§ 3.38 p.m.
§ The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)
My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
§ Moved, That the House do now again resolve itself into Committee.—(Lord Belstead.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The LORD ABERDARE in the Chair.]
§ Clause 47 [Transfer of operations of the Bus Company to the private sector]:
§ [Amendments Nos. 170 to 172 not moved.]
§ Clause 47 agreed to.
§ Lord Grimond moved Amendment No. 172A:
§ After Clause 47, insert the following new clause:
§ ("Application of s. 60 of Companies Act.
§ .—(1) Where it is proposed in connection with the disposal of shares in or other securities of a subsidiary or an associated company pursuant to sections 47 or 69 respectively to offer any shares or other securities of a qualified company to an exempt person for the purpose of raising money in connection with the acquisition by the qualified company of such shares or securities the Secretary of State may at the request of the qualified company order, upon such conditions as he shall think fit, that the offer shall be treated as falling within section 60(1) of the Companies Act 1985.
§ (2) For the purposes of this section a qualified company is a company which—
- (a) is incorporated with limited liability; and
- (b) the Secretary of State is satisfied that it is intended to be an employee controlled company as defined for the purposes of paragraph 10C of Schedule 1 Finance Act 1974, and
The noble Lord said: This amendment may require some redrafting. I am well aware that if the Archangel Gabriel came down in the guise of a Lord of Appeal in Ordinary and drafted amendments to any Bill, they would certainly be found out of order, and probably rightly so. There are two points to which I should like to draw the attention of the Committee before I reach
the substance of the amendment. First, I have taken some trouble to obtain legal advice on the matter, and I am informed that the amendment may require further words after subsection "(2)(b)" to make clear that it applies to employee controlled companies. Secondly, some Members of the Committee who have looked up the details of this amendment may be rather surprised by the reference to,
paragraph 10C of Schedule 1 Finance Act 1974".
§ At first sight that particular schedule to that Finance Act seems to bear no relation whatever to the matter in hand; but I am assured by my legal advisers that that is the correct way to refer to the definition of an employee-controlled company. Actually, it was made in a later Finance Bill but referred back to that Finance Bill.
§ Having dealt with some of the drafting points, I wish to turn to the purpose of the amendment, which is extremely simple. It is to facilitate the buying-out by their workers of companies which are to be privatised as a result of this Bill. I am not asking the Committee to approve or disapprove of the main proposals of the Bill. All I am saying is that if, as a result of this Bill, certain bus undertakings change hands, then the workers should be given an opportunity to take them over; and I have put down a later amendment in more general terms to ensure that if this Bill is passed then the workers would have what one might call a first refusal when the companies come to be offered.
§ I would have thought that I should carry your Lordships with me when I say that it would be a very good opportunity to take advantage of this Bill in order to spread worker ownership. I myself believe that wider worker ownership and a wider spread of wealth are absolutely essential to the wellbeing of the country. I believe that if this Bill is passed it will offer an opportunity for encouraging that movement. Unless this amendment is passed, it seems to me that it will be very difficult for the workers in a bus undertaking to complete a worker buy-out.
§ Your Lordships will remember that the National Freight Corporation was taken over by its management and workers and that it has proved extremely successful. How was that done? It was done because Mr. Thompson (as he then was) and his associates formed a company and issued a prospectus asking the workers in the National Freight Corporation and certain financial institutions to take shares in the company. The company then made a bid for the National Freight Corporation and procured it. I am told that it required 25 drafts of the prospectus before it was finally agreed. I am also told that the formation of the company issuing the prospectus was extremely expensive. I believe that to issue a prospectus for the smallest company which might seek to be listed on their listed market would be of the order of between £100,000 and £150,000. If this point is insisted upon, it would make it quite impossible for the workers in small bus companies to take over the operation. They would simply never find that kind of money. It would be far beyond their resources. No doubt your Lordships noticed the costs of the British Telecom issue. They actually ran into millions, though admittedly that sum takes account of various other matters.867
§ 3.45 p.m.
§ Therefore, unless the Government are able to assure me that there is something in the Bill which makes it unnecessary, I suggest that this amendment is essential if we are going to see any bus undertakings taken over by their workers. I should also say that the workers would almost certainly need to associate themselves with financial institutions. That was done in the case of National Freight, and it would seem to me to be highly desirable, both so that they can obtain the expertise that is available in the institutions and so that they can raise capital, because they will probably be unable to raise the whole of the capital themselves.
§ What I am asking is that the company laws which insist upon these elaborate prospectuses should be waived to some extent in regard to this Bill, and what I hope are the consequent proposals by the workers to take over some of the bus undertakings. I emphasise that such a relaxation is already allowed and I refer to that in my amendment.
§ I also draw the attention of your Lordships to the fact that the Secretary of State for Industry in another place, when speaking in the debate on the financial services, indicated that the Government would indeed relax the full requirements of the prospectuses in regard to smaller businesses. Your Lordships will be aware that under the present law the full prospectus is extremely elaborate, and to my mind to a great extent is poor and somewhat ineffective. It is a goldmine for lawyers and punters. It deals very largely with the past, and it gives not very much guidance as to the future prospects of the undertaking. Your Lordships may well think that the people who will know about the prospects of the undertaking are those who already work in the buses, and they will be in a fairly good position to judge whether it will be profitable or not. Therefore I do not see that this is a case in which a great mass of shareholders, widows and small people who know nothing about the undertaking, must be safeguarded to the hilt. In any case, I rather doubt whether the present Companies Acts do in fact safeguard them.
§ Here we have what I hope will be a proposal limited to workers in a bus undertaking and possibly to one or more financial institutions. I should have thought that in those circumstances it would be perfectly proper to extend the relaxations which are already made in certain cases. If, as I hope, your Lordships wish to encourage worker ownership, then I think that this amendment should commend itself to your good wishes; and unless the Government can show that it is unnecessary, it should be passed. I beg to move.
§ Lord McIntosh of Haringey
I appreciate that the noble Lord, Lord Grimond, has moved this as a probing amendment and that he himself has expressed some doubts about the wording of it. But even in those circumstances I should like to give a welcome from these Benches to the thinking behind the amendment and to express our view that, although of course we are in favour of public ownership of undertakings of this kind, which in our view and as expressed in this Bill do not readily lend themselves to the kind of privatisation proposed, there should be some opportunity for the workers involved in the industry to participate in it. I 868 think there is a limit to that from the participants' own point of view.
After all, we have expressed the view on a number of occasions that jobs will be at risk with privatisation and deregulation coming at the same time. The possibility of financial loss, if any of those undertakings go to the wall, added to the loss of jobs, could be very serious for a family. I am sure that the noble Lord, Lord Grimond, is aware of that problem and would wish there to be some limit on participation. With that minor disagreement, I think that we would support the noble Lord in his amendment.
§ Lord Sandford
I had intended to speak to the second of the two amendments on this subject tabled by the noble Lord, Lord Grimond, Amendment No. 172E, and I shall still do so if he is going to move it. But if he has now said all that he is going to say on both amendments, I shall speak now. I wonder whether he can guide me.
§ Lord Grimond
Subject to your Lordships' opinion, I had proposed to move the second amendment very briefly, but I am open to argument. I am a new boy in this House. It was my intention up to now to speak briefly on the second amendment and to move it.
§ Lord Sandford
Perhaps I may say what I wanted to say now, but by way of preliminary to make it clear that what I am saying is not to do with the National Bus Company, whose part of the Bill we are in, but the municipal bus companies. The Committee will have heard me say on many previous occasions that the municipal bus companies have a number of objections not so much to this policy but to the way that it is being implemented—to the fact that we have departed from our manifesto commitment. We are tackling this in one great swipe rather than by stages, and it is being undertaken, in our view, with insufficient consultation, research, study, testing, and so on.
The matter is already beyond question. We have reached the stage on this Bill in the two Houses of Parliament when buses will no longer be part of a public service but part of private enterprise, and we are all going into full-blooded competition with each other. Therefore I and the municipal bus companies very much welcome the noble Lord's introduction of this topic and the chance to debate it.
If there is to be full-blooded competition, the sooner the municipal bus companies start to consider full-blown privatisation, and employee participation in addition to that, the sooner they are likely to get themselves into a strong position to face the competition that is undoubtedly awaiting them. That means that discussion of employee participation as a part of the process of privatisation is very welcome at this stage.
I hope that the Government will be able to respond to the noble Lord, Lord Grimond, by indicating that they too are in favour of this process, particularly in the light of the good experience of the National Freight Consortium, and will agree with me that the sooner the existing municipal companies can consider and start to move into privatisation the sooner they will be 869 able to escape from the coils of legislation that will surround them if they stay within this Bill.
I very much welcome the introduction of this topic and look forward to hearing what my noble friend on the Front Bench has to say about it, not only in relation to the National Bus Company but in relation to the municipal companies.
§ The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne)
If I may first address myself to the first amendment of the noble Lord, Lord Grimond, I want to say that the Government have considerable sympathy with his aim of encouraging employee ownership of public transport companies. Indeed. Clause 48(4) of the Bill requires the National Bus Company to give employees a reasonable chance to acquire a controlling interest in the part of NBC's operation for which they work. Employee share ownership is thus something the Government wish to encourage. The amendment would enable an employee controlled company to raise capital for acquiring a subsidiary or associated company by offering shares to employees or financial institutions without being subject to the obligation to publish a prospectus.
As some of your Lordships will no doubt know, in January the Government published a White Paper on financial services in the United Kingdom. This contained proposals for a new framework for investor protection. Legislation is planned to be introduced as soon as possible. The White Paper included a chapter on public issues in which it was proposed that derogations from the requirement to publish a full prospectus should be allowed for offers of securities to professional investors and offers by a company of its securities to its employees. The details of the proposals have yet to be finalised. But the White Paper recognised that the cost of preparing a full prospectus could act as a disincentive to employee share ownership and accepted that the standard prospectus may not be the best way of communicating the necessary information.
I believe that it would be undesirable to pre-empt the financial services legislation by including in the present Bill a prospectus provision limited to the public transport sphere. Prospectus law is a complex subject and details of the Government's proposals are still evolving—for example, on the balance between the burden on companies of issuing a prospectus to employees and protecting the employees' position as investors by ensuring they have sufficient information.
In addition there is a potential defect in the amendment to which the noble Lord referred when he spoke earlier, but I should like to make it clear that I am not opposing the amendment solely on technical grounds.
Thus I am able to confirm that the amendment is broadly in line with our thinking and that we are, in preparing the forthcoming financial services legislation, giving sympathetic consideration to the encouragement of employee share ownership. I hope that the noble Lord will agree that it would be sensible to consider the subject in that context instead of proceeding on a piecemeal basis, and that accordingly 870 he will not wish to press his amendment. If he remains dissatisfied with our more general proposals, he will have an opportunity to take another bite at the cherry when the financial services legislation is introduced in due course.
§ Lord Tordoff
For the benefit of some of us, may we have a timetable? Will the legislation be in time for the employees of the NBC?
§ Lord Trefgarne
As the noble Lord will be well aware, I am not in a position to anticipate what this or any other Queen's Speech may contain, and so I cannot give him the categoric assurance for which he is asking; but we certainly wish to proceed with this matter as soon as we can.
§ Lord Grimond
I am most grateful to noble Lords who have supported me—the noble Lords, Lord McIntosh and Lord Sandford—and to the Minister for showing sympathy at least to the thinking behind the amendment. I realised that it would be desirable to legislate in general and not piecemeal. As I mentioned in moving the amendment, I am aware of the proposals in the White Paper which were endorsed by the Secretary of State for Industry. But, as has been mentioned, the trouble is that the financial services legislation will, I imagine, almost certainly come into operation considerably after this Bill. It may be that the provisions will still be useful, but I think that your Lordships will agree that it would have been highly desirable that the provisions which the Government themselves say that they at any rate contemplate introducing in the financial services legislation should be available when this Bill is passed into legislation, if it is.
Therefore I ask the Government to look at this matter again, as they have expressed sympathy with it, to see whether the provisions which they outline in their White Paper and their desire to see greater employee ownership in this Bill cannot somehow be brought together. But in view of the Government's general—
§ Lord Sandford
Before the noble Lord withdraws the amendment, if that is what he is about to do, may I put this to him? I am very disappointed at the lack of urgency registered by my noble friend on the Front Bench. I have in front of me the transition timetable for the formation of those companies and for the tendering that they have to be capable of. On top of that we are now contemplating privatisation of those companies when they are newly formed; and on top of that we are contemplating offering their employees share ownership.
They will need a lot more help than my noble friend has offered so far to be anywhere near being capable of carrying that through within the timetable set by the Bill. Either there has to be a lot more give and take on the final date for deregulation or a warmer response for what the noble Lord, Lord Grimond, has just been saying.
§ Lord Grimond
I am grateful to the noble Lord, Lord Sandford. What he says is absolutely true. As he divined, I intend, with the approval of the Committee, 871 to withdraw the amendment. However, I certainly should like to return to it at a later stage of the Bill because I feel it is highly unsatisfactory, if Members of the Committee and the Government want this, that some way cannot be found for it to be made more realistic than appears possible at present. Subject to a determination to return to the matter, with the agreement of the Committee I wish to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ 4 p.m.
§ Clause 48 [General duties of the Bus Company]:
Lord Gridley moved Amendment No. 172B:
Page 45, line 26, after ("shall") insert—
("(a) take such steps as may be necessary fully to secure the payment of the benefits that, but for the operation of this Part, would have been payable under any pension scheme or in accordance with customary practice in respect of the employment, before the coming into operation of this section, of persons employed or formerly employed by the Bus Company or in any undertaking or part of an undertaking which is to be the subject of a disposal under the programme, and so to secure the due performance of the employer's obligations in respect of those benefits; and (b)").
§ The noble Lord said: In moving my amendments to this Bill, at Clause 48, I have no political objective in view. I am speaking from conscience. I should like to speak also to Amendments Nos. 172C and 172D.
Amendment No. 172C: Page 45, line 27, leave out from ("any") to ("are") in line 29 and insert ("such undertaking or part");
Amendment No. 172D: Page 45, line 37, after ("(4)") insert ("(a) or (b)");
§ I have some experience of pensions issues. For over 15 years it has been my duty to serve as a Government-nominated member of the Far East (Prisoner of War) and Internee Fund, and I have given longer service on the executive committee of the Overseas Service Pensioners' Association. I have to say also that I do not move this amendment with a light heart, and only after persuasion.
§ It is a matter of hours since I became aware that an amendment identical to the amendment I am now moving was moved in another place and defeated by the Government by 241 votes to 178. I have to say that in the time available to me I have carefully considered the Government's arguments in Hansard in attaining their defeat of this amendment and I respectfully submit that I am not persuaded. The reference is Hansard, Report stage, House of Commons, col. 1031, on 22nd May.
