Property Services Agency and Crown Suppliers Bill

HL Deb 23 April 1990 vol 518 cc359-407

5.49 p.m.

Lord Hesketh

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee. —(Lord Hesketh.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD MURTON OF LINDISFARNE in the Chair.]

Clause 1 [Transfer of Property Services Agency and Crown Suppliers]:

Lord Graham of Edmonton moved Amendment No. 1: Page 1, line 5, leave out ("or schemes").

The noble Lord said: The amendment is perfectly straightforward and is designed to invite the Minister to say a little more than has hitherto been said in another place or by the Minister on Second Reading about the future plans of the Government.

The Committee should be reminded that although the Bill might appear to come within the Government's macro-scheme of privatisation, it could not possibly be seen as meriting stature with many other schemes. The Minister should know —he will be well advised —that there are tens of thousands of individuals who are very deeply concerned with regard to the Government's intentions. I invite the Government to comment on the tenor of the amendments that my colleague and I intend to move so that we can be better prepared for the next stage of the Bill. We are deeply worried by the refusal of the Government and the Minister to give satisfactory answers to perfectly straightforward questions.

The Minister is aware that the PSA has more than 20,000 employees and is responsible for work worth more than £3 billion. It is the largest design, building and maintenance organisation in the UK. Amendment No. 1 seeks to prevent the Government from breaking up the PSA in one way or another. I note from my papers that the former Permanent Secretary, Sir Gordon Manzie —whose name will be frequently mentioned tonight—told the PSA staff that the strong preference is to maintain the PSA as a single organisation and to sell it as a single organisation. The amendment seeks to come down on the side of Sir Gordon Manzie and invites the Government not to do otherwise.

The Government should be reminded that there are many ways in which the PSA, organised albeit in a different form in the future, still has a very important job to do for the nation. One can take the analogy of many large businesses, for instance the banks, the brewers and many other large organisations. They maintain in-house departments which are designed to carry out much of the work which the PSA is able to do and has demonstrated that it is able to do; it is a centralised in-house design and building organisation. We cannot see any sense in the Government not accepting the amendment.

I will mention one point, touched upon by many amendments. That is the unique calibre of the staff of the PSA. One of the prime reasons why people of such skill, experience and expertise stay with the PSA is because it provides the opportunity to work in a large vertically integrated organisation. The Government have acknowledged that the PSA's only real asset is the professional skill of its technical staff; without that, the organisation is nothing. We believe that the Government are treating very shabbily not merely those people with special skills, but uniformly all those who are currently civil servants. The sad fact is that many people are caught between the devil and the deep blue sea. They want to know precisely what the terms and conditions for the protection of their future will be after the given date. I am told that over 600 key staff have already indicated their feelings regarding the Government's attitude by voting with their feet; they are leaving the organisation. That is a tragedy. There will be set up small partnerships and consultancies which will begin to nibble away at the manner in which the PSA has been organised—I am not against reorganisation —so as to provide the kind of services that it does.

The Minister has a good opportunity to reassure people outside the Committee by speaking to this amendment. It is not the kind of amendment I should necessarily press, but it is a good amendment to get these debates off to a sensible start. I beg to move.

Lord Hesketh

I sense that Amendment No. 1 is a mischievous amendment—if it could be so described —designed to compel the Government to sell the PSA and TCS as a single entity. In practice it will delay the sale of the TCS. As the noble Lord is aware, that matter is already under way. The Committee is aware that the competition for the sale of the TCS in up to three parts has begun and is expected to be completed this year. It would be premature at this stage to settle the form in which the PSA should be sold, including whether it is to be sold as a single unit or in parts. That sale will not be before October 1992 at the earliest. But as with the TCS, decisions will take account of the return for the taxpayer, the future of the businesses, and, most importantly, the interests of the staff.

The amendment would place unnecessary and unacceptable restrictions on the timing and the method of the privatisations and would not benefit the taxpayer, the organisations or their staff It may be that some form of division will be to the benefit of the employees. I suggest that flexibility is the answer rather than the rigid structure proposed by the amendment. I urge your Lordships to reject it.

Lord Graham of Edmonton

Marvellous, my Lords! The Minister comes to the Committee and says that because matters have already proceeded in accordance with the Bill, the Committee is almost acting ultra vires in seeking to amend the Bill to exclude the actions which the Government have precipitously set in train. That is nonsense.

We know of the determination of the Government, the Minister and his colleagues to carry out their intentions regarding this small but very important element of the public sector. When the noble Lord says that he wants maximum flexibility and, using a phrase, I believe, which should stick in his craw, that he intends to do the best for the employees in this matter, all I can say on their behalf is that you could have fooled them. Much of what the Minister and his colleagues have said up to now has made them very fearful of what will happen.

The Minister must be aware that this is our only chance to act. The Bill is before the House at Committee stage for the first time. There will be a Report stage and Third Reading at which other amendments can be tabled. The Minister is quite right that there is a long timescale, but he and his colleagues should understand that there are men, women, families and communities who are very concerned. There are some communities where the PSA and the Crown Suppliers provide, if not the major source of employment, then certainly a major source of employment, in that community or town.

The Minister says that the amendment is mischievous. In the sense that it is pointed and pertinent I suppose that it is. When he says that it is designed to keep those two organisations as one, he is absolutely right. The Government certainly did not say anything through the Minister's short response to indicate to those outside the Chamber, who are anxiously listening, and who will read with care what has been said, that there has been any progress in the Government's attitude towards not only the PSA, but the people who work with it. I know that those people will study very carefully what the Minister said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6 p.m.

Lord Graham of Edmonton moved Amendment No. 2: Page 1, line 7, leave out ("and liabilities") and insert ("liabilities and business").

The noble Lord said: In moving this amendment, I speak also to Amendments Nos. 3, 4, 5 and 11, which are all related to the same theme. These amendments are some of the most important that we shall deal with tonight.

In our view, the Government are guilty of trying to foist a con trick not just on the people who work in the industry and in the department but on the public. There is a pretence that certain central government activities will be sold while retaining for all practical purposes those same activities in government, albeit diffused between departments.

The purpose of the amendments is simply to say that the PSA's business as such will not be sold but merely that the assets, rights and liabilities are to be disposed of We are already aware of the mix of private and public provision that exists, not just in this Government but throughout central and local government. I am told that over 70 per cent. of the PSA's design work is put out to the private sector. The PSA's role is that of a skilled intermediary between government departments and private design practice. The mini-PSAs which now operate in many departments undertake the same functions as were previously exercised on behalf of the department by the PSA itself. The phrase "to untie" various government departments—untie them from the central agency—has, of course, become fashionable.

At the mini-PSA currently being set up at the Ministry of Defence at Sutton Coldfield there are 250 design staff, many recruited from the PSA, who will be employed to oversee the commissioning of MoD design work and to manage projects. There is no point in the Government denying that that is a mini-PSA by calling the Sutton Coldfield set-up an intelligent customer facility. It is marvellous how the Government can dream up euphemisms to cover over the true position.

Numerous other examples exist. Until recently the PSA advised the National Physical Laboratory at Teddington on its maintenance needs. The PSA inspected the site, drew up maintenance schedules and specifications and placed contracts for private sector building contractors to execute the subsequent work. The NPL has recently employed its own technical staff in about the same numbers and grades as the PSA and they now do the same work direct. The PSA staff used to act as an intelligent customer facility for NPL but NPL now has its own technical staff and can act as an intelligent customer itself. When the PSA is sold off, this part of its business activity will not be sold but will remain with the Government. There are other illustrations of the way in which that is done.

We have to be exceedingly careful and clear as to what it is we are asking the Minister to do. We already have illustrations where non-PSA employees or a non-PSA nexus has been used in providing facilities. For example, at Rampton Hospital heavy electrical equipment was installed by private contractors without reference to the PSA. When it was switched on, it overloaded the system and major circuitry was blown. Rampton is a high security hospital. No one knows whether the electrical security system was disabled, because the incident was hushed up. That is a good example of the dangers inherent in allowing non-technical staff to take technical decisions.

A major redesign of Skills House in Sheffield was undertaken without reference to the PSA. At the annual inspection of the premises the PSA discovered that the refurbishments had dangerously overloaded the floors. The bar, leisure and restaurant facilities at the MSC headquarters at Moorfoot were modernised without reference to the PSA and a new suspended ceiling built which completely covered the ventilation ducts, with the obvious serious threat to health and safety.

The Minister may say that those are isolated cases but, if he does, I have a dozen other illustrations up my sleeve. In response to the pained look on the face of the noble Lord, Lord Glenarthur, I do not intend to cite all those 12 or 15 examples. However, it is important for the Minister and his colleagues to answer the charges we are making. The actions and policies of the Government may well look good on paper, but we believe that one of the objectives is to reduce the number of people who claim to be civil servants. When the PSA and the Crown Suppliers are privatised the total number of civil servants will be reduced, thereby assisting the Government to maintain one of its original shibboleths.

In practice we are referring to a very real danger and to damage which can be done not just to working conditions but to the public. The illustrations I have given, and those that I could give, refer to the kind of properties on which the PSA has a fine record in regard to design, management and monitoring but which are being put at risk. I beg to move.

Lord Reay

We do not believe that the addition of the word "business" at various places in Clauses 1 and 2 would add anything of significance to the Bill or that it is necessary for the Secretary of State to have explicit power to certify the drawings, designs, etc., which will be the sole property of the PSA or TCS.

As the Committee will know, employees are given important safeguards in relation to the continuity of employment and the terms and conditions of employment by the regulations known as TUPE. TUPE, however, only applies to commercial undertakings, which for these purposes include the PSA and the Crown Suppliers. The question is not whether they are currently making a profit or loss or whether, with regard to the PSA, they have commercial accounting systems. What does matter is the nature of the organisations' activities. Both the PSA and TCS provide services in direct competition with companies in the private sector.

The Committee may be aware that the Solicitor General attended the Committee in another place to answer certain legal questions. One of these was whether TUPE would apply to the proposed sales. His answer was unequivocal. He said: I have no doubt whatsoever that they constitute undertakings that are in the nature of a commercial venture for the purposes of the regulations". So far as Amendment No. 5 is concerned, the Bill already includes powers, in subsection 1(2) and in paragraph 1 of the schedule, for the Secretary of State to certify what has been vested by virtue of a scheme under subsection 1(1). He will, therefore, quite properly have discretion about which items of intellectual property, all of which is presently Crown copyright, should be transferred under the scheme. The Bill therefore covers the same ground as the amendment was seeking to cover.

I understand that the formulation used in the Bill—namely, "property, rights and liabilities"—is the normal way to describe the assets of an undertaking. No convincing reason, in our opinion, has been advanced for making a change. We suggest that it would be confusing, and therefore bad law, to use a different formulation. As I have indicated, we have in any case very firm legal advice that the staff of both PSA and TCS will have the benefit of the safeguards of TUPE.

The noble Lord, Lord Graham of Edmonton, referred to possible mini-PSAs. Clearly departments will be closely aware of the need to achieve value for money and to keep their procurement organisation to the bare minimum. Any idea that government departments were running their own mini-PSAs or TCSs and neglecting to get work done by an open and competitive process would soon run into trouble with the NAO and the Select Committee from another place, as well as from the Minister responsible for the department. For those reasons, I hope that the Committee will agree that the amendments are unnecessary.

Lord Graham of Edmonton

I am grateful to the Minister for the care that he has taken to give me a full answer. However, in doing so he poses a number of questions. He tells me that the Government are on firm ground in respect of the cover or provisions of TUPE '81 in this matter. We shall be coming head-on to what I maintain and hope to prove: that the ruling is in direct contradiction to the existing EC directive. The Government will be well advised to exercise the utmost caution in relying on TUPE '81. It is all very well doing so when it can be interpreted to suit the political imperatives of the Government. However, there is more to it than that.

The Minister also stated that the departments of state which have hitherto used the PSA would be well advised to look carefully at the extent to which they create their own mini-PSAs inside their departments. The Government ought to recognise, when the Minister used the phrase that staffing would need to be down to the bare minimum, that we are not talking about just any commercial undertaking; we are talking about the security of the realm. The work that the PSA has done, is doing and I hope will continue to do, is not merely commercial by any standard. As we move to the next amendment which relates to Northern Ireland, we find that there are aspects of the responsibilities of the PSA and conditions under which it works which cannot be made comparable to those anywhere else. I fear that in the Bill and in their response the Government are refusing to acknowledge the special—if not unique—nature of the PSA. More important, they are refusing to acknowledge the work of the PSA in looking after national assets.

Again the Minister has made a case which will be examined by those employed in the departments outside the House in order to see whether we wish to return with other amendments at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 3 to 5 not moved.]

6.15 p.m.

Lord Graham of Edmonton moved Amendment No. 6: Page 1, line 28, at end insert: ("( ) Mo arrangement shall be converted into a contract under this section until the National Audit Office has certified that good value for money will thereby be obtained.").

The noble Lord said: The amendment relates to the point that the Minister made—good value for money. I should like him to tell the Committee a little more about the part that he envisages that the National Audit Office has played in these affairs. We are far from convinced that some of the deals that have been done by the Government are satisfactory. I live in Enfield and I remember the sale of the small arms factories very well. Regularly in the House and in the other place we hear illustrations of cases in which the Government divested themselves of hitherto public assets in a manner which is a scandal and a disgrace.

