Railways Bill

HL Deb 12 October 1993 vol 549 cc95-177

3.25 p.m.

The Minister of State, Department of Transport (The Earl of Caithness)

My Lords, I beg to move that the House do now resolve itself into a Committee upon the Bill in respect of Schedule 10.

Moved, That the House do now resolve itself into a Committee upon the Bill in respect of Schedule 10.—(The Earl of Caithness.)

Lord Clinton-Davis

My Lords, I feel it right not only on behalf of my noble friends but, I believe, also on behalf of noble Lords in other parts of the House to register a strong protest about the way in which the Government have approached the debate today. The House will recall the circumstances which led to the recommitment procedure being invoked. At very short notice the Government decided, because of protests which were made about the tabling of amendments at extremely short notice, virtually to redraft Schedule 10. Those provisions vitally affect the interests of some 340,000 pensioners. It is to be recalled also that those issues were not ventilated at all in another place because the Government had not tabled their latest proposals at that time. Indeed, on occasions in another place when the issue of pensions failed to be debated the Government had then substantially changed their previous proposals. We took the point—and I believe that we have been vindicated in our attitude—that those highly complex, technical issues would have been more appropriately dealt with in primary legislation. They are extremely important and affect large numbers of people.

Therefore, against that background the Minister said that he would speak to the amendments on the sixth day of Committee, then he would withdraw them and reintroduce them for further debate today. A few hours before those debates took place, one had the bizarre situation of the production of the memorandum of understanding between the Government, the chairman of the trustees (who had not had time to consult all the trustees) and the British Rail Board. It arose because the Government thought that they faced defeat because of the amendment introduced by the noble Lords, Lord Peyton of Yeovil and Lord Marsh.

Today we face further amendments which were tabled, in my submission, without adequate notice. It is a situation which effectively compounds the errors of last July. On 4th October I received a letter from the Minister, dated 1st October, saying that he proposed to table a number of amendments. I thank the Minister for his courtesy in explaining in an accompanying document the purpose of those amendments. But the effect of that for us, and indeed for all noble Lords who are interested in today's debates on pensions, was that we had to try to take expert opinion on those issues. Few of us are experts in the matter of pensions. We then had to consider drafting amendments to the government amendments in time for today—a wellnigh impossible task.

I understand that the Minister would concede that those are far from easy matters, but this House has a duty to probe the effect of the amendments. It must have due regard to the interests of those hundreds of thousands of pensioners and future pensioners.

To add insult to injury, only last Friday afternoon the Department of Transport telephoned the Opposition Whips' Office in this House to say that the amendments for Report—we begin our Report stage on Thursday—were to be sent to the office that evening. That gave us, in effect, three days in which to consider a large number of substantive government amendments. That must be viewed against the preparation which we have had to try to undertake for today's debate.

Members of the Opposition and other noble Lords simply do not possess the resources of government to tackle those difficult issues. That is a matter which Ministers tend to overlook from time to time and they have certainly overlooked it on this occasion. I must ask the Minister a direct question: does he think that it is fair and equitable for the Government to have behaved in that way? Is it right that the matter should have been dealt with so far as concerns this House in that way? Can the House be expected to do its proper job of examining such complex legislation? Further, arid more importantly, how can the interests of 340,000 pensioners, many of whom are deeply disturbed—as is evidenced by the large post that many of us have received—be properly safeguarded? Why on earth did the Government allow August, September and the early days of October to pass without tabling such amendments? Why were we given only one week's notice? Finally, can the Minister really assert that the Government could not have done better?

It is not as though we can have confidence that the Government have at last got their tackle in order. Indeed, on their own admission, they have changed their proposals on a number of occasions. After due reflection, which could not be completed until the Government had tabled all their amendments, legal opinions which are now available to the trustees, as well as those of our advisers, have cast very strong doubts on the memorandum of understanding which was produced just hours before the debate on the sixth day of Committee.

There are doubts about the enforceability of the memorandum and doubts about the fact that sufficiently clear powers to implement certain key aspects of the memorandum are nowhere to be found in the Bill. In addition, there are doubts about surplus-sharing arrangements and the use of the special reserve in the rules of the closed pension scheme. There are also doubts about the fact that there is no provision for a resolution of deadlock between the government appointed actuary and the actuary appointed by the trustee company; and, indeed, doubts as to why on earth there is an appointment of a government actuary at all.

There are major doubts which have been expressed by people who are expert in the field about the very heart of what the Government have produced; for example, the memorandum of understanding. There are even doubts about its implementation. We shall further explore such issues today. However, I thought it right just to give an indication to the House of the serious major issues that remain to be resolved. Such issues need to be dealt with before the Bill leaves this House and, as I said before, the task is extraordinarily difficult.

I believe that we are entitled to an explanation for the Government's conduct. We are entitled to know why they have got into such a mess. Why have they been so unresponsive to the pleas that we have made for a little extra time? I understand that the new Session of Parliament is not to begin until the 18th November. Therefore, clearly there was further time available. We could have had until the week commencing 8th November in which properly to complete the Bill's passage, instead of seeking to dragoon so many new amendments through both Houses.

I believe that what the Government have done is wrong. I believe it to be unprincipled. I believe that they seek to take the House for granted. Above all, I think that it is unjust for more than 300,000 pensioners. It is wrong that the Government should behave in such a cavalier manner so far as concerns their interests.

3.30 p.m.

Lord Tordoff

My Lords, I do not want to prolong the discussion, but I should like to support the remarks just made by the noble Lord, Lord Clinton-Davis. It is not an easy Bill and we are not discussing an easy part of it. Opposition spokespersons do not have an easy task when dealing with complex measures. We do not have the kind of support which the Minister has behind him in the Box and elsewhere.

I thank the Minister for allowing us to have such information as he gave us, although it came extremely late. He obviously went out of his way to do his best at the last minute. Indeed, he was good enough to arrange a meeting with some of his officials for yesterday afternoon which I attended. It was helpful in the sense that they were able to explain what they thought the amendments were about.

It is true that many of the amendments are highly technical and should, perhaps, be nodded through. However, to be frank, I do not think that your Lordships' House should be expected to nod through even technical amendments unless they have been scrutinised outside this place. We would not be doing our duty to Parliament or to the people outside the House if such a situation were to arise. The truth is that the legislation is a botched job from start to finish. Nowhere is it more botched than in the pensions provision where the noble Lords, Lord Peyton of Yeovil and Lord Marsh, have put their fingers on substantial weaknesses which we shall debate later today.

Frankly, it is about time that the Government stopped bringing such legislation before your Lordships' House before they have themselves finally decided that it is the legislation that they want to bring forward. Before doing so, they should ensure that the legislation is in a form with which they are satisfied.

Lord Marsh

My Lords, the last time that we discussed the issue the whole debate turned on the memorandum of understanding which, for whatever reason, arrived very late. In my case, one matter which has emerged since that time is that I have seen legal advice which claims fairly clearly that the memorandum has no legal authority. It is possible that as part of a case it may be prayed in aid.

As now is the time to discuss it, and as it is central to many of the discussions on the issue, it would be helpful if the Minister could tell the House very simply in non-legal terms whether or not the memorandum of understanding of itself, subject to any other legislation, binds the Government totally?

Lord Shepherd

My Lords, I shall intervene but briefly. I believe that the noble Lord, Lord Marsh, has made an important point. When he speaks to the Government's amendments, I believe that the House will expect the noble Earl to be clear and specific as to what is intended by them, bearing in mind the judgment of the Law Lords last year that the courts can take into account what Ministers have said in Parliament. Therefore, it is important that such amendments are spoken to with the clearest and greatest clarity.

However, to me the issue is not so much about today—as has been said, it is a highly technical debate—as about what happens after Committee as regards the Report stage. When will it be taken? As the noble Lord, Lord Clinton-Davis, said, there is ample time for us to have a reasonable period between the Committee and Report stages both to consider the amendments which have been moved—and, perhaps, accepted by the House—and to obtain advice from those who practise in the law in the field of pensions. Such people are not all that numerous. However, we need time to consult between the present Committee stage and Report. I hope that the new Chief Whip will follow the way in which his predecessor met us in regard to having a recommitment. I hope that he will consider the matter very seriously and allow us to have consultation for a reasonable length of time between the Committee and Report stages.

The Earl of Caithness

My Lords, I listened with great care to what has been said this afternoon. However, perhaps I may deal first with the point raised by the noble Lords, Lord Clinton-Davis and Lord Shepherd, as to whether, in all the circumstances, it would be more appropriate to delay the Committee stage for some time. It is, of course, a matter for the usual channels to consider the timetable of business in your Lordships' House. However, I am advised by the House authorities that this Chamber has traditionally regarded a recommitment of part of a Bill as a rather special procedure to which the guidance regarding minimum intervals in the Companion to the Standing Orders does not apply. It is frequently the case that the House continues immediately to receive the Report of a Bill after having concluded proceedings on recommitment of part of it.

The noble Lord made his point with great force and the House will have heard him. However, I urge the House not to follow him down the road he proposes. The beauty of our procedures is, after all, that they are relatively flexible and it might inhibit the use of the option of recommitment if its effect were to be seen to delay unnecessarily the passage of legislation through your Lordships' House. I suggest that it would be in the spirit of our proceedings if we were instead to proceed to consider the substantive issues involved in this important schedule.

The whole point of the proposal originally made by the noble Lord, Lord Shepherd, was to enable the House to exercise its revising functions in a more constructive way today than your Lordships felt was possible in July. It would be a shame not to press ahead now in that constructive spirit rather than detain the House further on what I recognise are points of legitimate concern but which are unlikely to assist the House in considering the substantive issues involved in Schedule 10.

The noble Lords, Lord Clinton-Davis and Lord Tordoff, mentioned the large number of government amendments which have been tabled for the Report stage. I can only apologise to the House for the quantity of these amendments I should, however, point out that 81 amendments were tabled on 1st October and 133 were tabled last week. These include all the amendments likely to be considered on Thursday. An additional 40 or so amendments to be taken next week are to be tabled today. That is one week in advance of consideration. All these amendments are purely of a drafting or technical nature. I believe this will become sufficiently clear when the amendments are debated. I recognise the concerns that have been expressed but I think that on this occasion we have made all efforts possible to ensure that the amendments have been tabled with the utmost dispatch.

I turn now to today's proceedings. I wish to put into perspective the Government's position on pensions and the purposes of the government amendments I have tabled. I shall of course respond in detail to the amendments that have been tabled as we reach them. Let me make it absolutely clear that we remain committed to the underlying principles of protecting the security of pension rights enjoyed now by those affected by our privatisation proposals. Moreover, those of your Lordships who have studied this issue with care will, I am sure, agree with me when I say that I believe that the Government's proposals go beyond our original White Paper commitment.

In announcing our proposals in another place on 20th May, my right honourable friend the Secretary of State for Transport reaffirmed his objective to preserve the security of rights enjoyed by pensioners and members, while adopting arrangements to suit the new structure of the privatised industry. I wish to refute totally the allegation made again recently by the honourable Member for Hull East at his party conference that the Government are intending to plunder BR's pension funds. That is fundamentally wrong; that is not and never has been the Government's intention, and we are taking no powers in this Bill to let that happen.

The proposals we have announced incorporate a number of improvements given as a result of the consultation process. My right honourable friend the Secretary of State announced that a joint rail industry pension scheme would succeed the present scheme and that existing staff would retain an individual indefeasible right to remain in the scheme for as long as they remain in continuous employment in the industry. More importantly, he undertook to give them the protection of no less favourable future pension rights when transferred involuntarily to another employer, whether still inside the railway industry or not. Anyone can, of course, waive these rights if they wish. These arrangements for active members of the BR pension schemes have been welcomed by all concerned.

It is common ground that special arrangements must be made for pensioners. The nature of the railway industry and this privatisation make it impossible to allocate the present pensioners to new employers, or indeed to the different parts of the existing railway. Your Lordships will recall that when we debated pensions last on 21st July I announced that we had reached agreement with the trustees and BR. The memorandum of understanding we signed provided that a closed fund for the existing and deferred pensioners should be set up, with a target date of 1st October 1994. Under that memorandum the Government will provide two vital safeguards: first, an absolute solvency guarantee for retail prices index (RPI)-linked payments for pensions already in payment and those which have been deferred; secondly, the right for pensioners to share in any future surpluses. These arrangements will, for existing and deferred pensioners, underpin the Government's undertaking that the treatment of pensioners after privatisation will be fully safeguarded. We were informed by both the chairmen of the trustee company and of the BR board that they endorse these proposals which in their view satisfy the Government's commitments. That broad agreement stands. The consensus we reached on pensions provides a firm basis on which to proceed. Three issues have, however, been raised by the trustees, and these have been reflected in points made by your Lordships which we will debate in more detail soon. I shall return to them then.

During our earlier discussions in July I undertook to consider whether to incorporate the provisions of the memorandum of understanding on the face of the Bill. Some of the amendments tabled by my noble friends appear to have this effect. We have concluded that it is neither necessary nor practicable to incorporate the memorandum in Schedule 10 to the Railways Bill. The amendments put forward by my noble friend Lord Peyton and the noble Lord, Lord Marsh, recite only some of the points agreed in the memorandum—and no doubt what they regard as the essential ones—but not all. So the issue in practice is not whether to incorporate all of the memorandum but just some of its elements. The Government's Amendment No. 65 has been tabled because we need the cover of primary legislation to implement the particular provision of the memorandum with which it deals. We do not consider that the other provisions require similar cover. But we can take each of these points on its merits when we consider the detailed amendments. However, I can assure the House that it is our firm intention to abide by the memorandum of understanding.

To answer the point made by the noble Lord, Lord Marsh, I should say that the Government regard the memorandum of understanding as binding. I make it absolutely clear that the Government regard it as binding.

However, we have been convinced by my noble friend Lord Peyton that we ought to amend the Bill in order to give to the Secretary of State the major role in guaranteeing these funds—the closed fund for pensioners which we promised to guarantee in the memorandum of understanding—and the BR fund if in future it too becomes unstable, as also envisaged in the memorandum. I therefore undertake to bring forward an amendment at a later stage which would empower the Secretary of State to direct the board to guarantee new pension schemes on such terms and conditions as he may direct.

3.45 p.m.