§ It appears that at this stage I should briefly outline to the Committee the issues about pensions as I see them. The existing pension funds of the National Bus Company are well funded and soundly based. It is a condition of employment that employees on entry were, and still are, contributing to those funds. Indeed, the funds which have been entrusted for some years have been drawn up to give varying pensionable entitlements to the employees who are subscribers to these funds. The National Bus Company had every reason and the subscribers had every reason to believe when the time comes for them to enjoy pensionable status that they, the subscribers would enjoy a pensionable entitlement laid down in the pensionable schemes of the company, schemes which they joined 872 in good faith. In justice, in that situation I do not think we can ignore it.
§ The pension funds are administered by trustees under the legal provisions applicable to such funds to honour pensionable entitlement to employees which they have earned by subscribing, but under privatisation and fragmentation of the company the contingent liabilities which fall on accrued pensions to be paid cannot be foreseen with any precise exactitude by the trustees. I shall come to that in a short time.
§ It is apparently the Government's case that while this amendment is admirable in its way, and the Government accept that the existing pension entitlement of the employees of the National Bus Company are extremely important, they nevertheless consider the amendment in another place (similar to the one I am moving here) hampers the present NBC-Government negotiations. I am not aware of the full details of the Government negotiations with the National Bus Company, and if I was it would be improper of me to refer to them.
§ But in Hansard of another place there is admission by Government, when an amendment similar to the one I am moving now was considered, that the pension entitlements of the employees of the National Bus Company are extremely important. If they are extremely important, and considered so by Government, it is difficult not to believe that there have been discussions about these pension requirements already.
§ There are other problems, for under this Bill the National Bus Company will be dissolved, resulting in the fragmentation of its business and the privatisation of its fragmented parts. But the liability to honour pension entitlements for the NBC now and in full remains. The National Bus Company has covenanted with the trustees of the National Bus Company pension schemes to pay the balance of the cost of the schemes but this Bill will remove that covenant which effectively guarantees payment of pension entitlements earned today by 50,000 employees and 16,000 pensioners over varying years of service.
§ To be fair to the Government, they have indicated that they will top up any liabilities that exist at the time of privatisation of its fragmented parts and the dissolution of the company, but it is not known what this liability is meant to cover and perhaps the Minister when he replies will let me know.
§ At present the NBC pension funds are soundly based and financially well balanced. I believe that view is held in Government. The NBC also ensures, by three-year actuarial valuation, that these will be topped up if this actuarial valuation discloses any deficiency. Thus the NBC guarantees the solvency of its funds, and so there would appear to be no problem here.
§ The National Bus Company's concern is that the Bill gives no protection for accrued pension rights in respect of service before privatisation and after the company is dissolved, and when the company as it now is has been fragmented into smaller companies; that is to say, pension rights already earned at present by monthly or weekly deductions from wages and salaries, and when the contingent liabilities in the future on pension funds are unknown.873
§ I happen to believe that the bus industry might achieve greater prosperity in due course when privatised, but I cannot believe in justice that the Government should dissolve the bus company and proceed with the fragmention proposal before present and prospective pensioners have been fully assured that they will enjoy all the scales and emoluments of the present NBC pension funds that they would have enjoyed had there been no policy to dissolve the National Bus Company.
§ The difficuty for the company and the pension trustees—who, after all, have to abide by the laws which govern the management of these pension funds—is that it is impossible for them to calculate with any accuracy the precise liabilities of those funds after the company has been dissolved; that is to say, the amount of pension funds which will enable them to honour pensioners' entitlements to payment.
§ It has been suggested with regard to this contingent liability that recourse might be made to the insurance industry in order to take out insurance to cover accrued benefits. I have to say in regard to this that I am advised by the National Bus Company that after it pursued this question with two of the most prominent insurance companies in this country, the advised answer it received was that no insurance was possible unless there was a dilution of the pensionable payments paid to pensioners. This the National Bus Company and the trustees of the pension funds regarding dilution of payments to pensioners cannot accept; nor in fact could they, if they are to honour pension entitlement to employees which at present exists.
§ A considerable number are involved: 50,000 present employees; 9,000 pensioners and 6,000 deferred pensioners—a total of 65,000 people; to which must he added other dependent beneficiaries, making a total number well in excess of 100,000. That includes widows and orphans.
§ My final submission is this. There are millions of people in Britain who enjoy pensionable status because they believe in the security of a pension. In the present context 100,000 employees of the National Bus Company can be included in this belief. If ever the belief in the security of a pension was broken and not honoured, quite apart from the hardship to pensioners, the repercussions throughout the pension industry and elsewhere would be immense. The amendment that I have moved and those to which I am speaking were drafted by parliamentary lawyers and included under Clause 48 of the Bill. They make clear the legal obligations that lie on the National Bus Company and the trustees of its pension funds to obtain full security to all accrued pension entitlement.
§ The amendment does not exclude any of the options that might be suggested by the Government regarding the contingent liability to be met. And the solution thereafter in no way precludes the solution to the present problem which I have indicated, provided that all pensionable entitlements are met. I hope that the Minister and the Government will be able to accept the amendments or to give full consideration to them.
§ Lord Barnett
I should like to say at once that I am delighted to support the noble Lord, Lord Gridley, in 874 an amendment that is clearly not of a party political nature. I am also delighted to support the noble Lord because I know that he is held in the greatest respect in the House not least because of his knowledge of the pension industry. The amendment would be necessary regardless of the conclusions arrived at in any discussions to which neither of us is party between the Government and the NBC. There is no other way, as the noble Lord, Lord Gridley, has indicated, of ensuring that the pension rights are adequately and fully protected.
When I say that this is not a party political matter, I mean that there is, in fact, virtually no dispute between the noble Lord, myself and the Government, as I understand it, with regard to the objective of the amendment. In that sense I should like to refer to what the Secretary of State said at the Report stage in another place on 22nd May. He said at col. 1042:I accept that the obligation about which my honourable friend talked relates to the first two categories—existing pensioners, and rights earned up to the dissolution of the NBC. The difficulty is not whether we should achieve that objective—I agree that it is vitally important—but how we achieve it".So there is no dispute between us as to whether it should be done. The only dispute is how we should do it.
It seems to me that if there is no difficulty with the objective of protecting pension rights up to the point of privatisation, there is no reason why the Government should not give the appropriate guarantee. The Secretary of State certainly has absolute and total reserve powers as to how this should be achieved. Indeed, there is no other way, as I believe the noble Lord has indicated, and as I hope to show, in which the Secretary of State's own objective can be achieved. Unfortunately, the Secretary of State went on to say:The best that any company can do",in the pension fieldis to ensure that the money invested in the fund, as a free-standing entity with its own assets and liabilities, is adequate to provide benefits earned to date".I am afraid that he is wrong. That is not the situation. I am glad to see the noble Lord, Lord Gridley, nodding. It is not true, because the NBC and very many companies in both the public and private sectors have an obligation to provide additional funds if problems arise. In the case of the NBC the trust deeds and rules require it to pay the balance of the costs under schemes after allowing for the assets. It may well be the case that this would not be necessary because, as the noble Lord rightly said, the pension fund is a very soundly based one. In normal circumstances unless inflation once again went through the roof, or something else happened, those pension funds would be adequate. But, of course, at this stage we do not know. It is not possible to give an adequate assurance to those pensioners who are now pensioners and to those who have accrued rights up to the date of privatisation.
§ 4.15 p.m.
The Secretary of State went on to say that,
it is wrong in principle for the Government to give an open-ended guarantee to a private sector fund".
§ But the guarantee we are talking about—that kind of guarantee—has been given to the trustees of the 875 Industrial Training Board pension schemes. The ITB close schemes are covered by trust deeds and rules that are no different from any private sector close fund except that they have a Government guarantee. That is all that would be necessary here to meet the Government's own objective.
It so happens that the Secretary of State went on to say that,
there is no such legal guarantee at present",
by the NBC.
I should tell my honourable friend the Member for Portsmouth, North (Mr. Griffiths) that the NBC does not legally guarantee its pension fund. Neither the Government nor the NBC guarantee for all time the present NBC pension fund".
§ In fact, under the trust deeds and rules of its pension funds the NBC presently effectively guarantees any potential deficit in that fund. The NBC can break this guarantee only by giving notice of discontinuing the fund, in which event it avoids liability only for new deficits that may arise after the expiry of that notice. The Transport Bill will break this guarantee by dissolving the NBC. The question of whether one agrees with the objectives of the Bill is irrelevant. What we are concerned with here—the Government have indicated that they are concerned with it as well—is to ensure that pensioners and those who have earned rights up to the date of privatisation are protected.
§ It seems to me that a guarantee is required in respect of pension entitlements relating to service up to privatisation. If this is not granted, it will mean that the legislation has retrospective effect. There can be little doubt about that. If it turns out—much as we may all like to believe that the pension fund is adequate—that it is inadequate, pensioners who would have expected and who would have been entitled to expect, under the pension fund and under the arrangements which oblige them to join it, that they would have a certain pension, may, in the event, not be able to have that pension. Surely that cannot be right. I hope that the Committee will agree—unless the Government have some other way of meeting the objectives which they have indicated they want to meet—that there is no other way but that suggested by the amendment.
§ The Secretary of State also said in the debate that he felt that the NBC pension fund would be put in a privileged position if this amendment was carried. That is simply not true. It would only be put in exactly the same position that it was in up to the date of privatisation. It would be no better or no worse, but just in the same position. The Secretary of State has indicated that he will see that the funds are at an adequate level. But that simply is not possible, as the noble Lord, Lord Gridley, indicated. Neither the Secretary of State, nor I, nor anyone else, can say what will happen to inflation or earnings over the next 50 years. It is quite impossible. I do not dispute the good intentions and the good will of the Secretary of State. But no one can give an adequate assurance as things stand. The only way is something like the amendment moved so well by the noble Lord. As he indicated, you can give as much money as you like to an insurance company from the funds, but no insurance company will give cover for any possible rates of inflation or earnings over the years. It is impossible to get that kind of insurance cover.876
§ So there is no other way of meeting what the Secretary of State wants to do—to ensure that the pension funds are adequately protected. In those circumstances I hope that the amendment will have the support of your Lordships as being the only way to avoid a gross unfairness to employees and effectively introduce retrospective legislation on rights which people were very much intended to enjoy whether or not they ceased employment at the date of privatisation. I beg to support the amendment.
§ Lord Banks
I should like to support the purpose of Amendment No. 172B, moved by the noble Lord, Lord Gridley, and, with the leave of the Committee, to speak to Amendment No. 173 standing in my name and the names of a number of other noble Lords.
Amendment No. 173: Clause 52, page 48, line 3, at end insert—("( ) The Secretary of State shall guarantee that in respect of service with the National Bus Company or one of its subsidiary Companies participants shall receive at normal retirement date pensions no less than those which they were entitled to receive at normal retirement date on the day the National Bus Company and its subsidiary Companies ceased to operate.")Both these amendments have the same objective.
We already know that the National Bus Company is to be dissolved and broken up into parts. These amendments are concerned with the employees of the National Bus Company; they are concerned with their pension rights, and in particular with the accrued pension rights for service up to the time when they cease to be employed by the National Bus Company. As has already been said, there are about 65,000 people in that category.
The noble Lord, Lord Gridley, pointed out that the National Bus Company has formally covenanted the trustees of its own pension schemes to pay the balance of the cost of the schemes. The National Bus Company can only break that guarantee by giving notice of its intention to dissolve the funds. However, as the noble Lord, Lord Barnett, said, the Government are ending that guarantee by dissolving the National Bus Company.
As we have heard, the Bill provides that the pension funds should be adequate at the time of transfer, but of course the test of adequacy will be an actuary's opinion that the assets of the funds at that time will be sufficient in the future to meet the liability to provide the accrued benefits to which the employees are entitled at the time of transfer—that is, the benefits that they are entitled to receive at normal retirement date. As the situation is at that point, the National Bus Company will make up any deficiency so that the assets are those that the actuary says are required.
However, as we have heard, the actuary has to make certain assumptions with regard to inflation, to the rate of interest that may be anticipated and to mortality experience. These assumptions can be proved wrong through no fault of the actuary. That is why pension schemes are revalued every three years: to monitor progress and to correct any deviation between assumption and experience. Such deviation may well require higher contributions being paid after such a review.
If, in relation to the accrued rights at transfer, the assumptions prove wrong, it could be that further contributions are necessary to the funds. If that should 877 be the case, who would pick up the bill? There is no guarantee that the successor bodies will do it; there is no guarantee that the successor bodies will even be there. As the Government are abolishing the body which had guaranteed to find the money if necessary, surely the Government should replace that guarantee.
There is no precedent for the disintegration of a nationally-owned organisation prior to the privatisation of the residual parts. With all previous privatisations protection has been provided either by a financially equivalent successor—for example, British Telecom—or, where the successor body was not financially equivalent, the Government, or a Government-owned body. For example, in the case of the royal ordnance factories it was the Government, and in the case of Sealink it was British Rail. The only precedent for dissolution has been that of the industrial training boards, to which the noble Lord, Lord Barnett, referred, where the Government gave a guarantee to the trustees of the industrial training board pension schemes in respect of accrued benefits of members and pensions as at 31st March 1982.
It is important to stress that these two amendments, as I understand that of the noble Lord, Lord Gridley, and certainly as regards the one in my name and the names of others, are not asking for statutory protection for prospective pension rights for future service; they are asking for statutory protection to ensure payment of pension relating to service prior to the dissolution of the National Bus Company. The Government have decided to carry out that dissolution. They have a moral obligation to replace the guarantee which the National Bus Company gave. The National Bus Company are themselves asking that this should be done, and I hope that the Government will respond favourably.
§ Lord Belstead
If noble Lords would allow me, I wonder whether it would be of some help if I intervene briefly on behalf of the Government at this stage and then listen to the rest of the debate before making some brief remarks in reply at the end. I do so on the understanding—which I think I have right—that my noble friend Lord Gridley has moved Amendment No. 172B, with which go Amendments Nos. 172C and 172D, and the noble Lord, Lord Banks, has now spoken to Amendment No. 173, to which three other noble Lords' names are added. That means that we are having a debate about the National Bus Company, accrued pensions and we are not touching at all on the local authority pension scene, which will be the subject of more than one debate a little later on this afternoon.
Briefly, we are talking here about pension benefits which were accrued in the NBC pension funds before privatisation, and I take the point which has been made by all three noble Lords who have spoken that this is a very serious issue for Parliament and, of course, most especially, for those who are affected: the pensioners and employees of the National Bus Company.
Amendment No. 173, to which the noble Lord, Lord Banks, spoke, presses for a Government guarantee for these benefits. It is of course a case that has been put in another place as well as outside your Lordships' House, and the Government recognise that 878 the proposed privatisation of the National Bus Company will be unusual in that the company is to be split up at the time of privatisation so that there will be no single continuing employer. It is this that has lead to the proposal for a Government guarantee, which is called for in Amendment No. 173, and to the reference to the due performance of the employer's obligation, which is contained in Amendment No. 172B, which is being moved at the present time.
