other than road-based and rail-based pensions— that is to say, current service obligations. The purpose of the amendment is to see that they shall not be worsened by the successor company. I hope that this amendment, at least, can be agreed to by the Minister.


I fear that I am going to disappoint the noble Lord, Lord Mishcon, in that regard. This amendment, once again, was moved in another place in Standing Committee. I refer your Lordships to column 1852 of the proceedings of Standing Committee "H". My honourable friend the Parliamentary Secretary to the Ministry of Transport, Mr. Kenneth Clarke, spoke to this matter in some detail at column 1859. I think that at this hour it would be unnecessary to repeat his words in full, but I quote that reference for a particular purpose? The amendment was negatived at that particular stage.

It is a matter of regret that the drafting of this amendment has remained exactly as it was then.


It should be "section 45".


I am at a loss to know the point that the noble Lord is making.


I thought that the Minister, with his usual kindness, was trying to help me, because it should read: "… defined in sections 41 and 45 of this Act" and not "section 44", as the Bill now stands. I thought that the noble Lord was referring to that.


Yes, I think that this is a printer's error. I should like to point out that it is an error which appears to have been repeated on this occasion. The purpose of the amendment is to impose a restriction on the successor company which does not apply to the corporation at present and which does not apply to private sector companies. It is thus inconsistent with the general policy of Part II of the Bill, which seeks to put the successor company into the shoes of the NFC, but to free it from limitations appropriate only to a statutory corporation. In any event, the amendment does not appear to relate very closely to the actual facts of the corporation's present pension arrangements. It may be helpful to the Committee if I very briefly describe those arrangements.

Ninety-five per cent. of the corporation's employees are members of one or other of the two big schemes established in 1971— either the Salaried Staff scheme or the Wages Grades scheme. Each of these schemes has both rail-based and road-based members and pensioners. Relevant pension obligations, as defined in Clause 42, are owed in respect of each of these schemes. I might say that relevant pension obligations, as defined in Part III of the Bill, are also owed in respect of each of these schemes. One must, however, bear in mind that a pension obligation which is relevant for the purposes of Clauses 41 and 42 is irrelevant for Part III of the Bill, and, of course, vice versa.

When the new schemes were set up in 1971, those employees who joined were allowed to transfer some or all of their previous pensionable service to the new schemes. They were granted back-service credits. The corporation guaranteed the payment of the benefits corresponding to the back-service credits. These guarantees make up the greater part of the historic pensions obligations of the corporation. The corporation's obligations will pass to the successor company, and Clauses 41 and 42 and Part III of the Bill are intended to provide the wherewithal for those obligations to be discharged.

The security for the current service pension rights of NFC employees is provided by the funds themselves. They and their employer have paid contributions into the funds and these contributions have been invested by the trustee outside the corporation's business. The investments are held on trust and are not available for use by the corporation or by any successor company. I might say that as far as we are aware the current service sections of the funds are adequately funded and the assets are sufficient to support the benefits laid down in the rules of the Funds.

That deals with the corporation's main pension schemes. The other 5 per cent. of the corporation's employees are members of old British Rail schemes, or of old NFC schemes, or of no scheme at all I would underline one point. These employees have had the opportunity to join the new schemes. If they did not do so, it would have been their own decision. The amendment is, of course, concerned with the old NFC schemes; that is to say, the schemes inherited from the Transport Holding Company. I understand that these schemes are in a satisfactory condition and that the assets will be sufficient to meet their liabilities. I should say that these schemes are also funded schemes and that their assets are not at the disposal of the corporation or the successor company.

Finally, there are some NFC employees who are not members of formally constituted pension schemes but who are entitled to what are called "customary practice" or "ex gratia" pensions. These terms are somewhat misleading, as the pensions concerned are now, to all intents and purposes, legal entitlements. In any event, the pensions concerned have now been brought into the NFC (1978) Pension Fund, and are relevant pension obligations for the purposes of the Bill. I regret that I cannot advise your Lordships to accept this amendment which is, as I have said at all too great a length, unnecessary in practice and in principle, and will conflict with the policy of the Bill.


I am most grateful to the noble Lord for the trouble he has taken in regard to the detailed reply which he has given to the observations that I made. They are worthy of such respect that I would want to ponder upon them when they appear in the Official Report, and then possibly he would permit me to communicate with him if I have any further points to raise.

Amendment, by leave, withdrawn.

Clause 41, as amended, agreed to.

Clause 42 agreed to.

[Amendment 166 not moved.]

Clause 43 agreed to.

Schedule 7 agreed to.

Clause 44 [Payments by Minister in respect of B.R. and N.F.C. pension schemes]:

9.32 p.m.

Lord BELLWIN moved Amendment No. 166 A: Page 41, line 3, leave out (" sections 48 and 49 ") and insert (" section 49 ").

The noble Lord said: With Amendment 166A, which is a paving amendment, with your Lordships' permission it would be convenient to take Amendments Nos. 177A, 177B, 179A, 179B, 180A, 180C, 180D and 180H. All these amendments relate to Clause 48, which is the clause which deals with surpluses in "basic" schemes. I anticipate that there may be differences of opinion about this clause when we come to later amendments in the Marshalled List. However, I hope these amendments will not cause any difficulties. Amendments 166A, 177A, 177B, 179A and 179B correct a technical defect in the clause as now drafted. We had inadvertently contrived to reduce the Minister's liabilities to the supplementation scheme by more than the reduction in the liabilities of the supplementation scheme. Amendment 177B recasts subsection (2) of Clause 48 to remove this defect, and the other amendments are consequential drafting amendments.

Amendment 180A discharges an undertaking given in another place. There are some British Rail pension schemes, including in particular the British Transport Police Force Superannuation Fund, which pay increases of pensions to some of their pensioners but not to others. The others receive their pensions increases from the supplementation scheme. The amendment provides that Clause 48 will only apply to so much of any surplus in such a scheme as is attributable to those of the members and pensioners as stand to receive their increases from the supplementation scheme.

Amendments Nos. 180C and 180D also discharge an undertaking given in another place. Surprising as it may seem, the rules of some British Rail schemes do not permit the trustees or the management committees to increase the pensions paid by those schemes. The amendments confer on them the necessary power. I should make clear that the trustees will not be obliged to increase pensions, but they will have the power to do so if they wish. Amendment 180H is a consequential drafting amendment which moves a definition now in Clause 48 into the main definitions clause, since the definition is now needed elsewhere in Part III. I beg to move.


The Minister is to be congratulated on the ease with which he managed to meander through the maze of amendments which he discussed together. If I am not quite so successful in treading my path through them, I hope he will forgive me, but there are some observations I wish to make on some of the amendments with which he dealt. First, in regard to Amendment No. 177B— and I do not expect the Minister to reply now, but it would be a courtesy if he would communicate with me on the points I am now raising— the wording does not seem very clear. Suppose that in 1985 a surplus is revealed in one of the basic schemes (for example, the LMSR section of the BR superannuation fund) and that 85 per cent. of the surplus is sufficient to meet either, first, 90 per cent. of the cost of the 1986 scheme of supplementation or, secondly, 10 per cent. of the cost of all future schemes of supplementation.

It is understood to be the intention, which BR would, I understand, support— and I say at once that many of the observations I am making tonight on pensions come out of the concern of the BR pension funds, whose officers have supplied me with certain information— that interpretation B should apply; that was the second interpretation I gave, the 10 per cent. of the cost of all future schemes of supplementation. If we are supposed to consider all future schemes of supplementation as a group in order to reach that second interpretation, which I called interpretation B, we must presumably also treat them as a group for the purpose of understanding the opening phrase, and that is: If, at any time before the increases first become payable under the supplementation scheme ". This would lead to the position where, as soon as a scheme of supplementation had been introduced, Section 48 would cease to apply to the basic scheme for ever. I think it very doubtful if that is the Government's intention. There is a further problem about the wording. It states: … the obligation to pay or secure the payment of the increases or, if less, the relevant proportion of the increases shall not be regarded as a relevant pension obligation ". If that were so, then of course it would not qualify for Government support. Until the board pays the increases, they are not under an obligation to pay them. Reference might usefully be made here to Clause 45 (6) (b). Suppose, in the example already quoted, the board decides to reduce future schemes of supplementation by 10 per cent. so that a supplement which would otherwise have been £ 100 becomes £ 90, thereby hoping to get Government support for the whole £ 90— and that, I understand, is the intention— under the proposed wording, the board's obligation is only £ 90 and it would appear that £ 10 of that is not to be regarded as a relevant pension obligation. Hence Government support would be available for only £ 80 and not £ 90 as intended.