Will the Minister tell us what steps he will take to avoid the wrath of the National Audit Office? We do not wish to find that the horse bolted before the stable door was locked and organisations like British Aerospace laughed all the way to the bank. That firm bought the Royal Ordnance factories from the Government and it found that it had a goldmine. Hundreds, if not thousands, of acres of land had not been properly valued. I should like the Minister to tell us a little more about the steps that the Government have in mind.

I hope he will not say, "These are early days, it is a long time yet. We haven't got the flesh on the bones; we have a lot of consultation to do". Tonight is the opportunity for the Committee to put to the Minister our fears and worries. I beg to move.

Lord Hesketh

TCS and PSA have many assets but I can assure the Committee that hundreds of thousands of acres are not included.

I should explain briefly to Members of the Committee the purpose of subsection (3). Government departments in a legal sense are one and indivisible. They are all emanations of the Crown. The Crown clearly cannot contract with itself. Nevertheless, government departments frequently conduct business with one another in ways and on terms which in the private sector, or between governmental and non-governmental bodies, would amount to enforceable contracts.

When the Property Services Agency and the Crown Suppliers become companies, many of the arrangements that exist between them and their customer departments will have to be converted into contracts. This can be done in two ways. Either contracts between the transferee companies and government departments can be signed after incorporation, or, where more convenient, the provisions of subsection (3) can be used. Not all the informal arrangements existing at present will be suitable for conversion into formal contracts and in those cases new contracts will have to be negotiated. Customer departments will of course be fully consulted about these matters, and about the rights and liabilities to be imposed under subsection (3).

It is possible to suggest that this subsection is a device to allow the Government to give the TCS and the PSA lucrative contracts in some underhand way to the detriment of the Government's objective to seek value for money in procurement. I can assure the Committee that that is not the intention of the Government. It is for departments to decide what agreements they should enter into with PSA or TCS. They will make that decision as customers looking to secure their best advantage. The Government would not wish them to do anything other than that. I can also say that the subsection will not be used in any way to avoid competition that would otherwise have been required by European Community law.

Members of the Committee will be aware that the National Audit Office has very wide powers to scrutinise the activities of government departments and, if it thinks necessary, to report on these to Parliament. I do not believe that this addition to their powers is necessary for them to discharge these obligations effectively in relation to government departments dealing with PSA and TCS. Responsibility for obtaining value for money from PSA and other suppliers already rests with the accounting officers of client departments, and they are answerable to Parliament for the way in which they discharge this responsibility.

It will be for the NAO to scrutinise the arrangements that are being or have been entered into by client departments. The appropriate Select Committee in another place may then want to examine their accounting officers in the usual way.

The effect of the amendment would be to make NAO responsible for making judgments for which individual departments should be responsible. Furthermore, to the extent that NAO are not equipped to undertake this function, the whole process of privatisation would be held up. I yield to none in my desire to secure value for money. But the way to do so is to put the responsibility firmly on client departments and to call them to account for the way in which they exercise it. That is the reason why I urge the Committee to resist the amendment of the noble Lord, Lord Graham.

Lord Dean of Beswick

I rise briefly on a couple of points which have been touched on. The Minister made great play of the National Audit Office being something of a watchdog. Of course it is; but it is only able to give views on events that have happened. My noble friend Lord Graham referred to British Aerospace and the sale of Rover. All those who listened to our exchanges at the time of the sale know that things went on which were not in accord with what one could call fair dealing and proper public accountability. I understand that the issue has still not been resolved.

The Minister will understand that some of us take with more than a grain of salt the view that he has expressed on behalf of the Government. No explanation has been given as to why the exercise should be taking place anyway. No one has published statistics or overwhelming evidence of where the PSA has let the nation down in the past. It has had its flaws in the same way as any other business organisation. A case was reported only this morning of a local authority that has sold off hospital services. There is evidence that the people who were deemed to be good enough to take charge of the operation are providing an inferior service. If that is the Government's intention, they should say so.

It is rather strange that Sir Gordon Manzie, who was originally sent to the PSA to sort it out in certain financial respects, now appears to be heading those who will take control of the out-of-house organisation. If that is not negotiating with oneself I do not know what is. I cannot find any other explanation. The head person of a publicly owned organisation should not be negotiating the terms for the disposal of its assets, however it is done, and should not be indicated as being in charge of its reception into the private sector. Is that an example of fair dealing? The Government should not expect us to fall for that one. Those are very dubious actions indeed.

The person who starts to organise the exercise would be rather stupid, knowing what was really the Government's intention when he was first sent there, not to organise it on behalf of those he will represent. He may be the chief benefactor himself in the business sense. I take with a grain of salt the claim that the National Audit Office will safeguard the interest of the taxpayer. By the time the matter reached the National Audit Office and the Select Committee of another place the problem would have occurred. The National Audit Office does not make decisions in advance. It is a watchdog. But in some respects, because of the way the Government behave, it is a rather toothless watchdog. Nothing happens.

It is not the first time that mistakes have been made by the Government. I am looking forward to the first case of an overwhelmingly good deal being done on behalf of the taxpayer when parts of the public sector are privatised. More evidence is being produced of pubhc assets being sold off with the taxpayer receiving a bad deal.

Lord Graham of Edmonton

My noble friend makes pertinent points to which it is clear the Minister is impervious. We shall return to Sir Gordon Manzie later on. The Minister's notes have been well prepared. We read the Guardian as well. It is a sad fact that the Government look at these matters in one way. They are punitive in the manner in which they look upon their responsibilities towards their employees. Once that responsibility has passed out of their control the terms under which it has been passed out of their control will become a matter of history.

These matters have a habit of reappearing. The Minister has tried to be helpful and he may very well have been helpful. My colleagues outside will read what he has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Graham of Edmonton moved Amendment No. 7: Page 1, Line 29, leave out subsection (4).

The noble Lord said: I shall speak at the same time to Amendment No. 31. I have already made a passing reference to the significance of Northern Ireland in this context. I have the honour to speak on Northern Ireland affairs from my party's Front Bench. I have been to Northern Ireland and I try to brief myself on what is going on there. But I rely heavily on the Committee stage report of proceedings in another place.

On 11th January Mr. Eddie McGrady, the honourable Member for South Down, spoke to this amendment. He did not say anything which the Minister, who, I repeat, is always well briefed and wordly wise in these matters, does not already know. He referred to the terrible situation that exists in Northern Ireland. I met Eddie McGrady before he became a Member of another place. I respect him highly. He has long experience in politics, not least in the housing executive. What he says is chilling to someone like me who does not live in Northern Ireland, I understand and sympathise with people, including Ministers, who have to deal with these problems. I shall read a little of Mr. McGrady's speech. It gives a little of the flavour of the danger the Government may find themselves in. At col. 71 of the Committee stage report on 11th January he said: The larger part of Belfast is divided into three spheres of influence. One area is controlled by provisional IRA, a second area by the loyalist Ulster defence association and a third area by the official IRA which could roughly be described as the Republican Marxist element in the Republican movement. It is well known both to the Government and to the security forces that contracts and employment in those three areas are governed by those three bodies. They decide who is allowed to tender, to contract and to work".

That does not go on in the rest of the United Kingdom. It is a special reason why Northern Ireland should be treated differently in this matter. It would be treated specially if it were excluded from the provisions of the Bill.

Mr. McGrady went on to say that, contractual prices in Northern Ireland are automatically loaded by

6.30 p.m.

Lord Hesketh

I interrupt the noble Lord merely to draw the attention of the Committee to the fact that it is not the tradition of this Chamber to quote in a current Session from what has been said by a Member in another place.

Lord Graham of Edmonton

I acknowledge that fact. The words were so familiar to me that I thought I had heard them a long time ago. However, I am now reminded that they were spoken only this Session. I do not need the words other than as an aide memoire. Mr. McGrady told the Committee in another place that it is normally understood that building prices and contracts are overloaded by 20 per cent. Why are they normally 20 per cent. higher than anywhere else? It is because there is a need to pay "hush money", blackmail and contributions both by the company and by the individuals. He went on to say that it is not merely the company or the business which pays; the individual workers are also called upon to do so.

Mr. McGrady continued to give illustrations whereby companies that are fearful of either losing their business, their limbs or their lives go out of their way to ensure that statements appear in public print which they hope will indicate to the forces and the powers that be—we know that it is not the Government—that they have nothing whatever to do with government contracts. When we look at the situation of companies, we are also looking at security and safety. However, we shall discuss that aspect when we come to Amendment No. 9, which deals directly with security.

A very pertinent and poignant point was made by Mr. McGrady when he spoke in another place. He drew upon the fact that civil servants as such seem to escape as a class of people; they seem to escape the opprobrium of the men of violence from wherever they come. In other words, civil servants by the nature of their work, and possibly also because of the psyche of the Northern Ireland people, are treated differently. They are not seen as part and parcel of the battles.

My amendment seeks to give the Government an opportunity to exclude from the provisions of the Bill the references to "a Northern Ireland department". I believe that that is fair. I very much hope that the Government do not wish to carry this on their shoulders, along with all the other problems and burdens that they have in Northern Ireland —and I respect that situation —because there is no necessity for it.

In his first reply the Minister relied upon flexibility, timing and reconsideration. I think that this is an amendment which he could take away and reconsider. He could return to the matter at a later stage to see whether it is possible to find a means of excluding Northern Ireland. The Province is an important part of the United Kingdom. However, I cannot see what magic plan or what major piece of legislation would be materially affected if the mention of Northern Ireland was removed from the provisions of the Bill. I beg to move.

Lord Hesketh

The Opposition have already argued in another place that the Act should not relate to work which the PSA undertakes in Northern Ireland. They have made much of security, as if the mere mention of the word settles the issue beyond further argument. But the question is much more complex than that. The Government have already made it clear that they will not do anything that is contrary to national security. If the PSA undertakes any activities in Northern Ireland that on the advice of the security authorities would be prejudiced or put at risk by privatisation, those activities will remain the Government's responsibility. Security in Northern Ireland, as elsewhere, is the responsibility of the customer who commissions the work, not of the PSA. Further, the PSA undertakes work in Northern Ireland which is not related to the security services.

Amendment No. 31 would delete Clause 6(2), which extends the Bill to Northern Ireland and to work in Northern Ireland. Work in Northern Ireland represents a considerable proportion of the PSA's business, and Northern Ireland will offer important opportunities for the company to expand its markets. The PSA undertakes work in Northern Ireland for the Northern Ireland departments—environment, transport and agriculture—and maintains Hillsborough Castle. It could well in the new competitive world which it now faces offer a competitive service in other fields.

Given the assurances the Government have given about security, we do not believe that there are grounds for arbitrarily depriving an incorporated PSA of this part of its business. No decisions have yet been taken, or need yet to be taken, about how much of the PSA's current work ought to be retained in government. There is no reason why the Bill should exclude Northern Ireland from its coverage and possibly hinder the development of part of the PSA's and TCS's business. We believe that the amendment is one which will not assist and it is one which we resist.

I turn now to Amendment No. 7, which would prevent Clause 1(3) from being used to convert into contracts administrative arrangements between TCS, or the PSA, and Northern Ireland departments. Both TCS and the PSA are able to do work for Northern Ireland departments now, and we see no reason why they should be hindered from doing so in the future. Without the provisions of subsection (4), administrative arrangements with a Northern Ireland department could not be converted into contracts under subsection (3), though it would be possible for new contracts to be negotiated outside the terms of the clause.

The matter is currently under consideration by the Ministry of Defence, the PSA and Property Holdings acting as the vendors. I should reiterate that the key fact about security is that it is the customer who is in charge. To give an example, it would thus be the responsibility of the MoD if it required work to be carried out by the PSA in Northern Ireland or anywhere else where there may be a risk of terrorism, be it in Germany or the United Kingdom, to decide such matters. It is up to the customer to define the requirements for security, not the PSA. That is where we believe the misunderstanding lies. That is why we resist the amendment.

Lord Dean of Beswick

Before the Minister sits down, I must say I am surprised, as perhaps are other noble Lords, that at this late stage of the Bill no real hard discussions have taken place with the MoD. I should have thought that the department is now in a position to say what it thinks is desirable and undesirable. It would be a most peculiar situation if talks were set to take place in the short time which is left; indeed, we are talking about a matter of weeks in which this Bill has completed its passage through both Chambers.

I should have thought that the views of the MoD would have been sought some time ago, bearing in mind that whatever the Government decide for the PSA in Northern Ireland—that is, how it is fragmented —it will still be the role of the defence forces to guard the population of Northern Ireland, even those who work for the new companies which the Government expect to emerge from this piece of legislation. Therefore, while the Minister may not wish to answer at this point, I should have thought that he could give some indication that the discussions with the MoD will be serious and meaningful and that they will not take place when it is too late to alter the Bill.

Lord Hesketh

I am more than happy to answer the point. The PSA is essentially a service organisation; it provides integrated services. Thus each contract and each job will require a new assessment. It will be an ongoing discussion where it provides services to any customer, whether it be the MoD which may present a higher risk in Northern Ireland than the Department of Agriculture. As each service contract is provided and each turnkey project is dealt with, at the start of the analysis of each project there will be an assessment made by the customer, together with the PSA if it is the service provider, and others. If you go down the tree you must look at the position of the contractors which the PSA may have selected to come in to carry out the contract and at what the position is as regards security in each case. At the end of the day the responsibility must rest at the top, with the customer, which, if it was the MoD in Northern Ireland, would be the MoD.