Baroness Turner of Camden

My Lords, will the Minister please tell the House on what basis he has said that the memorandum of understanding is binding? Is there legal advice to the effect that the memorandum of understanding is binding? It is that point that concerns us.

The Earl of Caithness

My Lords, we have received legal advice that the memorandum of understanding is binding. I give the undertaking that we take it as binding.

Before the noble Baroness interrupted me I was talking about my noble friend Lord Peyton. In commenting further on his proposals I must advise the House that I think it would be unwise to place a duty on the Secretary of State. A duty would have to be specific as to the circumstances in which it arose and this could lead to difficulties. Indeed it could place an unwelcome constraint on the Secretary of State's ability to provide a guarantee in circumstances in which in future he may wish to do so. But a power is not entirely discretionary. Even not exercising a power is subject to the possibility of judicial review, and my right honourable friend would be answerable to Parliament for any decision not to do so.

The guarantee would be directed at the solvency of the fund as described in the memorandum of understanding. It would underpin the payment of index-linked pensions. The BR scheme presently pays index-linked pensions, and these rights will be protected when an order is made under paragraph 6 of Schedule 10. I say again that it is the firm intention of the Secretary of State to use the powers I am now proposing and the powers already in this Bill to ensure the payment of index-linked pensions to railway pensioners.

I wish to turn briefly to the amendments that we have tabled for today, the number of which the noble Lord, Lord Clinton-Davis, criticised.

Lord Shepherd

My Lords, before the noble Earl does so I hope he can help the House. When he says that the memorandum of understanding is binding, has it the force of a contract? If one of the parties to the memorandum felt that the other party had not fulfilled it, could he on that basis go to court to obtain an order?

The Earl of Caithness

My Lords, I believe that it is the intention of all the parties to the memorandum of understanding that they will abide by it. We certainly will abide by it. I shall take advice on the specific point which the noble Lord mentioned because we shall deal with the details in one of the amendments to come.

Today the House has before it for consideration 54 government amendments to Schedule 10 which I tabled on 1st October. Thirty-three of those amendments will be familiar to your Lordships because they were tabled on 15th July but subsequently withdrawn following our debates in Committee on 19th and 21st July. The majority are of a technical or consequential nature and I shall explain them in detail if wished when they are considered later. However, two amendments introduce important improvements agreed by the Government during the passage of the Bill through the other place following the consultation on our proposals for railway pensions after privatisation. They add the indefeasible right which I mentioned earlier for current BR employees to remain in the joint industry scheme and give effect to the proposal of the honourable Member for Wrexham in another place relating to publication of trustees' comments after consultation on certain pensions orders.

The new amendments are brought forward in the light of our earlier Committee proceedings and are mainly of a minor technical nature. The exception is the amendment which introduces three new sections— Sections 52B, 52C and 52D—to the Transport Act 1980 enabling the Government to vary the timing of cash payments of the support contributions presently required under Section 52 of the Act to new schemes. The reason for this is the added protection which has been given by the solvency guarantee. We intend to apply this to the proposed pensioners' closed scheme of the joint industry scheme in line with the agreement in the memorandum of understanding. Of course, I shall elaborate on any of those amendments later.

Further, to assist consideration by your Lordships we have produced a so-called Keeling version showing Schedule 10 as it would be if all the government amendments were agreed to. The noble Lord, Lord Shepherd, asked for that at Committee stage and I am very happy to oblige your Lordships. I produced it last week. Copies were available in the Printed Paper Office. I have sent a certain number to your Lordships and placed copies in the Library.

The Government consider these proposals on future pension arrangements to be extremely generous. They provide the promised security to pensioners and existing members while not imposing an unacceptable burden on future employers in the industry. I draw the attention of the House particularly to the combination of the government-backed solvency guarantee and the right of members to share in surpluses. Few, if any, schemes possess such advantages.

Perhaps I may now summarise the improvements that we made before the Recess to our proposals during the course of consultation. Those improvements are a joint industry scheme for existing staff remaining within the railway industry; the indefeasible right for such employees to remain in the scheme; the pensioners' closed scheme being managed as part of the joint industry scheme; the pensioners' closed scheme having an absolute solvency guarantee while members retain the opportunity to share in the available surpluses; and publication of the comments of the trustees on certain orders made under the Bill.

In addition, as I have now made clear, the Government will be bringing forward provisions to enable to Secretary of State to direct BR to guarantee those funds which we promised would be guaranteed in the memorandum of understanding. This is a significant further development which should provide additional comfort to those concerned about future pension arrangements for the industry. It is right that your Lordships should be concerned to ensure that the pensions provisions in this Bill are fair. With the additional commitment that I have made today, I have no doubt that they are.

Lord Peyton of Yeovil

My Lords, I had no intention of taking part in what I regard as a preliminary skirmish, chiefly because I did not wish to associate myself with any criticism of my noble friend, express or implied. I take the opportunity to pay tribute to the intelligence and courtesy with which he has performed his duty in handling this Bill. I would not now be on my feet had he not referred to me and to some of the amendments which are down in my name. I refer particularly to the request that the guarantee of solvency and the index-linking should be enshrined in the Bill.

I have only just received a copy of my noble friend's speech and I have not had an opportunity to consider it in any detail, but I understand clearly that the Government have decided that that amendment is unacceptable to them. At this stage I say only that in the post-Maxwell climate and against the background of the Government already having been forced to make a 180-degree turn and agree to a guarantee which they opposed previously, there is now a residue of suspicion and ill will which I suggest can be disposed of only by enshrining that particular guarantee in the Bill.

I hope very much that my noble friend will have second thoughts with his right honourable friends. I am bound to say, with great distress, that if he does not find it possible to do so I shall almost certainly feel obliged to take the opinion of the House because I regard the amendment as outweighing in importance all those others which are down in my name.

Lord Tordoff

My Lords, I am sorry to continue the debate. I do not want to go into the substance of the amendments, as we seem to have been distracted into doing. I wish merely to raise a question in relation to the amendments. The Minister suggested that another 40 amendments were being tabled by the Government: today. Do any of those amendments refer to Schedule. 10?

The Earl of Caithness

My Lords, I apologise for the length of time taken by my opening statement, but I felt that it was right to put on record the enormous consideration which the Government have given to this very important issue. We wish to get this right, just as much as your Lordships. We have moved substantially, and I have given a further commitment today which goes a long way to meeting the anxieties of my noble friend Lord Peyton.

With regard to the point raised by the noble Lord, Lord Tordoff, the amendments concern matters which are to be considered next week. The amendment to Schedule 10 which I have promised to put clown has not yet been drafted. There is a commitment that we shall bring forward such an amendment should the House accept that. The amendments which I am tabling today relate to the Report stage and not to this stage of the Bill.

Lord Clinton-Davis

My Lords, the House is indebted to the Minister for having taken the expressions of concern very seriously. Indeed, he could do no less. Equally, the House will be amazed to hear from him that another 40 additional amendments are to be tabled for a Report stage which will end next Wednesday. What position does the Minister expect the Opposition to take on that basis? What time do we have to consider the issues? Do we have time to take expert opinion?

I accept and do not question the Minister's good faith in this matter. However, just as he said that the Government have had to consider all these difficult and detailed matters, which has led to the delay, does not the House have the duty to consider these matters properly? We cannot simply accept from the Government protestations of good faith.

The Minister said that he believes that the memorandum of understanding is binding. I beg him to understand that it is not only the noble Lord, Lord Marsh, who has been advised to the contrary but also the Opposition. There are strong doubts about that. Who is able to enforce it? How is it to be enforced? Will it simply be by judicial review? Those are issues which we shall go into later and I do not propose to prolong the debate on that matter. However, the Minister talked of flexible procedures. Inflexibility has been the hallmark of the Government in terms of giving this House sufficient time to consider these matters.

I do not propose to press the House to divide on this matter. My purpose is to protest about an injustice. That view is shared by a number of noble Lords. We shall return to the matter. I wish to give the Minister notice of this. The matter will be pursued by my noble friend Lord Graham, our ChiefWhip, through the usual channels. On Report we shall expect the Government to give us more time for this matter on the last day. We hear that there are to be additional amendments tabled to Schedule 10.

The Earl of Caithness

My Lords, I did not say that.

Lord Clinton-Davis

My Lords, I thought that the Minister referred to additional amendments.

4 p.m.

The Earl of Caithness

My Lords, let me make the position absolutely clear. The amendments that I am tabling do not relate to Schedule 10. The only amendment that could relate to Schedule 10 is the commitment that I have given to my noble friend Lord Peyton which goes a long way to meet his concern. The amendments that I have tabled today relate to Parts II and III of the Bill but not to Schedule 10.

Lord Clinton-Davis

My Lords, I am obliged to the Minister. However, the fact that we have so many additional amendments to consider in so brief a time is not the right way to proceed. The Minister noticeably did not refer to the fact that there was no real need for the House to conclude its consideration of the Bill in such a short time. We could have gone on beyond the time to which the Government have committed themselves. In my submission, that is what the Government ought to do. They ought to give more time for the consideration of the Bill in this Chamber and in another place. I hope that the noble Earl's colleagues will take that counsel and be positive in their response.

On Question, Motion agreed to.

House in Committee (on Recommitment in respect of Schedule 10) accordingly.

[The CHAIRMAN OF COMMITTEES in the Chair.]

Schedule 10 [Pensions]:

The Earl of Caithness moved Amendment No. 1:

Page 171, leave out lines 13 to 21.

The noble Earl said: In moving Amendment No. 1, with the leave of the Committee I shall speak to Amendments Nos. 2, 3, 6, 8, 10, 11, 12, 14, 15, 16, 18, 21, 71, 72, 73, 74, 75 and 79. Despite the number of government amendments I hope that we shall be able to deal with them in quite simple terms, although I shall be more than happy to answer any questions that Members of the Committee may have on a point of detail. Many of the amendments will be familiar because they were tabled on 15th July but subsequently withdrawn in Committee on 21st July. They are technical or consequential in nature or are to correct drafting imperfections. I beg to move.

Lord Clinton-Davis

As the noble Lord, Lord Shepherd, observed earlier, there is a difficulty relating to the House of Lords' decision in Pepper v. Hart. That makes it necessary for the Minister not to go through those matters in the way that he has suggested. I fear that I must put him to the trouble of explaining each and every amendment. I am sorry about that. However, bearing in mind that these are complicated and technical matters, I believe that it is appropriate that we should have regard to the court decision. I leave it to the Minister to do that.

The Earl of Caithness

If that is the wish of the noble Lord and the Committee is in agreement, I am happy to go through each and every amendment in turn. I hope that all noble Lords will be present in the small hours as the noble Lord, Lord Clinton-Davis, and I continue this happy event.

Consequential upon Amendment No. 1 is Amendment No. 6. Those amendments correct an omission. The term "deferred pensioner" used within the definition of "member" in paragraph 1(1) would have excluded a person who had never participated in an existing or new pension scheme but whose pension rights had been transferred into such a scheme. Amendment No. 1 therefore deletes the existing definition of "deferred pensioner" and Amendment No. 6 widens the definition of "member" to include such persons. I commend the amendment to the Committee.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 2:

Page 171, line 33, leave out ("scheme (other than a new scheme)") and insert ("occupational pension scheme (other than a new scheme)—

(a) which is a scheme").

The noble Earl said: In moving Amendment No. 2, with the leave of the Committee I shall speak to Amendment No. 3.

The amendment amends the definition of "existing scheme" in order to limit it specifically to "occupational pension schemes". That is a more appropriate definition which links in with general pensions legislation. "Pension scheme" is otherwise an imprecise term. Amendments Nos. 18 and 21 are also consequential on Amendments Nos. 2 and 3 in paragraphs 3(4) and 4(4), which arise from the introduction of an "occupational pension scheme". I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 3:

Page 171, line 36, after ("service)") insert ("and (b)")

On Question, amendment agreed to.

Lord Peyton of Yeovil moved Amendment No. 4:

Page 171, line 38, at end insert: (""financial year", in relation to an occupational pension scheme means the 12 month accounting year of the scheme.").

The noble Lord said: This is an amendment of great simplicity. It is designed to be helpful. I was rather surprised to find it bracketed with Amendment No. 57 which I cannot altogether claim is designed for the same purpose. Amendment No. 4 simply asks for the sake of clarity in future arrangements whether it would not be better to have the financial year defined. I hope that my noble friend will have no difficulty in accepting the amendment or that he will come forward with some other suggestion which makes matters equally clear.

Lord Tordoff

If the noble Lord will forgive my intervening perhaps I may say this. If it is the wish of the noble Lord not to have the two amendments grouped together, it is entirely within his ability to move Amendment No. 57 when we reach it in the Marshalled List.

Lord Peyton of Yeovil

I am much obliged to the noble Lord. I do not regard Amendment No. 4 as of any great importance. It is drafted to help. If my noble friend cares to take advantage of it, so be it. However, I do not in the least wish to interfere with the grouping. It does not affect my purpose.

Amendment No. 57 is concerned with the guarantee of solvency and the index-linking of the closed fund. To that amendment I attach great importance and, as I said recently, I would not be prepared to let that amendment go without at least taking the opinion of the Committee in the absence of any assurance from my noble friend that he will have further thoughts on the subject.

There was a time when pension arrangements, though commonly regarded as important, were also considered safe and secure and not a matter for undue worry. Maxwell changed all that. Moreover, I believe that the Government have played quite a large part in getting themselves into their present difficulties. They decided to set up a closed fund but at the same time refused a guarantee of that closed fund and refused to index link it. In the eyes of pensioners the Government have not moved in their interests but in pursuance of a cause of their own. There was concern, and I think reasonably so, that a closed fund could be adversely affected by inflation, by changes in taxation, by legislative changes and by people living longer. In those circumstances I believe that the trustees were right to seek such guarantees.

The Government were adamant in refusing. It was only at a much later stage, on the matter which has just been discussed, that the memorandum of understanding was produced in which the Government agreed to give the necessary guarantee as to the solvency of the fund and to index-linking it. I do not wish to exaggerate nor to use strong words, but it seems to me that, in making that welcome change in their position, the Government expected the pressure simply to disappear and there to be nothing but a warm welcome and gratitude from pensioners. The fact is that the Government's original refusal to guarantee the fund which they themselves were setting up generated, among a large number of pensioners—they are not rich people, they do not have big pensions but those pensions are of great importance to them—an enormous amount of ill will and suspicion. That was in no way dissipated or removed when, late in the day, the Government decided to give the guarantees asked for.