In regard to Amendment No. 180A, although acceptable in principle, I must tell the noble Lord in sheer honesty that I wonder whether he really means the clause to imply what it appears to imply. There seems to be some ambiguity, at the very least, as to whether the assets and liabilities for members of the basic scheme who have not yet retired are to be taken into account. This is because such members are not yet in receipt of … pensions increases of which are payable under the supplementation scheme ". Lastly, as to Amendment No. 180B, this would be acceptable if the word "all" between (a) and (b) were changed to "and". As drafted, the Minister could fail to support the transfer value but also meet less than the whole of the pensions obligations. As I said, I do not expect the Minister to reply now. These are matters of detail, although they are matters of great importance to the pension scheme people. I therefore hope he will be kind enough to read what I have said and let me have his observations in due course.


Of course I shall readily and gladly do that. I may be able to help a little by confirming that we intend interpretation B rather than interpretation A. Certainly we shall look at all the other points, and we might have to do this in regard to the complex matters relating to many other amendments with which we are yet to deal. It is very difficult to absorb this kind of matter the first time round without looking at it in writing, and I am sure that no one on either side would expect otherwise.

Viscount SIMON

When the noble Lord is looking at this matter again— as he says he will— will he pay particular attention to Amendment 180A and the word "of" in the last line?

On Question, amendment agreed to.

9.41 p.m.

Lord BELLWIN moved Amendment No. 167: Page 41, line 26, after (" year ") insert (" which may be applied towards the payment of such of the pensions, increases and expenses payable under or incurred in connection with the scheme as correspond to the obligations ").

The noble Lord said: This is a drafting amendment. It picks up a stitch which was dropped when Clause 44 was originally drafted. Clauses 46 (3) and 44 (2), when taken together, provide for unfunded proportions of unity to be determined for certain British Rail and NFC pension schemes. The schemes concerned are those which have negligible assets with which to discharge their historic pensions liabilities. For these schemes the Minister's payments under Clause 44 will be equal to the difference between the total historic pensions outgo of the schemes and the corresponding income and assets.

The amendment is necessary to make sure that only the "historic" income (if one may call it that) of the scheme is brought into the calculation. The scheme might have non-historic liabilities, and an income to correspond. The non-historic income obviously ought to be used to meet the non-historic liabilities, and the amendment makes sure that it is available for this purpose. I beg to move.

On Question, amendment agreed to.

Clause 44, as amended, agreed to.

Clause 45 [Meaning of "the relevant pension obligations"]:

Lord MISHCON moved Amendment No. 168: Page 42, line 16, after ("scheme") insert (" taking account of the amendments which were introduced with effect from the date when employments in respect of which pension rights are earned under the scheme were contracted out under the Social Security Pensions Act 1975 ").

The noble Lord said: The main railway pension schemes were contracted out under the Social Security Pensions Act 1975. This took place with effect from 6th April 1978, and hence the pension scheme rule changes made in order to meet the statutory contracting out conditions occurred after 1st January 1975, which is the date mentioned in Clause 45 (l) (a) of the Bill. This means that the changes do not count as "relevant pension obligations" even though they relate to the same period of pensionable service as the other relevant pension obligations, and hence they would not qualify for Government support.

It may be argued that one of the most important effects of contracting out is that the national insurance scheme is responsible now for paying post-retirement pension increases on part of the fund pension. This means that the railway pension funds no longer have to meet the whole of the liability for pension increases and this has resulted in a saving in the Government support which would otherwise have been required. It therefore seems not unreasonable that, having made this saving, the Government should be prepared to meet the relatively very small additional cost which would be involved if they support the additional liabilities resulting from the contracting out changes. This is what the amendment is designed to achieve, and I beg to move.


I have listened with interest to the arguments of the noble Lord, Lord Mishcon, and perhaps I should first remind the Committee of the purpose of Part III of the Bill. It is intended to reproduce by a different means the support for the board's historic pensions obligations that was to have been provided under the Railways Act 1974. In particular, we are seeking to define the relevant pension obligations of the board in Clause 45 of the Bill in such a way that they equate to the obligations that were to have been supported under the Railways Act 1974. The pensions provisions of the 1974 Act formed only one part of a comprehensive reconstruction of the board's finances. We are not seeking to reopen the general financial settlement laid down in the 1974 Act.

It is not in dispute, I think, that support was not going to be provided under the 1974 Act for the increases in the board's obligations which are the subject of the present amendments. These increases flowed from a decision which the board themselves took. They decided to change the rules of certain of their pension schemes so that the employees who were members of those schemes could be contracted out of the state earnings-related scheme. They were not obliged to take that decision, but they considered that it was in their interests to do so.

It is true that contracting out will have consequences for future supplementation payments. But there are two things that I would say to that. First— and I admit that the argument is somewhat technical— there is a risk of not comparing like with like. If the employees concerned had not been contracted out, their total pension entitlements would have been higher than those entitlements in fact are. Thus, it is not surprising that the cost of providing those pension entitlements would have been higher than it in fact is. But the Bill, like the 1974 Act, is concerned with the pension entitlements that existed at 1st January 1975, and not with subsequent increases in those entitlements. Secondly— and this brings me back to my main point— we are treating the change in the burden of supplementation no differently under the Bill than it was to have been treated under the 1974 Act.

I quite agree that we ought to avoid unnecessary administrative complications; but that it not an argument for widening public expenditure commitments. In any event, I am not persuaded that the administrative difficulties here are insoluble. I am informed that there have been discussions by officials on the question, and for our part we have made it clear that, when it comes to arithmetic, we are ready to accept a degree of approximation.

I would suggest to noble Lords that it would be as well to be cautious before suggesting that it would be equitable for this or that obligation to be brought within the Bill, or that it is anomalous that this or that obligation is excluded from Clause 45. The principle underlying the clause is simple. It is aimed at obligations owed on 1st January 1975, and later obligations to pay supplementation. The Bill, like the 1974 Act, is concerned with obligations incurred in the past. It left the board with full responsibility for the future. The obligations owed at 1st January 1975 may have been something of a rag-bag. Most inheritances are. But if we are going to look at the merits of later obligations with a view to including them in the Bill, we might also look at the inherited obligations which are in the Bill to see whether there are any that merit exclusion.

The Government have not undertaken such a review as we are proposing to retain the principle to which I have referred. However, if we were to move to some different basis it could not be assumed that all the changes would be in one direction. For example, for some British Rail employees, present and future service is a historic liability, as is the indexation of the pensions corresponding to that service. This might be thought to be odd, since current and future employment is not what is normally understood by the term "historic" liability. Nevertheless, the obligation was owed on 1st January 1975, and it is within the Bill. I am sorry I have had to speak at some length here. I am sure that it will be very much easier to follow these arguments when we relate them to each other in the Official Report; but I regret that we cannot accept this amendment.


I will study all that the noble Lord has said. I find his reply somewhat disappointing. Perhaps I shall see a glimmer of light when I read the Official Report.

Amendment, by leave, withdrawn.

9.51 p.m.

Lord BELLWIN moved Amendment No. 168A: Page 42, line 20, after second ("of") insert (" or sums representing accrued rights in respect of").

The noble Lord said: With Amendment No. 168A it would be convenient, with the Committee's permission, to take Amendments Nos. 171 A, 172A, 180B and 180E on the Marshalled List. These amendments raise two aspects of transfer values; that is to say, the payments made by one pension scheme to another when a member transfers. Amendments Nos. 168A and 171A discharge an undertaking given in another place: they provide for the historic element of a transfer value paid by a British Rail or NFC pension scheme to be treated as part of the historic pensions outgo of the scheme, even though the board or the corporation were not at the operative date under an obligation to guarantee the payment.

New clause 180B is intended to permit block transfers. The board or the successor company might at some fufure date wish to give their employees the option to transfer to new pension schemes. The new clause provides for the old schemes, if I may call them that, to receive the same support as if the people concerned had not transferred. These arrangements are complementary to each other. In the case of individual transfers, or transfers to other employers. Amendments Nos. 168A and 171A provide for support for the transfer payment. In the case of block transfers, the new clause will apply. Amendments Nos. 172A and 180E are consequential drafting amendments. I beg to move.

On Question, amendment agreed to.

Lord MISHCON moved Amendment No. 169: Page 42, line 20, leave out (" and ").

The noble Lord said: Perhaps with the permission of the Committee, I may take Amendments Nos. 169, 170 and 172 together. When I reach Amendment No. 171, I propose to withdraw it in view of Amendment No. 168A. Under the Bill as drafted, there seems to be a danger that members of the BT Commission Male Wages Grades, pensions scheme will lose the benefit of the future pension increases for which the Government Actuary allowed in the 1974 valuation. It was assessed at that time at 4 per cent. per annum. The valuation was made as at 31 st March 1974 and the Government Actuary reported on 17th October 1974 that he has assumed: … the average annual rate of increase in the pension benefits in future for both pensioners and members in service will be 4 per cent. ".