Lord Dean of Beswick

I think that the Minister is trying to make a bad case. If we consider the history of what this Government have done, they have in some respects totally rejected the advice of highly qualified professionals at the Ministry of Defence.

I can remember proceedings taking place in this Chamber when former defence chiefs of staff strongly advised that the Government should not privatise the Royal Ordnance Factory and that we should keep under our control a large section of the government-owned logistic provisions and factories for the sake of national security. Unfortunately, the Government chose to reject that idea completely. Why should Members of the Committee from other parties who do not support the Government on this have any more reason now to think that the action proposed in the present Bill will be successful and in the interests of the people? It certainly has not been so in the past.

Lord Hesketh

At the risk of boring Members of the Committee, the argument which the noble Lord, Lord Dean, put forward may be attractive on the surface. He gave the example of the ROF, but there is a further example: in a modem society communications are vitally important, and one could use the same argument about British Telecom and say that that also should remain within the state sector for the purposes of security.

Lord Dean of Beswick

I am not against that.

Lord Graham of Edmonton

I am sorry that the Minister cannot on behalf of the Government agree with a reasonable case—that is, that Northern Ireland is a special case. The Minister is saying that those elements of a special nature will be taken into account by the commissioning government department when it consults in detail with the PSA.

I believe that the Government are not fully aware of the nature of life in Northern Ireland. No master plan would be damaged if Northern Ireland were excluded from the Bill. The Minister talked in terms of the PSA. It is not just a question of the PSA but of the elements of the PSA which become privatised. In my view, no master plan would be materially damaged if Northern Ireland were excluded. But I do not think the Minister will say any more, so I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Graham of Edmonton moved Amendment No. 8: Page 2, line 8, at end insert ("No day shall be specified under this section before a 5 per cent. surplus on net assets is returned in six consecutive audited commercial accounts,").

The noble Lord said: I beg to move Amendment No. 8. This goes to the heart of a great worry of the Government. They have said more than once that they are concerned about the timetable and about getting on with the job. However, the employees in the departments are concerned about the shape and state of what is to be sold on or flogged off by the Government in due course. The Government know that the ability to attract good employers who are willing to invest large sums of money in taking over the privatised sectors depends upon the health of the department at the time. Without going too closely into figures, because they change, the manner in which the Government have deliberately run down the department has caused a change in the viability of the PSA in recent years. This amendment simply says that there shall be no progress in these matters until the people who are looking at the asset are satisfied that what they are buying is something with a proven., recent. successful track record.

6.45 p.m.

Lord Hesketh

These amendments would prevent the incorporation of the PSA or TCS and their sale to purchasers until certain conditions relating to profitability, the availability of accounts and the valuation of shares have been met. Amendment No. 8 would delay the incorporation of the PSA until at least 1996, since it does not yet have audited accounts. The TCS did not meet the criterion, on a current cost basis, in the 12 months ending 31st December 1988, the last year for which results are available. So for the TCS, too, the delay would be considerable. To decide now to delay privatisation of either the PSA or the TCS to this extent would not be sensible.

In some ways noble Lords opposite seem to be trying to have it both ways, on the one hand protesting that they wish to protect the taxpayer by preventing the Government from selling off assets at less than their true value, while in the debate on this amendment they insist that if the PSA and TCS are not profitable they should not be sold and instead kept by the Government at the taxpayer's expense.

It is the Government's belief that both organisations will benefit from privatisation sooner rather th in later. Government departments are now untied from the use of the services of the PSA and TCS and will be seeking competition by obtaining competitive tenders from them and from private sector firms for future work.

If the PSA or TCS are to have full access to, and be able to compete effectively within, wider markets, they must have the full freedom of the private sector available to them at the earliest opportunity. We have been prepared to allow some limited freedom to the PSA and TCS to operate in private markets as a preliminary to their early privatisation. But these freedoms ought not to be extended too far in advance of incorporation because the Civil Service is not a suitable place for an organisation engaged in full-scale business activities. Early privatisation is therefore desirable if either organisation is to flourish. In addition, for the TCS the sale competition has been launched following a significant period of preparing the organisation for sale. Further delay would create uncertainties and jeopardise the future of the business. I suggest that this could be a loss both to the organisation and to the employees.

Amendment No. 29 would prevent the TCS trading fund from being wound up and its liabilities written off until is had operated at the proposed level of profit for three consecutive years. That is just as unacceptable as the previous amendment, for the same reasons. The main point is that we believe the TCS, like the PSA, will operate more effectively and profitably in the private sector. It is potential profitability, rather than actual profitability, which is important for the timing of the sales. Again, we resist the amendment.

The effect of amendment No. 26 is to prevent the sale of the PSA or TCS companies until the shares have been valued, and until six years' accounts are available. The TCS already has full commercial accounts capable of meeting the requirements of the Companies Acts and Statements of Standard Accounting Practice issued by the main accountancy bodies. The PSA is in the process of introducing them. The accounting systems will be capable recording balance sheet values and charging depreciation to profit and loss accounts, and will be subject to proper commercial audit. They will be perfectly adequate for the Government as vendor, and for prospective purchasers, in valuing the business activities of those two organisations.

But the value of both organisations will be based on bidders' assessments of their future profitability when they are freed from public sector constraints. That is something on which bidders will have to make up their own minds. It would be foolish in the extreme for the Government to publish their own assessment of the value of the businesses as a going concern before the sale took place. That would effectively set a ceiling on the purchase price, which I am sure is not what this Committee would intend. Thus we resist these three amendments.

Lord Graham of Edmonton

First, I apologise, as I should have made reference to the amendments additional to the one that I moved. The Minister was quite right to speak to the other two, and I am grateful.

I am intrigued, as I believe are many outside the Chamber, that hitherto it has almost been a cardinal point of principle that no element of the public sector shall be removed from that sector and sold unless it is possible to sell it to the best advantage. I should like the Minister to tell us what advice has been received, and what consultation has taken place and with whom, to satisfy him that the best possible price will be given by the market when these assets are put on the market. I am not as experienced as many others in this Chamber, but I should have thought that before someone buys something he should look not only at what it is doing now and might do in the future but at what it has done in the past.

If the Minister does not consider that the timescale that we have suggested is sensible or acceptable, he must surely agree that an element of our argument is acceptable. The evil day is merely put off until our measure is complied with. I make no bones about the fact that one of the motives we have in moving amendments of this kind is to provide time for the matter to be considered sensibly. We believe that the present situation will be seen as nonsense.

I hope the Minister can tell the Committee what advice he has received from those who are responsible for giving advice to the Government. I am referring to merchant bankers and people in the City who make a lucrative living from advising the Government on the means and the methods whereby dealings of this nature are carried out. The Minister may well tell the Committee that he is satisfied with things as they stand. I have no doubt that he is satisfied that the provisions of the Bill are beneficial. However, I hope that if that is the case, he will at least take the noble Lord, Lord Dean, and me into his confidence and tell us why he believes the Government will obtain the best price for these organisations.

Lord Hesketh

The answer is fairly straightforward. As the noble Lord, Lord Graham, is well aware, most of the previous privatisations were not of service organisations. However, these two bodies are essentially service organisations. They will be judged on their perceived ability. I hope that anyone who is interested in TCS—and as the noble Lord, Lord Graham, is aware, we are a considerable way from privatisation of the PSA and it will not occur before 1992—will take into account the glowing references that the noble Lord made earlier this afternoon.

Plenty of service organisations have been sold into the private sector. They were assessed on their potential. I said earlier that we did not wish to suggest a figure in this case which is then considered to be the limit. A figure is reached by considering the organisation itself, the people involved in it and the advice of those who have advised the Government on the matter. In the case of TCS the Government have received advice from Samuel Montagu. We have also received advice with regard to the PSA from Price Waterhouse. In the case of the PSA, we shall continue to take further advice. However, I must stress that we are selling service operations here. Prospective purchasers will assess them on the ability of the staff of those organisations.

Lord Graham of Edmonton

I am grateful to the Minister for his remarks. However, if a potential purchaser considers these organisations are worth buying, why on earth do the Government not consider that it would be a good thing to keep them within the public domain? The Government appear to be following their doctrinaire philosophy of selling into the private domain as many public sector bodies as possible. They wish to do that regardless of whether the public sector bodies are in the public domain because of the national interest or because of national security or other considerations.

The Minister has not assuaged some of my worries. However, he has gone some way to indicate that some advice has been taken and that the best terms will be obtained. That is one side of the matter, but the other side of the matter that we shall consider when we reach Clauses 2 and 3 is the impact upon the present employees of the PSA and TCS of being transferred into the private sector, if that option is open to them. However, I am grateful to the Minister and I shall read his remarks. I may return to the matter at a later stage; but, in the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Graham of Edmonton moved Amendment No. 9: Page 2, line 12, at end insert: ("(8) Without prejudice to the generality of subsections (1) and (2) above, no part of the business of the Property Services Agency or the Crown Suppliers which is referrable to national security interests shall be included in any scheme under this section; and the Schedule to this Act shall apply.").

The noble Lord said: This amendment concerns the national interest and national security. I hope that the Minister will deal with one or two points that were not raised in the short debate on Northern Ireland. I hope that he will deal particularly with the interests of foreign governments regarding the privatisation of some of the services which they share and enjoy as a result of existing arrangements. The United States Government are opposed to having a privatised PSA manage the design and maintenance of their UK bases. Before the point is made that they will get rid of that worry by removing their bases, I should state that the US Government have hitherto been satisfied with the arrangements and the services that they have enjoyed under the PSA. The German Government are reported to be insisting that only civil servants should manage the design and maintenance of bases on German soil. In whatever ultimate shape the PSA emerges when the dust dies down, that matter will still be relevant.

We read in the press of the various ways in which companies are formed and employees are shuffled sideways and management seek to avoid all kinds of responsibilities. In this case there is the genuine point not just of serving our allies but also of protecting our own interests. When national security interests are involved, they should be paramount. The amendment states: Without prejudice to the generality of subsections (1) and (2) above, no part of the business of the Property Services Agency or the Crown Suppliers which is referrable to national security interests shall be included in any scheme under this section".

The Minister may say that we are only seeking to retain parts of the two bodies concerned. That may be the case, but we are talking about parts of national security. The Government would show their flexibility and common sense if they responded helpfully to the points that I have made. I beg to move.

Lord Hesketh

I have already assured the Committee that the Government will not privatise any activities which, on the advice of the security authorities, would thereby be prejudiced or put at risk. But this amendment would go far wider and exclude all work related to national security, whether or not there were any good security reasons for doing so. The amendment may reflect a misunderstanding about the nature of the PSA's security responsibilities and the respective roles of Government and their contractors. The amendment may also reflect a presumption that the public sector has a monopoly of trust in security matters.

Any client of the PSA or TCS has the responsibility for setting security standards. Although the PSA and TCS conduct sensitive business for the MoD and other government departments, that does not imply that they are responsible for determining the security requirements. It is, and will remain, the responsibility of client departments to assess the level and nature of the threat and to decide what type of protection is needed. That is true, for example, in relation to the weapon resistance of hardened aircraft shelters and the physical protection of Downing Street. The task of the PSA and TCS is to provide the buildings, facilities or equipment required by clients and to do so in accordance with the requirements—such as for security—specified by them.

The client also has responsibility for security clearances of staff and contractors. To ensure that sensitive information does not get into the wrong hands, ihe PSA and TCS, like all government departments and many private sector contractors (for example, in defence procurement), have arrangements for staff to be security cleared. More rigorous clearances may be required for the most sensitive work.

There is a wide range of private sector consultants who ha\e for many years been carrying out many aspects of design on sensitive projects. Almost all the PSA's work of construction is done by private contractors. For example the main radioactive liquid treatment plant at Aldermaston and the floating jetty for Trident submarines at Coulport were designed and built by the private sector. All the staff involved were security cleared in the same way and no security distinction was made between design work done by private consultants and that done by civil servants.

Therefore, when PSA and TCS are privatised they will be in exactly the same position as the consultants with whom they will be competing for work. Their staff will be vetted in the same way as the staff of private consultants at present. It is the client, not the consultant or contractor, who settles the security regime which is to be followed in each individual contract. Their requirements will depend on the nature of the work.

The noble Lord, Lord Graham of Edmonton, raised the position with regard to the United States. I am very surprised that Members on the Bench opposite should decide that the Government's policy regarding the privatisation of the PSA should be decided on the basis of what a foreign power believes is right and proper. I must remind the noble Lord that security is the responsibility of the client —whether it is the MoD, the United States Air Force or the Ministry of Agriculture. It is the client who decides the level of security which is appropriate, not the PSA or any other contractor in the same: position carrying out a similar job.

7 p.m.

Lord Graham of Edmonton

Can the Minister confirm that what I said was correct? Have the US Government and the German Government expressed reservations? The Minister made a fair point when he said that their reservations may be groundless. However, it would be helpful to the Committee to know—regardless of what the Minister has said and of the Government's interpretation of the situation—whether those governments have, as my papers tell me, expressed reservations about the change.