That point is enhanced by the fact that governments change their minds from time to time. Perhaps it: is relevant to refer to the timing of the payments. It was originally dealt with in the 1974 Act but was subsequently changed in the 1980 Act. My right honourable friend the present Chancellor of the Exchequer declared the settlement in the 1980 Act to be the last word, a once-and-for-all settlement.

Now things have changed. I must ask my noble friend to take account of the fact that the great hosts of pensioners are not all that content with merely an assurance from the Government that all will be well. I believe that the Government would be wise to enshrine in the Bill the guarantees that they have given.

I welcome what my noble friend said on the subject just now. I had not seen what he was going to say but I am grateful that I now have a copy of the remarks that he made on the amendment. He said: I therefore undertake to bring forward an amendment at a later stage which would empower the Secretary of State to direct the board to guarantee new pension schemes, on such terms and conditions as he may direct". My quarrel is with the word "empower". What I seek is a duty. I wish to see the duty which the Secretary of State has had placed upon him in no way removed by what my noble friend went on to say: A duty would have to be specific as to the circumstances in which it arose and this could lead to difficulties". I should need much persuasion that such difficulties could not easily be overcome. Indeed, my noble friend went on to say, it could place an unwelcome constraint on the Secretary of State's ability to provide a guarantee in circumstances in which, in future, he may wish to do so". It simply does not make sense at all to me. I do not believe that there would be anything unwise or even inconvenient, if the Government were minded to do it, in a guarantee of what the Government have now said they mean to give—a hard and fast guarantee of the solvency of the fund and the index linking. I am unable to see any logic in my noble friend's position. I can only believe that this is the last wag of the tail—perhaps those are not the right words—the last whimpering growl from the people who were unwise enough in the first instance to refuse to do what was right: to guarantee the solvency of the pensioners' closed fund which the Government themselves set up.

Even at this late hour, I hope that my noble friend will be able to say that the amendment which he will bring forward will meet that point. I beg to move.

4.15 p.m.

Baroness Turner of Camden

I rise on behalf of these Benches to support the amendment which has just been moved by the noble Lord, Lord Peyton. As we understand it and as he explained it, the intention is to provide primary legislative backing for the RPI-linked and the solvency guarantee contained in the memorandum of understanding.

As we have already indicated on this side of the Committee, we have received legal advice as to the status of the memorandum of understanding. Perhaps I may read to the Committee what it says: The precise legal status of the memorandum is unclear, but we do not consider it to be contractually binding on the Secretary of State, either now or after the enactment of the Railways Act. Accordingly, in our view, the memorandum is highly unlikely to be enforceable, either by the trustee company or the BR board against the present Secretary of State or his successors". I join the noble Lord, Lord Peyton, in saying to the Minister that since the Government said that they regard the memorandum as binding upon the Government, it would be in the best interests of everyone if this were to be written into primary legislation. As we all know, BR pensioners—both prospective and present pensioners—have been very disturbed about the future of their pension provision. I have received a number of letters and I am sure that others have also.

That is heightened by what happened over Maxwell. People have now become very concerned and touchy about the prospects for their pension provision. Moreover, in the wake of Maxwell, we have had the Goode Committee report which recommends that there should be minimum solvency conditions.

We can write this into legislation and people will then feel that they have some proper sort of guarantee. But if we do not do so, then I regret to say that the people who are mainly affected—that is the prospective and the present pensioners—will continue to be worried as to whether or not they will have RPI when pensions are in payment and whether or not they will have a sufficient solvency guarantee to ensure that their pension provision is properly safeguarded.

For those reasons, I hope that the Minister will tell the Committee this afternoon that he has decided to accept what the noble Lord, Lord Peyton, said and what we on this side of the Committee support.

Lord Harmar-Nicholls

Perhaps the Minister will allow me to say this. One need not commit oneself to accepting Amendment No. 57 in its entirety, on which my noble friend bases his case, after having listened to the preliminary exchanges which took place before we went into Committee and the argument presented by my noble friend, supported by Members opposite. However, the difference is so marginal that I feel that we should be careful that the matter is dealt with in a manner satisfactory to both sides without being put to a decision of the Committee.

A little while ago we were talking about the shortage of time for various matters which had to be discussed. I believe that this is a case where time can be saved. The position is clear regarding the arguments. My noble friend asked for certain guarantees which would satisfy the real disquiet. On behalf of the Government, the Minister said: "What I have done so far has given you that guarantee. But what I have done and the guarantee on what the facts will be ought to be satisfactory to you".

I do not criticise my noble friend for moving his position. That shows strength. By moving he shows that he listened to the arguments and came quite a long way along the road to meeting the point made by my noble friend. It would show a continuation of that strength for him to go that extra bit further. All he needs to do is say that he will look again—this is only the Committee stage—and give us hope that the points raised by my noble friend will be either included in the Bill or that some move will be made which makes them equivalent to being in the Bill. An indication that he will move that little bit further along the road would be acceptable to the Committee and I hope that it would be acceptable also to my noble friend. We are so near. But that extra move forward is vital if we are to get through the business already on the agenda.

Lord Tordoff

It is rare that I find myself in complete agreement with the noble Lord, Lord Harmar-Nicholls, but on this occasion I do. However, I believe that one needs more than an expression of hope from the Minister. One needs something rather more firm than that.

For the life of me I cannot understand, any more than the noble Lord, Lord Peyton of Yeovil, can, why the Government are still resisting. If there is a substantive reason why they must resist I hope that they will reveal it today and that we will not hedge this matter around with any more mystery.

The case was clearly presented by the noble Lord, Lord Peyton. The Government said, "We pretty well agree with you but do not want to come at it in that way". Why not? In the absence of a clear indication as to why not, the Government must say today that not only do they "hope" to go down this road, but that they "will" go down this road.

Lord Marsh

It is no reflection upon the Minister, whose personal integrity no one doubts, but one must look at the genesis of the memorandum of understanding. It is not something which emerged as a result of careful, long-term consideration of the Bill and the position of the pensioners.

There is nothing unusual in the Government transferring pensioners from nationalised industries to the private sector. It has been done many times. From the day that they moved along this particular track, the Government knew that that was something they would have to do. If they had gone to an independent financial adviser—one must be careful of the circumstances in which one uses that title these days, but I mean in the traditional sense—it would have taken half a day and cost them £1,000. Since they are in the process this year of spending £12 million on consultancy fees alone to date, they could easily have had the whole business sewn up.

But of course it did not happen like that. It happened the night before the actual debate took place. The memorandum of understanding suddenly appeared and it was put before Members that same day. It cannot be ignored. Much play has been made by the Government on the fact that the memorandum of understanding was signed by the trustees. Of course it was. They had nothing else to sign. I am serious. There was literally nothing else upon which they could rely in the event of a dispute with the Government, who will, in the Bill, have their own actuary in the fund. They will have their own independent officer, although one wonders, if he is independent, what point there is in having him in the first place. In the real world he is the Minister's nominee. They have all that and the trustees have nothing else to sign. Of course they signed.

I repeat the point already made. It is significant that in this case, when the trustees looked at, and took legal advice on, a matter as crucial to their responsibilities as this, the debate was over. It was gone. It was a couple of weeks afterwards when they were able to obtain legal advice on what it was that they had signed. I am bound to say that there is strong, serious legal advice which says that, of course, the memorandum of understanding can be prayed in aid and, of course, it can play a part in an application for judicial review. But that of itself—the Minister's words were carefully chosen—is not a legally enforceable contract as such.

'The Minister says, "We are committed to it". One recognises his sincerity. But most arguments take place on occasions such as this between people who are totally committed to something and believe that they are right, and somebody else thinks that they are wrong. It is at that point that one seeks recourse to the courts.

I finish on the point we left when we concluded the last discussion. In my view there was nothing more that the trustees could have done on that evening than to sign the document with no advice. There was nothing else for them to do. That was at least something that they could pray in aid. I do not believe that there is anything that they can do now because they have no sanctions and no power as trustees. The only people who can protect those pensioners are the Members of this Chamber. If they do not, no one else can.

Lord Stoddart, of Swindon

I support the amendment moved by the noble Lord, Lord Peyton. I do so because I had the honour to represent Swindon in the House of Commons. At that time Swindon was a railway town. At its peak the industry employed 15,000 people. There are still a large number of people in Swindon who enjoy railway pensions and hope to go on doing so for a long time.

From my postbag and from the representations I have received from Swindon, and from other parts of the South West and elsewhere, it is clear that the people concerned—the pensioners, the pensioners-to-be, the contributors to the fund—are extremely worried as to their future; as to whether their pensions will be safeguarded; and as to whether the increases will be safeguarded. They are concerned about what is to happen to the surpluses and so forth in the pension fund.

At first they were encouraged by the memorandum of understanding. The fact that they have heard since that it is perhaps not worth the paper on which it is written worries them. Last night my telephone was ringing constantly. People told me that they were once again anxious about the matter and that they would only be satisfied when the provisions safeguarding pensioners and the pension fund were written on the face of the Bill.

The Minister is a reasonable and understanding man, as we all know. I urge him to accept in this instance that the only thing that will satisfy the pensioners and people who are members of the fund, the only thing that will reassure them about their future, is an Act of Parliament. That is what they are asking for. They trust Parliament. I do not say that they do not trust the Government, but, because of the background to the matter, they have perhaps had cause to doubt the Government's commitment. It is only through an Act of Parliament that they will receive assurances that are acceptable to them and that will make them happy in regard to their fund, their future pensions, their future contributions and other benefits from the scheme.

4.30 p.m.

The Earl of Caithness

There is absolutely no difference between what my noble friend Lord Peyton wishes to do and what the Government wish to do. We both want to do what is right. Those are the words of my noble friend. They are also the words of the Government. We believe that the Government have fulfilled—in fact more than fulfilled—what they set out to do and what they wished to do in relation to pensions in the White Paper. I made that clear earlier in our discussions.

We believe that we have now provided the safety and guarantee that we wished to do with regard not only to the indexing of pensions but also to solvency. As I said before and say again now—I know that the noble Lord, Lord Marsh, will agree with me on this point—there are very few schemes, if any, that have the guarantees that the Government have now given to British Rail in regard to this issue. There are very few of them. I know that the noble Lord, Lord Marsh, will agree with me on that point. It is important despite that to make sure that we get this item right.

The noble Lord, Lord Marsh, was right to say that there is indeed legal advice to the effect that the memorandum does not have the force of contract. It does not. But I repeat that we regard it as morally binding on the Government. We wish to be bound by the Memorandum of Understanding and wish to stick by it.

So where is the difference between us? I believe that it lies in something said by the noble Baroness, Lady Turner of Camden. I wrote down her words very carefully. She said that to put it on the face of the Bill gives some sort of guarantee. She then went on to correct herself and said: some proper sort of guarantee". That is exactly the difference between what my noble friend and many Members of the Committee who have spoken want and the Government's position. We believe that putting the guarantee in the terms of my noble friend on the face of the Bill could very well restrict the Secretary of State in giving the necessary sort of guarantee, because he might very well have to come back for primary legislation. It is the flexibility in the concession that I have offered to my noble friend in saying to BR that there must be a guarantee that we believe gives us the necessary flexibility to cover all the points that might arise. That in itself is a power for the Secretary of State, and I repeat that it is the very firm intention of my right honourable friend the Secretary of State to use that power. I give way to the noble Lord.

Lord Stoddart of Swindon

The Minister talked about flexibility; but flexibility can work both ways. He will find that that is precisely what people are worried about.

The Earl of Caithness

I understand that. That is precisely why, as a result of further representations made by my noble friend Lord Peyton, I was able to announce that very substantial concession to him. We have moved—it is hard to quantify—I believe 85 per cent. of the way to meet the anxieties of my noble friend.

Given that this matter is on recommitment, I hope that my noble friend will not press the amendment now. As my noble friend Lord Harmar-Nicholls, said—and the noble Lord, Lord Tordoff, echoed him—the difference is marginal. Perhaps we could enter into discussions with those concerned about this point. As the noble Lord, Lord Stoddart, says, the flexibility works both ways. We wish to have the flexibility so that we can cover every case for the pensioners. What we fear is that in putting it on the face of the Bill in primary legislation there might be a situation—I cannot say I envisage it now—in which some pensioners do not receive that protection. They will be very cross with the Government for not being able to give them that protection.

Therefore, I hope that my noble friend and I can meet between now and later stages of the Bill—we have two more bites of this cherry and it is the advantage of recommitment—together with anybody else who would like to come along. We certainly wish to discuss the matter with them. It is important that we get it right; but it is also important that we cover all the pensioners and not just some of them. The great difficulty lies in drafting it onto the face of the Bill. The noble Lord, Lord Clinton-Davis, is a lawyer and knows how clever lawyers can be. Even so, we wish to make certain that we cover everybody.

Lord Clinton-Davis

Before the Minister sits down, perhaps I may raise one point. At the moment he cannot envisage circumstances in which it would be necessary for the Minister to have recourse to primary legislation. It is that very fact—namely, that the Minister cannot cite or exemplify any such situation—that causes us some degree of anxiety about why he cannot go a little further down the road. He has been very open. The Committee will acknowledge that he indicated his openness to further discussions. I personally would wish to recommend that course.

The Minister said that there was a moral responsibility here. There may well be so far as he and the present Government are concerned. But they cannot bind their successors. Then we go back to the whole question of judicial review alone, which is not a satisfactory way of proceeding. That is why it is tremendously important to adopt what the noble Lord, Lord Peyton, backed by the noble Lord, Lord Harmar-Nicholls, had to say. Going down that route and recognising that the Government have made a number of concessions in principle, in protecting the large number of pensioners involved there is still a need to go that much further.

Lord Renton

Before my noble friend answers, I wonder whether he can give an assurance on a point that arises from his explanation. I am sure that, like all Members of the Committee, my noble friend the Minister is anxious that the present railway pensioners and those who achieve pensionable status before privatisation should, as a result of our legislation, not suffer and not have their pensions impaired. In order to achieve that, my noble friend pointed to what he considers to be the desirability of flexibility. That could mean several things. But we need to be told how flexibility will work and on what principles. Can he give an assurance that flexibility would be so applied as to ensure that none of the pensioners suffers from privatisation?