Even after allowing for these increases, the valuation showed a surplus of £ 1-42 million and pensions for all active members and pensioners were increased by 28p a week. Later in 1974, the pension scheme became part of the BR 1974 pension fund. If the funding arrangements under the Railways Act 1974 had remained undisturbed, then in calculating the amount of funding debt to be prescribed in respect of the BR 1974 pension fund, clearly account should be taken of the value of the prospective increases in pensions from the BTC Male Wage Grades pension scheme. This would have enabled the BR 1974 pension fund to provide the future pension increases of 4 per cent. per annum for which the Actuary had allowed.

If the fund had had a favourable investment experience, the members might well have benefited to a greater extent than 4 per cent. per annum. Under the Transport Bill, it would seem that the situation is different. There appears to be no provision for Government support to pay for the pension increases in question. Once the assets of the BR 1974 pension fund have been exhausted— as will happen during the first few months of operation after the Bill has become law, then even if the valuation of the BTC Male Wages Grade pension scheme showed that the 4 per cent. increases could justifiably be paid, there would not appear to be any provision whereby the Government could make the necessary money available. This is because the increased pensions would result from a rule change after 1st January 1975. I suggest that the situation is clearly unjust since there was a firm expectation existing before 1 st January 1975 that these pension increases could be paid, and the amendment seeks to restore that position. I beg to move.


We are dealing with Amendments No. 169 and, as I understand it, Nos. 170 and 172. Amendments Nos. 171 and 169 were tabled also in another place and my honourable and learned friend the Parliamentary Secretary agreed to consider the point which they raised. As a result, Government Amendment No. 168A has appeared on the Order Paper. It is one of a group of Government amendments on transfer values and, if the noble Lord, Lord Mishcon, is willing to withdraw Amendments Nos. 169 and 171, perhaps I might speak to the Government amendments on transfer values as a group. A number of rather complex points arise on this amendment, and it may assist the Committee if I briefly explain the background before I come to the point of the amendments.

The British Transport Commission (Male Wages Grades) Pension Scheme was established by the BTC in 1954. The scheme was closed to new entrants in 1967, when the British Railways Board established a new pension scheme for their wages grades, the British Railways (Wages Grades) Pension Fund. The BTC scheme was of an unusual type. It is contributory, but there is no fund. Members' contributions were treated by the BTC as income, and benefits were paid by the Commission out of revenue. Responsibility for the scheme was transferred to the British Railways (1974) Pension Fund, which was a fund established in 1974 to embrace the various railway pension schemes which had no assets. The benefits of the BTC scheme are fixed in money terms, and by today's standards are very poor. For instance, the basic pension entitlement under the scheme is 9 old pence a week for every year of service, with a maximum of £ 1-50 a week for 40 years' service. The scheme at present comprises 5, 000 serving members and 15, 000 pensioners. It was previously much larger, but many of the original members exercised the option, which was offered to all members in 1967, to transfer into the more modern wages grade scheme, which provides for better benefits.

As I have explained, the scheme has no assets, but its rules provide for five-yearly actuarial valuations, to be conducted on a notional basis. These valuations assume notional contributions from the employer. The last valuation of the scheme was conducted in 1974. This was done by the Government Actuary, because he happened to be the scheme's actuary, but his valuation was not in any way related to the introduction of the new Government support arrangements which were introduced in the same year. That valuation, which was done on a notional basis, revealed a notional surplus. The actuary therefore recommended that this surplus should be used to increase the benefits by 22 per cent., and this was duly done by means of an order which provided for a flat-rate increase in the benefits of 28p per week. However, in order to decide how much of the surplus he could recommend for distribution, the actuary made an assumption about the likely future rate of increase in benefits: he chose to assume 4 per cent. per annum. I must stress however that this was merely an assumption used for the purposes of the 1974 Actuarial valuation: There was nothing in the rules of the scheme at the time to provide for these increases; nor has this been written into the rules of the scheme subsequently.

The board have, however, represented to the department that, because the actuary made an assumption that benefits would be increased by 4 per cent. per annum from 1974, there was some presumption that these increases would be made. The purpose of the amendments we are considering is to provide that such increases would qualify for Government support under the new arrangements proposed in this Bill, notwithstanding the fact that they were not provided for in the rules of the scheme in 1975.

It has always been a central principle of the Government's approach to the arrangements for support for the British Railways pension obligations that the support should be restricted to what are termed "historic" obligations. The word "historic" means obligations on the board as at 1st January 1975. There is, of course, no objection to the board improving the terms of their pension scheme subsequent to 1975, but there is no Government commitment to meet the cost of such improvements. It seems to me clear beyond doubt that the board were under no obligation, in 1975, to improve the benefits of this scheme and so I regret that the cost of such improvements cannot possibly qualify for Government support. I must therefore advise the Committee to reject the amendment.

In giving this advice, I am very conscious that the pension benefits provided by this scheme are derisory by modern standards and I can further accept that the fact that the scheme is operated on the basis of notional funding has meant that the members have not enjoyed as much of the benefits which inflation can bring to pension funds as they would had the scheme been properly funded. But that is not the point at issue here.

It is perhaps convenient to remind ourselves of the basic principle of the legislation we are considering. The purpose of the 1974 Act was to assist the board to meet certain binding commitments to its pension funds, commitments which existed at that date. The 1974 Act was not concerned with terms of the pension entitlements themselves, whether they were good or bad. The present Bill seeks to reproduce the support that was provided for in 1974, but by a different method. It was not the purpose of the 1974 Act to allow improvements to benefits provided by outdated pension schemes, nor is it the purpose of the present Bill. If the board consider, in their judgment, that it would be right to allow some improvements to the benefits provided by this scheme, that is a matter entirely within their discretion, but they cannot expect that the cost be reimbursed under this Bill.

When similar amendments to those we are now considering were considered in another place, the Parliamentary Secretary to the Ministry of Transport undertook to consider whether the cost of the 4 per cent. per annum improvements would have qualified for support under the 1974 Act arrangements. This is a hypothetical question to which I fear there is no answer. I am advised that, during the five years between the passing of the Railways Act 1974 and the suspension of the negotiations about its implementation in 1979, the board never raised this point with the department. They now maintain that they would have raised the point before the grand revaluation was completed, and they would have pressed the department to make allowance for these improvements in pension terms in settling the funding debt to be provided under the 1974 Act. I am clear, however, for the reasons that I have explained, that the department would not have been prepared to agree to this, because it would have been in breach of the principle that the Government are only providing support in respect of "historic" obligations. I have, of course, every sympathy with the members of this scheme, who are in receipt of only very poor pensions under it, but we must not forget that these rail-waymen all rejected the option to transfer into a modern scheme with better benefits. And even the benefits of the BTC scheme are fully indexed in line with inflation after the member of the scheme retires. Therefore, while sympathising and not without some regret, I must advise the Committee to reject these amendments.


I thank the Minister for his expression of sympathy, but it does not appear to have very much practical application. I equally note his expression of regret, and I hope that it, at least, covers the pomise to look further into this matter. It may very well be that some- thing can be done about it before Report Stage, which will satisfy the basic requirement of the amendment, in which case I shall not have to press this matter further on behalf of myself and my noble friends. This is a very sorry position, as the Minister himself confirmed.

On Question, amendment negatived.

[Amendment No. 170 not moved.]

Lord MISHCON had given Notice of his intention to move Amendment No. 171:

Page 42, line 25, at end insert— and (d) any obligations of the Board in respect of any sums payable under the scheme in respect of any person and representing the whole or any part of his accrued pension rights under the scheme, insofar as those accrued pension rights correspond to obligations of the Board which were owed on the operative date in connection with the scheme.").

The noble Lord said: I shall not move this amendment, in view of what happened on Amendment No. 168A.

Lord BELLWIN moved Amendment No. 171A: Page 42, line 35, after (" of") insert (" or sums representing accrued rights in respect of ").

On Question, amendment agreed to.

[Amendment No. 172 not moved.]

Lord BELLWIN moved Amendment No. 172A: Page 44, leave out lines 8 and 9.

On Question, amendment agreed to.

Clause 45, as amended, agreed to.

Clause 46 [Unfunded proportion of relevant pension obligations]:

[Amendment No. 173 not moved.]

10.7 p.m.

Lord MISHCON moved Amendment No. 174:

Page 44, line 30, at end insert— (" () In determining what proportion of the relevant pension obligations of each BR or NFC pension scheme has not been funded the Minister shall use the same economic assumptions for every pension scheme subject to the determination.").