The Minister has said that the client, who in the case of American bases is the American Government, has been happy to work through the Crown Suppliers and the Property Services Agency but may decide in future not to do so. He is saying that it is up to the American Government. Can the Minister help us?

Lord Hesketh

The first point to make absolutely clear is that the situation regarding responsibility for security which will pertain in the future is exactly the same as the situation which pertains today in terms of the decision-making process. Because of the changes which are implied, particularly in the case of the PSA—and I remind the noble Lord, Lord Graham, that we are speaking of no sooner than 1992 —discussions are taking place now between the United States Air Force and the MoD. In the case of Germany there is a government-to-government agreement. Because there is to be a change in the future and the PSA will no longer be a government agency, discussions are also taking place with the German Government.

Lord Graham of Edmonton

The Minister has neatly sidestepped my question as to whether reservations have been raised. The fact that discussions are taking place is one thing. However, the Minister has told us that security will be the subject of negotiations which are now taking place. The Minister knows that civil servants are bound by commitments, by the Official Secrets Act and in many other ways which could very well be sidestepped or watered down if the people in charge were not bound in that way. There will be thousands of civil servants, members of the various trade unions concerned, who hold in their heads, as well as in their files, priceless national secrets which they guard jealously and which are the property of the Government. Those individuals have access to, and are privy to, a great deal of information which is priceless in the context of security.

The American and German governments are entitled to be gravely concerned about the possibility that in future they would be dealing with people who were not bound by the same oaths and commitments as civil servants. However, the Minister has tried to be helpful. We shall look at what he has said. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Dean of Beswick moved Amendment No. 10: Page 2, line 12, at end insert: ("(8) A scheme under this section shall contain a provision that there should be a period of not less than three months for consultation and agreement on employment terms and conditions at transfer between the transferee and the employee's trade unions. This period shall commence from the date of announcement of the agreed purchaser.").

The noble Lord said: It has become the practice recently in privatisations to allow a period for consultation of only one month from the date of announcing the name of the agreed purchaser to the transfer of staff. Given the complex issues of securing from the contractor agreements regarding the transfer details and discussing and issuing individual terms of employment to the staff, we believe the period of one month to be unreasonable and unrealistic. It is a departure from the timetable used in the transfer of management in the Royal Naval Dockyards and the sale of the Royal Ordnance Factories.

We argue, therefore, that a minimum of three months should be provided from the date of the naming of the contractor and advising the recognised trade unions of that name. We can see no commercial detriment arising out of this proposal. I beg to move.

Lord Reay

Amendment No. 10 seeks to incorporate into the Bill a requirement for consultation on employment terms and conditions. In our view adequate provisions are already included in TUPE which apply automatically to the transfers of PSA and TCS without the need for a specific provision in the Bill.

The Committee will be aware that Regulation 10 of TUPE imposes very detailed duties on employers to inform and consult trade union representatives about proposals involving the transfer of an undertaking. It is, of course, important that staffs trade union representatives should be given information about any measures that are proposed to be taken which affect them. TUPE requires that the unions should be properly consulted. Regulation 10(6) places a duty on employers to consider representations made by the unions, to reply to them and to give reasons if any representations are rejected. There is, therefore, no question of the unions being by-passed or ignored.

The unions have been told that the Government will aim to complete those consultations within 28 days of announcing who the purchaser will be. Whether that will be possible will depend on the nature and complexity of the issues which are the subject of the consultations. The Government have, however, already given an undertaking to the unions concerned that sufficient time will be allowed for proper consultations as required by TUPE. We accept that in the event that may take longer than 28 days, but in our view it would not be realistic to extend the period of consultation to a minimum of three months, nor to require the unions' agreement to the proposal as envisaged in the amendment. It would not in our view be in the interests of the businesses, the staff or the purchasers. Giving the unions a specific power to delay or veto the privatisations would serve only to help competitors and to damage the businesses and the staffs future in the private sector.

In summary, the Government do not regard it as helpful or necessary to incorporate into the Bill detailed consultation provisions which are more demanding and protracted than those already required under TUPE. I hope, therefore, that the Committee will reject the amendment.

Lord Graham of Edmonton

The Minister relies very heavily on TUPE 1981. He would be wise not do so because we intend to challenge it on a number of points in later amendments.

It is very sad that the Government say, in response to a very reasonable request and in the light of modem industrial relations, that people who are to be transferred from good employment with good conditions and faced with being employed by somebody unknown should have only 28 days in order to form a judgment.

The Minister knows that most trade unions—and the trade unions involved here are no exception—have smartened up their act very well in recent years in forming their intelligence on the nature of businesses. Their research is considerable. They will want time to form a judgment as to what they will advise their members to do.

Let me give the Minister an illustration of what is happening. I have here a letter from the London group committee of the Amalgamated Industrial Employees Side Association of the Whitley Committee relating to an event which is germane to our discussion tonight. It relates to redundancies in the Teddington district and states: You will be aware that the contract for the DTI National Physical Laboratory at Teddington has been awarded to Serco Gifford. As a result 44 DEL posts have been declared redundant. The terms of redundancy were negotiated and joint agreement was reached at a local Teddington District Whitley extraordinary meeting on 21st February 1990. Subsequently, on 5th March 1990, management sought to alter the agreement without negotiation. The London Industrial Whitley Group Committee discussed the Teddington District case at an extraordinary meeting held on 8th March and 12th March 1990. At the 12th March meeting the Director, London Region DOE/PSA, Mr. Giles Hopkinson, agreed that 43 of the 44 postholders would be treated under the Regulations for Industrial Employees' Chapter 14.40. The other post to be resolved locally. On the 16th March 1990, Teddington staff were informed locally that the 12th March 1990 agreement at Group level with the London Region Director was not going to be adhered to and that no compensation was to be paid to any of the 44 persons involved in the redundancy situation". There is more to come. The Minister gets the flavour of why the employees are unhappy if they are to be increasingly faced with that kind of situation. All they are saying is, "Give us a little more time". The Minister says that if more than 28 days are required more time will be given, but the pressure is on. Why does the Minister not accede to the trade unions' request in that one little sphere? They are not arguing policy or principle; they are arguing about the ability to protect their members in such a situation as I have described to the Committee which could well become increasingly prevalent. Their claims are reasonable.

Lord Reay

I believe that I gave the arguments when I spoke earlier. The main point is that the Government will allow a reasonable length of time for the necessary consultations. We have given an assurance that we hope that that will be within a period of one month. If it is necessary to continue it beyond that, we shall be willing to do that, but we cannot agree to be tied down in advance to a particular timetable.

Lord Dean of Beswick

Before the Minister sits down, I must say that I am puzzled by one of his remarks. He said that, if the period were extended to three months, it may well put the purchaser at a commercial disadvantage compared with other people. I cannot recall whether the Minister used the word competitor, but I assume that that is what he meant. How could that happen when the terms regarding purchase and ownership have already been decided? I do not relate the two ideas, unless the Minister is saying that the new owner will lower working conditions for his staff so that he can compete with other people in the future. What did the Minister mean? I cannot relate the two ideas. They can have nothing to do with commercial viability and competition when the purchaser has already been decided.

Lord Reay

There may well be circumstances in which it would be possible to complete all the agreemsnts within the 28-day period. In such a situation, it cannot be to the advantage of the company to delay privatisation any longer.

Lord Rochester

Before the noble Lord, Lord Dean, determines what he will do about the amendment, perhaps I may say a few words. As I understand it, the amendment seeks not only consultation but agreement on employment terms and conditions. Is the noble Lord saying that before a scheme can be introduced under this section there should not only be consultation but that the terms and conditions of employment should be agreed by the trade unions?

Lord Dean of Beswick

The Ministers appear to be nodding their heads, so I think the noble Lord has got it quite right. However, having heard the Minister's reply to both myself and the noble Lord on the Liberal Benches, we should look at what he meant. It is mad to try to proceed on this basis. It does not augur well for future industrial relations for whoever becomes the owner. The whole matter may be in conflict with EC and ILO views. However, I do not propose to press the amendment tonight, although we shall certainly come back to it at a later stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Transferred staff]:

[Amendment No. 11 not moved.]

7.15 p.m.

Lord Graham of Edmonton moved Amendment No. 12: Page 2, line 20, leave out paragraph (a) and insert: ("(a) this shall be regarded for the purposes of any scheme under the Superannuation Act 1972 as compulsory early retirement or compulsory early severance;").

The noble Lord said: We are moving on to what we consider to be a crucial clause and crucial issues. Ministers in another place—I exonerate the Ministers here—have made puzzling statements concerning the manner in which those who are affected by possible redundancy will fare under the arrangements.

The Minister, Mr. Patten, and his colleague, Mr. Chope, have sought to reassure union members and employees that they will not be detrimentally affected, but they have used differing words. They have used such words as "comparable" and "mirror" which have caused confusion. The aim of these amendments and others, particularly Amendment No. 14, is to encourage the Minister to tell us a little more. For instance, when the noble Lord, Lord Trefgarne, dealt with the Dockyard Services Bill, with which I dealt on this side, he said in respect of the principal civil service pension scheme and transfer regulations: It is, however, the Government's intention to set up pension schemes, one at each dockyard, which transferred staff will join and which will, as far as possible, replicate the provisions of the PCSPS in terms of rules and benefits, including index linking".—[Official Report, 25/4/86; col. 1389].

We want the Minister to assuage employees' fears that they will not be detrimentally affected if they are transferred out of employment. The Explanatory and Financial Memorandum to the Bill states: Clause 2 provides that any member of staff of the Property Services Agency or The Crown Suppliers whose employment is automatically transferred to a new employer will not be entitled to redundancy compensation".

We heard the Minister plead in aid advice that he had received from the Law Officers in another place that in effect that was correct. We are however very uneasy.

In moving Amendment No. 12 I shall also speak to Amendment No. 13. I shall leave discussion of the major matters that I want to raise in regard to the EC directive until we reach Amendment No. 14. I shall be grateful if the Minister will deal with Amendments Nos. 12 and 13 separately.

The terms are fairly well known. The manner in which individuals are affected are very well understood. I should like to give the Committee an illustration of that effect. I have the permission of the individual concerned to quote his present arrangements and the likely situation that will occur. It concerns a Mr. Roger Stirland, chairman of the IPMS, PSA branch, TCS section. He says: I joined the service on 1st April 1974 … giving me 16 years service in total. I was bom on 24th December, 1950, therefore my age is now 39. I have been a diabetic on insulin for 35 years and was subject to a Civil Service medical before being offered an established post as a PTO IV F&E in Nottingham. For the past seven years I have been receiving treatment for retinopathy on both my eyes. This condition is as a result of having diabetes for a long period; the treatment is an attempt to prevent total blindness which without treatment would have occurred about four years ago. The treatment itself causes the weakening of the sight and there is the strong possibility that my sight will in the future become so impaired as to prevent me carrying on with my work; also a total loss of sight in one or both eyes could take place at any time. So what would I get from the PCSPS if this happened tomorrow? My service of 16 years would be enhanced by 6.66 years giving a total of 22.66 years. My last year's earnings should come to £15,500. That, divided by one-eightieth, would give a figure of £193.75. The immediate annual pension would then be £193.75 multiplied by 22.66 which would equal £4,390.38. This would attract full index linking to the cost of living index. The lump sum paid immediately would be £4,390.38 multiplied by 3 less the widow's pension contribution on the added years which would be £1,548.45, leaving a lump sum payable of £11,622. To calculate the total benefits payable and their worth to me over the next 20 years I have allowed an average annual cost of living pension increase of only 5 per cent. On the lump sum I have allowed for an average annual investment income of again only 5 per cent. This gives the following results. Annual pension payment increased by cost of living paid over 20 years gives a total of £145,172. Lump sum payment invested over the 20 years would, with compound interest, rise to £171,076. This shows that the minimum level of benefit I would expect from the PSCPS over the next 20 years until my normal civil service retirement age would be £316,248. By forcing myself out of the Civil Service against my will I will lose my entitlement to the ill health retirement benefits under the Principal Civil Service Pension Scheme. How will the Government guarantee that I will not be disadvantaged as a result of this privatisation?

I shall be grateful if the Minister can satisfy Mr. Stirland as well as this Chamber. I beg to move.

Lord Hesketh

I am not sure that I shall be able to provide an instantaneous response to the particular circumstances mentioned by the noble Lord. I know that in his generous way he will want a very full response by Report stage, which would be entirely reasonable.

The effect of both the amendments would be to delete the existing paragraph (a) of subsection (2) and to substitute a provision whereby staff would effectively be regarded as having been compulsorily retired and entitled to the benefits under the PCSPS that flow from that.

As I have already explained in relation to earlier amendments, the Transfer of Undertakings (Protection of Employment) Regulations 1981 will apply to the privatisation of the PSA and the TCS and will safeguard the staffs terms and conditions of employment. The transfer of these organisations out of the Civil Service will mean that the staff can no longer be members of the Principal Civil Service Pension Scheme. The termination of their membership would trigger automatically the staffs right to redundancy compensation, even though they will retain their jobs on the same conditions of service.