The Earl of Caithness

To answer my noble friend's point, it is precisely because we are concerned to make certain that no pensioner suffers from the measures that we have proposed that we wish to have that flexibility. As the noble Lord will know far better than I, that is what can be constraining about putting matters on the face of the Bill.

In reply to the noble Lord, Lord Clinton-Davis, the reason I said at the moment I cannot think of a case is because I am not an expert in this field. However, I am advised that there could very well be cases. I cannot think of one at the moment—certainly, I am not an expert. But at this point I am led to the conclusion that the right way forward, as I suggested to my noble friend Lord Peyton, is to have further discussions. There is precious little between us in our aim. It is a matter of how we get to the position of protecting the pensioner in the best possible way. We all want that.

I repeat that we are frightened about putting this on the face of the Bill which, as the Committee will know, acts as a constraint in the case which is not covered by the particular words. That is the point. I also take the point that we need to cover all the pensioners—every single one.

Lord Peyton of Yeovil

On that single point of withdrawing the amendment so that we can have further talks, as my noble friend knows, we have already had considerable talks. The Government have moved a long way. They have taken a 180 degree turn. I simply ask them to acknowledge what they have done on the face of the Bill. I cannot believe that, if they wanted to do so, they could not draft an amendment with all the flexibility required to cover every kind of pensioner in every possible condition, predictable and unpredictable, in the future.

Those are not my last words on this point. My noble friend has to go further than he has gone. Just to hope that further talks will succeed is simply not enough.

Lord Harmar-Nicholls

I do not think I can accept that judgment from my noble friend although I have had a good deal of sympathy with him until now. The margin of difference that existed before my noble friend spoke from the Dispatch Box is now even narrower. He has said that he is prepared to talk. My noble friend said that they have had talks in the past. From what we have heard today the talks in the past have produced some kind of result.

We are much further along the road towards what my noble friend Lord Peyton wants than before they had the previous talks. I think that he ought to accept the invitation to talk further to my noble friend, particularly as my noble friend has given the impression to me that he would approach those talks not with a closed mind. We all know the problem when you are to some extent a junior Minister of having to represent a department and the Government. In view of the offer he has made, I believe that to expect my noble friend at this stage completely to capitulate is against normal parliamentary good sense. I hope that my noble friend Lord Peyton will accept, however reluctantly, the invitation to talk in the hope that by the time we next meet on this topic the margin of difference will be almost so small that it can be called non-existent.

Lord Peyton of Yeovil

I do not wish to prolong this matter into a debate between my noble friend and myself. I should simply like to observe that, while I am extremely grateful to my noble friend Lord Harmar-Nicholls for his advice—and I always will be—he has not been a party to the talks which have taken place. They have been prolonged. I see no real move from the Government's position in July when they said that it would be inappropriate and wrong to put this item of the memorandum of agreement on the face of the Bill. I still remain of that opinion. What my noble friend has said today and what he said in his speech—I have read the words very carefully—gives me faint hope. I do not wish to suggest for a moment that my noble friend is trying to deceive me but I could not possibly withdraw the amendment without something more than that.

Lord Marsh

I wonder whether it would help the Committee if the Minister could give a brief indication of the kinds of areas which might be covered and the things which might emerge in the future talks which were not covered in the meetings, of which there were at least two or three, before the original debate. I attended one meeting and there were others. We have had other talks before this debate. It must be something pretty startling that the Minister is thinking of. Can he give some kind of indication? So far hours and hours of talks have brought us really to the point at which we were in the beginning. I do not quite share the optimism of the noble Lord, Lord Peyton, on the size of the change. The Government have always argued that they would seek to avoid pensioners suffering disadvantage as a result of this compulsory change. The only issue then, the only issue today and the only issue next time is how that can be made binding.

The Earl of Caithness

I was a little surprised by what my noble friend Lord Peyton said at the end of his remarks. He will recall that he met my honourable friend the Minister for Public Transport and myself at the end of last week and that we talked about pensions. At that stage we did not talk about the concession that I was able to offer to the Committee today because it was as a result of that discussion that we went away, thought even more and came forward with the concession today. I cannot foretell what 'will be the result of further discussion. All I can say to my noble friend Lord Peyton is that our aims have not changed but the method by which we are trying to get to the aims has changed. My noble friend's input has been considerable in this matter. It was as a direct result of the talks that we have had, followed by the talks that he had with my right honourable friend the Secretary of State yesterday, that we felt that we could—

Lord Peyton of Yeovil

Perhaps I may interrupt my noble friend for a moment. I should like to ask a very clear question. Does he consider that the talks will open up a real prospect of enshrining the guarantee which we are now discussing in the Bill? If he will go that far then he is altering the whole issue and I would be disposed to think again. Let me repeat the question. Is he really saying that the talks which he is now suggesting, unlike the talks which have already taken place, open up a real prospect of putting something in the Bill amounting to a guarantee of the solvency and index-linking of the fund?

4.45 p.m.

The Earl of Caithness

Before I come on to that point I shall finish off what I was saying to my noble friend. It was as a result of the previous discussion that I came forward today and offered the substantial concession. With regard to the future discussions which I hope we will have on this issue, I do not know at this stage whether we can resolve the difference between us. But it would certainly be my intention to try to resolve the difference between us. We can only decide that when we get into discussion, because with the experts on both sides we will be able to focus on the particular point of difference between us to see how that can best be tackled. I understand my noble friend's concern I think that he too will understand that I have a very valid point on behalf of the Government, which is to see whether we can reconcile the two points of view in order to reach an agreement that is satisfactory to everyone so that we are all convinced that we are not only going in the same direction but that we are using the right method and the agreed method to get there.

Lord Tordoff

The noble Earl is not answering the question from his noble friend. Does he consider that there is any possibility of this going on the face of the Bill? If he does not consider that there is any possibility, we had better resolve the matter today.

The Earl of Caithness

That is a different question. There is a possibility, certainly. What I understood my noble friend to be asking for was a probability. That is what I could not give. I would not offer talks if there was not a possibility.

Lord Boyd-Carpenter

I have listened to the whole of the debate without intervening and it seems to me that the Minister has been extremely flexible and extremely helpful. I rise only to say that it would seem a great pity if, having offered talks and offered them against the background of his own helpful attitude, the Committee were to jump the gun at this stage and try to come to a decision. It will still be open to the House at a later sitting to come to whatever decision it thinks fit. But to come to a decision now and thereby exclude most of the effect, and perhaps all the effect, of these talks would seem a great pity. For that reason, if my noble friend presses the amendment to a Division, I shall vote with the Government.

Lord Peyton of Yeovil

I apologise to the Committee for being too persistent. There is a procedural difficulty. Our procedures are a constant snare and delusion to all of us. In this instance I am advised that though we have been talking exclusively about Amendment No. 57, which I was pleased to deal with at this time because it comes early in the afternoon, a Division or a withdrawal at this time can only cover Amendment No. 4, on which my heart is in no way set. It is just a matter for my noble friend's convenience which I am always willing to promote. Perhaps he can tell me now whether he will find time for such talks before we come to the proper place of Amendment No. 57 and when he thinks they might be likely to occur.

Lord Clinton-Davis

Is not the situation this: when one votes on a paving amendment one in fact establishes the case by the vote which then makes it impossible for the Government to go back on the substantive vote which will take place later? That is the point, is it not, of elevating the debate by a paving amendment?

Lord Tordoff

Much as I would like to subscribe to that view, I believe that the noble Lord himself made it quite clear that these amendments are not linked. There is a difference between amendments which are grouped and those which are linked. If Amendment No. 57 were consequential on Amendment No. 4, it would be quite right that were a Division carried on Amendment No. 4, then one would expect the Government to accept Amendment No. 57. However, that is not the position on this occasion.

Lord Harmar-Nicholls

I do not believe that there is the need to waste even that time because the solution is so near. What is the difference? In his final words from the Dispatch Box my noble friend said that he could not say at the talks that the outcome will probably be what is asked for, but that it possibly could be what is asked for. The difference is almost non-existent. I believe that the talks should be allowed to take place. It is very ingenious of my noble friend to ask whether they could take place before we reach Amendment No. 57. My noble friend impressed me very much when he said that we shall have the talks with our advisors and everybody can contribute as to whether "possible" can be turned into "probable"—if it is possible to get together that number of people with the necessary expertise within the time available. If my noble friend can find it possible to accept the offer now, and get on with it, we can discuss the matter again at a later stage in the Bill if it has still not been settled. That seems good sense now that we have got as close as we have to a solution.

Lord Howie of Troon

I have listened very carefully to this debate. I do not wish to intervene at any great length, but I wish to throw a lifeline to the Government. Although the Minister has been very flexible, I believe that his tactics involve putting off the evil day. If we do not come to a decision now at Committee stage, the matter will be put off until Report stage. We might then conceivably put the issue off to Third Reading and then it might disappear altogether. That would be very sad because I believe that the general feeling of the Committee is in favour of the amendment put forward by the noble Lord, Lord Peyton.

I suggest to the Government the following course of action: as the difference between the two views here is very narrow, why do not the Government merely accept the amendment put forward by the noble Lord, Lord Peyton, at this Committee stage and then, if they feel that the amendment has gone too far and that they have been tied in too tightly so that they cannot meet the circumstances which the Minister says that he is unable to envisage, the Government could then possibly come back with further minor amendments which adjusted the amendment put forward by the noble Lord, Lord Peyton? I believe that were that to happen a great step forward would have been taken and probably honour on all sides would have been satisfied. We should accept the amendment of the noble Lord, Lord Peyton, now and then, if it becomes absolutely necessary, it would be possible to come forward with what must be a very minor and marginal amendment at a later stage rather than put off this crucial matter until a later stage

Lord Boyd-Carpenter

That would be a very odd way to legislate: to put something into the Bill at this stage on the understanding that it may well be amended later on. That is not the way in which this House conducts legislation. I hope that it will pay no attention to the advice which the noble Lord has just given.

Lord Peyton of Yeovil

We seem to be in a jam. The position seems to be this: whether the Committee wishes to do so or not, we could not divide now on Amendment No. 57. Therefore, I see some merit in saying that I shall not move Amendment No. 57 at the proper time later on this evening but I do so on these terms: that my noble friend will undertake to explore the matter in a way which has not yet been done. I place stress on that. Although I am deeply indebted to my noble friends for their advice that I should accept my noble friend's very reasonable suggestion, they have not had the doubtful privilege which I have had of treading this ground so thoroughly over a number of weeks. The issue has been gone into and the Government have not yet moved very much.

The particular paragraph in my noble friend's speech deserves the attention of some scholar far more profound than I in order to detect whether it means anything at all and, if it does, what it does mean. He said: I must advise the House that I think it … unwise to place a duty on the Secretary of State. A duty would have to be specific as to the circumstances in which it arose and this could lead to difficulties". I do not understand what the objection is to the duty being specific. It can also cover quite a range of possibilities. However, I conclude my remarks at this stage by referring to one or two points which my noble friend has made. He said that very few schemes exist with such a guarantee as this one now has. As far as I know there are very few schemes indeed which contain a closed fund such as this and which have been set up at the Government's own instance.

I hope that my noble friend will not ignore the fact that what has gone previously has generated in the minds of pensioners, who do not follow everything that the Government say with the utmost care and attention—they do not get the opportunity—a great deal of ill will and suspicion. I fear that the Government's unwillingness to bow to the principle in the Bill will add to that ill will and suspicion. The point has already been made that from time to time Secretaries of State behave in a very strange and unpredictable manner. Although I have the utmost confidence in my right honourable friend the present Secretary of State, I would not be in the least willing to suggest to pensioners that they should be content to rely on his successors forever and ever.

The memorandum of understanding is a very big step forward. The Government have agreed to it. Why on earth cannot they see it included in the Bill? If my noble friend can give me the kind of undertaking which I have asked for then I would undertake not to move the amendment today. However, I would require some kind of encouragement to believe that the amendment which I shall table for Report stage and the one which my noble friend puts down on the subject, come at a reasonable hour.

The Earl of Caithness

Perhaps I may assure my noble friend Lord Peyton that I would not have made the offer that I did to hold the urgent discussions which are needed between now and another stage if I were not prepared to explore his particular concerns in a way in which they have not yet been addressed.

Lord Peyton of Yeovil

With that, I am completely content. I shall not move Amendment No. 57. My noble friend has not dealt with Amendment No. 4 at all. If only he were minded to accept it.

The Earl of Caithness

It will not surprise the Committee if I say no to that one. We always believed that Amendment No. 4 was consequential on Amendment No. 57, and if my noble friend is not going to move Amendment No. 57 I think that it would be wise for the Committee not to accept Amendment No. 4 at this stage.

Lord Peyton of Yeovil

On that basis, I beg leave to withdraw Amendment No. 4, to which I attach very little importance.

Amendment, by leave, withdrawn.

5 p.m.

The Earl of Caithness moved Amendment No. 5:

Page 171, line 38, at end insert:

(""the joint industry scheme" means such occupational pension scheme as the Secretary of State may by order designate as the joint industry scheme for the purposes of this Schedule;").

The noble Earl said: In moving Amendment No. 5, with the leave of the Committee and especially, I hope, with the agreement of the noble Lord, Lord Clinton-Davis, I should like to speak also to Amendments Nos. 19 and 47.

Amendments Nos. 5 and 47 fulfil the commitment given by my right honourable friend the Secretary of State for Transport in a Written Answer on 20th May (Hansard cols. 237 and 238) in the other place that BR's serving staff who transfer to new employers will have the right to remain in the joint industry (pension) scheme for so long as they remain in continuous; employment in the railway industry. This is frequently referred to as the indefeasible right.

These amendments add the indefeasible right to the existing protection provisions. Government Amendment No. 5 defines the joint industry scheme as the scheme so designated by the Secretary of State. Government Amendment No. 47 adds a new paragraph 7A which provides the indefeasible right to the existing protection provisions. It will enable the Secretary of State to make orders conferring a right on eligible persons to continue to participate in the joint industry scheme for so long as they remain in continuous employment and their employer is engaged in the railway industry. Eligible persons are those employed by BR or a BR subsidiary and participating in a BR pension scheme at the time of Royal Assent to the Bill, together with those absent from employment but fulfilling prescribed conditions—for example, those on maternity or other special leave with a contractual entitlement to return. Sub-paragraph (7) provides for orders under this new paragraph to specify as being "railway industry" any class or description of activity which in the opinion of the Secretary of State falls within or is related to or connected with that industry. The orders under the new paragraph would be subject to the affirmative resolution procedure in line with all other orders made under Schedule 10.