I ask your Lordships to bear in mind that even today, with its status as a single employer, the NBC does not actually guarantee the pension funds in the complete open-ended way that, in essence, is being requested in both of these amendments. As the noble Lord, Lord Barnett, said, it is true that the fund rules require the NBC to make employer's contributions to maintain the benefits. But it is also true that the rules of both the funds—because, as we know, there are two funds—provide for the termination, suspension or reduction of employer's liability, and a provision of that kind really cannot be equated with a complete guarantee in the full sense of the word.
I say that not as a debating point, because it is not a very attractive debating point, but in order to direct your Lordships' attention to the funds themselves rather than to the employer behind them. I really think that many of the fears which have been expressed in another place, outside your Lordships' House, and indeed at the beginning of this debate today, would not have been raised if the NBC had stood to be privatised as a single unit. Had that been the case, the NBC could not responsibly guarantee the funds, as indeed it does not now, simply because such a guarantee would depend upon the trading environment of the company, and that is a guarantee that no company can give. Indeed, that is why pension schemes have funds: so that they possess their own independent assets, independent of the fortunes of the parent company. Indeed the NBC funds already have their own independent assets, which are worth about £0.5 billion, which have been responsibly built up over the years in order to meet their obligations. I think it is worth stressing that nothing in this Bill diminishes those assets. They are in the funds to provide pensioners' benefits and we are not reducing or removing a penny of them.
§ 4.30 p.m.
§ I hope that what I have been saying indicates just how remarkable a step it would be for the Government to give a complete guarantee of the funds. Not only would it be to maintain a link with a privatised organisation, which I have to say is contrary to the whole principle of privatisation, but it would above all be to put the funds in a privileged position. It would guarantee the past service element of the fund against any economic event in the future, no matter how widespread its effects on the rest of the citizens of this country. It would be to pledge taxpayers' money to put a private sector fund in such a special position.
§ The noble Lord, Lord Barnett, said to me, "Well, that is all very well, but what about the industrial training boards?" Of course, in the case of the industrial training boards the Government were in the position of the employer, having been responsible for the running costs of the boards, and making the 879 employer's pension contributions. That really is not the case so far as NBC is concerned.
§ May I repeat the undertaking given by my right honourable friend in another place. My right honourable friend has undertaken that at the time of privatisation the Government will make sure that the assets of the funds are sufficient to meet their liabilities. That will be done following a fresh actuarial valuation on a prudent and reasonable basis, and the Government will ensure that, if necessary, extra assets are put into the funds from NBC resources. In so far as that eventually would mean a reduced revenue to the Government from the sale of NBC, then that is something that we would accept.
§ My noble friend Lord Gridley asks, exactly what does that mean? It means that the words I have just spoken would cover everyone who is in the pension schemes whether they are already on a pension or are the newest qualifying member of the schemes. This undertaking reflects our view that it is the assets of the funds which represent the best and most appropriate security for the fund members, and it is also our view that we must ensure, with the trustees, that those funds are adequate for their obligations.
§ I realise that the noble Lord, Lord Barnett, the noble Lord, Lord Banks, and my noble friend Lord Gridley each in their different ways have great experience of matters of this kind and have each drawn the attention of the Committee to the fact that, in so far as the accrued rights are concerned in the future, the trustees of the funds would probably very well feel that, in the circumstances I have outlined, they would need further security.
§ I realise it, too. I realise that if the funds were closed on privatisation then the advantage of cash flow from contributions as a means of easing the purely short-term peaks and troughs would not be available, just to give one example. In that case there would be the possibility for the trustees to seek backing for the fund's assets from a private insurance company on a reasonable basis.
§ Although this is something which has not commended itself to the three noble Lords who have spoken, the Government hope that the trustees will look carefully at that option. Certainly the Government for their part are doing all they can to help the trustees. Already insurance companies have been approached and negotiations are under way. But your Lordships will understand that this is a negotiating situation and that more than one insurance company is involved. I am sure that your Lordships will agree that it would be wrong for me at this time to say anything which might prejudice the interests of the pensioners in those negotiations.
§ My noble friend Lord Gridley made some remark about his understanding of the way in which the negotiations were going. I hope that my noble friend will forgive me if I say that I think that his understanding, so far as that is concerned, is out of date now. I am hopeful on behalf of the Government that a solution acceptable to all parties could be arrived at before the Report stage in the autumn, but of course that depends on whether your Lordships will allow the Government to go that far with this matter.880
§ I am saying that instead of agreeing to the first of these amendments, which is what the noble Lord, Lord Barnett, has already said in his speech the Committee ought to do, it would be wiser to allow the negotiations to continue so that on behalf of the Government I can report further to the House at the next stage of the Bill, in the expectation that a solution satisfactory to all parties can be made available to the trustees.
§ Lord Barnett
Would the noble Lord give way? It is important, if we are to accept the noble Lord's advice and leave it to Report stage, to know whether he is telling your Lordships that the insurance company negotiations could conclude with giving the kind of assurances that other noble Lords and I have sought in the debate this afternoon.
§ Lord Belstead
I was not wishing to go into detail because I was waiting to see what other noble Lords were going to say. Perhaps I ought to say that there are, in a most important position, the existing pensioners under the schemes, and no doubt something will be said about them. As I understand it, the existing pensioners under the two schemes have their pensions kept in line with prices. As my right honourable friend has said on more than one occasion in another place, it would be our intention to try to see that they were in no worse, but at the same time in no better, position than they would otherwise be because of privatisation.
I realise that the accrued benefits of the preserved pensions have to be carefully thought of. Here I can respond to the noble Lord, Lord Barnett, by saying that I know that one option which is being looked at is the possibility of preserved pensions being treated in line with prices with a percentage being put on the top of that. But this is all subject to negotiation. As the noble Lord, Lord Barnett, will be the first to realise, there is no way that I can possibly go further than try to give an indication, as I have in reply to the noble Lord, in I hope a reasonable way, to what was a reasonable request.
§ Lord Irving of Dartford
Before we resume the main theme of the debate so far, I hope that the Committee will allow me to raise a more limited point. I appreciate that it may be more appropriate for another amendment, but the noble Lord will tell me if that is the case. In 1974 London Transport improved the benefits of the London Transport 1970 superannuation fund, but the London Country Bus Services, by that time an independent company as a result of the London Transport Act 1970, indicated that it could not afford the additional cost falling on the management.
In the result, the London Country Bus Services staff were given an option to transfer to the national bus pension fund, the fund of their old parent company. The majority of the staff accepted the transfer terms, but of those who did not there remain a number, including 150 pensioners. These staff and pensioners are in a separate section of the London Transport fund.
The Government have undertaken to ensure adequate funds on an actuarial basis at the dissolution 881 of the NBC to pay the NBC pensions. Mr. Nicholas Ridley said in another place on 22nd May at col. 1043:We must make sure—absolutely sure—that the assets are adequate to discharge the funds' responsibilities".I should like to know from the noble Lord whether these LCBS people, whether present employees or pensioners, will be covered in that assurance.
§ Lord Nugent of Guildford
I should like to thank my noble friend for his helpful reply, which at any rate goes some way to meet this major anxiety which is shared by noble Lords on all sides. It was rightly said by my noble friend Lord Gridley, and I think by the noble Lord, Lord Barnett, that this is an unprecedented situation, where we have a nationalised industry which is being privatised, not as one unit but split up into a number of units. Indeed, it is the essence of the Government's plans that they should be a number of relatively small units. The commercial structure is going to be completely different from what it was.
The point has already been made in answer to the precedent which the noble Lord, Lord Barnett, thought he had of the industrial training boards, that that was not a true precedent because the Government were the employer, and continued to employ the same people afterwards and to guarantee their pensions. We have here an unprecedented situation; one which gives anxiety to everybody. There is a major conflict of principle. On the one hand, there are the existing employees and pensioners of the National Bus Company, with their right to expect the pension scheme to maintain its value and the value of their pensions after privatisation, but on the other hand, it is the Government's duty to protect the taxpayers from the burden of underwriting the value of pensions in private industry. Nobody would be more aware of this principle than the noble Lord, Lord Barnett, with his distinguished ministerial career on the financial side in another place. I am certain that noble Lords in all parts of the Committee will recognise that this is something the Government must do.
The Government have argued that the trustees can best provide for the interests both of existing pensioners and the employees, and the employees who already have a claim against the pension fund, by making a deal with an insurance company that they will, on dissolution of the National Bus Company, see that the funds are topped up on a generous scale following the advice of the consultant actuary. That goes a long way, but much depends on just how far it does go. My noble friend has told us that he hopes to be able to tell us more about that when the negotiations have been concluded, when he can see what the situation looks like.
I follow the point made by the noble Lord, Lord Barnett. I do not believe that any insurance company, whatever the fund, will give an undertaking to underwrite index-linked pensions for the future, because they are underwriting something which is unforeseeable. Here is a basic difficulty in the situation. I am familiar, as are other noble Lords, with the process in nationalised industries that usually every three years there is an actuarial valuation and the consultant actuary advises the trust, and through 882 the trustees the employers, what the employers' contribution should be for the next three years to maintain the solvency of the fund at the required level of pension which will be needed for the numbers expected in the future. That is combined with the foreseeable investment income which will be coming in from investment funds managed in a prudent and skilful manner.
That process goes on every three years and employees have that security which they can look to. They know that this is happening every three years and it is unlikely that their contributions will be significantly increased, but the employers' share undoubtedly will be increased as necessary. If inflation is bad in any particular period the employers' contribution will have to be increased accordingly. The employers then have to take that burden on board, the extra cost goes into the income and expenditure account, and that is paid for either by reduced profits in the undertaking or by increased charges that the undertaking has to pass to consumers and the public.
All that will change when we have a number of small individual bus companies. There is no way in the world I can see of reproducing that position. I have thought about this because I feel, just like my noble friend Lord Ridley, that the Government have a major obligation to meet and to try to find the right balance between their obligations to the employees and pensioners in the National Bus Company on the one hand and the taxpayers on the other.
I read with care what my right honourable friend said in another place and the fairly sharp exchanges that took place on the subject. But here, in this calmer atmosphere, all of us want to try to find a satisfactory answer. I think it might be possible—I am not sure whether my noble friend can accommodate such a thought—to differentiate between the past and the future. I am clear in my mind that the Government cannot rightly underwrite the pensions for the employees of the new range of private bus companies which will come into being. That would be wrong in principle and every Government would resist it. But I think it would be terribly hard on the existing pensioners if they received something less good than they have already because that, so far as they knew, was a solid pension scheme, as good as the credit of this country.
I wonder whether my noble friend might consider, maybe he will give a complete answer, the negotiations which the National Bus Company will carry out with the insurance companies, with the generous provision which my right honourable friend in another place has undertaken to see is provided in topping up the fund. That may be good enough. But I admit that I feel that out of it should come an absolute guarantee that the existing pensioners' position, their existing pensions with their index-linked nature, should be maintained for the future, either by that means or by the alternative that inevitably they would be transferred to the public purse for the Treasury to take on.
I do not think that suggestion breaches the general principle that the Government should not in any circumstances underwrite pension schemes in private business. It does not. This is an unusual situation, 883 whereby we have a nationalised industry in the course of transition from one kind of body into another. I hope my noble friend will be able to consider that thought. It could be fulfilled by the method he has suggested, and I hope it will be; but if it is not, I seriously urge that he and his right honourable friend should consider the alternative that this is not an improper burden for the public fund to shoulder.
§ 4.45 p.m.
§ Lord Shepherd
I am happy to follow the noble Lord, Lord Nugent, because with the latter part of his speech I found myself in more than broad agreement. The noble Lord said it would be quite wrong for the Government to guarantee the pension of any employee of the National Bus Company as and when he moved into the private sector. That is not the purpose of this amendment. That has never been the case that has been made to the Government by the trustees of the pension fund. The limited objective is that at privatisation no employee or pensioner should be worse off in his pension entitlements, earned and paid for by members. That limited objective falls closely to the final words of the noble Lord, Lord Nugent. I am so glad that we have agreement on that.
I am deeply distressed that this matter has had to come before your Lordships because there has been immense anxiety within the National Bus Company ever since the introduction of this Bill in another place. I have to say frankly to the Government that whereas the National Bus Company management took a very positive attitude on the proposals in the White Paper and in this Bill, the sense of injustice that has arisen as a consequence of debates in another place has been a most destructive element in the morale of those in management and the work force on whom much of the future of the Bill which is now before us will so greatly depend.
The noble Lord, Lord Belstead, raised the question of whether there is a legal guarantee by the board. My noble friend Lord Barnett referred to the deed of trustees and the rules of the pension funds. A board, of which I was not a member, firmly undertook in an agreement on the setting up of the pension funds that there would be the provision of moneys to ensure that the assets could meet the liabilities of the pension funds.
Through all my six years as chairman, when we looked at the pension funds situation to ascertain that all was properly in balance, that undertaking, that guarantee, to the trustees was never questioned at any stage. It has always had the firm support of the board; and, if I may say so, Secretaries of State of successive Governments have never raised this issue with the board.
It is perfectly true, as the noble Lord, Lord Belstead, has said, that in the agreement (if that is the right expression) by the company over the trust funds there is provision that in the event of the company being unable to make contributions to the fund, it can give notice. If my memory is right, in giving notice, its liability would remain exactly the liability on the date of giving notice. The ability of the National Bus Company to pay its contributions to the fund—and the funds have been recognised in all quarters as being 884 properly managed—has been acknowledged within the recent actuarial review to be broadly in line with the liabilities. The point that I am trying to make is that the liabilities of the fund have been fully covered by the assets. The board, without any question, has seen itself able to fulfil its commitment; and the resources of the National Bus Company would always encourage it to that view.
I wish to remind your Lordships' Committee that the National Bus Company has been a good profit earner for the state and the taxpayer. Apart from the £20 million a year which it pays on its capital and its interest, it has repaid since the end of 1983 and should have repaid by October of this year some £63 million of its capital and its borrowings. So on a commercial track record the board would have no difficulty in saying they can guarantee the fund. But that has never been in question.
The noble Lord is quite right. The problem arises not through the privatisation of the National Bus Company, but through the possible fragmentation of the group as a consequence of this Bill. The noble Lord, Lord Belstead, in the earlier part of his speech departed very little from the speeches that were made in another place, except that perhaps they were delivered in a more agreeable form; but then that is the characteristic of the noble Lord, Lord Belstead. But he advanced very little. Then, right at the end, he put your Lordships' Committee into what I would say was almost an impossible position. What he was saying was this: "If you insist upon this amendment, you will prejudice us (the Government) in finding a solution to this problem". I would have had more confidence in this respect if the noble Lord, Lord Belstead, had made known his position a little earlier. I then might have had time to think and to take advice, as no doubt the noble Lord, Lord Gridley, would have so wished.