I am sure that the Committee will agree that the payment of redundancy compensation in these circumstances would be rather strange. It is precisely that anomaly which subsection (2) seeks to rectify. That is why paragraph (a) contains standard provisions which have appeared in all recent legislation concerned with the privatisation of organisations whose employees are members of the Principal Civil Service Pension Scheme. Amendments Nos. 12 and 13, if adopted, would simply introduce into the legislation the strange situation which I have described.

Amendment No. 13 would result in redundancy compensation for staff transferring with their jobs. It also proposes that any questions of contractual rights and obligations arising under Section 1 of the Superannuation Act 1972 should be referred to the ombudsman for pensions. Schedule 3 to the Social Security Bill 1990, which is currently before this Chamber, provides for the establishment of this post. As I understand it, on his appointment the ombudsman will have extensive powers to deal with matters of maladministration and to deal with matters of fact and law. If that Bill is enacted, and the ombudsman for pensions is appointed, it will be open to any individual to seek to have questions on contractual rights and obligations considered by him. That will be provided for automatically in the social security legislation and we believe that to reiterate it here in this Bill would be superfluous.

On the basis of those remarks, I hope that the noble Lord will see fit to withdraw the amendment.

Lord Graham of Edmonton

We shall need to read what the Minister said. Time and again it comes back to the fact that the Government have failed to satisfy us, or to satisfy the trade unions who represent many thousands of members, with the explanations given. I have quoted one individual's situation. I shall be mentioning one other case before the debate ends this evening. There are dozens of anxious people who can see that in practice they will be damaged. If they were to be transferred from one government department to another, that in itself would be traumatic but at least they would be kept within the family, as it were. The Government propose to transfer them out of the family.

I do not for one moment subscribe to the view that there has in any way been ultra-protection. I have read out figures. Those are the kinds of circumstances that prevail in many cases.

However, when someone such as Sir Gordon Manzie is able to have his release from employment facilitated and the terms under which he left the Government's employment enhanced and when his prospects, to which he has been privy and of which he has been aware for many months, have been the subject of the personal intervention of the Prime Minister—or so I understand from the press—then I believe that the Minister can understand very well why the ordinary individual whose salary might be £8,000, £9,000 or £10,000 should feel just a little aggrieved. Some individuals are able to look after themselves very well; in the case of others it is left to the power and the advocacy of their trade unions to try to get marginally better terms than the Government have introduced. I believe that the Minister's answers will be considered with great care by those outside the Chamber. I may return to the issue at a later stage.

Amendment, by leave, withdrawn.

[Amendment No. 13 not moved.]

7.30 p.m.

Lord Graham of Edmonton moved Amendment No. 14: Page 2, leave out lines 23 and 24 and insert: ("(b) Article 3(2) of the Business Transfer Directive (No. 77/187) shall have effect in relation to the agreed redundancy procedures applicable to a person employed in that service").

The noble Lord said: The Business Transfer Directive (No. 77/187) states at Article 3(2): Following the transfer within the meaning of Article 1(1), the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement". The trade unions in PSA and TCS have collective agreements relating to redundancies and to the procedures which shall apply in relation to redundancies.

Although I am not in difficulty, I believe that the Government are. Clause 2(2)(b) is objectionable, first because it violates EC Council Directive 77/187, thereby placing the UK in breach of its obligations under the Treaty of Rome; and, secondly, because it flouts two principles of responsible industrial practice which the directive seeks to enforce. The first is that the transfer of an undertaking shall not be used as an excuse for depriving employees of that undertaking of the rights and benefits they enjoyed before the transfer; and, secondly, that any necessary change following the transfer of an undertaking shall be negotiated —and I repeat the word "negotiated"—and not imposed unilaterally.

The stated purpose of the directive is to bring about, the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfer of undertakings or businesses or parts of businesses". I refer the Committee to the preamble to the directive. Article 1(2) states that, "a transfer" includes any legal transfer or merger.

Two of the cardinal provisions of the directive are that on the transfer of an undertaking an employee employed in that undertaking is automatically assigned on his existing terms and conditions into the employment of the transferee. That is Article 3(1). Secondly, following the transfer, the transferee employer must continue to observe the terms and conditions contained in any collective agreement applicable to the transferor until the collective agreement expires or is renegotiated. That is Article 3(2).

Member states can limit the period following the transfer within which collective agreements must be observed, but the period must be not less than one year following the transfer. That is Article 3(2). They cannot limit the period for which a transferred employee will continue to enjoy the terms and conditions of the contract of employment which has been automatically assigned upon the transfer. If the transferee wants to change the terms of an individual contract of employment, he must negotiate—I repeat, "negotiate" —the changes with the employee. The directive does not empower member states to create exceptions to these rules for particular transfers or kinds of transfer. If there is a transfer of an undertaking within the meaning of the directive, that is the end of the matter. Articles 3(1) and 3(2) must be observed.

Member states were obliged to bring into effect the laws, regulations and administrative provisions needed to comply with this directive within two years of its notification (see Article 8). In order to secure compliance on the part of the UK, the Transfer of Undertakings (Protection of Employment) Regulations 1981 S.I. 1794 were introduced. Because the directive stipulated that the principle must apply to every legal transfer, the regulations apply, Whether the transfer is effected by sale or by some other disposition or by operation of law". That is Regulation 3(2).

Clause 2(2) of the Bill plainly assumes that a transfer scheme under Section 1(1) will or may constitute a transfer of an undertaking. It goes on to provide in Clause 2(2)(b) that, none of the agreed redundancy procedures applicable", to an (employee prior to the transfer shall apply after the transfer. It therefore derogates from the regulations and more importantly, from the directive. That is because it means that where an agreed redundancy procedure has become part of an individual's contract of employment (expressly or by implication) he will cease to enjoy that benefit upon being transferred. That is a plain violation of Article 3(1). Secondly, even if the agreed redundancy procedures are not incorporated into individual contracts of employment and exist only as collective agreements, they cease to apply immediately after the transfer. They do not continue to be effective for the minimum period of one year prescribed by Article 3(2) of the directive.

One legal consequence would be that the UK would be in breach of its obligations under the Treaty of Rome and could be brought before the European Court of Justice by the EC Commission on account of treaty violation.

A second legal consequence would be to open a Pandora's Box of uncertainty. That is because an individual suing or being sued by the transferee employer in the British courts could seek to argue that the directive has "direct effect" under Community law, and that the British courts should therefore ignore Section 2(2)(b) as being in conflict with the individual's rights under European law. The circumstances in which a directive ay be relied upon in this way before national courts is a vexed question of Community law. But is s clear that the argument is in principle open where the individual is seeking to enforce the directive against the state.

Whether an undertaking transferred by the Property Services Agency or Crown Suppliers is "the state" for this purpose is itself uncertain. However, in the Foster v. British Gas case currently before the European Court of Justice, the European Commission has submitted that "privatised" bodies can or do constitute part of "the state". Suffice to say, that if Clause 2(2)(b) remains, it can only create uncertainty as to the legal position of individuals affected.

The violation of the directive represented by Clause 2(2)(b) would not be merely technical in character. It offends the central purpose of the directive, which is to ensure that the transfer of the undertaking should not be treated as good reason for detracting from the rights and benefits of employees who have served the undertaking; and, secondly, that a transferee employer who finds the terms he has inherited to be inconvenient should look to negotiation with the staff and not impose new terms unilaterally.

The justification for Clause 2(2)(b) is hard to seek. Clearly the view cannot have been taken that a scheme transfer would necessarily be outside the definition of a "transfer of an undertaking". Clause 2(2) clearly assumes the contrary. Similarly Clause 2(2)(b) cannot be intended simply to ensure than an employee will not enjoy redundancy procedures at the point of transfer to the privatised body. The effect of the regulations is that he does not become redundant at the transfer, so that the redundancy procedure would not be triggered at this point in any event.

The only explanation which remains is that the existing redundancy procedures were thought to be inconvenient for prospective transferees. But to give effect to any such concerns is to fly in the face of the whole objective of the directive. The new employers should negotiate change. They should not be in a position to impose it.

I apologise to the Committee for taking the care that I believe this Chamber will recognise that I have taken in order to be well prepared to deal with a central point of concern to the employees who are affected.

I make the point to the Minister in all seriousness. Although earlier the noble Lord, Lord Reay, said that the Government had taken advice, I should be happy if in the light of the legal opinion that I have given to the Committee the Minister will look at the matter again. I shall not press the amendment to a Division but it would be helpful to those outside the Committee if the Minister could indicate that he has seized the gravamen of my argument and will look at the matter again. I beg to move.

Lord Hesketh

It may be helpful if I begin by explaining the background to Clause 2(2). It was designed to ensure that the transfer of the PSA and the TCS to the private sector did not result in the staff being regarded as redundant.

The Committee will know that TUPE ensures that the staff enjoy continuity of employment. But because of the way in which the Civil Service pension scheme is drafted, when civil servants' membership of the scheme is terminated by their transfer to the new companies the pension scheme would treat them as having retired on grounds of redundancy. That would be patently absurd and would give civil servants an unfair advantage over other employees. It would result in them retaining their employment with the transferee on their existing terms and conditions, as a result of TUPE, while being compensated by the transferor as though they had been made redundant.

Clause 2(2), therefore, seeks to deal with this anomaly. Paragraph (a) prevents the payment of redundancy compensation to staff who transfer to the purchasers' employment by providing that they are not to be treated as having retired on redundancy. Paragraph (b) relates to the agreements that departments have with trade unions representing civil servants about the way in which any redundancies among the staff should be dealt with. As I have explained, since the proposed transfers of the staff are not redundancies, it is important to avoid any confusion about whether the departmental redundancy agreements should be activated.

These agreements have two main purposes. First, when a department finds that it has surplus staff the agreements set out a range of measures designed to avoid the necessity of making any staff redundant. These include measures that the department with the surplus can take, such as the discharge of casual staff and calling for volunteers for early retirement. But they also include measures affecting other government departments such as limiting or suspending recruitment throughout the Civil Service and transferring surplus staff to other departments with vacancies. The second purpose is to set out arrangements for the selection of individuals for discharge in the event that a department declares posts to be redundant. However, as I have said, the staff of the TCS and PSA are not in any event being made redundant, so these procedures should not apply to them.

Therefore it would not be acceptable to the Government for Clause 2(2)(b) to be deleted. If the Committee passes this amendment some confusion could be caused. It might be thought that the redundancy selection procedures could apply to deciding which staff transferred. As I have explained, they should not do so because the staff are not being made redundant. Clearly uncertainty about the transfer would not be in the interests of the staff or of the organisations themselves.

Finally, Clause 2(2) is well precedented. It has appeared in virtually the same form in all recent legislation. The noble Lord, Lord Graham, raised the issue of the effect that Clause 2(2)(b) might have in reletion to the procedures that would be applied if there was a need to make staff redundant following their transfer to the new employment. There are substantial parts of the Civil Service agreements which could not survive a transfer to the private sector. I am thinking here of the parts of the agreements which have service-wide implications. Clearly a private sector organisation could no longer have links with the Civil Service in dealing with any surplus staff. But I accept that there are parts of these agreements which would be capable of transfer. For the reasons I have explained, the amendment would not be acceptable to the Government. But I have taken note of the noble Lord's point and I undertake to consider it before the Bill completes its passage through this Chamber.

7.45 p.m.

Lord Graham of Edmonton

I am grateful to the Minister for his concluding remarks. We are puzzled by the fact that those remarks and the Bill's provisions cease to have effect in respect of the new employer on day 2. On day 1 the employment is transferred, no redundancy is paid and the employees are in the hands of employers, who may not be good. The Minister will not be surprised to be told that not only are there bad employers but there are those who have fallen on hard times.

At present men and women employed in the public sector enjoy good terms and conditions negotiated for them by their trade unions. These conditions were given to them sometimes grudgingly, by governments of the day. If Clause 2(2)(b) remains unaltered the conditions of employment will be to their detriment. I have taken care to obtain a legal opinion which has some force, as those outside the House will understand. Whether it prevails is another matter. If it does not prevail the consequences could be serious for the Government and the individuals concerned.

1 referred to the dockyards Bill. During our debates on the way in which TUPE '81 affected the dockyards the noble and learned Lord, Lord Denning, said: The Government have amended the provision substantially, but I still think that it is very difficult to follow. That is why I suggest that the provision should be left out and instead there should be inserted the subsection which I suggested originally at the Committee stage. It reads: 'The provision of European Community Law contained in Council Directive 77/187 shall apply to the transfer of the dockyard undertaking to another company; and shall take precedence over any regulation or enactment which fails to implement the Directive correctly'".—[Official Report, 27/6/86; col. 545.] The amendment was lost and the Government's view prevailed. Hence, we are now in the present situation. I believe that they are using a false analogy based upon a weak premise. Although the Transfer of Undertakings (Protection of Employment) Regulations 1981 are good they do not of themselves give any authority by which the Secretary of State can transfer the qualified service employees without their consent from the service of the Crown to the service of any other employer. That proposition was contained in the amendment moved by the noble and learned Lord, Lord Denning, in 1986, and it has force in respect of the present debate.

My purpose has been served. I have made my case and the Minister has given the Committee a fair answer. He said that before the Bill reaches its concluding stages he will advise me what, if anything, he is able to do or say which will allow me to take appropriate action in the concluding stages. I am grateful to him and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Graham of Edmonton moved Amendment No. 15: Page 2, line 24, at end insert: ("( ) No person shall be transferred by this section other than by mutual consent.").