Turning to Government. Amendment No. 19, this enables the Secretary of State to impose duties on the trustees of the transferee scheme and on an employer, if any, with respect to participation in a scheme to which employees of his are transferred. It also enables the: Secretary of State to require any person whose approval or consent is necessary to give that approval or consent. I commend these amendments to your Lordships and beg to move Amendment No. 5.

Lord Tordoff

I wonder whether the Minister can assist me. I believe that he was speaking to Amendments Nos. 5, 19 and 47, but was he speaking also to Amendments Nos. 48 to 56, which are Opposition amendments? My other problem relates to the numbers printed in bold on pages 7 and 8 of the Marshalled List. The numbers 17, 25, 29 and 42 etcetera seem to have intruded into the margin of at least my copy of the Marshalled List. I do not know whether it is the same for everybody.

The Deputy Chairman of Committees (Lord Aberdare)

Perhaps I may clarify that matter. Those numbers should all be obliterated. They are line numbers which unfortunately have been printed in large type. The numbers printed on pages 7 and 8 mean nothing as far as we are concerned at the moment.

Lord Tordoff

I am most obliged.

The Earl of Caithness

I was not going to deal specifically with Amendments Nos. 48 to 56 now because I thought that my introduction and explanation of Amendments Nos. 5, 19 and 47 would be so convincing that nobody would wish to comment on them.

Lord Peyton of Yeovil

If my noble friend is unwilling to do so, perhaps I may be permitted to refer briefly to Amendments Nos. 50, 52, 54 and 55. My noble friend has referred to the indefeasible right of existing British Rail employees to stay in the joint industry scheme. That is all very well, but the employer has to remain engaged in the railway industry. My amendments are designed to remove that crippling condition because it seems to me to be totally unjustifiable. An employee may be transferred against his will to some employment outside the railway industry by the same employer. The employer may cease to be engaged in the railway industry. In neither case would the employee have any option or choice in the matter at all. It would therefore seem to me to be a very oppressive condition.

In addition, there are a great many people, such as those engaged in either the infrastructure of the industry or in support functions, who will simply not know where they are. My amendments would secure the right to remain in the scheme unless and until the continuity of employment was interrupted by an action of the employee himself. That seems totally fair.

My argument is reinforced by the fact that, as far as I know, the Government have been unable so far to define what "the railway industry" is. That puts the employee in great difficulty. I am sure that my noble friend would not wish to resist such eminently sensible amendments and I take it that when he replies on Amendment No. 5 he will indicate his willingness to accept these

Baroness Turner of Camden

The noble Lord, Lord Peyton, has spoken to Amendments Nos. 50 and 52, but before we reach those, I have tabled Amendments Nos. 48 and 49 to Government Amendment No. 47. Perhaps it is appropriate for me to speak to them now given that the Minister has already spoken to Amendment No. 47 and has referred to new paragraph 7A.

As has already been explained, this side of the Committee feels that we have had inadequate time to consider these complicated and difficult amendments. I must advise the Committee that I am by no means certain whether Amendments Nos. 48 and 49 actually do what I want them to do. As the Committee will be aware, this is the first occasion on which I have had the pleasure of participating in our discussions on this Bill.

It would, of course, be possible for the Government to establish a living industry-wide pension scheme—and there is a lot to be said for industry-wide schemes in general. For one thing, they deal effectively with the whole question of transferability between different firms and organisations in the same industry. It is a pity that there are relatively few industry-wide schemes in the private sector since they are recognised by many experts as being a very good way of providing adequate pension cover for employees who move around within an industry from one employer to another. As we know in the case of this Bill, we have had a series of understandings, which we have already discussed, which are designed to protect the pension rights of those already employed in the industry immediately prior to the Act coming into force or of those who have already been employed in that industry.

The government amendments with which we are now dealing refer to entitlement to participate in the joint industry scheme. They do nothing for new entrants who come into the industry after the date of privatisation. The Government's position appears to be that after that date pension provision will be a matter for negotiation between the employer and the employee. I think that that is undesirable for a number of reasons. First, it does not make much financial sense. I am told, for example, that in 1991–92 10,000 people joined the industry while 3,500 left on a pension. A genuine industry-wide scheme would obviously benefit from the contributions made by or on behalf of new entrants.

Secondly, if new employees can be hired with less good, less expensive pension provision than existing employees, what becomes of the cherished principle of the level playing field? Obviously, those employers offering a cheaper employment package, including less good pensions, would be at a built-in advantage. Furthermore, in the event of redundancy, the older employees would be more vulnerable and would be at greater risk than cheaper, newer employees with less good pension arrangements.

If all employers are not bound to offer the same pension provision to all employees, the opportunity exists for the bad to undercut the good and the result would be that ultimately everyone would be dragged down. That is not acceptable. What we are suggesting is not new. There are schemes run on an industry-wide basis covering employees in the public sector and those in the private sector in case the Government tell us, as I believe they already have, that it would not be possible to combine public sector and private sector provision in that way.

We are anxious to protect benefits based upon continuity of employment as well; hence some of the later amendments dealing with that issue. I have no doubt that we shall be told again that the Government are against that in principle; that there are technical problems; that it would be a matter, after privatisation, for negotiation between the employer, who in terms of unemployment negotiates from a position of strength, and those who desperately need employment. But technical objections relative to the Inland Revenue or anyone else can be overcome. It is a matter of political will.

If am well aware that all the discussion so far has taken place on the basis that there will be a closed fund. I am aware that I am reintroducing this issue at a rather late stage. Nevertheless there is strong feeling about this matter in the industry. The unions have written to me about it. They still feel strongly that the failure to provide a living industry-wide fund is a threat to people already in employment who are already vulnerable.

I am asking whether, despite all that has gone before, the Minister can be persuaded to look again at this whole question because it is important, not just for present employees but for those who will join the industry in the future. I do not believe that it is acceptable to have a worse pension provision for one set of employees and reasonable provision which is protected for others.

The Earl of Caithness

I listened with care to what my noble friend Lord Peyton and the noble Baroness said when speaking to their amendments, which are amendments to my Amendment No. 47. I shall turn first to what the noble Baroness had to say about Amendments Nos. 48, 49, 51, 53 and 56.

The noble Baroness, Lady Turner, seeks to extend the indefeasible right to persons who join BR after Royal Assent and to extend the indefeasible right to survive voluntary transfers. I believe both of those principles to be wrong.

On Amendment No. 48, the Government's policy is to protect the existing pension rights of those BR employees existing at the time of privatisation. The cut-off date is to be that of the passing of the Act. I consider that it would be wrong to extend the indefeasible right to any person joining residual BR at any time in the future when terms and conditions of employment may be totally different. The noble Baroness was right when she said that I would use that argument. That must surely be a matter for BR to decide, like any other employer.

Turning to Amendments Nos. 49, 51, 53 and 56, the general protection given under protection orders will not survive voluntary transfers. We have agreed that the rules of the joint industry scheme should provide for employees to transfer voluntarily between different participating employers in that scheme without losing continuity of service for pension purposes in order to facilitate the continuation of the existing mobility within the industry. But such people ought to be free to negotiate with their new employer to transfer to his section of the joint industry scheme. That appears perfectly satisfactory to us.

Even if someone's indefeasible right were to be able to survive his voluntary transfer, it might have no effect in practice. The prospective new employer could refuse to offer him employment unless he agreed to waive the right. He could be at a disadvantage compared with other potential recruits. The proposed amendment provides for voluntary waiver, as indeed it must; general pensions law no longer permits membership of an occupational scheme to be compulsory.

I move now to Amendments Nos. 50, 52, 54 and 55 tabled by my noble friend Lord Peyton. I know my noble friend will understand that, although a person himself may no longer have anything to do with the railway industry, provided his employer does, the right to remain in the joint industry scheme will continue. However, we do not consider it sensible to prolong the indefeasible right in a situation where a person's employer no longer has any involvement in the railway industry. To do so could lead to a circumstance where, for example, a former BR computer programmer, now employed by a company which has resorted to producing computer games, has an individual right to insist on remaining in the railway joint industry scheme. If his employer is content to participate in the joint industry scheme, and its rules allow, he might continue. But if there are just a very few remaining employees with the right, it would be burdensome on the employer for them to be able to insist.

However—and this is an important protection and one of which I know that my noble friend will take careful note—provided the continuity of employment has not been broken, such employees whose pension rights are transferred outside the rail industry will still retain their "no less favourable" protection under paragraph 6 of Schedule 10. Therefore an employer would be required to ensure that his alternative pension scheme provided no less favourable benefits than those provided by the joint industry scheme. I believe that that will go a long way towards reassuring my noble friend.

5.15 p.m.

Lord Peyton of Yeovil

Perhaps my noble friend will answer one point. Is there available any acceptable definition of a "railway industry"? It is an important point.

The Earl of Caithness

I have a number of points on the rail industry to which I shall come in a moment. Under the new paragraph, my right honourable friend the Secretary of State will have power under sub-paragraph (7) to make orders specifying activities he regards as being within the railway industry. We consider that process to be better than attempting a rigid definition of that industry.

I come now to the point my noble friend has just raised. The intention is that my right honourable friend the Secretary of State should be able to specify, among other things, the following types of industry: operating a railway asset, whether licensed or exempt; providing railway services, as defined in Clause 81; providing services comprised in the provision or operation of a network—for example, the maintenance of track or a station, cleaning or car parking, whether or not provided by a licence holder. It will also be possible for him to specify services provided to train operators such as providing train drivers, leasing or otherwise providing rail rolling stock; the cleaning of trains; the selling of tickets and heavy maintenance; such activities as the maintenance of trains or other goods used in providing railway services; the activities of the regulator, the Franchising Director, the Central Rail Users Consultative Committee and the Rail Users Consultative Committee, or any trade association or similar private sector body whose activities are wholly or mainly related to the railway industry. In addition, we have done our best to ensure that the maximum scope can be given to the term "railway industry". I hope that that goes a long way towards calming some of my noble friend's anxieties.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 6:

Page 171, line 40, leave out from ("scheme") to end of line 41 and insert:

("(b) any pensioner under that scheme; and

(c) any other person who has pension rights under that scheme;").

On Question, amendment agreed to.

Baroness Turner of Camden moved Amendment No. 7:

Page 171, line 44, at end insert:

("'no less favourable' means in relation to pension rights a right to or eligibility for payment of a pension or other benefits which in every circumstance is at least as favourable as the pension or other benefit which would have been payable in the same circumstances had the person to or in respect of whom it is paid remained a member of an existing pension scheme or if the existing pension scheme of which he is a member has remained unamended, as the case may be.").

The noble Baroness said: I believe that Amendment No. 46 is grouped with this amendment.

The memorandum of understanding provides that anyone retiring from the railway industry in future will do so on terms, no less favourable than hitherto".

As we have already said, we on this side of the Committee are concerned, and our legal advice tells us, that the memorandum is not in itself legally binding. We have been informed that if an order made by the Secretary of State in the future adopts a formulation which is less generous than the apparent intention set out in the memorandum, the Secretary of State's decision will be subject to challenge only if it is so demonstrably unreasonable that no reasonable Secretary of State could have made an order in those terms. Those actually affected by such an order may nevertheless continue to feel that they have not been dealt with fairly by reference to the memorandum. If the Government intend to honour the memorandum completely, would it not be better, as we have said already in respect of other issues, to write these terms unambiguously into legislation?

The amendment that we are suggesting provides for no less favourable treatment in every circumstance. I understand that that could be important to some potential beneficiaries. For example, under present provisions there are entitlements to lump sums on retirement. Currently they are based on service. If in the future the employee remains with one employer throughout his working life in the industry presumably there will be no problem and he will have the same entitlement as if privatisation had never taken place.

But let us suppose that the employee works with a number of different employers. I am given to understand that he or she is likely to be less well off since the lump sum will be based on the latest period of employment prior to retirement. If that is so he or she would be worse off despite the memorandum, whereas the inclusion of the words that we are suggesting—"no less favourable in every circumstance"—would give employees the protection that they are seeking. Presumably, all Members of the Committee believe that they should have that. I hope that in the circumstances the Minister will accept what we are saying and will be prepared to agree to our amendment.

Perhaps I may deal with Amendment No. 46. The amendments are grouped together and they deal with a similar issue but they are not exactly the same. The amendment deals with protection for the contribution conditions. The BR scheme is not funded on a balance of cost basis, which I understand is the case with most private final salary schemes; in other words, the kind of basis where the employer is bound to pay into the scheme whatever it takes to meet pension promises, while the employee normally pays a fixed amount.

The BR scheme is a fixed-ratio pension scheme, where contributions must be paid by employers as a fixed minimum multiple of employee contributions. That is advantageous to members. If employer contributions are to be reduced below the minimum, the employee contributions must be reduced too. Furthermore, the fixed minimum multiple gives a greater likelihood of surpluses being generated in the future.

The right to be, and to remain, a member of a pension scheme which required employers to pay a minimum multiple of employee contributions was recognised as legally protected in the litigation concerning a recent pension case—LRT Pension Fund Trustee Company and Others v. Hatt and Others. It was held in that case that the removal of the employer's minimum contribution of two and one-third times the employee contributions by means of a process permitted by a private Act of Parliament was unlawful.

It appears to me that the same issues arise in this case. Indeed, I have been advised that it is arguable that European law requires that result if an undertaking in which an employee is employed is transferred from one employer to another. Article 3(3) of Directive 77/187 of the Council of the EC requires member states to adopt the measures necessary to protect the interests of employees and of persons no longer employed in the transferor's business at the time of the transfer in respect of rights conferring on them immediate or prospective entitlement to old-age benefits, including survivors' benefits under a pension scheme.

Moreover, the Government have accepted that pension rights in the event of a transfer must be broadly comparable. If a departure from the method of funding is allowed, the likely result is that they will not be. As I and other Members of the Committee have indicated, that is likely to add to the sense of insecurity which pensioners and prospective pensioners may have. I beg to move.

The Earl of Caithness

Perhaps I, too, may deal with the two amendments separately because that may be for the convenience of the Committee.