The noble Lord said: During the Commons Committee stage at, I think, column 2027 of the Official Report, the Government gave an assurance that they would be adopting the same general assumptions for the BR and NFC pension schemes, and the amendment was on that basis withdrawn. If the Minister would kindly confirm that assurance, I could take a similar course now. I merely wanted the assurance reiterated, so that there was no doubt about it. I beg to move.


I am looking at the Official Report of the Commons Committee stage, column 2027. I think that when this amendment was debated in another place, my right honourable friend the Minister gave an assurance about the general approach that we intended to adopt when the unfunded proportions were determined, and I am happy to repeat that assurance in this House. I wonder whether that is a sufficient answer to the noble Lord at this stage, or would he prefer to hear the remainder of my comments on the amendment?


I am sure that the Committee would be greatly educated by the Minister elaborating on what was said, but as I merely sought a repetition of the assurance I think I can spare the Committee's time. In view of theassurance which has been repeated, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord MISHCON moved Amendment No. 174A:

[In substitution for Amendment No. 177]

Page 44, line 30, at end insert— (" () Before confirming or varying the said determination the Minister shall consult the persons administering the pension scheme concerned about the proportion he proposes to specify in the said order in respect of the scheme, and in the event of those persons giving notice in writing to the Minister within two months that they object to the said proportion, the Minister shall appoint an independent actuary, to be nominated by the president for the time being of the Institute of Actuaries, to report before the end of the second financial year on the proportion which would be appropriate and the Minister shall thereupon by order confirm or vary the proportion so as to give effect to the said report.").

The noble Lord said: This amendment provides for arbitration on the actuarial basis. The Department of Transport wrote on 7th December 1977, that the basis for the valuation to be made in connection with the Railways Act 1974— and I quote this to the Committee with some emphasis, in view of the statement made by the noble Lord, Lord Belstead, when he dealt with matters akin to it on Second Reading— will be freely agreed by all the parties involved— the Government, the Board and the Funds on the basis of the actuarial advice available to them.

Reference was also made in that same letter to the report of the Public Accounts Committee. The letter continued: However, if policy were to be changed in the light of this review, one must I think assume that this would be done in such a way as to leave the position of members and pensioners of the fund as secure as it is now. In other words, if a change were made, the security which is effected by full funding would be replaced by some other equally effective security for the membership ".

In the Second Reading debate the Parliamentary Secretary, Mr. Clarke, made the following statement on the actuarial basis, and I quote him: The actuarial basis is being considered, and we hope that it will eventually be agreed between the Government and the board and the unions, but we cannot guarantee that. Someone has to decide, and actuarial judgments involve a matter of opinion in the final analysis. Certainly at present we would hope to reach agreement, if we can, on the actuarial basis ".

The Parliamentary Secretary also stated: There is absolutely no threat to the pension rights of the railwaymen who are affected by these historic rights provisions ".

Clearly the Parliamentary Secretary's statement meant only that he will try to reach agreement on the actuarial basis, but in the last resort the decision must be the Minister's. This is quite different from the 1977 statement which I quoted, that the basis for the valuation would be— I quote it again: freely agreed by all the parties involved ".

In the light of the 1977 assurance, one would clearly have expected that if there had been any failure to reach agreement on the actuarial basis, then some kind of outside arbitration might well have been decided upon in order to avoid the undertaking being breached.

The present amendment proposes to keep the spirit of the 1977 undertaking inviolate. It provides for completely independent arbitration which would be binding on the Minister. If this amendment is accepted, not only will justice be done but it will be seen to be done.

10.12 p.m.


The question of the choice of actuarial assumptions has caused almost as much misunderstanding as the rest of the pensions provisions put together. It is said that the Bill changes the position that existed under the 1974 Act. Let me make the position about the choice of actuarial assumptions quite clear.

First, there is the former position. Under the Act the Minister was to determine the amount of funding debt that was to be created. He did not have to obtain the agreement of anybody else. The position was the same under the Bill as introduced, but in another place my right honourable friend the Minister wrote into the Bill a requirement that there should be consultation with the parties before the unfunded proportions are determined. He will have to consult with the management committee of the scheme concerned— with the board or the corporation, as the case may be. Secondly, there is the extra-statutory position. I believe that it was the intention of the previous Administration to seek to reach agreement on the actuarial assumptions to be used with the board, the corporation and the pension schemes. However, as I commented on Second Reading, it takes two to reach an agreement.

The noble Lord, Lord Mishcon, has referred to a letter written in December 1977. That letter was written to an outside body and it is available to me. I understand that the circumstances in which that letter was written were as follows. It was written in the context of one of the interim funding orders which were made under the Railways Act 1974. These funding orders were to lead up to a grand revaluation of the board's historic liabilities. That particular funding order was calculated on a different basis from its predecessors. The letter was written at the request of the board for the sole purpose of confirming that there was at that time no intention of abandoning the grand revaluation itself. While its wording might have given a different impression, both the addressee of the letter and its signatory knew that this was its purpose. It was not intended to constitute a new commitment as to the choice of actuarial assumptions.

We will be consulting those concerned before the unfunded proportions are determined. We will be trying to reach agreement but we cannot undertake to reach an agreement. This is no different from the position under the 1974 Act. If there is disagreement, then the decision has to be taken by somebody and that decision is the Minister's reponsibility. Substantial sums of the taxpayers' money are at stake and it seems right for the Minister who is accountable to Parliament and the public to take the decision. We do not regard this as a suitable matter for arbitration. The key issues are not issues of actuarial theory or practice. They are not issues on which the Government can pass responsibility to an outside arbitrator. Therefore we cannot endorse the amendment.


The Committee will possibly realise that we are coming to some important amendments in a moment. I am referring to that of the noble Lord, Lord Selsdon, and to Amendment No. 176, and I have an idea that it may lead to clarity of thought if I withdraw this amendment at this stage instead of having it formally confirmed or negatived, and leave the decision as to what is done in regard to this amendment until after we have seen the result of either Amendment No. 175A or Amendment No. 176. On that basis I ask leave to withdraw the amendment, but the principle which I have tried to enunciate is certainly not withdrawn.

Amendment, by leave, withdrawn.

10.17 p.m.

Lord MISHCON moved Amendment No. 175:

Page 44, line 48, at end insert— (" () The Minister shall inform the Trustee in the case of NFC pension schemes and the Management Committee of the Fund in the case of BR pension schemes what proportion of the scheme is funded and how this proportion has been calculated before he makes an order under subsection (1).").

The noble Lord said: Happily I can be very brief on this amendment. The purpose of this clause is to place the basis of calculation on record so that if difficulties should arise in the future it will enable a proper assessment of the reasons for the difficulties to be made. It will also ensure that those who run the pension schemes have an opportunity to check that the facts which have been taken into account are correct from a technical viewpoint. I beg to move.


This amendment was one of a group debated in Commons Committee and later rejected on a Division. A requirement in the Bill on the lines of the amendment would serve a real legal purpose only if the information to be provided by the Minister were to be used at some further stage of the proceedings. It is not, however, envisaged that there will be any further proceedings once the unfunded proportions have been determined.

I would begin by reminding your Lordships of the amendment which my right honourable friend moved in another place to what is now Clause 46. That amendment followed upon discussion of a group of amendments which included the present amendment. The Bill now lays down a statutory requirement for consultation with the board, the corporation, and the BR and the NFC schemes before final determinations of the unfunded proportions. I would hope that the requirement to consult would produce the general effect which the amendment would produce. It would, however, have the advantage that information would pass in both directions. It would not be a question merely of the Minister stating what it was that he intended to do. It would also be a question of the views of the board and of the schemes themselves being relayed back to the Minister.

I ought perhaps also to make clear that subsection (5) of Clause 46 has not been included in the Bill merely by way of ornamentation. At the technical level, we are envisaging that the actual arithmetic of determining the unfunded proportion will be done by the actuary to the scheme, and not by the Minister or the Government Actuary. He will have to be informed what assumptions have, after consultation, been decided on. Indeed, we would envisage that the actuaries will participate in the discussions and consultations.

There is no question of the schemes being left in the dark about how the unfunded proportions have been calculated. Accordingly, I would advise your Lordships that the amendment is unnecessary.


Again, I am going to study what the noble Lord the Minister has said in order to see whether this matter could or should be brought forward at the Report stage. In those circumstances I ask leave of the Committee to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord SELSDON moved Amendment No. 175A:

Page 45, line 4, at end insert— (" (6) Either the Minister or the persons administering a BR pension scheme shall have the right to require a review of the unfunded proportion from time to time, provided that no such review shall be made before 31st December 1986 or before the expiry of 5 years after the previous review under this subsection unless the Minister and the persons administering the scheme consent. Within 2 years after such a review is required the Minister, after consulting with the persons administering the scheme and the Board, shall make the best possible estimate of the proportion of the pensions corresponding to the relevant pension obligations which cannot then be met by the assets held by the scheme in respect of such obligations and shall make an order to replace the proportion referred to in subsection (i) by the said estimate, which order shall be subject to annulment in pursuance of a resolution of the Commons House of Parliament.").