The noble Lord said: The amendment is simple to understand and it is important. It is clear that there will be redundancies from within the Civil Service. There will also be terms and conditions of transfer, but some employees will not wish to move. In such circumstances one may talk about voluntary and compulsory redundancy.

We are saying that no person should be transferred other than by mutual consent. That means that terms will be reached under which the transfer shall take place. That is the raison d'être of industrial relations. Therefore, this is not a threat, a promise or a question of being mulish or digging in one's toes. If the Government are serious about their industrial relations nexus, then they should be prepared to accept this amendment. I beg to move.

Lord Hesketh

I do not deny that the staff of PSA and TCS face a period of considerable change. But it has been made very clear both to this Chamber and another place that so far as concerns their terms and conditions of service, the staff will not be disadvantaged by the privatisations.

Even so, I accept that some staff may not wish to move into the private sector and would rather stay within the Civil Service. The Government have already taken some measures, in relation to TCS, to ensure that the staff have as much choice as possible, consistent with the objective of a successful privatisation. But I am sure that Members of the Committee will agree that if the privatisation is to succeed, TCS must be staffed properly. In particular, it cannot be deprived of all its expert staff.

During 1989, administrative and ancillary employees in TCS were asked whether they wished to volunteer for secondment with the new owner. The staff in those grades are generalists and represent about half of the 1,100 then employed by TCS. Almost 70 per cent. of those eligible volunteered for secondment, and will remain civil servants during their secondment period. They will also be free to accept permanent offers of employment by the new owner. Those not offered permanent posts, and those who do not wish to accept them, will be offered alternative civil service posts. Of those staff offered secondment, those who opted not to be seconded are being moved to other civil service posts before the sale takes place.

TCS has decided to make a significant reduction in the number of its furnishing professional staff As a result, nearly 100 staff are being given the opportunity to retire early on favourable terms.

It was not possible to offer secondment to the professional and industrial staff in TCS because there was no certainty of finding alternative Civil Service posts for all those who might have wanted I them. Instead, these staff have been given an undertaking that they will be given an opportunity to state their preferences about whether they wish to remain in the Civil Service or to move into the private sector. This is likely to be when the terms on offer from the purchaser are known. Management have already given a commitment to use their best endeavours to meet such staff preferences, bearing in mind the needs of the TCS business and the availability of other posts.

So far I have confined myself to TCS, where the sale is more advanced. It is impossible to be as specific about PSA staff at this stage, not simply because the sale is still some way off, but also because there are far greater numbers involved: there are 22,000 PSA employees in the UK. However, I can assure the Committee that the Government are conscious of the need to take account of the wishes of PSA staff, so far as it is possible without jeopardising the viability of the organisation in the private sector.

The Government intend to establish the preferences of PSA's staff and to fill posts there with staff who wish to stay with it as it moves into the private sector. A booklet has recently been issued to all PSA's non-industrial staff asking them to record their preferences. It is clear that changing workloads within PSA as a consequence of untying, and the drive for greater efficiency will mean that alternative postings will need to be sought for significant numbers of PSA staff in any event. As the opportunity arises, we intend to post out as many as possible of those who wish to move to alternative Civil Service posts.

However, it would be wrong to leave the Committee with the impression that there can be any guarantee that the preferences of all such staff can be met either within the PSA or elsewhere within the Civil Service, or that natural wastage will be sufficient to cope with any surplus.

The amendment involves the concept of mutual consent. I take that to mean the consent of the new owners of the PSA and the TCS as well as the individual members of staff It may be that Members of the Committee opposite consider that there is less likelihood of members of staff being made redundant after the sales if the new owners have reached the decision in each case as to whether or not they wish to employ them. I cannot accept those arguments on the principle nor, even more importantly, as a practicality. The issue of principle is that staff have the benefit and safeguards provided by TUPE. It seems to me wholly wrong that the purchasers of the PSA and the TCS should be able to override the provisions of TUPE by being allowed to pick and choose who should transfer.

Members of the Committee will know that the Government made a small amendment to the Bill on Report in another place to remove any doubt that there may have been that the new owners could pick and choose their staff. That change was pressed on the Government by the Opposition, but this amendment is wholly inconsistent with that. As a matter of practicality, I do not see how an employer can be expected to reach decisions about 22,000 individual members of staff within the PSA. For those reasons, we resist the amendment.

Lord Graham of Edmonton

The new employer would not have to deal with 22,000. The Minister has already gone through a range of ways in which the numbers likely to feel aggrieved or disadvantaged could be substantially reduced. The trade union negotiators are realistic men and women. They will not unnecessarily stand out for a benefit or an advantage for a handful of their members who it is felt are acting unreasonably. However, the Minister should not equate someone who does not wish to be transferred or made redundant with being unreasonable. We are not talking about the Minister's livelihood or mine or that of any other Member of the Committee. We are talking about people with responsibilities who have mortgage payments to meet.

I should like to share the confidence of the Minister that a new employer will be as reasonable and sensible as he indicates to the Committee. I fear that the new employer, whether or not he has a good bargain, will be proved to be less willing to take into account the range of matters which are currently part of the conditions under which civil servants work. However, I do not believe that we shall make any progress this evening. I shall read what the Minister has said and I shall take advice upon it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Graham of Edmonton moved Amendment No. 16: Page 2, line 24, at end insert: ("( ) The benefits for early retirement of redundancy, inefficiency and limited efficiency grounds shall be underwitten by Treasury funds.").

The noble Lord said: In moving this amendment, I shall speak also to Amendments Nos. 17, 18, 21, 23, and 30. This group of amendments invites the Government to be generous and helpful. Sadly, there will be people who cannot be taken on and who will be passed over for whom retirement will need to be sought. As an act of good faith we are inviting the Government to say that the public purse, which has hitherto been well served by those people will underwrite any payments.

I am under no illusion—as I am sure is the case with the Minister—that we are talking about potentially large sums of money. However, in practice those figures will not be too great. The other amendments in this group relate to the same kind of nexus. For the avoidance of doubt, these amendments deal with this and any subsequent transfer because the Minister will be aware that once the employee has left the protection of public employment, then all sorts of things can happen to him.

This is the time when people like myself, who seek to represent the views of those who sought my assistance, face the Government with the realities of the situation. It is also the time when those outside the Committee expect to receive confirmation that their case has been made. I do not put too fine an edge on it. We saw what happened in previous situations. The Royal small arms factory was given all kinds of assurances by the Member of Parliament and others. There were assurances by many people. Unfortunately, once the ordnance factories were sold to British Aerospace there was a change in the plans. Redundancies and closures took place; it was a very unhappy situation. I say that having been the local Member of Parliament at the time.

It is no good wringing our hands after the event. The Minister must reassure people who at the moment are fearful. The Minister has said more than once tonight that he hopes to reach agreement with the trade unions. He used a phrase at which I smiled. It led the Committee to believe that negotiations with the trade unions were without blemish. I can say to the Minister that the trade union negotiators are a very unhappy group of people at the present time. He may give them some reassurance when he responds to the amendment. I beg to move.

8 p.m.

Lord Hesketh

These six amendments all relate to the redundancy terms for the staff transferred to the new PSA and TCS companies. They seek to do two things: first, to provide the transferred staff with the same benefits they have at present; and secondly, to provide for the protection of those benefits by means of a Treasury guarantee, a special fund to pay benefits or by dedicating assets to underwrite the payments.

Amendments Nos. 18 and 21 appear to duplicate one another, as to a certain extent do Amendments Nos. 16 and 21. The latter amendment refers to pensions as well as redundancy. There is a separate group of amendments on pensions and, with the Committee's leave, I will deal with that part of Amendment No. 23 when we consider the relevant amendments.

I should like to deal first with redundancy terms. The Government have already said categorically, and I am happy to repeat the assurance to the Committee, that arrangements will be made to ensure that, after privatisation, redundancy terms will be identical, as far as possible, to those the staff have at present. There is only one respect in which the redundancy terms may not be identical to Civil Service terms. Some staff, on being made redundant by the Civil Service, would be entitled to the immediate payment of their pension lump sum. Whether staff made redundant after privatisation receive any immediate pension lump sum will depend on a complex of circumstances. The arrangements we are proposing, however, will ensure that the staff will, if necessary, receive a payment which compensates them for deferment of the lump sum that they would have received had they remained civil servants.

Amendments Nos. 17 and 21 use the words "comparable" and "equivalent" respectively in relation to redundancy terms. As I have indicated, we shall be arranging for the staff to be given redundancy provisions which are virtually identical to those they have at present. That seems more beneficial than what is being proposed in these amendments. I do not believe, however, that it is necessary or indeed desirable to include provisions in the Bill to this effect. There are two reasons for this. First, the approach that the Government are adopting on redundancy provisions is in compliance with their obligations to the European Community, and it is not necessary to repeat those obligations in the Bill. Secondly, the redundancy terms are complex, and providing fully for them in the Bill would considerably and unnecessarily lengthen and complicate the Bill. No such measures have been included in previous privatisations, all of which have been carried through with proper protection of staff interests. I am quite satisfied that the staffs redundancy rights will be fully protected in these privatisations also by the measures the Government are proposing.

I should like to turn now to the question of the security of any redundancy payments made after the privatisations. Members of the Committee proposing Amendments Nos. 16 and 23 argued that there should be some form of guarantee that, if the new owner defaults on his obligations, the payments will be made from public funds. The trade unions representing the staff of PSA and TCS have already made representations to the Government about that.

Those representations are being considered, but I should perhaps say to the Committee that I am doubtful about the case for guarantees. There has, in effect, only been one occasion when such a guarantee has been given. That was the Devonport dockyard; it was considered right to give a guarantee in that case because of government decisions to reduce the workload there which would lead directly to redundancies. Guarantees were not given in the case of the other dockyards, or for any other privatisation. Generally, privatisation policy entails a clean break between the privatised entity and the Government so as to ensure that the new company competes on equal terms in the private sector.

In running the sale competition for TCS —and this will also apply when we come to sell PSA —we have had regard to the importance of selling to a purchaser who demonstrates a commitment and ability to consolidate and develop the business. We shall also seek to ensure that the purchaser has the necessary; resources to run the business successfully. This will mean that if, at some future date, it should prove necessary for some of the staff to be made redundant, the company should be able to do so on the basis of the terms I have explained without threatening the viability of the business.

I quite accept that a purchaser may wish to propose changes to the redundancy terms, or indeed to other terms and conditions of employment. That will be a matter for negotiation between the employer and the staff, or their trade union representatives. I can reassure the Committee that an employer cannot force his staff to accept inferior terms and conditions of employment.

In summary I ask the House to reject all six of these amendments. As I have set out to explain, the Government will ensure that the staff have redundancy terms which are identical, as far as possible, to those they have at present. The question of guarantees of those terms is under consideration, but such a guarantee is unprecedented in a privatisation of this kind and it is unlikely that the Government will accede to the unions' requests. We believe that the interests of the staff, in relation to redundancy, will be properly safeguarded by the measures I have described.

I hope that the noble Lord, Lord Graham of Edmonton, will consider my remarks and withdraw the amendment.

Lord Graham of Edmonton

I am grateful to the Minister for the care he has taken in preparing himself but having listened very carefully to what he said, it is very confusing. The words that I used to describe what the trade unions want: not "broadly comparable", but "comparable"; not identical "as far as possible", but "identical".

I understand that the Minister is saying that there may be some difficulty in carrying out the amendments; the difficulty is finding the money. However, the Minister should understand that Mr. Brown, who is employed in a responsible post and is paid a fair wage—shall we say £13,000 or £14,000—is very concerned when this hoo-hah is going on with regard to the change. He recognises that there will be a different climate because he will not be in the public sector but in the private sector. He is asking whether he can be assured that the benefits for which he has been paying will be transferred with him. As the Minister knows, any wage structure which an employee enjoys is cushioned and conditioned by the fact that other things such as redundancy, enhanced redundancy schemes, sick pay or early retirement are all part of the wages and conditions of the employee. He wants them carried forward.

I accept that negotiations are going on. Earlier in the debate I referred to Sir Gordon Manzie, the former chief executive of the Property Services Agency. He has not had any problems concerning what would happen to him when he reached the end of his employment. His employment was facilitated into early retirement with very generous terms. That is the man to whom the employees of the PSA looked for the past number of years to protect their interests. He did not need any advice on how to protect his own interest. He received a £66,000 per year salary—not £10,000 or £12,000—and he retired with a £33,000 per year index-linked pension and a £100,000 lump sum. Good luck to him! Those were no doubt part of his conditions of pay. The employees who may be forced willy-nilly to go elsewhere do not want a job which might pay £250,000 per year for a two-day week, which is what the newspaper tells me Sir Gordon will receive. They only want that which they already enjoy.

I am careful with my words. I do not want to denigrate the conditions that the Government have seen fit to provide for their employees until now: they are neither generous nor parsimonious; they are fair, they are negotiated. In the same way as Sir Gordon Manzie has looked after his own interests, we are asking that someone should look after the interests of employees who served under him.