We are now being asked to accept a particular assurance—and I accept that sincerity of the noble Lord, Lord Belstead—which places us, I would suggest, in a difficult situation. If the Committee wishes this amendment to be withdrawn, I think that it should be withdrawn on condition that this particular clause of the Bill should be recommitted at Report stage so that this matter could be freely and frankly discussed in a Committee situation and not in the more formal restraints of the Report stage. I think that the Government ought to give that undertaking if they wish to press the noble Lord, Lord Gridley, and my noble friend Lord Barnett, not to proceed with this amendment. I may be more persuaded if the noble Lord can give me an answer to the following question—
§ Lord Tordoff
Is not the undertaking that the Committee needs an undertaking that if negotiations were to fail, the Government would come back with a similar provision to the one in this amendment?
§ Lord Shepherd
That certainly would be the case. But I should like to put this question because I think it is very central to the issue and much depends on how the noble Lord replies to it. The noble Lord has said that there were discussions with various insurance companies. The insurance companies have made their position clear, and I suspect (as the noble Lord, Lord 885 Barnett, has said) that the question arises of how to guarantee these funds for 30, 40 or 50 years hence on the present assets of the company. Clearly, there would have to be some topping up.
This is the question to which I referred. If an insurance company were prepared to take over the assets and to guarantee the benefits at a price (which would include a profit element) to be determined by its own actuaries, does topping up—that is a phrase that the Secretary of State in another place has used—mean that the Government would pay whatever is required by the most competitive insurance company which is prepared to take on the risk without dilution of the benefits?
If the Minister will say that in the Governments's view the topping up meets that point, I certainly would have greater ease in not pressing this amendment today. But the noble Lord, I am sure, will understand that he has placed some of us who have great responsibility in this matter and great commitments of past service, in a difficult situation because of the manner in which he has made this statement this afternoon. I do not say that in any way it was a political ploy; but it has placed some of us in an intolerable position as to the best decision on behalf of the 50,000 employees and the 16,000 pensioners. I think that is enough for the moment, but I hope that the Minister can give me a direct answer to that question.
It is only because my name is on the amendment that I might be allowed a few minutes briefly to address the Committee. I should like to say to my noble friend that so far as I am concerned, as a late signatory to the amendment, I thought that the undertaking he gave was helpful and forthcoming—and in some contrast, may I say, with a rather more dismissive attitude taken to this amendment when it was moved in the same words in another place.
So far as I am concerned therefore I think it would be quite wrong to press my noble friend's amendment to a Division at this stage. I want to be brief and I want to try very hard not to repeat what has already been said. I added my name to this amendment because it seemed to me to raise a question of important principle which did not depart in any way from the object of the Bill.
Also, for some 10 or 12 years, I was a director of a bus company before it was nationalised and I was a consultant to another; therefore I know quite a number of former employees of the National Bus Company who are now enjoying their pensions. We have just been reminded that there are some 16,000 involved. I have tried, therefore, to put myself into their shoes and, speaking as if in their shoes, I feel that the Government are under an inescapable obligation to ensure somehow that the promised benefits are secured. As I see it, we are debating not whether it should be done but how it can be done.
§ 5 p.m.
§ How then can the rights of NBC pensioners and employees with pension rights be most effectively and 886 inexpensively underwritten? I think that is the right phrase to use. My noble friend Lord Gridley and other noble Lords have talked about what contribution might be made by an insurance company by covering all risks and covering all contingencies—and, incidentally, making a goodly profit at the same time. It goes without saying that this would surely be very expensive indeed, and I cannot for the life of me see how any insurance company can think half a century ahead in trying to cover contingencies and risks which might arise.
§ We have discussed the option of a Government guarantee—although my noble friend Lord Belstead does not like the word, and perhaps he will have to find a better one—that all pension rights can be fully secured at the moment of privatisation. That would certainly be cheaper and simpler. There is the precedent—and I regard it as a precedent—of the industrial training board; and my noble friend made a sharp distinction, which did not seem to me a distinction with a real difference.
§ But there is a third option, or part-option, which nobody has yet mentioned—that is, that the companies tendering for the NBC routes, however many of them there may be, will be making offers for assets and liabilities. The existing pension rights of those now employed and of those who have retired are one of the liabilities. Why not apportion existing pension obligations between the successful bidders? Of course that might be much too complicated; it might be impossible. But that option has not yet been mentioned and I certainly think that it ought to be most carefully considered. Perhaps it would be possible even to dovetail all three options.
§ As I see it, therefore, it is for the Government to recommend how this problem should be solved, and it is for Parliament to approve it. In that connection we look forward very much to the Report stage. This is the Government's Bill and it is their problem. As I see it, we want a firm assurance that somehow a way will be found to underwrite the trustees' present covenant under seal, which, although my noble friend Lord Belstead does not like the word "guarantee", does amount—at any rate to a layman like me—virtually to a guarantee. The mechanics, given that assurance, can follow later. The Bill at present retrospectively expunges the NBC guarantee, and that cannot be right.
§ Viscount Massereene and Ferrard
I should like very much to support what my noble friend has just said. I was going to say much the same, though of course not so expertly. I am absolutely definite that the pension rights of the NBC employees must be secured. To do otherwise would be quite dishonourable.
I hope that the fragmentation of the NBC into companies will not be too great. I understand that is entirely in the hands of the Secretary of State. He is enabled to sell these assets to people who send in their tenders. However, I think there would be some safeguard if the only people to be accepted to run the buses were big companies, and those with a very good background, because fragmentation into dozens, if not hundreds, of small private companies could be highly dangerous. It is probable that one or two of them might go into liquidation, and one wonders what would happen then to pension rights.
887 I am quite definite that the Government must find a solution—even though not necessarily by way of a guarantee—which so far as human ingenuity can ensure it, should be foolproof. I hope that will be possible. Of course I favour a Government guarantee, and I do not think the taxpayer would object to that: certainly I myself, as a taxpayer, would not object. When one considers how some of our taxes are squandered on the most useless endeavours, I would far rather see them being spent to ensure a guarantee for the pension rights of the employees of the NBC.
§ Lord Mottistone
I added my name to the amendment of the noble Lord, Lord Banks, because my views on this matter are similar to those put forward by the noble Lord and by my noble friend Lord Gridley, and indeed by practically every noble Lord who has spoken. I have no wish to repeat all the statements that have been made already.
The important points I should like to comment upon are, first, that I do not think my noble friend the Minister is right in talking about underwriting pensions of companies in private industry. We are not talking about that: we are talking about underwriting pensions of companies before they were in private industry, which is a very different matter.
My second point concerns training boards, which have been mentioned by several noble Lords. My noble friend dismissed them because the Government was the employer. I was an employee of a training board, although when I went to another company I transferred my pension and so I am not in that pension scheme. But at the time I was with my training board all the training boards were independent, and the result is not quite the same as saying that the Government have always been the employers. I make the point because, as other noble Lords have said, this is a special case, and therefore it requires special treatment. I think the Government can afford not to be swayed by people who might say, "You must not set up a precedent", because it will be difficult to envisage another precedent quite like this.
I thought that my noble friend Lord Nugent in his closing remarks really put his finger on the point: what we must have is some sort of undertaking from the Government which satisfies us as meeting the basic requirement of giving the pensioners what they would have got if nothing new had happened. That is what we must have. I think my noble friend has said that is what he is aiming for and that is what is in negotiation. I understand the point made by the noble Lord, Lord Shepherd, that it is infuriating not to know in advance what the outcome of that negotiation will be, but I would suggest to your Lordships that we are extremely fortunate that this Bill has hit us at this particular time so that there is a gap of two and a half months between Committee and Report. That really does give time for these negotiations to reach the right conclusion.
In that connection I agree with the suggestion made by the noble Lord, Lord Shepherd, that we should, if necessary—I would qualify it in that way—have a recommitment of this clause, as was done in the Insolvency Bill with Clause 7, and for somewhat similar reasons. There is a precedent there. Perhaps that course could be adopted when we resume in October. However, I say that should be done only if it 888 appears to be necessary, because I hope that my noble friend the Minister will put down an appropriate amendment of his own which will give us the reassurances that we need. Indeed, perhaps he might write to us to say that he has completed his negotiations satisfactorily.
What I think would be unwise at this stage is to take either of these two amendments to a Division. I personally, if I have to choose between them, think that the much more simple one, (that is No. 173), which clearly puts the weight on the Secretary of State, is the better of the two. I am just about to sit down; but I should not like to go into the Division Lobby at this stage of the game in support of Amendment No. 172B, and I hope that the noble Lord, Lord Banks, will not push his Amendment No. 173, either.
Before my noble friend sits down, may I ask very briefly whether he is aware that Amendment No. 173 does not deal with existing pensioners—or has he not noticed that? He has put his name to it.
§ Lord Peyton of Yeovil
I lay no claim to any specialised knowledge of the pensions industry. I concede, of course, to my noble friend Lord Gridley, who moved the amendment, and to the noble Lord, Lord Barnett, opposite, that they have such a specialised knowledge. Therefore, most of my remarks will be in the interrogative, seeking from my noble friend on the Front Bench an understanding of the position. There can be no challenge anywhere in your Lordships' Chamber of the need to show care to safeguard the accrued rights of pensioners. Like others of your Lordships, I have received many letters on this subject. An official of the Transport and General Workers' Union kindly came to see me the other day to express the anxieties of his members and I told him that I was very ready to consider those and to repeat them here.
But I think—and I am not referring to anything which has been said today in your Lordships' Committee—that it is also incumbent upon others who oppose the Bill not to stir up unnecessary and irresponsible anxieties on this very delicate matter. We are, I think, united that employees ought not to lose, but I want to be clear myself as to the likelihood, as things are at present, of their actually doing so. My first question is: how absolute is the so-called guarantee which pensioners, either present or prospective, enjoy? As I understand it, the rules of these funds provide for the reduction, suspension or termination of employers' liability, which at least gives me the impression that the guarantee is not quite as absolute as has been suggested.
The Government are now asked to give a guarantee which is not qualified in the way that the present National Bus Company's guarantee is qualified. I am concerned to know whether pensioners are at present protected—and I hope that my noble friend will be able to give me a clear answer to this—against, for instance, a storm of inflation. The noble Lord, Lord Barnett, opposite, in the course of his very temperate remarks, suggested that one of the dangers was a recrudescence of inflation which would immensely 889 damage the rights of pensioners. What I am inquiring about is whether, in fact, today pensioners are fully protected against such a return of inflation.
I come to my second question. If it were the intention of the Government that the National Bus Company should be sold as a whole would it, or could it, have replaced its present limited guarantee with one such as is now suggested; in other words, something very much wider? My last question is: does any private employer give any such guarantee now, and if he did how could he be sure of being able to honour it? The Government have stated very clearly—and I think this has been generally welcomed—that if, following a prudent actuarial valuation, any deficiency in the fund should appear, then that could be topped up from National Bus Company funds. The possibility of some insurance arrangement has been aired, and I share with others of your Lordships a considerable interest in learning what progress has been made.
I think the suggestion that the noble Lord, Lord Shepherd, made towards the end of his speech, that this was putting your Lordships in very great difficulty was, if I may say so, slightly unfair, for it seems to me that my noble friend has done, and is continuing to do, his best to resolve what is generally admitted to be an exceedingly difficult problem and one without precedent.
I hope that my noble friend will give me answers to those questions, because I have a feeling that some of the things that have been said on this subject have given the impression that present pensioners enjoy a very much wider guarantee and a wider degree of certainty than in fact they do. I may be wrong, but I should like to be reassured about that.
The last point that I want to make is this. Some of the arguments that have been adduced during the passage of this Bill have led me to believe that some of your Lordships, and some of my noble friends even, would really stop at nothing in their attempts to wreck this Bill—
§ 5.15 p.m.
§ Lord Peyton of Yeovil
I am so sorry, but I am entitled to my opinion. I do not interrupt other noble Lords. We have had a very great number of amendments which seem to me to be designed to undermine the working of the Bill. If all of your Lordships do not agree, that is my misfortune, but it is my view. What I fear is that this very sensitive aspect of the Bill might well be used by others, not in your Lordships' House, in an irresponsible manner, and that the very delicate subject of pensions will be treated as yet one weapon in the arsenal of those who wish to destroy this Bill.
§ Lord Shepherd
The noble Lord, Lord Peyton, has really cast a massive slur upon the noble Lords, Lord Gridley, Lord Barnett and Lord Chelwood. They put their own names to this amendment. Certainly, I had no involvement in their names being put to it. What the noble Lord is saying is that, because some of us have spoken on the general nature of the Bill, we are 890 using what is a sensitive and very serious matter, like the noble Lord, Lord Nugent, has said, for narrow reasons to cause difficulties for the Government and for the Bill. I hope that the noble Lord will withdraw that statement.
§ Lord Peyton of Yeovil
I was very careful to say in the course of my remarks that nothing of what has been said in your Lordships' Committee this afternoon was anything other than completely responsible. I am sorry if the noble Lord, Lord Shepherd, misunderstood me, but he certainly did.
§ Lord Barnett
Will the noble Lord allow me to intervene, as he was so kind as to exclude me! Probably, he meant his criticism to say: present company excluded. But may I say to him that not only does the amendment not seek to wreck the Bill; it effectively assumes that the Bill will become law.
§ Lord Peyton of Yeovil
I do not wish to detain your Lordships for too long, but the whole point of what I had to say was to refer to amendments which were, in my view, designed to undermine the Bill. I was not referring to the one which your Lordships are at present discussing and which was moved very responsibly by my noble friend Lord Gridley and supported by the noble Lord, Lord Barnett.
§ Viscount Hood
The National Bus Company has two very good pension schemes, and I think it is common ground in the Committee that the members should enjoy those schemes. The problem with which the Government have to deal is that they are both fully related to the retail price index. This inevitably leads to the uncertainties, to which the noble Lord. Lord Barnett, referred in achieving some completely insured scheme for the future. The companies are undertaking to fund these schemes, in one case up to 1995 and in the other case to 1998, but these schemes can clearly fall under the terms of the Bill before your Lordships' Committee.
The scheme of a good and well-run private company is fully funded and it is backed by the company, though probably not by any written undertakings. But the company and the pension plan are run under the authority of the same board of directors. It is an essential element in the judgments of the directors to see that their employees are happy, and a pension plan is an important element there. Clearly, the Government will have to make up the full funding of both these schemes. This can be on certain assumptions arrived at with a given figure, but the problem is how to be sure, that having been achieved, that the funding will remain intact for the forty or fifty years ahead of these schemes. I do not think that this is an insoluble problem.
It is also fair to say that the unwritten guarantees of any company are only as good as the company. The guarantee of the Government is necessarily better than that of any company, including the National Bus Company. This is the Government's problem. I think that the amendments go too far with a complete guarantee of Her Majesty's Government, and that the Government should be given time to work out some scheme which is acceptable to your Lordships and to the members of the scheme.