The effect of Amendment No. 7 would be to provide that in every circumstance pensions and other benefits—for example, retirement lump sum, death in service lump sum, spouse's benefits—shall be at least as favourable as if the member had remained in an existing pension scheme, or if the existing scheme in which he is a member had remained unamended, as the case may be.

The purpose seems to be to ensure that if the rules of any existing BR scheme are amended in the future in such a way that the current level of benefits is reduced, the original level of benefits shall still apply. The Government could not accept that.

Amendment No. 46 seeks similar provision on the face of the Bill that the protection order covering pension rights of existing employees shall make it clear that the words "no less favourable" include the right to belong to a shared cost scheme, as now, and that the same ratio of employee to employer contributions should continue.

We will be debating separately Amendment No. 58 which covers the pension rights of existing BR employees. That will be the opportunity for rehearsing the Government's position on the rights of staff remaining in the railway industry. At this stage I can only say that we are not at all persuaded that the Bill is the appropriate vehicle for seeking to define what is "no less favourable". For example, are "no less favourable" rights ones which are actuarially equivalent to the current rights or must they include at the very least some of the principal elements of the current rights? Indeed, should the future rights mirror image the ones that they replace? This is detail which is surely best left to an order under paragraph 6 of Schedule 10. Members of the Committee will of course have the opportunity to consider these matters in detail when a draft order is laid. I confirm that that will be under an affirmative resolution.

I hope that the noble Baroness, Lady Turner of Camden, will accept that our reluctance is no reflection on the Government's honour. We simply do not believe that we should be seeking to enshrine these terms in primary legislation. The pensions orders are the place for ensuring that we get the detail right for every possible case.

Lord Tordoff

Again, we face the old problem with affirmative orders; namely, that this Chamber cannot amend orders nor can it vote against them. Clearly, the Committee would prefer to see this provision written on to the face of the Bill.

I listened to what the Minister said, but I found it difficult to understand the basis. He appeared to say that he does not want these aspects to be any less favourable, but he considers that perhaps it is all unnecessary. Will the Minister go over that part of his brief again because he slightly lost me at that stage?

The Earl of Caithness

Perhaps I may summarise the point that I was making. We are discussing a technical area; that is, the definition of "no less favourable". The noble Lord, Lord Tordoff, will be aware that an order will be laid under paragraph 6 of Schedule 10. Before that we shall discuss Amendment No. 58 when we shall be able to go into more detail. The Government's view is that the order under Schedule 10 is the right place in which to set out the definition. It is also an order which is subject to affirmative resolution.

Baroness Turner of Camden

I am disappointed by the Minister's response although I am not entirely surprised. I found it difficult to follow his reasoning. I understood the Government's position to be that people should not be worse off as a result of privatisation. I gave an example which could arise; that of people expecting to have an entitlement to a lump sum on retirement. If they had been employed by BR for the whole of their working lives they would have a lump sum based on that continuous service. If, however, they reach retirement at some time in the future with a variety of employments within the railway industry they could well find themselves worse off unless there is an absolute guarantee that they will not be any worse off than had there been no privatisation.

I am certain that individuals who find themselves obtaining a lump sum based on a shorter period of employment than would otherwise have been the case had there been no privatisation, will not consider that they have had a no-worsening guarantee. Therefore, I do not accept what the Minister said this afternoon. We must look again at our wording and take further advice about it. It may be that we must return to this matter on Report.

5.30 p.m.

Lord Tordoff

Before the noble Baroness withdraws the amendment, will the Government say at this stage what they mean by "no less favourable"? The Minister says that we must wait for the order to be produced. However, perhaps he will give an indication as to what the Government mean by "no less favourable".

The Earl of Caithness

I cannot go beyond giving the most simplistic definition of "no less favourable". Were I to go beyond that and the answer already given to the Committee I should be getting into so much technical detail that I would be bound to miss something. It is not that I do not wish to help the noble Lord but it is an extremely technical area. We are all agreed that we want to get this right. We want to make it "no less favourable". However, because of the technicality and detail involved, we believe that the order is the right place for such a definition rather than writing it on the face of the Bill.

Lord Tordoff

I am sorry but the Committee will understand the difficulty that we face. When the order is produced, if there are matters which do not satisfy the Chamber, there is nothing we can do about it. We can debate it but by convention we have no option but to pass it. Well, we have an option but it is not an option which we exercise. We certainly have no option to amend it. Before we reach the next stage of the Bill perhaps the Government will reconsider and give us a firmer assurance as regards the meaning of the phrase in the Government's view.

Lord Clinton-Davis

Does the Minister propose to respond to that point? I endorse what the noble Lord, Lord Tordoff, said. It looks as though the Minister seeks to rely on a kind of moral or political commitment. Political commitments are not enforceable. What is to be the position if, as has already been said, when the Minister comes forward with this admittedly complex statutory instrument there is just the same muddle which has existed as regards pensions generally?

That is a wholly unsatisfactory state of affairs and it is not right that that large body of pensioners should be left in a position of uncertainty until such time as the Government decide to come forward with a statutory instrument. The fact that it will not be possible to amend the order is not acceptable to Members on this side of the Committee. The Minister must concede that there are great problems. He has brought forward innumerable amendments on these difficult pensions issues in the course of our debate in this Chamber. Who is to say that he will get it right as regards that order?

Therefore, it is imperative that the Minister should give an undertaking—I hope that he will not think that I am being unreasonable—to reflect further on the point between now and Report and endeavour to provide us with a better definition of "no less favourable" as regards the Government's commitment. We shall return to this matter. If the Minister is not able to make out a satisfactory case when we debate it on the next occasion, we shall have to divide the House.

The Earl of Caithness

That is entirely a matter for the noble Lord. I cannot give him the assurance which he seeks. "No less favourable" must be interpreted in the context in which it is used and must take account of all the circumstances in the case. That is why the definition must be specific to the order to which it relates. Until we have the orders, we cannot reach a precise definition of "no less favourable".

I understand the difficulty which the noble Lord is in in that regard. He wishes to be absolutely specific at this time and wishes the definition to be written on the face of the Bill. I cannot give the noble Lord an absolutely correct definition until the order and its precise terms are known and that may vary from order to order. Therefore, it is extremely difficult to give him the answer which he requires. Indeed, I cannot give him that answer.

Baroness Turner of Camden

I shall withdraw the amendment but I am not happy about having to do so. It seems to me that the Government are expecting a great deal of flexibility all round on this legislation. I do not find that acceptable.

I shall withdraw the amendment this afternoon. However, before Report stage I shall look carefully at our definition to see whether we can produce an amendment which will give the added protection or the feeling of protection which we seek to give to people who will be affected by the legislation. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 8:

Page 171, line 45, leave out ("by section 66(1) of the Social Security Pensions Act 1975") and insert ("in section 1 of the Pension Schemes Act 1993;").

The noble Earl said: I believe that the noble Lord, Lord Clinton-Davis, wishes me to speak to this amendment. Is that correct?

Lord Clinton-Davis

I merely wish the noble Earl to tell us in simple terms what each of the amendments is about, bearing in mind that there is an extremely important House of Lords' precedent that if there is a difference about construction the courts can consider the matter on the basis of what the Minister has said. If the Minister says nothing, the court cannot be helped in any way. That is why it is important for the Minister to give a resumé—it need be only two or three lines—of what each of the amendments is about.

The Earl of Caithness

I am grateful to the noble Lord for clarifying his complete change of position on this issue. Technical amendments were moved in Committee which the noble Lord was happy to accept without comment. I understand that in future he will not accept technical or drafting amendments without an explanation.

In moving this amendment I shall speak also to Amendments Nos. 15 and 79. Amendments Nos. 8 and 15 update in paragraph 1(1) the definition of "occupational pension scheme" and paragraph 3(3) (d) with reference to recent legislation which is replacing the Social Security Pensions Act 1975. They also bring paragraph 3(3) into line with the extension of the provisions of Schedule 10 to Northern Ireland.

Amendment No. 79 provides transitory provisions in case the provisions in the 1993 Pension Schemes Act and its Northern Ireland equivalent, which are referred to in the Railways Bill, have not come into force by the time that Schedule 10 comes into force. The fall-back provisions are the equivalent sections and parts of the existing Social Security Pensions Act 1975 and its Northern Ireland equivalent. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 9:

Page 172, leave out line 9.

The noble Earl said: In moving this amendment I shall speak also to Amendments Nos. 22 to 25 and 27 to 44. Despite the apparent complexity of the provisions proposed, I hope we shall be able to deal with them in quite simple terms. But that depends on the noble Lord, Lord Clinton-Davis.

Many of the Government's amendments will be familiar because they were tabled on 15th July. The noble Lord has had the Recess in which to study them. They were then subsequently withdrawn in Committee on 21st July. The key amendment in this group is government Amendment No. 22. It replaces the original definition, which was considered unnecessarily complex, with a simplified but nevertheless comprehensive definition of "protected persons" for the purposes of protecting their pension entitlements under the provisions of Schedule 10. This is an important definition. I can assure the Committee that nothing is lost through this simplification and that all who were protected by virtue of the original paragraph 5 remain so protected.

The remaining government amendments are either of a consequential nature or comprise a variety of minor technical points which correct omissions or drafting imperfections or make detailed clarifications. I shall of course speak at length to all of them in due course. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 10:

Page 172, line 20, at end insert:

("(2A) Any power to make an order under or by virtue of this Schedule in relation to an existing scheme, the joint industry scheme, a new scheme, the Transport Police scheme, or a designated scheme within the meaning of paragraph 9 below shall be exercisable notwithstanding that the occupational pension scheme in question only becomes such a scheme by virtue of its establishment or designation as such in the instrument which contains the order in question; and references to such schemes shall be construed accordingly.").

The noble Earl said: This is another technical amendment to provide that orders affecting schemes can be made within the order which establishes or designates them. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 11:

Page 172, leave out lines 34 and 35.

The noble Earl said: In moving the above amendment I shall, with the leave of the Committee, speak also to Amendment No. 14. We considered the point and, on reflection, we believe that paragraph 2(2) (d), which provided for payments to the trustees of a new scheme by any person, whether contributing to the scheme or not, is no longer necessary. Adequate provision for the payment of contributions can be included in the scheme by virtue of paragraphs 2(2) (b) and (c), which relate to contributions by the participant and his employer. It would be quite exceptional to require contributions from anyone else, and we do not propose to do so. Amendment No. 14 is a related technical amendment which makes the provisions of paragraphs 2(2) and 3(2) consistent with each other. I hope that the proposed amendments will be welcomed. I beg to move.

Lord Clinton-Davis

Why did the Minister come to the conclusion that the previous legislative proposals had been rendered unnecessary?

The Earl of Caithness

We did so because, while the noble Lord was having a nice time forgetting about the Railways Bill, we were working on it.

Lord Clinton-Davis

That was a very silly and childish remark. The noble Earl is typically childish from time to time and resorts to that sort of thing. I should like to know the specific reason why the provision was put forward in the original way, then found to be unnecessary and finally found to be in need of redrafting. It is a perfectly reasonable question which the Minister must answer.

The Earl of Caithness

I gave the answer when I read out the reason for proposing the amendment. I shall repeat it for the benefit of the noble Lord. On reflection, we believe that paragraph 2(2) (d), which provided for payments to the trustees of a new scheme by any person, whether contributing to the scheme or not, is no longer necessary. Adequate provision for the payment of contributions can be included in the scheme by virtue of paragraphs 2(2) (b) and (c), which relate to contributions by the participant and his employer. It will be quite exceptional to require contributions from anyone else. We do not propose to do so

With the very best will in the world, we drafted the Bill as we thought correct; but, on reflection, we found—as I am sure the noble Lord would agree—that sometimes you can do things a little better than is the case the first time.

Lord Clinton-Davis

Yes, but not to the extent to which the Government have resorted in relation to this Bill. They got everything wrong and are now trying to put matters right at the last moment.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 12:

Page 172, line 39, at end insert:

("(3) Any occupational pension scheme established under this paragraph shall be treated for all purposes as if it were a pension scheme established under an irrevocable trust.").

The noble Earl said: This is another technical amendment which provides that new schemes established by order under paragraph 2 shall be treated as being established under an "irrevocable trust". The intent is to attract the concepts of trust law and the tax exemptions which apply to pension schemes established by irrevocable trust. I beg to move.

On Question, amendment agreed to.

5.45 p.m.

Lord Clinton-Davis moved Amendment No. 13:

Page 172, line 39, at end insert:

("() An order under this section shall require the scheme as to one half to be administered by a board of trustees appointed by the employer, or former employers, of persons who participate in the scheme, and as to one half by persons who participate in the scheme or their representatives and the Board shall be required to appoint the actuary.").

The noble Lord said: The purpose of the amendment is twofold. First, it is to prevent any division of trustees on the board from being weighted by the government appointee against those representing employee interests and, secondly, it is to provide the board with the duty to appoint an actuary. Members of the Committee will recall that, when we debated on 21st July issues relating to the Memorandum of Understanding, some degree of anxiety was expressed over the Government's intention to appoint a director of the trustee company. I expressed the reason behind that at the time, but I do not believe that the point was answered by the Minister.

Trustees have fiduciary duties to the trust. One has to ask how one can square that situation with the position of a government appointee. Indeed, one has to ask what is the position of the government appointee. Is he there to observe the same fiduciary duties to the trust as the other trustees? If so, what is the point of having him there? It is an area which is replete with possibilities of conflict of interest. I hope that the Government will further reflect on the matter. Certainly, they have done little to try to resolve the anxieties that have been expressed, especially by employee trustees and others. It is a matter which also causes a good deal of concern so far as concerns pensioners: they want to feel that their situation is secure.

When we debated such matters on the last occasion, we did not have the benefit of the Goode Report, which was published fairly recently. I think that it would be appropriate for the Minister to give us some indication as to whether the Government have taken the recommendations of that report into account as regards the issue of divisions between employers and employees on the trustee bodies.

I have a simple question to ask. I should like to know where the government director would sit? Is he there as an arbitrator? Is he there to represent the position of the Government in relation to such matters? One simply does not know the answer and the memorandum does not clarify the matter. The memorandum simply proposes the appointment of a government director. What we want is clarification of the position. What is the director's role to be? I have to say that I shall need much convincing that the appointment of such a director is of any importance or significance; indeed, I believe it to be inappropriate. The appointment by the Government of such a director would suggest that he will owe to the Secretary of State who appoints him some duty differing from that of the other trustees.