This is one of those situations where the Minister has said as much as he can. I am not privy to any detail of the discussions. I say that absolutely honestly. I shall be guided by the employees' representatives outside this Chamber. However, I have to tell the Minister that there is no point in using such phrases as "unique", "one-off, "innovation" or "creating new conditions". It is as a result of trade unionists' experience with previous privatisations that they take their current attitudes. They have already been over similar ground. It is because they are unhappy with the way other privatisations have been handled that they want to introduce these ameliorations. However, I am grateful to the Minister, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 17 and 18 not moved.]

Lord Graham of Edmonton moved Amendment No. 19: Page 2, line 24, at end insert: ("( ) No person shall be transferred under subsection (2) above unless his interests in respect of rights conferring immediate or prospective entitlement to invalidity benefits and old age benefits, including survivors benefits are protected. This protection shall include —

1. (a) the provision of benefits comparable to the benefits provided by the Principal Civil Service Pension Scheme; and
2. (b) the index linking of benefits identical to the Principal Civil Service Pension Scheme; and
3. (c) either contribution rates identical to the Principal Civil Service Pension Scheme or full compensation in lieu thereof").

The noble Lord said: I am sure that the Minister has a brief headed "resist". I should be grateful if he could tell us what it says in response to this amendment. I beg to move.

8.15 p.m.

Lord Hesketh

My Lords, I never like to think that the Government give the longest reply at the Dispatch Box but I have done a considerable amount of research into this subject which I feel may be of assistance and I hope not too boring for the noble Lord.

Lord Graham of Edmonton

I thank the Minister.

Lord Hesketh

I should like to begin by explaining the Government's proposals for pensions in relation to these two privatisations. Both the PSA and the TCS are commercial undertakings to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 will apply. These are known as TUPE. TUPE will ensure that when the undertakings are sold, the staff's contracts of employment are not terminated by the transfer of the undertakings. The regulations will further ensure that the staffs terms and conditions of employment remain unchanged. The single exception is that occupational pension schemes are excluded from the transfer. In this respect TUPE is fully consistent with the European Community's Acquired Rights Directive. Nevertheless, employees are protected by United Kingdom employment law and might be able to claim that they have been unfairly dismissed if after the transfer the pension provisions offered by the new owner are not broadly comparable with their existing pension provisions.

In the sale of the TCS we have said to prospective purchasers that we shall expect them to offer pension terms broadly comparable to the PCSPS. There may of course be a different mix of benefits; for example, a higher pension and a lower lump sum. The proposals submitted are being analysed by the Government Actuary to determine whether they are broadly comparable with the PCSPS. Pension proposals will be an important factor in the Government's assessment of the bids for the business. In the case of the TCS we cannot compel prospective purchasers to offer a particular scheme. They are likely to want the TCS employees to join the existing company scheme.

If the purchaser's scheme is assessed as not being broadly comparable, ways will be found to make up any disadvantage. The Government would seek in negotiations with the purchaser to improve the pension terms or to improve other terms and conditions of employment. As a last resort, if these routes proved impossible we would compensate the staff for any pensions disadvantage. In that way we would ensure both that the staff were fully protected and that the Government complied with their obligations.

The sale of the PSA may proceed in the same way as for the TCS, in which case the arrangements for dealing with pensions will also be similar. It is probable, however, that the PSA will be incorporated and would then trade as a wholly-owned government company. If so, the staff of the PSA will cease to be members of the PCSPS on the date they are transferred to the government-owned company. A new pension scheme would need to be available for the staff to join from that point and it would be the responsibility of the Government to set it up. In doing so the Government would consult appropriate advisers, including the Government Actuary. The scheme may not be identical to the PCSPS—for example, it would probably be a contributory scheme—but the aim would be to create a scheme with a package of benefits broadly comparable with those of the PCSPS. When the company is later sold, the purchaser would acquire the shares of the company. He would simply inherit the then existing pension arrangements and would be bound by them.

I now turn to the four amendments relating to pensions. Amendments Nos. 22 and 19 both refer to the provision of comparable pensions. Amendment No. 24 refers to equivalent pensions. I have already explained the legal background to the Committee and also set out the Government's proposals. In both privatisations we shall be seeking to achieve broad comparability. Assurances have been given in another place, and I am happy to repeat them to the Committee, that the Government will ensure in relation to their overall terms and conditions of service that the staff do not suffer any disadvantage as a result of the sales.

These amendments also deal with one or two other matters and I now refer to them. Amendment No. 22 refers to the initial transfer and to any subsequent transfer. The protection which United Kingdom employment law provides will apply in any case and I see no need for a special provision of the kind proposed in the amendment.

Amendment No. 24 would make it necessary for changes to a pension scheme to be subject to negotiation and agreement with the trade unions. The Government will be consulting the trade unions about the proposed pension arrangements. Once the new pension arrangements are put in place it will be for individual members of staff to decide whether they wish to join that scheme and also whether they wish to transfer any benefits they have accrued in the PCSPS to it. Once that scheme is running the employer may only make changes to it with the agreement of the members. Again, therefore, this is not a matter which requires specific legislative provisions.

Amendment No. 19 refers to index-linking and to contribution rates. I have already explained the Government's approach to comparability, but it would simply not be practical to approach the task in the way envisaged by this amendment. The amendment would require index linking and contribution rates to be identical to those already in the PCSPS. These are important matters but in the Government's view they need to be assessed as part of the overall pension scheme.

Amendment No. 25 would introduce a new clause which would allow staff who have contracted to buy added years from the PCSPS to continue to do so. As the Committee will be aware, the staff of the PSA and the TCS will cease to be members of the PCSPS when they are transferred to the new companies. It would not in the Government's view be reasonable, or indeed possible, to make an exception in relation to the purchase of added years. In common with their ordinary benefits, staff will have the choice either of freezing any added years or transferring their benefits to the purchaser's pension scheme. Therefore, the value of any added years purchased up to the date of the sale will not be lost. It is also expected that the purchaser's scheme will have its own arrangements for enhancement which members can take advantage of if they wish.

Finally, I refer to Amendment No. 23 which is principally about guaranteeing redundancy compensation, but I believe we have already debated this point.

On the basis of those remarks, and I apologise if they were too lengthy for the Committee, I ask the noble Lord, Lord Graham, to consider withdrawing his amendment.

Lord Dean of Beswick

I should like to make one or two observations on what the Minister has said. I think he agrees that his comments were somewhat long and involved and they need to be looked at in detail by noble Lords and by the people affected before reaching any conclusions on the actual meaning.

However, a thread running through the Minister's comments appears to cross the Government's avowed intention. A major feature of the Government's platform, and one has to say that they have had much success with it, is the so-called giving the unions back to the members and setting the unions free. From what the Minister said, while many of the points he made may well be acceptable and be thought to be reasonable, it comes across clearly to me as a former active shop floor trade unionist that there are very few negotiations at present taking place with the trade unionists and their leaders who are involved in this dispute. I think that it is almost the Government saying what the negotiations will be.

This is a strong argument. I have an idea of the course my noble friend will take with these amendments. Probably he will do the same as he has done with previous amendments earlier in the evening. If these negotiations are to be accepted by the members of trade unions, to have any real chance of success and to get the show properly on the road it should in my opinion be the trade union representatives, not the Government who should undertake this. There is far too much involvement of the Government in this matter.

Lord Graham of Edmonton

Without wishing to give any offence, I fear that the Minister has been advised that because consultations have taken place or meetings have been arranged, ipso facto, agreement has been reached. The Minister must understand that the trade unions tell us that they are very unhappy about the manner in which the Government are handling the provision of the Bill which transfers people out of government employment into public employment.

The adviser to the Minister can probably spot each amendment and say which trade union has proposed it. I am prepared to acknowledge that we would not have spent any of the time which we have spent tonight on the political aspects of the Bill —and that has been a minor point on industrial relations—without the advice of the trade unions. They have not proposed these amendments because they wish to write amendments and briefs, print articles and hold public rallies and meetings. They are very unhappy. All that we can do is to inform the Minister that against that background he will be telling the Committee not that all is well but that he is doing as well as he can.

Colleagues of the Minister have used the words—though not tonight—that the terms will mirror those enjoyed at present. All the employees want is the same. They do not want euphemisms, adjectives that can be interpreted or misinterpreted. They do not want something that is broadly like something else or virtually the same. They want the same.

I can understand the Minister telling us that there are problems. Frankly, the biggest problem is how the Government weight the debt or potential debt of the new employer in such a way that it will be less attractive and not be sold. The Minister told us that there would be a comparable package. I speak as someone with a little experience but nothing like that of those from the trade unions who are advising me. Some elements of the package will obviously change: the Minister talked in terms of some being less and some more. Can he tell us that, although there will be changes that will suit the Minister and the prospective purchaser, at the end of the day the package will have to be broadly acceptable to the trade unions?

If the Minister is telling us that there will be changes in a number of facets which are mentioned in the amendment—invalidity benefits, old-age benefits, survivors' benefits, index linking, contribution rates, the pension scheme, redundancies—I can understand that. Can he tell us that he will not be satisfied unless the prospective new employer comes up with a package which is acceptable not just to him but also to the trade unions? I fear from previous experience that the new employer will seek to obtain the minimum terms, which may be the minimum terms acceptable to the Minister but not to the trade unions.

The Minister used another phrase, "suffer no disadvantage". It was the intention of the Government that the package should be such that employees would suffer no disadvantage. Do we understand from that that, if the trade unions demonstrate that people are suffering disadvantage, the Minister will not approve the terms in the package?

Lord Hesketh

The first and most important point is that I can repeat the last of the several undertakings that I gave in my first reply. As a last resort, if these routes proved impossible, we should compensate the staff for any pensions disadvantage. That states the Government's position very clearly.

However, it is perfectly possible that at the end of the day the trade unions may say, "That is not good enough because the real desire we have is not to go out at all". In those circumstances I cannot provide the answer that the noble Lord, Lord Graham of Edmonton, wishes.

Lord Graham of Edmonton

I understand that. Of course governments have the absolute right in pursuit of their policy and politics to say, "This is what we intend to do". There is no argument, I am not arguing about that. We are talking in terms of a realistic trade union negotiator recognising that the Government have rights as well as anybody else. He will look objectively at the package which he has to sell to his members. I do not speak in a pejorative sense: he has to avoid difficulties at a certain stage.

It will not be in the interests of the employees to create difficulties which are unjust or unworthy. I can envisage a circumstance in which the trade union negotiator is told by his members that the terms of sale which he is trying to sell to them do not add up to a reasonable package. However, I believe that the Minister has said all that he can tonight. I beg leave to withdraw the amendment. Amendment, by leave, withdrawn.

Lord Graham of Edmonton moved Amendment No. 20: Page 2, line 24, at end insert: ("( ) No member of the executive, administrative and support staff shall transfer unless he or she has previously consented to do so in writing.").

The noble Lord said: This amendment stands in the names of my noble friend Lord Dean and myself. It has a familiar ring to the argument that we went through about consent. It is worded slightly differently: No member of the executive, administrative and support staff shall transfer unless he or she has previously consented to do so in writing".

There are very good reasons why this grade or these grades are singled out. The short answer is that there is an anticipated diminishing need for the skills of executive, administrative and support staff over the next two to three years. Such staff who have no building skills are career civil servants. They will be required to effect the PSA's transition from vote accounted government department to commercially accounted building firm. Once that work is complete, they face redundancy.

Both the National Union of Civil and Public Servants and the First Division Association estimate that between 70 and 80 per cent. of the 5,000 staff in the executive, administrative and support groups have no long-term future with PSA plc. Privately, PSA's senior managers concede that such estimates are realistic. The transition from government department to plc to which I refer is not merely a matter of introducing and proving new computer systems but of devising, deciding on, introducing and testing new procedures, codes and guides across the PSA, together with staff retraining and communications.

At the same time, the new business will be feeling its way in a highly competitive market. It does not expect to retain all its existing workload in the short or medium term or expect to balance this loss by winning new work. In consequence, after the transitional work is complete and the transitional period is over, staff face redundancy. I do not believe that the Committee would wish to pass a Bill which condemns loyal and hardworking civil servants to this fate. I believe that in those circumstances it would be immoral.

When the staff became aware of what the Government had in store for them, they quite naturally began to protest. As a response to one of the protests, Christopher Chope, the Parliamentary Under-Secretary, caused a general letter to be sent to employees who had raised those concerns. It read: If there are individual staff who are particularly concerned to remain in the public sector then there may be opportunities of posts in other departments before privatisation, which is still at least two to three years away".

I am told that the Minister has gone back on his word. Can the noble Lord help us tonight by responding to the words of Mr Chope? Both Mr. Chope and the PSA's top managers are pressing the Cabinet for permission to implement quickly one of the provisions of the Bill. They wish to set the PSA up as a government-owned company—a so-called Go-co —as early as possible, perhaps as early as 1st April next year. On that day therefore all PSA staff will cease to be civil servants and will become company employees.

It will not be possible over the next 12 to 18 months to relocate all those who wish to leave the PSA for other Civil Service work and effect the transition and continue to manage business. The transition will take some two to three years to complete. Executive staff will be forced out of the Civil Service once the Go-co is formed. Since they will be required only in the short term they face redundancy thereafter. It is not only immoral but will be very costly indeed. Making staff redundant during the period of the Go-co will be a burden on the taxpayer running into many millions of pounds. It is crazy to waste taxpayers' money in this way when the overwhelming majority of the staff could be found jobs in other government departments. Many of them have skills which are in short supply in other departments—skills in accountancy, information technology, contracts, training, personnel and so on.