The noble Lord said: I have two reasons for moving this amendment. One is a personal one in that my family were associated with one of the railways prior to nationalisation and I know that my antecedents, respecting the hereditary principle, would like me to make sure that their former employees were well protected and looked after for future generations. Secondly, I feel that there is a chance that we could reach a situation in the future of considerable unfairness, whether this be to the taxpayer or to the employee of British Railways.

The reason for this is that I do not have full confidence in the ability of Government, Civil Service departments, or Government actuaries to forecast the level of inflation in the future. This is an assumption which must be made if a fair assessment of the unfunded portion is to be made. I quote examples of unfairness. The one I think of first is, if in the assessment a level of inflation is assumed and that level of inflation rises, then the commitment by the Railways Board to fund pensions increases, and they may not be able to afford this. Consequently, if the level of inflation falls the taxpayer will be contributing a higher level than could be deemed to be fair.

This amendment simply calls for a review. I do not necessarily say it is worded correctly, but what I would ask is that the Government would give consideration to an amendment of their own that might consider a review every five years, or at a convenient or suitable date.

I must inevitably try and bring this point back to the individual. I have asked for, and obtained, examples of just one particular situation, which is a true one. There is the case of a Miss W who was a secretary with British Rail for 40 years. She entered the service of LNER in 1940 and retired as a senior secretary earlier this month on a pension of £ 50 a week. She now looks after an aged father in Ilford. She originally joined the LNER superannuation fund, but in 1970 she elected to join the new pension fund which was then introduced. This meant she had to pay more, but her pension would be price protected after retirement. She does not understand all these things. My question to the Government is, will her pension be price protected after retirement if there are insufficient funds available from the board, and if so by whom?

There are other points that have been raised on this. For example, we know that the Railways Act 1974 provided for a once-for-all assessment, and the Government quite rightly quote this to us. But this was under a funding situation as opposed to a pay-as-you-go situation, so there is a difference. Arguments which were advanced in another place are perhaps not as strong as people may have thought at that particular time. When I was approached to raise this I tried to assess in my own mind whether we were talking about a political amendment— that is, people were trying to reintroduce points made in another place and defeated in a Division— or whether we really did have an unfair situation.

I have a feeling that this situation could be unfair if you bear in mind the possible oscillation in levels of inflation. I would submit that noble Lords opposite have an opinion that the Government's policies may not reduce the level of inflation and that inflation may remain high. I, on the other hand, believe that inflation will begin to fall. They may, therefore, argue that there will be insufficient funds to fund pensions, and I might argue that there could be too much money, which is taxpayers' money. Somewhere in between lie the Government, because there can be no one else in the middle. My proposal is simply that there should be an opportunity to review, and that as we always have confidence in Ministers of Transport and those in this field we should leave it to Ministers at a future date. I beg to move.


I am most grateful to my noble friend Lord Selsdon, not only for the amendment, but for the way in which he has moved it, which I think commands even greater consideration and respect for it than might have been elicited simply by looking at the amendment as originally tabled.

Let me deal with the two main points that he has mentioned, the first of which is his concern about the effects of the forecasts of levels of inflation. May I respectfully suggest that the critical question, in fact, is not the level of inflation, but the real returns on the investments and the real movements in pay rates'? The forecast of inflation is actually less important than under the 1974 Act, because the Government will not be paying a fixed proportion of the liabilities. If inflation rises, the Government's payments will rise, and vice versa.

It would seem clear from the example of Miss W which my noble friend quoted that perhaps he has not fully appreciated the purpose of the Bill. The purpose of the Bill is to reproduce the fixed and limited Government support that was to have been provided under the Railways Act 1974 to assist the Railways Board to discharge their historic pensions obligations. The Bill does not affect the legal duty of the board to secure that Miss W's pension is paid. To suggest that Miss W's pension might be reduced, is to suggest that the board of a nationalised industry will default on their payments to their creditors. No Government has allowed a nationalised industry to default on its financial commitments and it is worrying even to suggest that pensioners are at risk.

The amendment presents openly an issue which underlies new Clause 176, which the noble Lord, Lord Underhill, and his noble friends have tabled. The question is whether the unfunded proportion should be open to review, and whether the ultimate responsibility for the historic liabilities should be transferred to the Government.

The substance of the amendment is that the Minister should take full responsibility for the historic pensions liabilities. Support would take the form of long-term deficit financing. Many of the arguments for the amendment are equally arguments for deficit financing of railway passenger services. But we know from experience that deficit financing is a bad system.

Your Lordships should bear in mind that the quantum of the historic liabilities is not fixed and immutable. It depends, at the margin, on current management decisions of the board and of the corporation. So if, for instance, overtime and bonus payments were to be consolidated into basic pay, the quantum of the historic liabilities would rise.

Equally, the value that will be obtained from the historic assets will depend on the decisions of BRB's and NFC's fund managers. At the moment they have a strong incentive to achieve the best possible return on their assets. If they fail to obtain a return on their works of art, for instance, the board will want to know the reason why. Under the amendment, however, they would have no incentive to do anything of the sort, because it would be the taxpayer who would be footing the bill.

The Committee has been told that surpluses and deficiencies might emerge under the Bill— and so they might. But much bigger surpluses or deficiencies would have emerged under the 1974 Act. The size of these deficiencies can easily be exaggerated. I do not blame the board for seeking to transfer responsibility for the historic liabilities. But the case for a transfer is nothing like so strong as has been suggested. Within the range of actuarial assumptions that actuaries ordinarily use, the surpluses or deficiencies that one might expect would be no longer than might be expected in any normal on-going pension fund.

Clearly one has to have sympathy for the amendment as tabled. I should certainly like to say to my noble friend that, while we cannot accept it as it is at present, he himself suggested— at least, I assumed he was suggesting— that perhaps we might look at it to see whether we are, indeed, entirely satisfied that there could not be any of the problems which I think very properly concern him. I certainly undertake that we shall do that, and do it quickly. I cannot accept the amendment as it is for the reasons that I have given. However, I repeat the fact that I think we owe it to the noble Lord to look at it in this way, and I gladly undertake to do so.


I am glad that my noble friend Lord Bellwin has decided to look at this amendment again, because undoubtedly my noble friend Lord Selsdon put forward a very convincing argument. At this stage, I should like to make an appeal to the noble Lord, Lord Mishcon, because the amendment which he moved— No. 174A— has basically the same intention, the same purpose, as that of my noble friend Lord Selsdon. But, of course, my noble friend's amendment has the advantage that it will be unnecessary to make what I would call "risky actuarial assumptions".

Therefore, I think that if assumptions have to be made of the kind that the noble Lord, Lord Mishcon, mentioned— whether with an independent actuary or with the actuary who in any event will advise those concerned and who is referred to in Clause 46— then difficulties are certain to arise. Those difficulties will make it less likely that my noble friend Lord Bell-win can help. But to have what one would call a realistic— if you like, open-ended— review of the kind envisaged by my noble friend Lord Selsdon would, I think, give rise to a much more satisfactory result.


I almost rush to the Dispatch Box in order to deal at this hour very shortly and simply with a matter that I believe the noble Minister and I thought would take a very long time. I say that because of the arguments that could be advanced both ways in. regard to what was said on Second Reading and what is said now. There is not a scrap of politics in the amendment in the name of the noble Lord, Lord Selsdon, or in the amendment which stands in my name and that of my noble friends. Our one desire— and we think that it is a united desire of this Committee— is to see that justice is done, that there is honourable dealing, that promises are promises and that Governments are honourable, whatever may be their political complexion.

It is in that spirit that I understand that the noble Lord, Lord Selsdon, asks in his amendment for reviews which are subject to notices and which, therefore, may not take place if all goes well. I thought that the contribution of the noble Lord, Lord Renton, was as usual most helpful, most calm and most considered. If this Committee can accept the proposition of the noble Lord, Lord Selsdon, in this amendment I would not dream, and nor would my noble friends, of moving the amendment in my name and theirs. We should be perfectly content.