§ Lord Belstead
Perhaps I may reply briefly to what your Lordships have said. That is not an entirely easy thing to do as practically every noble Lord who has spoken has a first-hand knowledge of pensions or a very close knowledge of the bus industry or of the National Bus Company, or has a knowledge of both areas. Nonetheless, I shall do my best.
Briefly, and without more ado, perhaps I may pick up a point which was put to me by my noble friend Lord Peyton. My noble friend asked about the rules of the two funds which are the pension funds for the National Bus Company. My reading of the rules, which I have with me, is clear. They provide for the termination, the suspension or the reduction of the employer's liability. I feel on behalf of the Government that no company could guarantee its trading position and therefore the fortune of its pension scheme without any peradventure at all.
I should like immediately to make the point that I am not saying that as a defensive screen for an argument that the Government are attempting to put before your Lordships, but as the reason we believe that we need to ensure that the funds of these pension schemes are adequate. That is why my right honourable friend in another place has given an undertaking that, following a fresh actuarial valuation on a prudent and a reasonable basis, the Government will ensure that, if necessary, extra asets will be put into the funds from the sale of NBC assets. It could mean a reduced revenue to the Government from the sale of NBC, but we accept that in order to fulfil our undertaking to all who are in the pension schemes, whether they are already drawing a pension or are the newest qualifying members of the schemes.
It is, though, the further security to protect the funds in the future against any unforeseen eventualities which is at issue now, the point spoken to by so many of your Lordships, in particular by my noble friend Lord Gridley in opening this debate, by the noble Lord, Lord Barnett, and by the noble Lord, Lord Banks. I have said on behalf of the Government again today that the Government cannot pledge taxpayers' money to give an open-ended guarantee, but it is here that there is the possibility for the funds to be backed for the future by private insurance. The difficulty in which I find myself with regard to this afternoon's debate is that, although all noble Lords who have spoken have been at one in expressing their concern for the future position of NBC pensioners, either those who are pensioners now or when they take the pension, there has been some difference of emphasis coming out of this last hour and a quarter's discussion.
We have two different sets of amendments—one would place a duty on the National Bus Company itself to give a form of guarantee; the other would place a duty on the Government, although the nature of the exact guarantee that would fall upon the Government does not seem to be entirely agreed between all your Lordships. My noble friend Lord Nugent, although by no means being uncritical of the position in which we find ourselves at the moment, put his finger on the position of the existing pensioners as being more special almost than anything else. My noble friend Lord Mottistone and my noble friend Lord Chelwood were both generous in saying that they felt that, on behalf of the Government, I had endeavoured to come 892 forward with a helpful and forthcoming statement earlier on. But both my noble friends went on to examine very carefully what they believe the options might be for the future. Indeed, I must be fair about this: they expressed doubt and at any rate hesitation about what insurance could do when one was looking many years ahead.
On that point, may I pick up the view that was expressed by my noble friend Lord Hood in the intervention that he made at the very end of this debate. My noble friend said that he felt that this was not an insoluble problem. As a layman in this matter I have been reflecting for many days now. Surely, it is the case that although no insurance company or any other body can predict precisely what will be the rates of inflation and rates of interest for periods for many years ahead, nonetheless, it is not the business of many insurance companies, not least the life insurance companies in this country, to try to do just that, although very often it is more difficult to underwrite one form of cover than it may be for another?
In reply to the emphasis on the different views which have been put forward, and indeed in reply to the two different sets of amendments which have been put forward, the Government are saying that in addition to the absolutely cast-iron guarantee that we give for the topping-up of the funds at the time of privatisation, we are now negotiating with insurance companies for further security for the funds. Negotiations so far have shown a good basis for fruitful further progress if the trustees decide that they want to pursue the insurance option. My noble friend Lord Nugent drew particular attention to the position of existing pensioners. Here I would say to my noble friend that any insurance option which we can secure would of course be for the members as a whole, most certainly in order to cover existing pensioners.
So far as preserved pensioners are concerned, as I said to the noble Lord, Lord Barnett, he asked me to respond about the detail, we are looking at an option, which would be connected with prices. The noble Lord accepted that I could not go further than what I said about three-quarters of an hour ago. If I may say so to the noble Lord, Lord Shepherd, we are most certainly not talking about dilution. However, we may have to talk about the same package of benefits in a different shape in return for insurance cover and certainly—not worse benefits but different benefits, but equivalent. Here again, this is subject to negotiation.
I will end by answering three questions put to me by noble Lords. The first came from the noble Lord, Lord Irving of Dartford, who referred to the London country bus service. I am hopeful that this particular situation will not be an obstacle to any satisfactory settlement. We recognise the point which the noble Lord made in his speech and we are certainly taking account of it.
Secondly, in reply to my noble friend Lord Peyton I should like to say that we are seeking to ensure that employees do not lose out. I have to say that the present rules of the funds are indeed, as my noble friend suggested, not absolute. Negotiations with insurance companies have shown, as I have said, that there is a basis for fruitful further negotiation. I do not 893 see how the National Bus Company, if privatised as a unit, could have given a complete guarantee. However, that is ground I have already gone over.
Thirdly, the noble Lord, Lord Shepherd, asked me an absolutely direct question: would the Government be prepared to pay whatever an insurance company demanded in order to guarantee the existing benefits? At least, I thought that was the question which the noble Lord put to me.
§ Lord Shepherd
I meant a guarantee that was competitive, whereas the noble Lord suggested that I referred to a guarantee at any price. My question assumed a competitive situation. Clearly I am not suggesting that the Government should pay whatever price any insurance company demanded. Obviously one is talking about a competitive situation.
§ Lord Belstead
I am grateful to the noble Lord, and he was quite right to intervene. My answer is that the Government will be prepared to pay what is necessary to achieve adequate insurance cover, as we would be to top up the funds adequately in the way that we have given an assurance that we would do.
I am asking as a result of this debate that the Committee will agree that the negotiations to which I have referred should continue, so that the Government can report again to the House at the next stage of this Bill. I make that request not in order to try to evade responsibility. As sure as night follows day, and whatever may happen to anybody in this life, your Lordships' House will meet again for the next stage of this Bill a little later this year. And, again, as sure as night follows day, it will be in the hands of your Lordships as to what your Lordships consider should be done with this particular part of the Bill and with this particular issue.
I earnestly ask your Lordships, after what has been a valuable exchange of views which has taken us a little further today, to allow the Government to try to pursue the option which the Government are genuinely trying to pursue, and then allow me to report back to your Lordships' House, if that is the way events turn out at the next stage of this Bill.
The Earl of Selkirk
Can my noble friend the Minister say whether or not there was a covenant between the National Bus Company and their pensioner! If so, does he have any idea of what were the terms of that covenant?
§ Lord Belstead
A covenant has been referred to in today's debate. I certainly accept anything that has been said about it and about an undertaking by the National Bus Company about the payment of contributions. But that is part of the rules. The rules are, as I understand them—and I have the rules with me—subject to the overriding stipulation that they can be terminated, suspended or reduced by the National Bus Company if it wishes to do so, by way of the employer's liability, if that is necessary. That is an overriding stipulation.
§ The Earl of Perth
Before the Minister concludes, will he give an answer to a proposal which I found to 894 be of the greatest interest? It was made by the noble Lord, Lord Shepherd, who suggested that at Report stage we should recommit this matter, as if it were. We would then all feel very much happier about letting the Government go forward with their negotiations. We could be the judge of whether recommitment was necessary. The noble Lord, Lord Mottistone, used, I believe, the words "if necessary". I say that we should have it as an assurance. After all this debate we could then wait and see.
§ Lord Shepherd
Before the Minister replies to the noble Earl, perhaps I may make a point in a similar vein. Of course this matter depends very much on what your Lordships wish to do. Clearly this is an on-going situation. I believe we are due to return to this Bill at Report stage on 14th October. We will not therefore have the usual facilities for discussion and information.
In the pursuit for a settlement will the noble Lord the Minister undertake that he will be willing to see those who have expressed an interest in this question, so that they may be brought up to date on the situation before we meet on 14th October for the next stage of this Bill? We would then be in a position to take a view as to how far the negotiations have progressed, how successful they have been, and how closely the genuine anxieties expressed have been met. Such a meeting could be the basis of that information.
§ Lord Gridley
the noble Earl, Lord Selkirk, spoke about a covenant. As I understand it, the position is that at present the National Bus Company has covenanted with the trustees of the National Bus Company's funds that if there is any shortage in those funds to pay the entitlement of pensioners, the company will see to it that those funds are met. That agreement covers 50,000 pensioners. I believe that is the covenant to which the noble Earl was referring.
§ Lord Belstead
Perhaps I may reply specifically to the noble Earl, Lord Perth, and to the noble Lord, Lord Shepherd. I give without hesitation the undertaking for which the noble Lord, Lord Shepherd, has asked. The Government give an absolute undertaking that in the week before we reach the Report stage of this Bill there will be a meeting with any noble Lord who has spoken on this particular amendment this afternoon. I shall make sure that we are in touch with noble Lords to that effect. I will go further. When that meeting takes place, if it is to take place in good faith, there clearly must be an understanding that if the Government's report is not to the liking of your Lordships, the Government will agree to recommittal of this particular clause. I give that undertaking.
§ Lord Barnett
The noble Lord the Minister has, as usual, been very courteous. I am most grateful to him for the way in which he has responded, particularly in his concluding remarks. In those circumstances I am sure that your Lordships will feel that the House should have an opportunity to consider the matter again. Because it will be a couple of months before we reach that stage I believe one or two points of clarification still need to be placed on the record.
895 I know the noble Lord too well, even in the short space of time I have been in this House, to believe that he would wish in any way to mislead the Committee. However, I noted in particular what he said about the Government's undertaking in reply to my noble friend Lord Shepherd. I shall return to that point in a moment.
I shall now take up the point made by the noble Lord, Lord Peyton, concerning the present rules. In the case of the rules of any pension fund, it would be absurd if there were not a clause allowing them to be discontinued. It is not surprising that such a clause exists in this case, but in respect of the NBC all that would happen is that the NBC could break the guarantee only by giving notice of discontinuation, and it would cease as from that time. However, this would not affect the position before that time.
What we are talking about in these amendments and what I thought almost every noble Lord who has spoken in the debate—the noble Lord, Lord Peyton, included—wanted to ensure was not that there should be some open-ended guarantee for new pensioners but that it should be for existing pensioners and the existing pension rights of employees at the date of dissolution. I thought that that, however much they disagreed or agreed with the amendment, was what everybody was in favour of doing.
We are not, therefore, talking about a link with a private company. We are talking about a link for employees of a publicly-owned company up to the date before it becomes a private company. So there is no dispute about that. Nor is there dispute, I should have thought, about the case for the industrial training boards. Frankly, and I hope that on reflection the Minister will agree, one is a state-owned board and another a state-owned company, and to argue whether one is right to give a guarantee and one not is no more than a quibble.
I now turn to the point to which we shall return at a later stage. I said that I would not wish to accuse the noble Lord of misleading the Committee. I noted very carefully what he said about the Government's proposals in these negotiations. He told us that the undertaking would be to top up the funds on a reasonable actuarial assumption. Those are the words he used. That makes it quite clear. In reply to my noble friend Lord Shepherd a moment ago he gave an undertaking that the Government would ensure that there would be adequate funds; but they cannot, by the very nature of things, be adequate to ensure the guarantee. They cannot be; that just cannot happen.
I do not know what actuarial assumptions will be given to the actuary but I must tell noble Lords that when I was Chief Secretary to the Treasury I gave a few assumptions to the actuary and he had no choice but to take them. I have to say that they did not always come true, as many assumptions do not; yet here we are talking about assumptions that will have to last for some 50 years. The Minister tells us that in those circumstances he will ensure that the funds will be adequate but, frankly, we all know that no insurance company would accept whatever money anyone is prepared to give it in order to provide a 50-year undertaking that was previously given to workers in a pension fund at the date of dissolution.
896 However, I hope I am wrong. As I said, I know the Minister did not wish in any way to mislead the Committee. Therefore, when he comes back to this issue he will be able to tell us the extent to which the insurance companies are unable to give the sort of guarantee that most noble Lords want and that there will be a further topping up by the Government to ensure that the guarantee is met.
§ Lord Banks
I have just one point to make. It seems to me that the central issue at stake is whether the successor bodies will be as good a guarantee for providing any extra funds which may be necessary to secure the accrued benefits as is the National Bus Company. Can the noble Lord, Lord Belstead, say whether he thinks that the successor bodies will be as good a security from the point of view of making up any deficit in the funds in the future, relating only to the accrued benefits at the time of transfer? If he does not think so, obviously the employees must be in a worse position.
I listened with very great interest to what the Minister said about the negotiations with the insurance companies. I am not very hopeful about that, but it may turn out better than I expect. However, in view of what the Minister said I would not want to move Amendment No. 173 when we reach it.
§ Lord Belstead
Perhaps I may just say to the noble Lord, Lord Banks, who is an expert in this field, that the question of accrued benefits for those who are moving off to the subsidiaries is of course all part of the calculations and negotiations one must go into when considering the position of those people for the future. This is a matter to which we must return on Report.
§ 5.45 p.m.
§ Lord Gridley
I have heard with interest the reply given by my noble friend the Minister to this rather long debate on pensions. I feel that my amendment has drawn the attention of your Lordships to all the provisions regarding pensions with which the National Bus Company has to comply in honouring pension schemes to its employees.
Constructive speeches have been made, but I am in a little doubt in withdrawing my amendment because I cannot see why it should in any way fetter the Government's future negotiations. It clearly lays down what are the existing legal requirements in obtaining satisfaction for pensioner entitlements. My noble friend said that he is prepared to meet the requirements in a way which can be dealt with on Report. If it is the feeling of the Committee that it would be right to consider an amendment on those lines at Report, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ [Amendments Nos. I 72C and 172D not moved.]
§ Clause 48 agreed to.
§ Clauses 49 and 50 agreed to.
§ Lord Grimond moved Amendment No. 172E:
§ After Clause 50, insert the following new clause:
§ ("Employee acquisition of business.
§ . Before granting or withholding his consent to any scheme of disposal submitted to him for approval by either the National Bus Company or a controlled authority, the Secretary of State 897 must first be satisfied that the employees concerned have had an opportunity to acquire the business for themselves.").
§ The noble Lord said: In the debate on an earlier amendment I said that I wanted to move this amendment but intended to be brief in doing so. I hope that the amendment speaks for itself. It lays upon the Secretary of State an obligation to see that employees are given an opportunity to acquire the successor businesses, whether they come from the National Bus Company or a controlled authority. In the debate on the earlier amendment I explained that I am much in favour of employee-owned and controlled companies, co-operatives, and so on.