The second matter that arises is that it is entirely unclear as to how any potential conflict between the government trustee and the others is to be resolved. The Government have been totally silent on that aspect in the memorandum. I believe that it is important and that it is an issue with which the Government should deal tonight. Moreover, the means whereby the other directors of the trustee company are to be indemnified or protected from the action of the government director are wholly unexplained.

What we want from the noble Earl is an assurance that the government director will in fact owe the same fiduciary duties to the trustee company and to the scheme as any other director and that he will not be answerable to the Minister. If that were to be the case, we should have a legally enforceable assurance for the future. It would not be a wholly satisfactory one, but it would at least be better than the present silence on the issue. If the government director acted in a way suggesting that he were answerable to the Secretary of State and not to the beneficiaries of the scheme, it is conceivable that a legal action might be maintained that he had acted in breach of his fiduciary obligations. That is another matter that the Government must clarify.

However, equally critical is the fact that the statutory instrument which would create the new closed scheme and the formal documents which constitute the scheme—that is, the articles of association of the trustee company, the trust deed and the rules—must also reflect that assurance. If they do not do so, I think that we could assume that the Minister's assurance would be raised in any debate upon the affirmative resolution required for the statutory instrument.

We are discussing an important matter. I should like to advert to one or two of the recommendations arising from the Goode Report which seem to be relevant. I merely refer to the conclusions of the report rather than to whole paragraphs. Paragraph 46 of the conclusions provides that certain rights need to be reserved to the trustees irrespective of what the trust deed provides. Decisions on certain matters should be reserved to the trustees by legislation, for example appointing the scheme auditor, actuary, fund manager and other professional advisers. That duty as regards the auditor and the actuary is quite clearly set out in the Goode Report and we are saying it should be reflected in this Bill.

The second provision that is relevant concerns directing the scheme actuary as to whether discretionary benefits should be taken into account in computing cash equivalent transfer values for individual transfers. Goode is suggesting that specific duties need to be provided for. We have suggested in the amendment that the board of trustees should appoint the actuary. We are also proposing that, An order under this section shall require the scheme as to one half to be administered by a board of trustees appointed by the employer, or former employers, of persons who participate in the scheme, and as to one half by persons who participate in the scheme or their representatives".

That seems to me to be an equitable way of dealing with the matter and would also help to avoid the problems which have been compounded by the Government. I beg to move.

Lord Tordoff

I do not wish to pursue this argument although I agree with it. However, it gives me the opportunity to raise a matter I have been wanting to raise for some time, and that is the position of the pensioners themselves in relation to the trustee bodies. As I understand the position at the moment, there is no direct pensioner representation on any of these bodies. The employees are represented through their trade unions and the employers are represented—we know all about that—but there is no direct pensioner representation. Frankly, I am not sure how that can be achieved but I think it is important it should be achieved in some way, particularly in the future.

I realise that the pensioner organisations themselves are not a cohesive body. There are a number of pensioner organisations. I wonder whether the Government have directed their mind to this problem. It seems to me unfortunate that pensioners could in certain cases be squeezed out between the upper and nether millstone of the employer and the trade union representation. I do not impute any disreputable intentions to those people, but I hope the Government understand that there is a problem here. I know that representations have been made to them in the past. Is there any way that we can introduce into the Bill some method of making sure that the pensioners' voice is heard loud and clear as regards representation?

The Earl of Caithness

While I understand the reasons behind the amendment I shall resist it because it is not necessary. First of all, we have already said that we will be replicating the effect of the existing rules of the BR pension scheme in the rules of the new pension schemes that are to be established. Those rules already provide that membership of the management committee is to be shared equally between employer and employee representatives; and the corporate trustee, the BR Pension Trustee Company, has directors appointed in equal numbers by the employer and employees. I can assure the noble Lord, Lord Clinton-Davis, that there is no intention to make any change, and given that undertaking there is no need to add to the Bill in this respect.

Secondly, it would appear to exclude the appointment of independent trustees if these were desired in the future; and it might inhibit the appointment of a government director to the pensioners' section of the scheme. We have riot concluded yet precisely how he should be appointed but I am told that the trustees are rather keen on the idea.

Finally, I turn to the question of the BR board appointing the actuary to the scheme. There are three points against this part of the noble Lord's proposal. First of all, it would be inappropriate to provide for the BR board to appoint the actuary for ever. Secondly, it is for the trustees to appoint the actuary. I need not remind the noble Lord that it is the trustees who have agreed that the Government Actuary will be a joint actuary to the pensioners' closed fund. Thirdly, the Pensions Law Review Committee has recommended in Recommendation 82 that trustees should appoint the actuary to a fund, so it would go against that too.

I now turn to some of the specific points that the noble Lord raised. He referred to the Goode Committee recommendations on pensions. Recommendation 37 of the Goode Committee's report encourages the appointment of some pensioner representatives as trustees. I consider that this is right and certainly most appropriate for the proposed pensioners' closed section of the joint industry scheme. I shall welcome the present trustees' views as to how these representatives might be selected. The Goode Committee itself makes no recommendation but thinks it is a matter for the pensions regulator who it proposes might develop policy.

Recommendation 183 of the Goode Report states: The treatment of future privatisations should accommodate the concern of scheme members as to the security of their pension entitlements and the application of surplus funds". That has been our aim in railway privatisation, and I believe we have already achieved it.

The Goode Committee report was published by my right honourable friend the Secretary of State on 30th September. We have not yet commented on this report but I believe that our proposals for railway pensions after privatisation give rise to no significant conflict in principle with the report's recommendations. We shall all need to consider the report properly.

The noble Lord, Lord Clinton-Davis, also mentioned the role of the government director. The appointment of the government director to the new closed fund is to ensure that the interests of the taxpayer at large are protected. The Government are proposing to provide an absolute guarantee providing index-linked benefits. It would be irresponsible if the Government were not to take steps, through the appointment of a director with appropriate powers and of a joint actuary, to protect their interest in the scheme. I can confirm to the noble Lord that the government director would owe the same duties to the trustee company as any other director.

Lord Clinton-Davis

It is in that regard that problems could arise because the Government will be serving the purposes that the Minister outlined. That could be in conflict with the advice that may be given to the rest of the trustees. One could have a potential area of conflict here. If the Government go ahead, as they have indicated, with the appointment of the government director in relation to the closed fund, there could be an area of conflict and no means of resolving it. It seems to me that there is a clear difference between a government director, who presumably will have a duty to the Government, and the rest of the directors. It is all very well to say that he will share the same duties as the others, but I do not see how that is consistent with the kind of facts the Government have produced in this debate and on previous occasions.

There is a potential area of conflict. I do not propose to press this issue tonight because clearly we shall have to consider this area further. As regards the Goode recommendations, I have a great deal of sympathy with the point that was raised by the noble Lord, Lord Tordoff. However, as he himself recognised, there are considerable difficulties in determining who is to be a pensioner representative. At the moment I believe, that existing pensioners have been well served by the trustees, and indeed there is no evidence to suggest otherwise. But nonetheless this is an important recommendation and I hope the Minister will indicate how the Government propose to embrace some of the Goode recommendations which are relevant to this matter later on, if and when the scheme comes into operation. Presumably this would be done by statutory instrument. But I am not sure about that. The Minister will have to indicate whether that is the case.

The Minister is quite right to say that the actuary is appointed by the trustees rather than the board. That is clearly an error on our part. We too can make errors from time to time. The Minister does not have a monopoly in that, although he seems to exercise it. It is appropriate that we should reconsider that point.

Having regard to the points that have been made by the Minister, which we shall take strongly into account, I shall seek leave to withdraw the amendment.

Lord Tordoff

Before the noble Lord does so perhaps I may return to the issue of the pensioner representatives. I take his point that so far the pensioners have been reasonably well served. However, I believe that some of the pensioners would complain that they were not consulted over the contributions holiday which occurred in the last couple of years or so. They feel that if the fund had been allowed to build up they might have been better served at the end of the day and the pot for distribution would have been greater. It was not necessarily in the interests of either the employers or the current employees to put more money into that pot, although it might have been in the long-term interests of the pensioners. I believe that there is a specific case in which the pensioners have perhaps not been as well served as they might have been if their voice could have been heard.

Before we leave the point perhaps I may ask the Minister whether it is the intention to consider putting down amendments which implement more of the Goode Report than has so far been the case in relation to that particular point.

6 p.m.

The Earl of Caithness

That is a very difficult question to answer because it depends on when the Government finalise their thoughts on the matter. Should the Government finalise their thoughts and amendments are necessary, I am sure that further amendments will be welcomed by the noble Lord, Lord Tordoff.

Lord Tordoff

I do not expect the noble Earl to reply again, but perhaps I may press him to direct his attention to the problem in the very short time we have before the Bill finally leaves this Chamber. We have identified an important point today.

Lord Clinton-Davis

The Minister does not appear to be willing to respond to the noble Lord on that point. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 14:

Page 173, line 1, leave out from second ("provision") to end of line 17 and insert ("with respect to any of the matters specified in paragraphs (a) to (g) of paragraph 2(2) above.").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 15:

Page 173, line 23, leave out ("Social Security Pensions Act 1975") and insert ("Pension Schemes Act 1993 or Part III of the Pension Schemes (Northern Ireland) Act 1993;").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 16:

Page 173, line 29, leave out ("amend an existing scheme by") and insert ("make an").

The noble Earl said: The amendment simplifies the drafting of paragraph 3(4). I beg to move.

On Question, amendment agreed to.

Lord Carmichael of Kelvingrove moved Amendment No. 17:

Page 173, line 30, leave out ("after consultation with") and insert ("with the consent of").

The noble Lord said: Amendment No. 17 has been grouped with Amendments Nos. 66 and 67 in the names of the noble Lords, Lord Peyton of Yeovil and Lord Marsh.

We believe that it is inappropriate for the Secretary of State to have all-embracing powers to amend the existing British Rail pension scheme. The scheme has been carefully created and has a balanced structure which has been negotiated over many years for the protection of the members. Amendments may not be made without the approval of the members' representatives. Rates of future pensions accrual are therefore protected. The rate at which surpluses will accrue in the future is also regulated by the fixed ratio in which members and employers contribute.

In the famous case of London Regional Transport Pension Fund Trustee Company Limited & others v. Hatt&others the court recognised that such a fixed ratio amounts to a private right of the members which could not be taken away by private legislation without express parliamentary authority. Paragraph 3 will allow the Secretary of State to make an order to remove that fixed ratio after affirmative resolution but without further representation from the members of the scheme.

The existing scheme also has a carefully constructed winding-up rule requiring improvements in benefits if there is any surplus when the scheme comes to be wound up. Paragraph 3 allows the Secretary of State a completely free hand in constructing a new winding-up rule, subject only again to consultation with the trustees and affirmative resolution endorsing any order he makes.

The noble Lord, Lord Tordoff, has explained some of the problems which we have in this Chamber in dealing with the orders, particularly at this late date in the passage of the Bill. In such an important matter as this we believe that it would be better to have on the face of the Bill the words "with the consent of" instead of "after consultation with". I beg to move.

Lord Peyton of Yeovil

Amendments Nos. 66 and 67 in my name are coupled with this amendment. Therefore I should like to make a few brief remarks on the subject.

The final signed edition of the memorandum of understanding, unlike those which preceded it, made it very clear that the trustees' agreement to the timing arrangements was essential. The Government now ask us to accept that consultation will do instead. At first blush I thought that that was totally unacceptable and that having signed that agreement they should stick to it.

One reason for my unease was that this is not the first time that Parliament has had to visit this subject. In 1974 there was legislation on the subject of railway pensions. There was further legislation in the Transport Act 1980. When that Act was introduced my right honourable friend the present Chancellor of the Exchequer, in a rather more lowly capacity than that which he enjoys today but nevertheless with that clarity of expression for which he is well known, said that that was a once and for all settlement and under no circumstances should it be broken into again and the payments rephased. Therefore, the Government have a rather difficult position to explain because here they are making a new arrangement.

My noble friend will be slightly surprised to hear me say that I believe that the amendments in my name present the Government with a real difficulty in that if the amendments require the agreement of the trustees to be included in the Bill—as is the case with the present amendment—all sorts of constitutional problems about pre-empting Parliament and all the rest of it are raised. I am not a great champion of those views but they are deeply entrenched in this place and in Whitehall. I do not believe that I am sufficiently equipped with powerful enough explosives to blow them out of their entrenched position.

I am tempted to beat a retreat from the two amendments and to say to my noble friend that I understand his problem. Being mortal himself and with limited powers, he may not be able to take on this powerful and entrenched position.

I should like to suggest this. If he will undertake to come forward at Report stage with some formal alternative which would not involve putting this objectionable word "agree" in the Bill, I shall be disposed to withdraw the two amendments to which I now speak. I hope that that is helpful to my noble friend.

The Earl of Caithness

Perhaps I may welcome back the noble Lord, Lord Carmichael, into the Committee. It is very good to hear him. I should be grateful if he would pass on our very best wishes to his noble friend Lord Ewing. We are sorry to hear that his noble friend is ill. Perhaps the noble Lord will pass on the very good wishes of, I am sure, the whole Committee for a speedy recovery. We look forward to the noble Lord, Lord Ewing, being back among us before long.

Amendment No. 17 would require my right honourable friend the Secretary of State to secure the consent of the trustees before making an order to amend an existing scheme. It is not the Government's intention to seek to amend an existing scheme without agreement of the trustees of that scheme. That is why there will be a formal consultation procedure to enable the trustees to report their views to the House, before or at the same time as any order amending a scheme is laid. We have tabled an amendment (Amendment No. 76) which deals with just that matter. Those arrangements will be sufficient to enable the House to satisfy itself that any order amending an existing scheme accords with this Government's commitment fully to protect the pensions of existing, deferred and future BR pensioners after privatisation. I do not therefore accept that Amendment No. 17 is necessary.

I listened with care to what my noble friend Lord Peyton said when he spoke to Amendments Nos. 66 and 67 which stand in his name. I can only re-confirm to my noble friend the advantage of discussion and the necessity to meet on regular occasions. When there are matters of concern, it helps to resolve the matter for both sides.