All that I want to do is to protect the position of the noble Lord, Lord Selsdon, who moved— I thought, in such an attractive way— the amendment that came before the Committee. I want to protect him and all the members of the Committee in order to see precisely what it is to which the Minister is agreeing. If the Minister is saying— as I believe the noble Lord, Lord Renton, thought he was saying, and as your Lordships and I hope he is saying, because there is a case for having a look, if it be necessary, on either side in the future— that what is required here is some thought about the proper way of doing it (whether it be the precise way of the noble Lord, Lord Selsdon, or the amendment which follows and which I hope I shall not now move), then I shall immediately take my seat. I pledge my support and that of my friends to the noble Lord, Lord Selsdon. I trouble the Committee no more with my amendment and we can all go peacefully to bed tonight knowing that justice has been done, whereas at the moment there is a grave injustice.


I clearly cannot say that I can accept the amendment as it is, nor do I think that my noble friend Lord Selsdon is asking me to do that. What I can do is to confirm that I think the points that he raises, and indeed the other points made by the noble Lord, Lord Mishcon, in his succeeding amendment, are of sufficient merit to deserve our taking it away to have another look. Where I shall get to with it, or where my right honourable friend will get to, I cannot say as I stand here now, but I say that I think we ought to do just that and I gladly undertake to do that before we come back next time.


I think it may be for the noble Lord, Lord Selsdon, to speak more than I, but I feel that the Minister has expressed sympathy with the idea— I think that should be recorded— and a wish to try to be accommodating. In those circumstances, and if that be the spirit, I certainly would be prepared, if the noble Lord, Lord Selsdon, is, to withdraw my amendment when it comes. I believe that the noble Lord, Lord Selsdon, may have the same view about his amendment.


I am most grateful to noble Lords for their comments, and particularly for the unheralded support from noble Lords opposite. I have two brief points to make, because if the noble Lord, Lord Mishcon, and I can take credit for shortening this session tonight I am sure that noble Lords will be most grateful to us. I am grateful for these comments made by my noble friend, and his reassurance that nobody would suffer because the Government would be bound to stand behind British Rail is much appreciated because, as he knows, at the moment there is no Government guarantee, and this was causing concern.

I would, however, take issue with him on one point. He said that the trustees would not have the incentive to manage the investments efficiently. He knows that trustees are required by law to manage their investments efficiently, and I know he would not wish to cast any doubts at all upon the abilities or the motives of pension fund managers who are, of course, over and above all politics. In view of his comments, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 46 agreed to.

[Amendment No. 176 not moved.]

Clause 47 agreed to.

Clause 48 [Reduction of payments in respect of certain supplementation schemes]:

Lord BELLWIN moved Amendment No. 177A: Page 45, line 30, after (" obligation ") insert (" arising after the passing of this Act ").

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 177B:

Page 45, leave out lines 34 to 44 and insert— (" (2) If, at any time before the increases first become payable under the supplementation scheme, the actuary to the basic scheme certifies that the assets of that scheme exceed its liabilities, then, in relation to the supplementation scheme, the obligation to pay or secure the payment of the increases or, if less, the relevant proportion of the increases shall not be regarded as a relevant pension obligation for the purposes of any determination made under section 47 (1) for a financial year beginning after the date of the actuary's certificate.").

On Question, amendment agreed to.

Lord MISHCON moved Amendment No. 178: Page 45, line 35, leave out (" exceed its liabilities ") and insert (" exceeded its liabilities on 31st December 1979").

The noble Lord said: I shall try to be as brief as I can. Under the Railways Act 1974, an allowance for surpluses existing at 31st December 1979 might have been made in calculating the funding to be created at that date. No allowance could however have been made for surpluses revealed after that date. It is therefore unfair to take account of such future surpluses now, and inconsistent with the Minister's assurance that no pensioner will be worse off.

I appreciate that the counter-argument is that under the funding arrangements there would have been less likely to be future surpluses since certain funds would have been amalgamated and the combined fund would have been less likely to show a surplus than the two funds taken individually. There is, I admit, some truth in this in respect of surpluses arising from certain causes, for example inflation, although the amalgamations could not have taken place without the consent of the trade unions. Indeed, the board had given an undertaking to the unions in the autumn of 1978 that amalgamations could not take place without their consent.

However, it does not apply to surpluses arising from other causes, for example mortality in excess of that assumed. To give an example, consider a small pension fund where some of the pensioners die prematurely in a future year. Under the 1974 Act, arrangements there would have been a resulting surplus, to increase the pensions of the remaining pensioners, some of whose pensions may be very small. Under the Bill, 85 per cent. of that surplus will be clawed back by the Government. How can it be said that the pensioners will be no worse off? I beg to move.


I am afraid that the noble Lord, Lord Mishcon, is out of order in moving this amendment. It is my fault; I should not have called it because the passage to which the noble Lord has been speaking was amended by the previous amendment.


Whether what I have said appears in the Official Report I know not. If it does, I shall at least have made some point and achieved some object.


I will only use a term I have heard since arriving in your Lordships' House: "I hear what you say."

10.42 p.m.

Lord MISHCON moved Amendment No. 179:

Page 45, line 44, at end insert— (" () If the actuary to the basic scheme certifies that following a reduction as specified in subsection (2) of this section in payments to the persons administrating the supplementation scheme the basic scheme has liabilities exceeding its assets at any time later than one year after the reduction was made, the payments to the persons administering the supplementation scheme made under section 43 (1) shall be increased for each financial year after the date of the actuary's certificate by the aggregate amount for that year of such of the increases mentioned in subsection (1) as become payable from that date or, if less, the relevant proportion of those increases.").

The noble Lord said: I hope that if this time I am out of order, your Lordships will be spared and I shall be silenced at the outset of my remarks. Under the Bill as drafted, it will be possible for the Government to claw back 85 per cent. of the surplus by reducing supplementation payments and for the basic pension scheme concerned then to run into unforeseen financial difficulties. The amendment seeks to provide that in such circumstances the Government support will be increased again. The wording of the amendment is a mirror image of subsection (2). In the Commons Report stage the Parliamentary Secretary stated that he could not meet this point, his reasons being: Summarised, the argument is that if we were to accept this amendment or anything along the lines proposed, it would be possible, as soon as a basic scheme got into surplus, for the fund managers hastily to rearrange matters, to start giving out improvements in benefits to their members and to make sure that they were in deficit again fairly smartly to prevent the Treasury from taking its 85 per cent. We would have to take powers to control the scheme to prevent that temptation arising, and we would rather not do that ".

I do not comment any further on the Minister's view of how people behave in matters of this kind, but I go on to deal with his argument on the basis that it is a worthy argument. It overlooks the fact that, if a scheme did distribute a surplus, the members and pensioners would retain only 15 per cent. of it. If the scheme then went back into deficit, the additional support payments from the Government would be limited to 85 per cent. of the amount by which the liabilities of the scheme exceeded the assets. The amendment is a straightforward safeguard which would not be abused. I beg to move.


In Committee in another place the Parliamentary Secretary promised to think further about this amendment. My advice to the Committee is that an amendment is not necessary, and that for the effect to be achieved it would be necessary to complicate still further what is already a complicated clause. The effect of the amendment as drafted would largely be to nullify the purpose of Clause 48. Once Clause 48 had operated once, the basic scheme could so arrange matters that the offset under the clause operated for one year only. That would be done by arranging for benefits to be increased with effect from one year ahead, thus increasing the liabilities of the scheme from that date.

This is not merely a drafting point. If the principle of the amendment were accepted, the Government would be obliged to take power to control the way in which improvements to the pension schemes were made, because otherwise the whole purpose of the clause would be nullified in the way that I suggested.

In all this legislation we are anxious not to become directly involved in the actual rules of the funds on the terms of the benefits. We would be reluctant to have to do so in the very specialised circumstances involved here, and as I shall explain, the likelihood that arrangements of the kind which this amendment is proposing are required is remote in the extreme.

There is one general point about the clause; namely, that it concerns the way in which we envisage a surplus being distributed. It is not the intention that 85 per cent. of any surplus should be distributed immediately. It is not the intention that a surplus should go to offset all, or most, of next year's scheme of supplementation. What is intended is that a small proportion of next year's scheme of supplementation should be offset; the same proportion of the scheme of supplementation in the year after that; and so on. In other words, the proportion of the surplus that is used to offset supplementation will be very gradually distributed over the term of the pensions liabilities of the basic scheme.

There is a substantial measure of self-correction under such an arrangement. The basic schemes to which the clause applies are schemes where the benefits are largely fixed in money terms; and for all these basic schemes pensions in payment are fixed. The most likely scenario in which the balance of assets and liabilities would be less favourable at one actuarial valuation than it was at the previous valuation would be one in which the expected inflation rate had dropped sharply. But in such circumstances, the burden of meeting the relevant proportion of future schemes of supplementation would equally fall. Equally, if the rate of inflation were to rise, so would the rate of return on the assets of the scheme, and thus the size of the surplus.