§ This is a general amendment calling attention to the possibilities existing under this Bill for promoting ownership by employees, in all its forms. I also said earlier that my amendments are relevant to the question of whether or not your Lordships consider this is a good or a bad Bill, but my personal feelings are that it at least gives a chance for the setting up of small businesses and the promotion of competition. In that respect at any rate it is in my view much preferable to some of the earlier privatisation measures which merely turned public monopolies into private monopolies. It seems to me that the Secretary of State could well be given the power indicated in this amendment.
§ But whether the Committee decides that he should be or not, what I think is quite certain is that if the Government are to tell us that they are in favour of spreading ownership, in my view they must go very much further than some of the rather cosmetic allocations of small numbers of shares which have been a feature of earlier Bills, and they must also be in favour of encouraging small businesses. As the Bill stands I am afraid that, without some amendment and without the positive good will expressed not only in words but in actions by the Secretary of State, the excellent intentions which the Government express will never come to fruition. Therefore I think the amendment is perfectly clear and with those few words I beg to move.
§ Lord Sandford
Again, I should like to thank the noble Lord for introducing this subject and particularly this amendment, the purpose of which is, if anything, a little clearer than the earlier one which was linked with it, certainly to a layman like myself. I should like to stress that at any rate as regards the municipal bus operating authorities it will, so far as I can see, be very greatly in their interest, once they have formed the company required by this Bill, immediately and at the same time to consider not only privatising that company but also embarking on the possibility of employee acquisition. We want a lot of help from the Government in that area because it is a major undertaking to step from being a public service within a local authority to being an employee-owned private enterprise, and I should like further assurances from my noble friend on the Front Bench not only about the timing but also about the assistance and encouragement that we can expect from central Government in this field.
§ Lord Belstead
There is really nothing between the Government and the noble Lord, Lord Grimond, on the objective. As the noble Lord recorded in his remarks, the Government have made it clear that they believe in employee acquisition. In the White Paper of last July we made it clear that we would welcome bids from employees for the units in which they work. This is now reflected in Clause 48(4) of the Bill which places on the company a duty in carrying out their disposal programme to take such steps as may be practicable to secure that employees are afforded a reasonable opportunity for acquiring a controlling interest in the part of NBC in which they work.
But as regards putting this on the face of the Bill, perhaps I may first of all make clear to my noble friend Lord Sandford that in the case of the public transport companies to be created from the PTEs and the municipal bus undertakings, it is not our policy at this juncture to secure their privatisation. I felt from an earlier discussion that my noble friend felt that it was. We should not wish to stand in the way of that happening, particularly if the employees were disposed to make a bid, which of course they would be quite free to do.
Clause 71 contains the necessary powers to facilitate disposals, and that clause indeed requires my right honourable friend's consent. This provision was included to stop the possible misuse of the power of disposal rather than to secure that particular parties should be the beneficiaries of such a sale. I say that because the noble Lord, Lord Grimond, will readily appreciate that there is a difference in the relationships between my right honourable friend and the National Bus Company, on the one hand, because the Government are a 100 per cent. shareholder, and the public transport companies which are to be formed on the other, in which of course my right honourable friend will have no equity interest at all.
Really, in the last analysis the controlling authorities have to be free to exercise their control as shareholders over the affairs of the public transport companies in the same way as shareholders are in any other company. Although I hear my noble friend Lord Sandford saying that help from the Government is needed, I should have thought that this really would come very close to Government interference.
As for the public transport companies, the amendment would place the Secretary of State in the position of deciding how assets for which he has no responsibility ought to be sold, and this is a task which the Government consider should be more properly placed on the controlling authorities. It is not that I do not agree with the noble Lord, Lord Grimond, in the objective which he is trying to achieve, but I do not think that it can be done by Government interference—and I think it would be seen as interference.
I should like just briefly to support the noble Lord, Lord Grimond, the more so since, when some years ago I was chairman of the Co-operative Development Agency, he was very helpful with the work of that agency on a number of occasions. I rise merely to point out to your Lordships that cooperative ownership of transport undertakings is a perfectly feasible and viable proposition. Perhaps I 899 may give two examples. The first is that the buses in Israel are run by the workers in that undertaking. The second is that the gondoliers in Venice are run by a co-operative. So I feel very sure that with such variety of example it ought to be possible in this context for the workers to run co-operative undertakings in the transport industry.
§ Lord Sandford
May I at once say that of course I was not inviting central Government to interfere in the affairs of local authorities. My constant song is that they should do less of that. What I was saying was that they are in a position to encourage us, not the least by removing various impediments. What happens if we saddle the new municipal bus operating companies with unacceptable pension liabilities in respect of their pensioners? This is one of the ways in which the Government can help—and we shall come to that in a moment. When we get to the subsection of this Bill concerning municipal bus operators, I shall explain to the Committee how the various structures at present on offer in the Bill are all entirely unsatisfactory and that therefore the best option for the municipal bus companies is to privatise themselves. Another impediment in our way, which I alluded to at an earlier stage, was the impossibly tight timetable that we have set. It is impossibly tight as it is now, but if the municipal bus operating companies decide that their best option is to become fully privatised and at the same time they enable their employees to take up shares in the ownership of the company, then we need time to give effect to all these measures. It is that kind of encouragement for which I was asking.
§ Lord Grimond
I am obliged to the Minister for his response to my argument and also to the noble Lords, Lord Sandford and Lord Oram. Indeed, I remember well the noble Lord, Lord Oram's, distinguished chairmanship of the Co-operative Development Agency, and I rather look forward to visiting Venice with him, where no doubt we shall be well received by the gondoliers. But I was rather surprised at one remark made by the noble Lord the Minister, which was that it was not the Government's intention to interfere in transport. I understood that the whole of this Bill was an interference in transport. If it is not an interference in transport, it appears to me that we are wasting our time. But I suppose that the noble Lord the Minister meant that he did not want the Secretary of State to do any more than is his duty in regard to the National Bus Company.
As to what the noble Lord, Lord Sandford, said, it is not so much a question of the Minister taking only positive action, but of removing impediments to worker ownership. Indeed, I believe—and here again I think I have the support of the noble Lords, Lord Sandford and Lord Oram—that unless the Government remove the impediments to ownership and take a more positive line about this—I know full well that they are nominally in favour of worker ownership and that there are parts of this Bill which actually advocate it—it will not take place. Therefore if the Government are sincere about this matter, I beg them to look not necessarily at the proposals in this particular amendment, but at the general tenor of the Bill, and at least to remove some of the obstacles and 900 persuade the Secretary of State to take up a very positive attitude where groups of employees are willing to take over a bus company.
I end by reiterating what has already been said by the noble Lord, Lord Oram. This is the kind of small business which is very suitable to the co-operative system. If the Government are sincere about spreading that type of ownership, this is a great opportunity for them. Nevertheless, in view of what the Government have said, I would, by leave, withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 51 agreed to.
§ [Amendment No. 173 not moved.]
§ Clause 52 agreed to.
§ 6. p.m.
§ The Deputy Chairman of Committees (Lord Murton of Lindisfarne)
Unless your Lordships wish to speak on any of these clauses, may I put the Question that Clauses 53 to 56 stand part of the Bill?
§ Clauses 53 to 56 agreed to.
§ Clause 57 [Passenger Transport Areas, Authorities and Executives]:
Lord Teviot moved Amendment No. 174:
Page 51, line 9, leave out ("consists") and insert ("is a body corporate with perpetual succession and a common seal consisting")
§ The noble Lord said: This is a small technical amendment. Clause 57(1) substitutes new subsections for subsections 9(1) to 9(4) of the Transport Act 1968. While most of the essential provisions have been reenacted in Clause 57, the Bill does not re-enact the provision in Section 9(1)(b) of the 1968 Act that the executive shall be a body corporate with perpetual succession and a common seal. That provision is obviously essential to enable the executive to carry out the functions provided for in the Bill together with its normal day-do-day business. I beg to move.
§ Lord Brabazon of Tara
I hope that I can answer my noble friend very briefly and to his satisfaction. I can assure your Lordships that those words in Section 9(1)(b) of the 1968 Act have already operated in the case of each PTE. That means that each executive is already a body corporate with perpetual succession and a common seal and will remain as such. The provision in the original version of the 1968 Act therefore has now no further function to perform. Its replacement will not alter the position of the existing PTEs. I hope that with those remarks my noble friend will be satisfied.
§ Lord Teviot
My noble friend sounds very reassuring. I shall read exactly what he says and be advised accordingly. I thank him very much indeed, and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
§ Lord Brabazon of Tara moved Amendment No. 174Z:
Page 51, line 34, at end insert—
(" (bb) in subsection (5), as it applies to Scotland, for the word "designated" there shall be substituted the words "passenger transport";")
The noble Lord said: With the leave of the Committee, I should also like to speak to Amendments Nos. 174Y and 174X.
Amendment No. 174Y: Page 51, line 36, leave out ("subsections") and insert ("subsection")
Amendment No. 174X: Page 52, line 16, leave out from beginning to ("and") in line 17.
§ These are technical amendments. They reinstate Section 9(5) of the Transport Act 1968 for Scotland. The provision which allows district councils to assist a PTE and vice versa was proposed to be repealed because district councils in Scotland no longer have transport functions. However, we have received representations from the Strathclyde PTE that under this power it enters into agreements with district councils for such matters as the cleaning and maintenance of bus shelters. We propose therefore to reinstate the provision but subject to a minor drafting change to alter the description of the area from "designated" to "passenger transport" as the Bill does elsewhere in the 1968 Act. I beg to move.
§ On Question, amendment agreed to.
§ Lord Brabazon of Tara moved Amendment No. 174Y:
§ [Printed above.]
§ On Question, amendment agreed to.
§ Lord Brabazon of Tara moved Amendment No. 174X:
§ [Printed above.]
§ On Question, amendment agreed to.
Lord Brabazon of Tara moved Amendment No. 174W:
Page 53, line 19, leave out second ("section") and insert ("sections").
§ The noble Lord said: With the leave of the Committee, I should like also to speak to Amendments Nos. 178D: 208CA and 211ZCA.
§ Amendment No. 178D: Page 54, line 31, at end insert—
("Consultation and publicity with respect to policies as to services.
.—(1) When considering from time to time the formulation of policies for the purposes of section 9A(3) of this Act, the Authority for a passenger transport area shall consult—
(2) As soon as practicable after any occasion when they formulate new or altered policies for those purposes, the Authority concerned shall publish a statement of all policies so formulated by them on that or any previous occasion which for the time being apply in relation to the performance by the Executive for their area of their duty to secure services under section 9A(1).
(3) When the Authority publish such a statement, they shall send a copy of the statement—
(4) The Authority shall also—
Amendment No. 208CA: Clause 61, page 60, line 1, leave out subsection (4).
§ Amendment No. 211ZCA: After Clause 61, insert the following new clause:
("Consultation and publicity with respect to policies as to services.
.—(1) When considering from time to time the formulation of policies for the purposes of section 61(1)(b) or (2)(b) of this Act, any council to whom either of those provisions applies shall consult—
(2) As soon as practicable after any occasion when they formulate new or altered policies for those purposes, any such council shall publish a statement of all policies so formulated by them on that or any previous occasion which they propose for the time being to follow in the performance of their duty to secure services under section 61(1)(a) or (as the case may be) under section 61(2)(a).
(3) When any such council publish such a statement, they shall send a copy of the statement—
(4) The council shall also—
§ I shall not detain your Lordships too long with these amendments. They are important and useful amendments which arise from undertakings given in another place, and I hope that they will find favour in your Lordships' Committee.
§ First, they requires PTAs, county councils, regional councils and in the case of Clause 61, islands councils before formulating their general policies for securing public passenger transport services to consult each other where those policies may affect each other's area. Clearly authorities' policies for subsidising services will have an important effect on neighbouring authorities, particularly in areas close to the boundaries of authorities, and I believe this new requirement will be welcomed by authorities and passengers alike.
§ Secondly, they require the authorities to publish a statement of their general policies for securing services. It was impressed upon my right honourable friend in another place that such a requirement would usefully improve accountability to the electorate. My right honourable friend agrees, although his natural concern was to avoid placing an unnecessary extra burden on local authorities. These amendments are not intended to require authorities to produce an annual report. The intention is that members of the public should always be able to see a statement of the authority's policies. I believe these amendments will increase accountability, which we all welcome, while keeping the burden on authorities to a minimum. I beg to move.903
§ On Question, amendment agreed to.
§ [Amendment No. 174A not moved.]
Earl De La Warr moved Amendment No. 175:
Page 52, line 32, after first ("to") insert ("(a)").
The noble Earl said: In moving Amendment No. 175, I should like to speak also to Amendments Nos. 176 to 178, 180 to 183, 188 to 206, 212 to 217, 219C and 219D, 220 to 225, 230 to 238, 241 and 243 to 245.
Amendment No. 176: Page 52, line 34, after ("subsection;") insert ("and
(b) the manner in which the powers of the Executive under subsection (4) below are to be exercised in securing such services").
Amendment No. 177: Page 52, line 36, leave out ("duty under that subsection") and insert ("functions under those subsections").
Amendment No. 178: Page 52, line 43, leave out ("; but their power to do so is subject to") and insert—
("(4A) The functions of the Authority and the Executive in securing the provision of passenger transport services by agreements providing for service subsidies shall be exercised in accordance with").
Amendment No. 180: Schedule 3, page 130, leave out lines 2 to 8 and insert ("subsections (1)(a), (2) and (3) shall be omitted").
Amendment No. 181: Page 130, leave out line 10.
Amendment No. 182: Page 130, line 11, leave out ("(b)").
Amendment No. 183: Page 130, leave out lines 13 and 14.
Amendment No. 188: Clause 58, page 56, line 18, leave out subsection (8).
Amendment No. 189: Page 56, line 24, at end insert ("but subject as provided in section 71(2) of this Act").
Amendment No. 190: Page 56, line 27, leave out ("otherwise than in accordance with subsection (8) above").
Amendment No. 191: Clause 59, page 57, line 7, leave out subsections (5) and (6).
Amendment No. 192: Page 57, line 24, leave out ("; and").
Amendment No. 193: Page 57, leave out line 25.
Amendment No. 194: Page 57, line 29, leave out ("or have the powers under section 10(1)(i) and (viii)").
Amendment No. 195: Clause 60, page 57, line 38, leave out from ("the") to ("place") in line 40 and insert ("initial company has been formed by the Executive,").
Amendment No. 196: Page 57, line 41, leave out ("Authority") and insert ("Executive").
Amendment No. 197: Page 57, line 42, leave out ("Authority") and insert ("Executive").
Amendment No. 198: Page 58, line 15, leave out ("Authority") and insert ("Executive shall consult the Passenger Transport Authority for their area and").
Amendment No. 199: Page 58, line 24, after ("the") insert ("Executive and the").
Amendment No. 200: Page 58, line 28, after ("the") insert ("Executive and the").
Amendment No. 201: Page 58, line 32, leave out ("Authority") and insert ("Executive").
Amendment No. 202: Page 58, line 43, leave out ("Authority") and insert ("Executive").