The new owners of the PSA who are likely to be its senior managers are not concerned at the redundancy costs involved. That is because the Bill before us allows the Government to write off all Go-co debts and liabilities before the sale of shares at the end of 1992. Therefore the new owners will not inherit the redundancy debt but the taxpayer will. It is unnecessary because there is a means by which such staff could continue their Civil Service careers and willingly help the PSA effect a successful transition. That way is through secondment.

Secondment has been proposed by the National Union of Civil and Public Servants. It is an eminently sensible solution to a very real problem. It provides staff with a risk-free opportunity to work for PSA Go-co, and perhaps PSA plc, with a return ticket to the Civil Service when they are no longer required. It provides the PSA, its senior managers and Ministers with willing, well motivated staff using their skills to help the PSA prepare for and begin life in the commercial world. It would save perhaps millions of pounds of taxpayers' money because when staff were no longer needed they would in the main return to Civil Service jobs and not receive redundancy payments.

I have to tell the Committee that when executive, administrative and support staff in the Crown Suppliers were offered secondment about 70 per cent. decided to volunteer. For that reason the Government will not be using the Transfer of Undertakings and Protection of Employment Regulations to force these staff, who make up 50 per cent. of the Crown Suppliers' workforce, into the private sector.

Does the Minister wish for dogmatic reasons to move people out of the service and not offer them a ticket back no matter what the consequences? My honourable friend in another place, Mr. Tam Dalyell, described those moves as callous and barbarian. I do not wish to see this Chamber go down that route. The amendment affects a different group of people, who can be assisted in the way that I have suggested. I beg to move.

8.30 p.m.

Lord Hesketh

I do not deny that the staff of the PSA and the TCS face a period of considerable change and upheaval. But it has been made very clear both in this Chamber and in another place that, as concerns their terms and conditions of service, the staff will not be disadvantaged by the privatisations.

Even so, I accept that some staff may not wish to move into the private sector and would rather stay within the Civil Service. The Government have already taken some measures in relation to the TCS to ensure that the staff have as much choice as possible consistent with the objective of a successful privatisation. But I am sure that the Committee will agree that if the privatisation is to succeed the TCS must be staffed properly. In particular, it cannot be deprived of all its expert staff.

During 1989, administrative and ancillary employees in the TCS were asked whether they wished to volunteer for secondment with the new owner. The staff in these grades are generalists and represent about half of the 1,100 employed by the TCS. Almost 70 per cent. of those eligible volunteered for secondment and will remain civil servants during their secondment period. They will also be free to accept permanent offers of employment by the new owner. Those not offered permanent posts and those who do not wish to accept them will be offered alternative Civil Service posts. Of those staff offered secondment, those who opted not to be seconded are being moved to other Civil Service posts before the sale takes place. The TCS has decided to make a significant reduction in the number of its furnishing professional staff As a result, nearly 100 staff are being given the opportunity to retire early on favourable terms.

It was not possible to offer secondment to the professional and industrial statT in the TCS because there was no certainty of finding alternative Civil Service posts for all those who might have wanted them. Instead, these staff have been given an undertaking that they will be given an opportunity to state their preferences about whether they wish to remain in the Civil Service or to move into the private sector. This is likely to be when the terms on offer from the purchaser are known. Management has already given a commitment to use its best endeavours to meet such staff preferences, bearing in mind the needs of the TCS business and the availability of other posts.

So far I have confined myself to the TCS, where the sale is more advanced. It is impossible to be as specific about PSA staff at this stage, not simply because the sale is still some way off but also because far greater numbers are involved: there are 22,000 PSA employees in the United Kingdom. However, I can assure the Committee that the Government are conscious of the need to take account of the wishes of PSA staff as far as it is possible without jeopardising the viability of the organisation in the private sector.

The Government intend to establish the preferences of PSA's staff and to fill posts there with staff who wish to stay with it as it moves into the private sector. A booklet has recently been issued to the PSA's non-industrial staff asking them to record their preferences. It is clear that changing workloads within the PSA as a consequence of untying and the drive for greater efficiency will mean that alternative postings will need to be sought for significant numbers of PSA staff in any event. As the opportunity arises, we intend to post out as many as possible of those who wish to move to alternative Civil Service posts.

But it would be wrong to leave the impression that there can be any guarantee that the preferences of all such staff can be met either within the PSA or elsewhere within the Civil Service or that natural wastage will be sufficient to cope with any surplus. While no guarantees can be given to staff who wish to remain within the PSA, it is nevertheless clear that many of the staff who wish to return to the Civil Service after the creation of the Go-co and after privatisation may apply for jobs in other government departments. Subject to their past records and their current skills matching departments' requirements, their applications are likely to be sympathetically considered.

I apologise for having repeated the remarks I made earlier. On the basis of what I have just said, I hope that the noble Lord may be able to consider his position.

Lord Graham of Edmonton

I am once more grateful to the Minister for the care he has taken. Hundreds of thousands, if not millions, of people are employed by the Government. A small group of highly trained and experienced people is referred to in this amendment. I know that people sometimes fail to get a job because they are too well qualified. We are talking here of people who want to stay in the public service and who recognise that there will not be a place for them in a slimmed-down PSA.

They are genuinely willing to move. I have always understood that part of the conditions of service of civil servants is that they must be willing and able to move. We are not talking about someone who says that because he lives in Hackney, Bromley or Enfield he will not take a job that means that he will have to move. That situation would certainly be outwith redundancy terms.

Again, I think that the Minister has shown some sympathy with the points which I have made. He repeated that employees will not be disadvantaged. I very much hope that his optimism is not misplaced. We shall read with care what he said and we may return to the matter at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 21 to 24 not moved.]

Clause 2 agreed to.

[Amendment No. 25 not moved.]

Clause 3 [Transferee companies]:

[Amendment No. 26 not moved.]

Lord Graham of Edmonton moved Amendment No. 27: Page 3, line 15, at end insert: ("( ) The Secretary of State shall not exercise any powers under this section unless the Property Services Agency or the Crown Suppliers is maintained as a national network.").

The noble Lord said: The purpose of this amendment is to seek to maintain the unity of the PSA to ensure that it is not privatised until it is commercially viable. The amendments to Clause 3 refer to the transfer of the existing safety requirements of the public sector into the private sector. Earlier amendments to Clause 1 related to the tentative way in which the privatised PSA will move. We are sensitive to the fact that the Government intend to privatise the PSA in April of next year and at that point we shall have very little work to consider.

As late as February of last year Mr. Christopher Chope was telling Parliament that it would not be right to sell the PSA until a sufficient track record of profitable commercial operation was established. I should like the Minister to tell us what has happened since that time. I beg to move.

Lord Reay

As I understand it, the purpose of this amendment is to prevent changes to the existing pattern of the PSA and TCS offices. In our view the amendment would place unacceptable restrictions upon the commercial management of the businesses. This would be damaging to both the organisations and their staff. The amendment might also rule out the separate privatisation of any division or region of the businesses if that was thought to be most appropriate.

To insist on a national network would, in the Government's view, prevent the businesses from evolving to take account of changes in the market and in the customer base already taking place. I have no doubt that both organisations will wish to compete, and compete vigorously, for business. But that does not mean that they should necessarily compete for business in every part of the country, or that they should maintain their existing pattern of offices. Such restrictions on their freedom of action could not be tolerated by commercial organisations, which must be free to decide where to establish premises and where to concentrate activities. The businesses which make up the PSA services and the Crown Suppliers have provided services to the public sector throughout the United Kingdom. I expect that their successors will wish to continue to do so. In our view, however, it would be wrong to impose on them a rigid framework. I hope, therefore, that the noble Lord will decide to withdraw the amendment.

Lord Graham of Edmonton

The words, it would be wrong to impose on them a rigid framework", ring in my ears. It all depends on whether the "rigid framework" which the Minister is invited to impose is acceptable to us. We are most unhappy that at the end of the day we shall see a dissolution of what

hitherto has been a proud and successful public service department. There is no doubting the fact that it is the Government's intention to dissolve this fine public servant and fine public service.

All the movements made, which have been presaged in this Bill and in statements, will mean that we shall cease to have access as of right in the public sector to the expertise, the knowledge and the intelligence which has been built up by so many good public servants over the years. It is a tragedy. However, it appears that the Government will not be moved. I shall take advice on the matter and may return to it at a later stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3 agreed to.

Clause 4 [Winding up of Crown Suppliers trading fund]:

8.45 p.m.

Lord Graham of Edmonton moved Amendment No. 28: Page 3, line 36, leave out from ("to") end of line 37 and insert ("affirmative resolution of both Houses of Parliament").

The noble Lord said: The purpose of this amendment is, as is well understood by those who follow such matters, to ensure that Parliament has the Opportunity to consider the detail of what the Government propose. The amendment is necessary because of the extreme vagueness of the Government's plans and because of the particular nature of this privatisation.

There are two main arguments for the amendment. First, Clause 1 reveals that the Government have no clear idea about how the PSA and TCS will be privatised. They cannot say whether the PSA will be sold as one business or as several; indeed, the Minister has repeated that fact tonight. Further, they have no idea whether the PSA is saleable because they have no firm evidence. In my view, the privatisation is proposed to advance the ideology of the Government.

There has been no study commissioned to ascertain whether privatisation is feasible because the previous surveys and inquiries which were carried out turned out to be definintely against the thrust of the present legislation. Therefore it is right that Parliament is assured of an opportunity to consider the detail of the Government's plans.

Secondly, the Government have failed to give any firm assurance about the way in which staff interests will be protected. I exonerate the Minister from this, as I sense that he has a genuine understanding of the anxieties which I have raised. But we nevertheless believe that the detail for which I am asking in respect of such matters should be given to the Committee before we let the matter through. In effect, this amendment concerns the affirmative resolution procedure. I beg to move.

Lord Hesketh

As the noble Lord, Lord Graham, said, this concerns the affirmative resolution procedure. I am only sorry that my noble friend Lord Boyd-Carpenter is not present in the Chamber to rehearse the arguments, which he could do so much more lucidly than I, as to why we should not accept this amendment.

Members of the Committee will be aware that the purpose of Clause 4 is for the Secretary of State to wind up the Crown Suppliers' trading fund, including the power to write off any outstanding debt. The clause also refers to public dividend capital. TCS does not at present have any such capital and it is not proposed that any should be credited to the fund in the period remaining until privatisation.

NLF debt will not transfer from the trading fund to the TCS company. The proceeds of sale will, therefore, be applied to repay the debt. If the proceeds from the sale exceed the outstanding NLF debt, the balance will be surrendered to the Consolidated Fund. If however there is a shortfall, part of the NLF debt will have to be written off Subsection 1(a) allows for this. A key factor as to whether there will need to be debt write-off will be the treatment of Wellington House, whose value is considerably in excess of the outstanding debt. If the freehold of Wellington House is not sold with the business, it may be necessary for there to be some debt write-off. But the Government would then have retained the asset of Wellington House, so this would be an accounting adjustment.

Subsection (4), to which amendment 28 relates, proposes that an order under this clause would be subject to the negative resolution procedure. This amendment would change the procedure to an affirmative resolution of both Houses.

I have explained that the purpose of an order under Clause 4 would be perfectly straightforward, and I do not believe it would be right to burden your Lordships' House with it, unless, when the order is tabled, it is believed that it raises issues of principle. That is why the Government have proposed the negative resolution procedure. I invite your Lordships to confirm that approach and hope that the noble Lord, Lord Graham, will see fit to withdraw his amendment.

Lord Graham of Edmonton

As the noble Lord said, the noble Lord, Lord Boyd-Carpenter, is not in favour of the affirmative resolution procedure during the lifetime of this Government. We shall see what his views are in a little while when the Government changes. I am certain that he will see a great deal of merit in inviting the Government, if they have nothing to hide, to come before the House of their own volition.

I understand the powers of the negative resolution procedure; but simply to say to the Committee, "We are now satisfied that we have got it right and we want your approval" is unsatisfactory. I do not cast any aspersions on the Minister or his colleagues by using such a clumsy phrase as "anything to hide"; but it would be an assurance to those outside this Chamber whose livelihoods and communities are at stake if they were satisfied that when all the negotiations have taken place, when everything has been considered, the Government will come back and say, "These are the details, the nitty-gritty". But the Government are not willing to do that. I believe it is to their detriment, and it will make those outside this Chamber a little more uneasy.

In concluding the debate, the Minister has been very fair to the Committee and to me tonight. He has given a lot of information and at the next stage of the Bill I am certain that there will be some business to be done, but what it will be I am not in a position to say. I am grateful to the Minister for the way in which he has responded to my requests for information tonight. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 29 not moved]

Clause 4 agreed to.

Clause 5 [Expenses and receipts]:

[Amendment No. 30 not moved.]

Clause 5 agreed to.

Clause 6 [Short title and extent]:

[Amendment No. 31 not moved.]

Clause 6 agreed to.

Schedules agreed to.

House resumed: Bill reported without amendment.