This self-correction can best be illustrated by example. Suppose the actuary certifies that a basic scheme is in surplus. Suppose he certifies that the relevant proportion is 30 per cent. That means that 30 per cent. of the cost of future supplementation stands to be met by the basic scheme. Suppose that inflation then falls to zero. Obviously the interest earned on the assets of the scheme will also fall. But there will be no future supplementation and therefore no offsetting under the clause. Thus, there would be a smaller surplus, but none of it would stand to be distributed in supplementation. I have deliberately chosen an extreme example, but it shows that there is self-correction in the clause as it stands.

The clause does not specify what basis of valuation the actuary is to use. It will be open to him to hold back a contingency reserve by using a prudent basis of valuation. All the clause says is that, in so far as a surplus is distributed, a certain proportion should be used to offset supplementation. It does not compel a distribution if the actuary thinks that it would be proper to hold some, or even all, of a surplus back for the time being.

In view of that explanation I wonder whether the noble Lord will feel able to withdraw the amendment. Bearing in mind how lengthy and complicated it was, he may wish to consider it further after he has read it.


I shall do just that. In those circumstances I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord BELLWIN moved Amendment No. 179A: Page 46, line 2, after (" proportion ") insert (" (if any) certified by the actuary to the basic scheme to be the proportion ").

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 179B: Page 46, line 3, leave out (" the basic ") and insert (" that").

On Question, amendment agreed to.

10.49 p.m.

Lord MISHCON moved Amendment No. 180: Page 46, line 4, leave out (" 85 ") and insert (" 60 ").

The noble Lord said: It has been the practice for a number of years that pension increases granted by the board under schemes of supplementation should be reduced by the amount of any increase which the pensioners have had from their basic scheme after retirement. The justification for this offsetting is that the purpose of the schemes of supplementation is to place the pensioner in the same position in terms of purchasing power as he was in when he retired. If he has had an increase from his basic scheme, then to that extent there is no need for him to be supplemented in addition. In practice however the offsetting has been less than complete. This is partly because offsetting does not occur until at the earliest the next date on which increases are granted under a scheme of supplementation, and partly because there is no offsetting in respect of active members of a scheme.

The net effect of these factors is that in the various distributions of surplus that have occurred in railway pension schemes over the last few years the proportion of the surplus which has been offset has so far averaged only about 60 per cent., or perhaps rather less. That is the background to this amendment, which I now move.


Under the Bill, the unfunded proportions of unity stand to be determined for the two supplementation schemes; that is, the British Rail (1974) Pension Fund and the NFC (1978) Pension Fund. That means that the taxpayer will become responsible for the whole of the historic pensions payments of these two funds. It will not surprise your Lordships if I say that neither the board nor the corporation, nor the pension funds, nor the unions, have raised any objection to this arrangement. Things would have been different under the Acts of 1974 and 1978. Fixed amounts of funding debt would have been allocated to the schemes, and these amounts might not have proved to be sufficient.

We ought to pause to consider what would have happened if the taxpayer had not stepped in. In the private sector, when a surplus is revealed in a pension scheme which does not provide in its rules for automatic pension increases, it is normal practice, although not universal, for pension increases to existing pensioners to be treated as a first charge on the surplus, although not necessarily to the exclusion of other forms of distribution. Furthermore, in the past, when the cost of supplementation fell on the board rather than on the Exchequer, it was common for part of any surplus to be used to reduce the board's liability for supplementation.

I could go on to talk further about this particular point, but I think your Lordships will have gathered by now that there is really no question of the surplus in the new section being used to meet the cost of supplementation to pensioners in other schemes. It may be that this, too, is something which the noble Lord may feel he wants to discuss again at a later stage, or he may feel that such as I have said is sufficient for the time being. If he would care that I should supplement my comments on supplementation in another form, needless to say I shall be very pleased to do so.


I think it would be extremely helpful if that did take place, because there are many arguments, on which I am briefed, to what the noble Minister has already said, and it would be most inconsiderate if I inflicted those arguments on the Committee now. It would be much more practical, I think, if we had an exchange.


I will write.


I am most grateful.

Amendment, by leave, withdrawn.

Lord BELLWIN moved Amendment No. 180A:

Page 46, leave out lines 16 to 21 and insert— (" (5) References in this section to the assets and liabilities of the basic scheme are references to the assets and liabilities of that scheme so far as it relates to the payment of pensions increases of which are payable under the supplementation scheme.")

The noble Lord said: I have already spoken to this amendment, as I have to all those up to and including Amendment No. 180H. I beg to move No. 180A.

On Question, amendment agreed to. Clause 48, as amended, agreed to.

Lord BELLWIN moved Amendment No. 180B:

After Clause 48, insert the following new clause: Exclusion of payments in respect of certain transfer values (. Where the whole or any part of a person's accrued pension rights under a B.R. or N.F.C pension scheme are transferred to any other pension scheme, being a scheme established by the Board or the successor company or any subsidiary of either of those bodies, the Minister may direct that for the purposes of— (a) any determination of the aggregate amount of the pensions, increases and expenses payable under or incurred in connection with the first-mentioned scheme; or (b) any determination under section 47 (1) in relation to that scheme, it shall be assumed that the said rights had not been transferred and that the payment of any sum representing those rights had not been made).

On Question, amendment agreed to.

Clause 49 agreed to.

Clause 50 [Supplemental provisions]:

Lord BELLWIN moved Amendments Nos. 180Cand 180D: Page 47, line 19, after (" scheme ") insert (" or any other pension scheme established by the Board or the Corporation ") line 21, leave out (" bringing it") and insert (" enabling them to pay increases of pensions payable under the scheme or otherwise bringing the scheme ")

On Question, amendments agreed to.

Clause 50, as amended, agreed to.

Clause 51 [Interpretation of Part III]:

Lord BELLWIN moved Amendments Nos. 180E to 180H:

Page 48, line 15, at end insert— (" "subsidiary" has the same meaning as in the Transport Act 1962; ") line 20, leave out (" specified in") and insert (" for the time being within ") line 24, leave out (" specified in") and insert (" for the time being within ") line 27, at end insert— (" () References in this Part to any pension scheme established by the Board include references to any scheme in relation to which the rights, liabilities and functions of the British Transport Commission were transferred to the Board by the British Transport Reorganisation (Pensions of Employees) (No. 3) Order 1962.")

On Question, amendments agreed to.

Clause 51, as amended, agreed to.

Schedule 8 agreed to.

Clause 52 [Grants towards duty charged on bus fuel, and new bus grants]:

[Amendment No. 181 not moved.]

Lord BELLWIN moved Amendments Nos. 182 and 183: Page 48, line 40, leave out (" the Transport Act 1968 ") and insert (" that Part ") line 42, leave out (" the Transport Act 1980 ") and insert (" that Act ")

The noble Lord said: I have not spoken to these amendments, but I can deal with them quickly. They are drafting amendments, and I think call for no special comment. I beg to move.

On Question, amendments agreed to.

Clause 52, as amended, agreed to.

Clauses 53 to 55 agreed to.

Lord BELLWIN moved Amendment No. 184:

After Clause 55, insert the following new clause: Abolition of Railways and Coastal Shipping Committee (. The Railways and Coastal Shipping Committee established under section 150 of the Transport Act 1968 is hereby abolished).

The noble Lord said: I can speak to this amendment if the Committee feel it necessary. There is nothing that I need particularly to explain. I think it is straightforward. I beg to move.

Viscount SIMON

I do not want to detain the Committee, but this is an area in which at one time I had considerable interest. I only want to ask the noble Lord if he could confirm whether this does away with the committee on which problems about competition between the railways and coastal shipping were discussed. Has this clause been agreed with the General Council of British Shipping?


The purpose of the clause is to secure the abolition of the committee to which the noble Viscount referred. It forms part of Government policy to review and, where possible, to reduce the number of non-governmental bodies. It was established by the then Minister in 1969. The committee has not met since 1974. During the whole of its existence, it received no complaints about charges. I should have thought that, in the circumstances, there would not be too much concern.

On Question, amendment agreed to.

Clauses 56 and 57 agreed to.

Clause 58 [Citation, etc.]:

Lord MOWBRAY and STOURTON moved Amendment No. 185:

Page 50, line 24, at end insert— (" "modification" includes addition, omission and alteration, and related expressions shall be construed accordingly; statutory provision" means a provision contained in an Act or in subordinate legislation within the meaning of the Interpretation Act 1978.").

On Question, amendment agreed to.

Lord BELLWIN moved Amendment No. 186: Page 50, line 28, after (" 55 ") insert (" (Abolition of Railways and Coastal Shipping Committee) ').

On Question, amendment agreed to.

Lord TEVIOT moved Amendment No. 187:

Page 50, line 41, at end insert— (" Provided that section 12 shall not come into force until 3 years after the passing of this Act.").