Amendment No. 203: Page 58, line 44, leave out ("Authority") and insert ("Executive").
Amendment No. 204: Page 59, line 11, leave out ("Authority") and insert ("Executive").
Amendment No. 205: Page 59, line 16, leave out ("Authority") and insert ("Executive").
Amendment No. 206: Page 59, line 18, leave out ("Authority") and insert ("Executive").
Amendment No. 212: Clause 68, page 69, line 26, leave out from ("Executive") to end of line 27.
Amendment No. 213: Page 69, line 29, leave out ("Authority") and insert ("Executive").
Amendment No. 214: Page 69, line 31, leave out ("Authority") and insert ("Executive").
Amendment No. 215: Page 70, line 5, leave out from ("Executive") to ("of") in line 6.
Amendment No. 216: Page 70, line 17, leave out paragraph (a).
Amendment No. 217: Page 70, line 21, leave out from ("Executive") to ("are") in line 22.
As amendments to Amendment No. 219B:
Amendment No. 219C: Clause 69, in line 2 of paragraph (a), leave out ("Authority") and insert ("Executive").
Amendment No. 219D: In line 4 of paragraph (a), leave out from ("within") to the end of the paragraph and insert ("their powers for that area").
Amendment No. 220: Page 71, line 26, leave out ("Passenger Transport Authority or").
Amendment No. 221: Clause 71, page 73, line 39, leave out ("a Passenger Transport Authority").
Amendment No. 222: Page 74, line 7, leave out ("Authority") and insert ("Executive").
Amendment No. 223: Page 74, line 10, leave out ("Authority") and insert ("Executive").
Amendment No. 224: Page 74, line 13, leave out ("Authority") and insert ("Executive").
Amendment No. 225: Page 74, line 23, leave out ("Authority") and insert ("Executive").
Amendment No. 230: Clause 74, page 76, line 31, at end insert—
("(3) In exercising or performing their functions under this Act, a Passenger Transport Authority shall have regard to any administrative, professional or technical services which may be provided for them by the Passenger Transport Executive for that area.").
Amendment No. 231: Clause 75, page 76, line 32, leave out ("Authority") and insert ("Executive").
Amendment No. 232: Page 77, line 3, leave out ("Authority") and insert ("Executive").
Amendment No. 233: Page 77, line 17, leave out ("Authority") and insert ("Executive").
Amendment No. 234: Page 77, line 20, leave out ("Authority") and insert ("Executive").
Amendment No. 235: Page 77, line 33, leave out ("Authority") and insert ("Executive").
Amendment No. 236: Page 77, line 42, leave out ("Authority") and insert ("Executive").
Amendment No. 237: Page 78, line 1, leave out ("Authority") and insert ("Executive").
Amendment No. 238: Clause 76, page 78, line 12, leave out ("Authority") and insert ("Executive").
Amendment No. 241: Clause 78, page 79, line 13, leave out ("Authority") and insert ("Executive").
Amendment No. 243: Clause 82, page 83, line 33, after ("Executives") insert ("or Passenger Transport Authorities in accordance with subsection (8) below").
Amendment No. 244: Page 83, line 36, at beginning insert ("subject to subsection (8)").
Amendment No. 245: Page 83, line 36, at end insert—
("(8) In any passenger transport area the Passenger Transport Authority shall be responsible for determining which (if any) tenders for agreements providing for service subsidies are accepted and, subject to any direction which may be given to the Executive by the Authority, the Passenger Transport Executive shall be responsible for issuing invitations to tender, advising the Authority on tenders submitted and the publication of statements and shall be party to all such agreements.").
§ My arithmetic may be wrong but I think that it is around 50! That may encourage some of your Lordships during the tedious hours that lie ahead of us.
§ I should like to make it quite clear at the start that this big series of amendments fully accepts the principles and the practice of the Government's policy of deregulation and everything that goes with it. There is absolutely no intention at all to question the main thrust of the Government's intentions either directly or indirectly.905
§ The amendments deal with the ownership and operation of buses in the metropolitan counties alone. This is a subject of which many noble Lords will not have a great deal of knowledge, and so I must do a certain amount of preparatory explanation. First of all, let me say this. The amendments have two simple objects. They aim to leave control of bus operations with the professionals—that is, the transport executive—in each metropolitan county—and to give responsibility for subsidised services and making the decisions about them to the transport authority—that is, the political arm.
§ Let me enlarge on what the situation is now, and then go on to deal with what is proposed. The existing set-up in a metropolitan county is this. The transport authority is the metropolitan county council. It will shortly become the joint transport board and it will continue to be called the transport authority. The present function of the authority is to appoint the director-general and the members of the executive, to give general directions on policy, to approve the executive budget and to control to a large extent its fare structure.
§ The transport executive is a statutory body. It is staffed by professionals and its present function is, first of all and primarily, to own and operate the buses. That means that in each metropolitan county in some cases the executive is operating many thousands of buses—a very large operation indeed. In addition to owning the buses it may in some cases own ferry services and in one case underground services. That is the first function. The second function is operating agreements with other operators and with British Railways. Thirdly, they are required generally to oversee public transport. However, I repeat that their main object, their raison ďêtre, is to run the buses. Thus, if I may sum up, on the one hand one has the authority, a political body drawn from democratic elections, and, on the other hand, business people who are professional in their job of running buses but are a statutory body. That is the present set-up.
§ Under the new Bill, some remarkable and curious changes are to be made. First, the bus assets are to be formed into a Companies Act company. That is quite straightforward and no problem. As soon as that has been done by the executive, they are to transfer the shares in those assets to the authority—that is, to the political arm. It is the authority who will then run the buses because it owns them and because the Bill specifically forbids the executive so to do. The authority will in addition to that allocate funds to the executive to do the job which it has to do.
§ So the executive will be left with no buses, although they are staffed by professional busmen, and it will be asked to administer the tendering process for the subsidised services, the services that are to be subsidised following competitive tender and, in order that it can do this, to make the decisions that have to be made as to what services are socially necessary and therefore fit to receive subsidies. That seems to me to be an odd task to give to the officers of the executive. Social judgments are to be made about the services that are to be available to people, with the taxpayers' money and the ratepayers' money, whereas surely that 906 is something that is more properly done by an elected authority.
§ 6.15 p.m.
§ I simply do not understand the reasons for what I call this "looking glass" situation. As somebody who has been involved with buses for quite a long time but in the service industries for the whole of my business life, I have to say that it appears to me to be an arrangement which makes no business sense at all. Why remove the buses, the ownership and their operation from the profession? Why deny to the elected body, the authority, the right and the duty to spend the money that they receive from Government and from the ratepayers, and to decide how it shall be spent? I would suggest that that is what elected authorities are all about.
§ Is it surprising that in these amendments we have sought to reverse this situation? We have sought to leave the buses where they are and where they should be, in the hands of the executive, the professional, and to give the authority the job of operating the tendering process and to decide what services shall receive subsidies.
§ We have gone along one route with the Secretary of State. He wants to keep the staff of the authorities small, and he may be right on that. If the staff of the authority is small and there will be no one else to do the job, therefore we have suggested that it is for the executive to do the administrative work on behalf of the authority; but the authority must decide where its money is to be spent.
§ Many may think that this subject is obscure, and indeed esoteric. I assure them that this is not the case. We are talking about thousands of buses; we are talking about millions of passengers. I repeat that we are seeking no interference with the main thrust of the Bill. We are seeking only greater operational efficiency, and that means the best service to the travelling public. I very much hope that my noble friend, even though it may be difficult, will be able to give me some encouragement, even if only to the extent that he will say that these matters can be discussed in the light of this debate.
§ I shall make the assertion, but I will not enlarge on it, that there are a number of apparently false premises behind the method that the Secretary of State has chosen to go about this matter. With the help of professional advice, we badly want to feel that, as a result of what I am saying and what we are going to discuss now, further talks will follow. As I have said, I am well aware that this is a new subject. It is unfamiliar to many members of the Committee. I hope that your Lordships will feel, as a result of what I have said, that there is a need for further consultation between now and the time when we deal with this Bill at a later stage. I beg to move.
§ Lord Belstead
My noble friend has presented what I think can be described as an alternative configuration for the ownership of bus companies and the administration of tendering in the passenger transport areas in a selection of some 50 amendments to which he has spoken. My noble friend's plan would involve the passenger transport executives who are, as my noble friend said, the transport professionals, retaining 907 control of the bus operations, although in company form and broken down into smaller units, and the diivision of the tendering function between the executives and the passenger transport authorities which, in England, will be joint boards made up of district councillors nominated by the councils to which they are elected.
My noble friend argues that the bus company is to be operating in a free commercial market and therefore requires professional control motivated to succeed in its business. The Government could not agree more. But the Government's proposals do not mean that the company will be deprived of such expertise. A considerable number of skilled managers with considerable experience of bus operations will transfer to the companies when they are formed.
The Bill provides for there to be at least a required minimum number of full-time employee directors on each company's board. The board will also have a number of directors who are not drawn from the company's management staff. Some of these may well be councillors nominated by the joint board to supervise the ratepayers' interest in the company. Those interests are considerable. These bus undertakings have been built up on the basis of local rate income over many years. The Government are convinced that it is the ratepayers, though their elected representatives, who should benefit directly from any profits generated by the companies and from the proceeds of any disposals.
My noble friend suggests that the joint boards may set objectives for their companies which are of a political nature rather than the companies needing to face the commercial reality of competition. But if the joint boards are minded to follow uncommercial policies, there are going to be important limits placed on them. The company must remain solvent as there is no automatic right to subsidy to make good any losses. Any rescue plan is subject to the agreement of my right honourable friend, who would not, as I am sure your Lordships will realise, agree to continuing commercial folly.
To remain solvent, the company has to be competitive. It must control its costs, organise its services to win passengers and bid effectively when invitations to tender for service subsidy are issued. I tend to think that controlling the company may bring a much greater sense of reality to the PTA than might prevail under my noble friend's alternative. I am sure that the company will have the expertise to succeed and that its success will quickly become an objective of the joint board.
My noble friend also spoke of the role of the PTE in connection with the whole tendering process. The PTEs are, as my noble friend stressed, the transport professionals. As such, they are well able to evaluate tenders from operators and to determine the most cost-effective way of meeting the objectives set for them by the joint board. Let us be clear that this is the split of responsibilities. The PTA, at least initially, has no expertise in these matters. It is a point of agreement between my noble friend and the Government that it would be undesirable for the joint board to develop its own bureaucracy with the sole aim of second-guessing the PTE's evaluations. It is surely better for the PTE to 908 carry out the whole tendering process within the general policy framework which the PTA has set.
Within the framework provided for in the Bill the PTEs functions in relation to tendering will complement their other functions of negotiating subsidies for local rail services under Section 20 of the 1968 Act and taking measures to secure the coordination of commercial and subsidised services and the convenience of passengers. All these functions are to be formed within the general polices of the joint board, the PTE having clear duty to follow those policies.
What I have been trying to say on this very complicated string of amendments is that the Government, for their part, are convinced that the bus companies, formed from the restructuring of both PTE and municipal bus undertakings, should be controlled ultimately by the ratepayers' representatives. There is really no inconsistency of approach here between our proposals for the passenger transport areas and for other authorities. The function in relation to tendering, however, is one which, in our view, can best be performed by the PTEs and is consistent with their wider co-ordination role. The PTE must act in accordance with the PTA's general policies throughout. The joint boards themselves would not be equipped to decide upon tenders independent of PTE advice. There is nothing to be gained, we feel, by placing such a role upon them.
I hope that my noble friend will forgive me if I add one last thing. My noble friend really asked two questions: first, whether this had been considered, and, secondly, would it be possible to discuss it further? My noble friend, as he has taken great trouble to do before and throughout the Bill, warned me that his string of amendments would be put down. I was most grateful to my noble friend for mentioning the matters and for explaining the broad thrust of them. And, indeed, I consulted my right honourable friend.
I am sorry. Although this is an interesting string of amendments, we disagree with them fundamentally. They would change totally the functions of the PTAs and the PTEs under Part IV of the Bill. I hope therefore that my noble friend will not think that I am being unhelpful when I say that, for once, there is not anything to sit down and talk about in relation to these amendments. It is always a pleasure to meet my noble friend, but not on this string of amendments.
§ Lord Carmichael of Kelvingrove
The Minister has explained very reasonably his objections to the amendments and has tried to give an explanation of how he sees the Bill operating. The noble Lord was absolutely correct in saying that this is a complicated string of amendments. I believe, however, that the amendments are an attempt to examine a very complicated method of operating a bus service. I am in complete agreement on one issue at least with the noble Earl, Lord De La Warr There is nothing political in this. It is a business arrangement connected with running the transport service in an area.
Having had some connection with the setting up of the PTEs, I thought that they were a reasonable way of organising things. I cannot, for the life of me, understand why the same method has not been used 909 and could not be used even now. The Minister said that he was concerned that at present the PTEs are in control of the buses although they are ultimately owned by the PTAs. The PTAs themselves will be broken up and become joint boards when the Local Government Bill goes through. The joint boards will then own the buses. The more that one gets into PTEs and PTAs the more confused one becomes. If the noble Lord the Minister spent as much time as I did last night looking over this stuff, he was probably rather punch-drunk himself at the end of it.
The position, so far as I can understand it, is that the buses owned by the authority, by the PTA, even though once removed (there are separate companies but the buses will actually be owned by the authority) will be competing with private operators for the ordinary, commercial services and for the uneconomic services, although, on the uneconomic services, the subsidy will be paid by the authority to the buses that it owns. To me this seems to be real grounds for confusion.
It will be the PTAs which will be paying any balance from their rate support or from the transport support funds to their own companies once removed for running services that are uneconomic as well as, on some occasions, doing it with private companies. To me this is a recipe for considerable confusion and there is a good possibility of political influence, depending on which particular group ran the local authority at the time or which group had the strongest representation on the joint boards.
§ 6.30 p.m.
§ I am almost convinced that between now and the Report stage, or at some stage, another memorandum will come from some other section of the Department of Transport saying, "Perhaps we have it wrong and should look at it again". I can assure noble Lords that I have looked at the matter with a number of people who are experts on this particular subject and we do not always reach the same conclusion when we talk it over for any length of time. I believe that there is a strong possibility that that will happen when the Minister takes the matter away over the Summer Recess. I am sorry that he was quite so positive about it. I certainly accept that he will not agree to any of the amendments now, but I hope that over the recess period better counsel will prevail.
§ For the sake of simplification of the system, I do not see why he cannot return to the system that operated before, with the PTA being the authority that decides the wide political aims—and when I say "political", I mean the social desirability of a network in an area—and with the PTE, including the joint board company, finding the operators to operate this network. Then the PTE would need to return to the PTA and tell them that the cost would be so many million pounds. The PTA would perhaps say, "We are sorry, but we cannot meet that sort of cost, so you will need to trim it in certain places". I believe that that is a much better way to organise it than the way which the Minister has suggested. I hope that he will look at what has been said, particularly by his noble friend Lord De La Warr, who has great experience of the running of the bus industry.910
§ Lord McIntosh of Haringey
I know that it is unusual for two speakers to rise to this Dispatch Box one after another, but I am emboldened to intervene by having been in this position; I do not know whether any other noble Lords have. I was a member of the Transport Committee of the Greater London Council at a time when London Transport had the relationship which the noble Earl, Lord De La Warr, described. I am perfectly familiar with the powers of an elected authority—in this case it would be a joint board—over London Transport and of the limitations of those powers. Perhaps I may give an example of the limitations of those powers. In those days the Greater London Council had the power to issue directives to London Transport, and indeed it had the duty to do so every year when it came to consider London Transport's budget proposals; it had to consider them in the light of its own transport policies and programmes, and to consider what financing from the ratepayers was required in order to meet the objectives agreed with Government for an integrated transport policy and, therefore, to agree a transport budget for public transport with London Transport.
The power of direction existed for other purposes, but in my experience the only occasion when the Greater London Council ever came close to issuing a direction to London Transport was when London Transport insisted on the name "Heathrow Central" for the new station which they were just about to open, and the GLC was convinced that that was the wrong name and that is should simply be called "Heathrow". Needless to say—I should not say this, should I?—it now turns out that London Transport was right and the GLC was wrong, because there has to be a separate station for Terminal 4.
The other use of the GLC's powers over London Transport was to nominate members to the executive, and when I was involved it was done with care and discretion, and there was never any conflict between the GLC and London Transport. It is only in the last couple of years that the GLC has sought to dominate the London Transport Executive by the appointment of part-time members. If I remember correctly, this policy was widely execrated by the Government in this House and in another place.
The thought that the Bill is now proposing a situation where the joint board is composed of politicians—these very local politicians who are so despised by the Government and whose powers have been taken away to such an extent by the newly passed Local Government Act—who will have 100 per cent. of the shares of the operating companies, which means that the only restriction on them is that they cannot order the directors to do anything illegal (they can do everything else), seems to me to be absolutely extraordinary.
I believe that the Government have turned the whole matter on its head. Surely the joint board should have what is proposed by the noble Earl; it should have responsibility for the disbursement of public funds, the financing of socially necessary services, and the allocation of public resources. Then it should have a general oversight of the PTEs and of the appointment of members, as has been the case in London and as will be the case in the shire counties. On the other hand, the PTEs comprise the bus men who ought to be 911 owning the bus undertakings and they ought to be giving professional advice to the elected authorities about the tendering process and about the way in which the concessionary fares policy determined by the elected members is actually operated.
I have listened very carefully to the noble Lord, Lord Belstead, and he has not convinced me in any way that the Government have not stood this completely on its head: the politicans are left to run the buses and the bus men are left to take the political decisions. It says in the Bill that the PTEs have responsibility for the assessment of public transport requirements of the area. That is a political decision, not a decision for a bus company.
§ Lord Tordoff
If the noble Lord will give way, he is absolutely right, but that is not the way the Government see it. The noble Lord takes the same view as I take and as the noble Earl takes. But the view that the Government take is that the running of buses is not a political matter. They maintain that it is not a social matter, but that it is a managerial matter and is simply a matter of business. If you take the Government's view, of course you stand the matter on its head because they are standing on their head.
§ Lord McIntosh of Haringey
I am sorry to disagree with the noble Lord, but that is not the case. The noble Lord is suggesting that the Government are taking a business view of the matter, whereas in point of fact they are failing completely to take a business view and are failing to meet their own objectives. If they were wise, they would listen to the words of the noble Earl, because it is the noble Earl who has the experience and who, as the noble Lord, Lord Tordoff, properly says, is making the right distinction, between business and politics.
The amendment accepts—I do not—that the running of buses is to be primarily a commercial undertaking, separate from Government. That is included in the amendment. The amendment says that where public money is to be involved—and inevitably public money will be involved because there is a whole series of processes for the involvement of public money—it is the elected members who shall have the responsibility for ensuring that public money is properly allocated. The Bill does the exact reverse of that.
Earl De La Warr
I am extremely grateful to the noble Lord, Lord McIntosh, for the way in which he puts a punch into the points I made. I think he probably put the arguments a great deal clearer than I did. At least, I hope that noble Lords are clearer about these esoteric problems than they were when we started some 25 minutes ago.
I want to say two things. First, I want to comment on something that my noble friend Lord Belstead said. In practical terms, this is a crucial point. My noble friend said that we can assume that a lot of people will come over from the transport executive and run the buses for the authority. I think that the Government are depending a great deal too much upon that happening. If it does not happen they are going to find themselves in the cart. I have to tell them that I think it might well not happen.
912 The members of the transport executive are not civil servants, they are members of a statutory body. They will not wish to see their pensions interfered with even to go on running buses, because they would then have to become municipal servants. For that reason alone, while I cannot aver that the assumption the Government have made is false, it is extremely risky, and there is a danger that instead of the highly-professional management you get now there may be a second-rate management as a result of this, and that would be a shame. This is the only new point that I should like to raise which arises out of what my noble friend said.
If I may comment in general terms, I am deeply disappointed in the answer that my noble friend gave. I did not find his arguments persuasive, and in part I did not find them persuasive because I thought they were so short as to verge on the border of being dismissive. Nevertheless, despite that, partly because I am an optimist and partly because I am extremely determined in this matter, we shall carry on with this affair until we get it put to rights.
It will be argued inside the Chamber and outside the Chamber; it will be argued in the regions and in Marsham Street. My noble friend may be certain that we shall be extremely busy between now and the autumn, because for sure we shall return to this at Report. With the permission of the Committee, I beg leave to withdraw this amendment, and we have got through 50.
Amendment, by leave, withdrawn.
§ [Amendments Nos. 176 to 178 not moved.]
§ 6.45 p.m.
Lord Belstead moved Amendment No. 178ZA:
Page 53, line 13, after ("public") insert ("including persons who are elderly or disabled)").
§ The noble Lord said: I beg to move Amendment No. 178ZA. With your Lordships' permission, I shall speak also to Amendments Nos. 178C, 210ZA and 211ZBA.
Amendment No. 178C: Page 53, line 30, at end insert—
("(6A) It shall be the duty both of the Authority and of the Executive for any passenger transport area, in exercising or performing any of their functions under the preceding provisions of this section, to have regard to the transport needs of members of the public who are elderly or disabled.").
Amendment No. 210ZA: Clause 61, page 60, line 36, after ("public") insert (" (including persons who are elderly or disabled) ").
Amendment No. 211ZBA: Page 61, line 15, after ("Act") insert (", other than services provided wholly or mainly to meet the needs of the members of the public who are elderly or disabled.").
§ Several of your Lordships emphasised in the debate we had last week on elderly and disabled travellers how important it is that the powers of local authorities should extend beyond subsidised services to commercial or, as they have sometimes been called, mainstream services. The Government recognise the need for this and the first two amendments, 178C and 178ZA, impose a duty on both the PTA and the PTE to have regard to the transport needs of members of the public who are elderly or disabled in securing both subsidised services and exercising their wider coordinating powers for subsidised and commercial services.913
§ The first of our amendments also reminds authorities that the public, whose convenience is to be promoted under subsection (5)(b), includes members who are elderly or disabled. I would ask your Lordships to accept that these amendments impose quite a comprehensive obligation on authorities in the metropolitan areas.
§ As to Clause 61, our amendments apply to the power of non-metropolitan district councils to secure the provision of subsidised services under Clause 61(6), or again to the power of the non-metropolitan county councils and Scottish councils to co-ordinate the provision of all services, commercial as well as subsidised, under subsection (7). Our amendments cover all these duties and powers and would also secure, as in metropolitan areas, that attention is specifically drawn to the presence of elderly and disabled people among the public whose convenience authorities should be promoting.
§ I accept that when we come to the amendment in the name of my noble friend Lord Ingleby and other noble Lords, 211ZA, that amendment covers all the powers and duties which Clause 61 confers on the different authorities. I shall have to say, when we come to that amendment, that I am concerned about the specific requirement which the amendment would impose on operators to co-operate with authorities in the performance of their duties.
§ It is my hope that co-operation will exist, but we have before been through the difficulties that there are if one lays a duty on operators so far as concerns excluding some operators who would be exceedingly good at their job but perhaps unable to offer the facilities required in a particular amendment. I say no more about that because it is for the noble Viscount, Lord Ingleby, to decide whether he would wish to speak on the amendment I move now, in regard to his amendment.
§ The final Government amendment, 211ZBA, relates to services provided under permit under Clause 19 of the Bill, which is a point which has not yet been brought out in our debates. The Government appreciate that it is precisely mini-buses of the kind that would be provided under Clause 19 that would be used in many, if not most, cases to operate the Dial-a-Ride and other voluntary services now making such a welcome contribution to the mobility of elderly and disabled people.
§ This amendment recognises this by providing that the exclusion of these mini-bus services from the definition of public passenger transport services shall not apply in those cases where services are provided wholly or mainly to meet the needs of members of the public who are elderly or disabled. This means that it would be possible, if the amendment is agreed to, for authorities to provide support for these services through subsidies in a way that would not be possible unless the amendment were to be made. Those are the Government's amendments which flow from the first of the amendments I am moving which is Amendment No. 178ZA. I beg to move.
§ Viscount Ingleby
I should like to thank the Minister for the Government amendments to which he has just 914 spoken. I am delighted to hear that this duty will apply to unsubsidised services as well as to the subsidised services. But I should like to make a few further remarks when we reach Amendment No. 211ZA.Amendment No. 211ZA: Clause 61, page 60, line 43, at end insert—("(8C) It shall be the duty of the authority in exercising its duties and powers under this section to have regard to the public transport requirements of the elderly and disabled in respect of—
- (a) the services to be provided;
- (b) the types of vehicles to be used; and
- (c) the facilities to be provided at stops and terminals.(8D) It shall be the duty of each operator of registered local services in the area to co-operate with the authority in performing its duty under subsection (8C) above.").
§ Lord Ennals
May I from these Benches say how much, in the light of the debate that took place on 10th July on this issue, we welcome the fact that the Minister has taken on board many of the concerns that were expressed from both sides of your Lordships' House. I welcome all of the amendments that he has proposed, especially the reference to services such as Dial-a-Ride which is described in Amendment No. 211ZBA, and also the fact that this relates to unsubsidised services as well as to subsidised services. This was one of our principal fears when we were debating this matter on 10th July.
I find it surprising, though it is not for the Minister to decide, why we are not discussing Amendment No. 211ZA at the same time. I know that we will reach it and then no doubt we shall want to argue the case strongly that there should not only be a duty upon PTAs and PTEs, the licensing authorities, but that there should be a duty upon operators as well. That amendment is not in this group so we shall have to wait until it comes. In the meantime, I warmly welcome the fact that the Minister has taken several steps forward both from the time when it was debated in another place and from the Bill as we saw it when we debated it on 10th July.
§ Lord Henderson of Brompton
I add my thanks to the noble Lord, Lord Belstead, both for the substance of the amendments and for bringing them forward at the Committee stage with great effort on his behalf and on behalf of the department. It has been extremely helpful that these are to be put into the Bill at this stage so that we can look at the Bill on Report as it has been amended now, to see whether any improvements need to be made.
Will the Minister confirm my understanding of what he said and what was obviously the understanding of the noble Viscount, Lord Ingleby, that the amendments that he is proposing apply both to subsidised and non-subsidised undertakings or operators?
Secondly, I think he referred obliquely to Amendment No. 211ZA—I gather that we are to have a separate debate on that—when he said that Amendment No. 211ZA was unacceptable if only because it specified the requirements, which is perhaps not the best thing to do. If one specifies requirements one might inadverently leave out other requirements which have not been specifically mentioned. At this stage I think that paragraphs (a), (b) and (c) of Amendment No. 211ZA were put in only in response to the noble Lord, Lord Belstead, who said in reply to a previous amendment that it was hard to see what the 915 amendment was getting at because it was not specifically specific. One cannot win! However, that is mere detail and when we came to debate Amendment No. 211ZA perhaps we can address ourselves particuarly to the duty of the operators, which some of us believe ought to be mentioned in the Bill together with one or two other matters.
At this stage I should merely like to thank the noble Lord, Lord Belstead, for the extremely constructive start to the provisions for the elderly and the disabled.
§ Earl Attlee
On behalf of these Benches, we too thank the Minister for these amendments. Many people will be relieved especially concerning the point that this will cover subsidised and normal services.
§ Baroness Fisher of Rednal
While one welcomes the points that the Minister has made, one must read the amendment:it shall be the duty of any council".Obviously, the duty of any council will be governed by the amount of finance that they will be able to put into the scheme to subsidise the needs of the elderly and the disabled. While I welcome what the Minister has said, and though it sounds nice, I am a little worried lest it will not go all the way to cater for all the needs of the elderly and the disabled that one might expect.
§ Lord Belstead
I think we should be dealing with local government finance with the question raised by the noble Baroness, Lady Fisher. However, I should reply to the noble Lord, Lord Henderson. Yes, the Government amendments apply both to subsidised and to commercially-provided services, but they apply in different ways in the sense that they impose a duty with regard to the needs of the elderly and disabled people when authorities are carrying out their duties in exercising their powers to secure the provision of subsidised services and their power to co-ordinate all services, both commercial and subsidised. There is a duty. However, although the power to co-ordinate covers all services, both commercial or subsidised, this leaves us in the position which I endeavoured to explain a week ago, which is that local authorities, be they PTEs or non-metropolitan county councils, only have power under these amendments to stipulate that an operator shall provide certain facilities on subsidised services. The power to stipulate that an operator shall provide certain facilities does not, under the amendments to which I have spoken, extend to commercial services.
§ Lord Ennals
It seems to me, from his last sentence, that the Minister almost used the words of Amendment No. 211ZA, subsection (8D) which reads:It shall be the duty of each operator of registered local services in the area to co-operate with the authority in performing its duty under subsection (8C) above.I know that the Minister has doubts about "(8C) above" and those matters we shall deal with, but did he not say that the operator shall have the responsibility of co-operating with the licensing authority, PTA or PTE, in terms of making provision as required by the licensing authority? In that case, is he not accepting the principle that lies behind an amendment shortly to be debated?
§ Lord Belstead
I think the answer is, no, because we still have to debate Amendment No. 211ZA tabled by the noble Viscount, Lord Ingleby. But this lays a duty on the local authority to have regard to various things connected with elderly and disabled people in providing services, and then lays a duty on each operator of local services in the area to co-operate, be those services subsidised or commercial. Therein lies the difference.
§ On Question, amendment agreed to.
The Earl of Caithness
I think this is an opportune moment to move that the House do now resume. In moving that Motion I confirm that we shall not come back to consider this matter further until 8 o'clock.
§ Moved accordingly, and, on Question, Motion ageeed to.
§ House resumed.