The noble Lord said: This is where the train is going to stop, for I am afraid that I will move this amendment and discuss it. It is like the drawing room comedy before the war when a well-dressed gentleman— not me— always came in in the third act and put everything right. I do not say this amendment does that. We have already debated the provisions relating to trial areas and your Lordships are well aware of the concern that is felt in many quarters regarding their possible effect. It has been suggested that it was the established operators of bus services who opposed the trial areas because they wished to protect their vested interests, or perhaps it was thought that they failed to be adventurous. It is difficult to know where a network bus operator thinks that the interests of the travelling public start. There are private companies which operate networks as well as public sector undertakings.

I am sure that we are all agreed, and have said often before, that in Parliament our responsibility is to protect, first, the public interest, and only secondly the legitimate interests of others. The problems of trial areas relate to the travelling public. In many cases, bus operators would be delighted to withdraw services if their responsibility was commercial only, but they recognise that they perform a public service. If therefore the network is destroyed, the problems of restoring any services withdrawn will be ten times greater than merely maintaining the existing provision of services. If anyone doubts this then let him look at the example of the USA. In that great country public transport was allowed to decay. Now the President himself takes a personal interest in restoration and is ready to invest tens of billions of dollars because he sees it to be in that country's interest.

Compared to this, trial areas are very small fry. But the principle is the same. Moreover, we have through this Bill provisions which will radically alter the licensing— and the pattern of provision— of bus services in this country. I ask the Committee to recognise the need for this new system to find its own equilibrium— and I submit that this will take several years. Until the new system has been tried, and proved to be successful— or otherwise— it would be premature to have the impact of total delicensing in trial areas. I do not suggest that the merits of this further experiment should be ignored. What I do suggest is that counties concerned, and the Government, should not rush in where angels fear to tread. For this reason I commend to you this amendment, which will allow a three-year period to elapse before the further experiment of trial areas is superimposed on the changes made by this Bill. I beg to move.

11.2 p.m.


Contrary to the arguments deployed by my noble friend, trial areas are an integral part of the reform of the bus licensing system that this Bill is designed to bring about. Everything we are doing is aimed at increasing competition and efficiency in the bus industry. Everywhere it will be easier to get road service licences, and the balance of presumption before the traffic commissioners will be changed. And it will be open to county councils and their Scottish equivalents to go further, and to choose to have road service licensing abolished altogether in their area. County councils may feel— and it is a view with which I have much sympathy— that unfettered competition will better serve the people of their area than traffic commissioner restrictions. If they do, they will be able to apply to my right honourable friend the Minister for designation as a trial area, and, after he has considered the proposal and any representations received, he will decide whether to make the order as requested.

Experience in trial areas— and I can assure the Committee that they will be carefully monitored— will help to decide the question whether road service licensing is on balance in the public interest, and will be a guide to future policy. Experimentation here, as in the physical sciences, will help valid conclusions to be reached.

I see no reason for putting off the time at which applications for designation can be made. If counties want freedom, I do not see why they should have to waste three years waiting for it like a princess in a fairy tale. The Government are not compelling any county to apply at once, though we certainly hope that two or three will, soon after the Bill comes into force. If a county wants to wait and see what are the effects of the other changes in the Bill, before making up its mind, there will be nothing to stop it; there is no time limit in the Bill for applications.

I have listened throughout the whole Committee stage of this Bill to my noble friend Lord Teviot speaking on a number of occasions, and I have the greatest respect for his experience and knowledge, as he knows. But the trial areas are exactly what they say they are: trial areas. There is no compulsion, no pressing for anyone to go into them; but once we are going to go into them— and why should we not give a trial?— let us give them a fair wind so that we can see. If it should prove to be that they are not the solution to what we are seeking, then so be it. But if they are, as I have said before, look at the prize that is there to be won. The least we can do is to give them a fair wind in that trial. This really is fundamental to the Bill, and I hope the Committee will not accept the amendment.


It was not my intention to intervene, but the noble Lord the Minister has compelled me to do so. I rise to support the amendment moved by the noble Lord, Lord Teviot. Noble Lords will realise that we have been critical of some aspects and we are very pleased that the noble Lord the Minister agreed to look at a number of these; otherwise I would have taken part in the discussion on whether Clause 12 shall stand part of the Bill. However, the Minister has agreed to look into certain aspects of that clause.

I am surprised the Minister says that the trial area scheme is an essential part of the Bill— if it is, we have been wasting something like 15 hours in this Committee and 33 sittings in a Standing Committee elsewhere. We are not opposed to innovations or changes, but to rush into a trial area scheme might be unwise in view of the fact that noble Lords opposite would agree that there are some very far-reaching propoals in the Bill and they should be worked through to see exactly what their effect is. Some of the changes could have a considerable effect. I would like to ask this: Have the Government assessed what has happened to the 15 routex schemes? Have they indicated to the Committee whether they have been successful? That was an experimental scheme which had Government support.

My noble friends and I suggest that this amendment is worthy of consideration. It would give the counties the utmost time to consider the position in the light of the new proposals and would give existing opera- tors ample time to look at their position, and a similar opportunity to new operators, without asking anybody to rush into a hasty decision on this matter.


I regret to say that I hope my noble friend's amendment will not be accepted. For a third of a century I represented a huge rural constituency, and throughout that time the bus services declined. They declined for various reasons with which, at this late hour, I shall not trouble your Lordships. Also the experiment whereby local authorities could subsidise bus services did not work very well either; and the only hope that people living in rural villages have, who do not have transport of their own, is that the trial areas should be attempted as soon as possible.


The intervention of the noble Lord, Lord Underhill, was a surprise and a pleasure to me. From what he said I think I shall answer the point of my noble friend Lord Renton first. He represented an excellent county, the source of so many of our cereal crops and vegetables and of our architectural heritage— the county of Huntingdon. We rush through it frequently on the train; it is bounded in one corner by St. Ives, and there is Ramsey. I can well see what he means: I think it was probably represented by the National Bus Company, and it is a small area. But I would hate to think how, even in that area, if it were a trial area, the services would be decimated. If there is anybody lurking in Godmanchester, St. Ives or Ramsey, they might like to come to the rescue.

Turning back to the comments of the noble Lord, Lord Underhill, his support was a rather pleasant surprise because if I was going to get any support I should have expected to get it before my noble friend gave his answer. On Part I of the Bill, I think we were extremely tolerant. We let my noble friend off the hook by accepting his undertaking that he would go back and consult about it. I am quite sure that between now and Report stage we are going to get some delightful surprises. I mean that: this is not a flippant or cynical remark. In the other place, some amendments were made. We often quote ministerial promises which, for one reason or another— probably very good reasons— are not fulfilled in the final stages. But we look forward to so much in Committee stages in your Lordships' House. Trial areas are very experimental, and those in the industry are extremely frightened of them. This is a very radical Bill and one should watch to see what happens, and that there is a trial period. Therefore, I am afraid that I shall not withdraw this amendment.

On Question, amendment negatived.

Clause 58, as amended, agreed to.

Schedule 9 [Repeals]:

Lord BELLWIN moved Amendments Nos. 188 and 189:

Page 72, line 34, at beginning insert—

1 & 2 Eliz 2 c. 33. ducation (Miscel laneous Provisions) Act 1953. Section 12.")

Page 74, line 3, column 3, leave out ("entry relating to") and insert (" entries relating to section 12 of the Education (Miscellaneous Provisions) Act 1953 and").

The noble Lord said: I have already spoken to these amendments. I beg to move.

On Question, amendments agreed to.

Lord BELLWIN moved Amendments Nos. 190 and 191: Page 74, line 20, column 3, leave out (" 138 (1) (a) ") and insert ("138, in subsection (1) (a) ") line 22, column 3, at end insert (", and in sub-section (3) (a) the words "subject as mentioned in subsection (l) (a) of this section".").

The noble Lord said: These are both very minor consequential amendments. I beg to move.

On Question, amendments agreed to.

Lord BELLWIN moved Amendments Nos. 192 to 194 en bloc: Page 74, line 43, column 3, at end insert ("; and paragraph 11.") line 44, column 3, leave out from beginning to end of line 48 and insert— ("Section 13 (5). In section 13 (6) (a) the words from "or to a decision "to" traffic commissioners "."). Page 77, line 9, column 3, at end insert (" Section 150.").

The noble Lord said: I have already spoken to these amendments. I beg to move.

On Question, amendments agreed to.

Schedule 9, as amended, agreed to.

In the Title:

Lord BELLWIN moved Amendment No. 195: Line 8, after (" Council ") insert (" and the Railways and Coastal Shipping Committee ").

On Question, amendment agreed to.

Title, as amended, agreed to.

House resumed: Bill reported with the amendments.