My noble friend was right to say that the amendments cause us difficulty because they would give to the trustees a power of veto over government expenditure under the 1980 Transport Act to the guaranteed BR pension scheme. We accept that the memorandum provides for their agreement, but to put that into the Bill is unacceptable for this reason. It would be wrong for an outside party—in this case the trustees—to have an effective veto over legislation relating to matters of government expenditure. That would not only be wrong, but I believe that it would also be quite unprecedented. Instead the new Section 52D of the 1980 Act, which would be introduced by government Amendment No. 65, requires consultation with the trustees. However, I can assure the Committee that the Government intend to seek and obtain agreement on such matters with the trustees. It will surely be in the interests of all the parties concerned that agreement is reached.

It is for those reasons that I also say to my noble friend Lord Peyton that I cannot accept the noble Lord's amendment to Amendment No. 65 if he moves it.

Lord Peyton of Yeovil

Perhaps I may—

The Earl of Caithness

I am about to put an alternative. As regards the point that he raised, let me consider it. I do not know whether that is possible. I take the point that my noble friend makes. I, too, wish to be as helpful to him as he has been to the Government on this matter. Therefore I shall see what can be clone. However, at the moment I cannot go further because I have not considered the point.

Lord Tordoff

The Minister gave the game away and confirmed what the noble Lord, Lord Peyton, said when he stated that such a provision is not only wrong but unprecedented. In other words, it is far worse to be unprecedented than to be wrong.

6.15 p.m.

Lord Carmichael of Kelvingrove

That is a beautiful parliamentary point, is it not? First, perhaps I may thank the noble Earl for his kind words about my noble friend Lord Ewing of Kirkford. I spoke to him today. He hopes to be back some time late in November. I am sure that the House will look forward to his return.

Two points arise from the Minister's statement. They perhaps solve some of the problems to which the noble Lord, Lord Peyton, referred when stating that it would be difficult always to have to ask a member representative for his opinion. However, under the present BR scheme amendments to the scheme may not: be made without the approval of the member representatives. Rates of future pension must be: discussed with the members.

The second sub-paragraph of paragraph 46 of the Goode Report states: To decide in consultation with the employer, on the investment strategy of the fund". I agree that that does not provide that written consent must be obtained. I am sure that the Minister will have considered paragraph 46, which states, "to decide in consultation", whereas the Bill refers merely to consultation with the member. That may be a fine point but I believe that there is a difference.

Will the Minister consider publishing after the order has been made the views of the trustees whom they will consult? The point probably will apply to our own Government fairly soon. We shall be able to see how much attention has been paid to the view put forward by the trustees to the Government before the order was made. Will the Minister take those points on board?

The Earl of Caithness

I am sorry to disappoint the noble Lord. I do not foresee a change of Government for some considerable years to come. Therefore the assurances that I give will he honoured to the full. That is without doubt.

On the noble Lord's first point relating to the fineness between "consulting" and "in consultation", I believe that I can leave the lawyers to determine whether the words have the same effect. Doubtless I can receive wisdom on that point in the fullness of time before another stage. Will the noble Lord repeat the second point?

Lord Carmichael of Kelvingrove

I referred to consultation. Without publishing the views before the order is laid, will the Minister consider the possibility of at least letting us know the views of the trustees after the order has been laid so that we can see whether the Government have veered far from the views of the trustees? We could build up a general picture as to whether the trustees are doing their job, and whether the Government are listening to them.

The Earl of Caithness

In certain circumstances the trustees' considerations will be laid before noble Lords. I shall have to check whether that applies in this case too.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendment No. 18:

Page 173, line 30, leave out ("scheme") and insert ("occupational pension scheme to which the order relates").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 19:

Page 173, line 48, at end insert:

("() Where any pension rights are transferred under sub-paragraph (1) above, the Secretary of State may by order—

1. (a) impose on the trustees of the transferee scheme, or on the employer (if any) of the person whose pension rights are transferred, duties with respect to—
   1. (i) the participation of that person or that employer in the scheme, or
   2. (ii) the payment of contributions by that employer under the scheme,
   in accordance with the rules of the scheme; and
2. (b) make provision requiring any person whose approval or consent is necessary in connection with the doing of anything required to be done by virtue of an order under this paragraph to give that approval or consent.").

On Question, amendment agreed to.

[Amendment No. 20 not moved.]

The Earl of Caithness moved Amendment No. 21:

Page 174, line 2, leave out ("transferor scheme and the trustees or) and insert ("occupational pension schemes which are, or are to be, the transferor scheme and").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 22:

Page 174, line 6, leave out from beginning to end of line 44 on page 175 and insert:

("(a) any person who immediately before the passing of this Act—

1. (i) an employee of the Board or of a subsidiary of the Board; and
2. (ii) is participating in an existing scheme;

(b) any person not falling within paragraph (a) above—

1. (i) who either is, immediately before the passing of this Act, an employee of the Board or of a subsidiary of the Board or has at some earlier time been such an employee;
2. (ii) who has participated in an existing scheme before the passing of this Act; and
3. (iii) who fulfils prescribed conditions;

(c) any person who, immediately before the passing of this Act, has pension rights under an existing scheme but is not participating in that scheme;

(d) any person who, after the passing of this Act, acquires pension rights—

1. (i) in consequence of the death of a person falling within paragraph (a), (b) or (c) above, and
2. (ii) by virtue of the participation of that other person in an existing scheme, or in an occupational pension scheme from which pension rights of that person have been transferred, whether directly or indirectly, to an existing scheme.").

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 23:

Page 176, line 6, leave out ("any of paragraphs (a) to (f) of paragraph 5(1)") and insert ("paragraph (a) or (b) of paragraph 5")

The noble Earl said: For the benefit of the noble Lord, Lord Clinton-Davis, this is a consequential amendment arising from the simplified definition of "protected person". Paragraph 6(2) (b) need only refer to the new paragraph 5(a) and (b) because it only deals with persons participating in an occupational pension scheme—that is, contributing members. I beg to move.

Lord Clinton-Davis

The Minister serves no purpose for himself or the Government by constantly saying that it is for my benefit that he is doing something. He owes a duty to the public and he ought to remember that. The reason that he owes it was fully explained previously, so perhaps he would put aside childish things and get on with the job that he is paid to do.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 24:

Page 176, line 15, leave out ("relevant date") and insert ("coming into force of the order").

The noble Earl said: The "relevant date" in this case is now to be the date on which orders amending existing pension schemes or transferring rights between schemes come into force. The effect is the same. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 25:

Page 176, line 22, leave out from first ("the") to end of line 23 and insert ("existing scheme mentioned in paragraph (a) or (b), as the case may be, of paragraph 5 above.").

The noble Earl said: This is a consequential amendment arising from the simplified definition of "protected person". It amends the definition of "former scheme". I beg to move.

On Question, amendment agreed to.

Lord Peyton of Yeovil moved Amendment No. 26:

Page 176, line 23, at end insert:

("() Where—

1. (a) an occupational pension scheme is established under paragraph 2 above or amended under paragraph 3 above and provides pension benefits exclusively for pensioners and deferred pensioners who are protected persons; and
2. (b) the scheme's actuary determines on a valuation of the scheme that the assets of the scheme exceed its liabilities by an amount (the "surplus"),

the Secretary of State shall by order provide that not less than forty per cent of the surplus shall be available for application by the Trustees of the Scheme for the benefit of the pensioners and deferred pensioners in such manner as the Trustees may in their discretion decide.").

The noble Lord said: This amendment is not at all consequential. I had hoped that it would follow upon a decision of the Committee to accept Amendment No. 57, but because of our procedural rules, although we were able to debate Amendment No. 57, we were not able at that time to take the opinion of the Committee on it. In any event, my noble friend has offered not just talks—we have had enough of them—but talks which break new ground. I attach enormous importance to those last words about new ground.

Amendment No. 26 is aimed at enshrining in the Bill that part of the memorandum of understanding which lays down the share which pensioners would have in any surplus which might arise. I do not wish to repeat all the kind or unkind things that have been said about the memorandum of understanding. Suffice it to say that it was produced in a hurry. It did not have the elegance and certainty of meaning which it might have had; but nevertheless the Government have made it absolutely clear that the part of the clause which relates to the surplus has the Government's agreement, and they will stand by it.

I ask the simple question which has been asked before in connection with the guarantees: "Why won't the Government put this simple amendment into the Bill?" Perhaps they will on this occasion and thereby give the pensioners the assurance which I think they need and deserve. I beg to move.

Baroness Turner of Camden

I rise on this side of the Committee to support the amendment moved by the noble Lord, Lord Peyton. The Government have frequently said, and the Minister repeated it this afternoon, that it is the intention that pensioners should not be worse off after privatisation. It seems to me that all the discussion we have had this afternoon has centred around the desire of everyone in the Committee to give those kinds of assurances to the people who have written to us.

I understand that the present position is that pensioners now have an expectation that they will benefit from any surplus. They already have RPI indexation; but I gather that it has been the custom for them sometimes to receive additional amounts in the event of a surplus. I believe that that is particularly important in the context of railway work. It has never been highly paid; there is a lot of overtime which does not count for pension purposes. Hence, retired railway workers sometimes look to payments over and above RPI from time to time when the surpluses become available. Those have had the effect of providing an adequate income in retirement.

Amendment No. 26 seems to endeavour to ensure that there is built into the legislation a safeguard to ensure that share-outs of the surplus would still be available after privatisation. Provided our expectations are reasonable—and it seems to me that this is reasonable in the circumstances applicable to the industry—they should be safeguarded as part of the general protection afforded to pensioners and prospective pensioners.

As we have already said, nowadays people are touchy about surpluses and what happens to them, particularly as a result of the Maxwell scandal. Unless something like this is written in, there is nothing to say in the legislation what happens when there are surpluses or to confirm the pensioners' entitlement to their share of the surpluses. Therefore, I hope that the Government will accept that this is reasonable and will be prepared to write it or something similar into the legislation.

Lord Boyd-Carpenter

It is quite right that pensioners should take some share where happily there is a surplus in the pension fund. However, with due respect to my noble friend Lord Peyton, I am inclined to think that the amendment goes too far. First, the surplus may be large. If, happily, it is large, then not less than 40 per cent. of it might be a large sum which ought not necessarily to go to the pensioners but ought to be regarded as a necessary part of public funds. After all, the alternative is for it to go into the public funds for the general relief of the taxpayers.

Secondly, I am not happy about the use of the words: not less than forty per cent.". If it is thought that where the surplus is a moderate size and 40 per cent. is about right—a perfectly reasonable view—it would be quite wrong to give support to the pressure that not less than 40 per cent. meant a higher figure than 40 per cent. Therefore, I should be unhappy if the amendment were put into the Bill.

Lord Stoddart of Swindon

I support the amendment. I believe it is very necessary indeed arid should be on the face of the Bill. As I said earlier, I have received a great deal of correspondence and representation from my former constituents in Swindon, many of whom are members of the BR pension scheme. They are rightly concerned about their scheme under privatisation; and, in my view, they are entitled to demand statutory protection for their future rights and benefits. Make no mistake that surpluses are part of their rights and benefits, because they have contributed towards them.

Pension schemes belong to their members, not to the employers—present or future—and certainly not to the Treasury, nor necessarily to public funds. In the case of the railways, they may belong to franchisees, so we must be careful about it. I believe that Parliament should heed the voice of pensioners and staff and write the safeguards that they need into the Bill. They know perfectly well that the Treasury is strapped for cash. They know that the Treasury is looking around for money and that there may be a temptation for the Treasury, with a £50 billion deficit, to rob or take money from those funds.

Before going into Parliament I worked for the electricity supply industry. Indeed, at the present time I enjoy a small pension from it and therefore declare my interest. But the electricity supply industry was privatised, as were the pension rights. We were given assurances that we would be no worse off. However, recently there was a revaluation of the electricity supply pension scheme. Various parts of it have been treated differently. There was no safeguard on the face of the Bill for the pensioners and for what happened to the surpluses. The first revaluation of the scheme produced many anomalies. Let me take the case of Nuclear Electric, which administers my pension. The revaluation produced an actuarial surplus of £114.8 million. The rules of the scheme said that the company should make arrangements to deal with any surplus arising from revaluation.

This is what Nuclear Electric is doing: first, it is using £70 million—61 per cent. of the surplus—to fund early pensions for 2,000 members of staff who are to be made redundant. Therefore the huge bulk of the surplus is being used by the company to finance the redundancy of 2,000 people. Secondly, £17 million—only 14.8 per cent. of the surplus—is to be used for minor improvements in spouses' benefits, increases of death and service benefits and the removal of national insurance modifications which will benefit some but not all pensioners. The generality of pensioners and present contributors will receive nothing from a revaluation which produced a surplus of £114.8 million. The amount of £28 million will be carried forward—the board says as a measure of prudence. In plain English that means as an insurance against the company having to make up any future deficit.

We see therefore that the result of the first revaluation hardly benefited Nuclear Electric pension scheme members at all. In fact, Nuclear Electric has filched the surplus to help finance redundancies; existing contributors and pensioners are being robbed to help finance the redundancies of their colleagues. In those circumstances I should have thought that we needed some safeguards for railway pensioners on the face of the Bill, and that is where they want them.

Nuclear Electric says that it is acting legally. Legal or not, what it is doing is immoral and unfair to pensioners and contributors alike. After all, redundancies financially benefit the company and its customers, not pensioners and existing contributors. It is almost beyond belief that the board of Nuclear Electric would act in that rapacious way of its own volition. One must therefore ask—this is the important point—whether the sticky fingers of the Treasury have been at work in that instance and whether they will work in the same way in relation to railway pensions.

That is not all. The scheme was broken down into various companies. What is even worse is that pensioners who contributed for many years to the same pension scheme are now being treated differently. For example, pensioners in National Power are receiving large benefits; some are receiving lump sums of £6,000 and the minimum will be £1,000. The staff contributions are being reduced from 6 per cent. to 3 per cent. for three years. Therefore there are now differences among people employed in the electricity industry who for donkeys years have paid into exactly the same scheme in exactly the same proportion.

That is why I say that it is essential for the protection of pensioners in the railway scheme that those matters are written into the legislation. There will then be no doubt that when benefits come to be distributed they will all share equally in them, rather than as happened in the case of the electricity supply industry pension, of which I have some experience, though I am sorry to have bored the Committee with it. The pensioners should benefit equally; they should know that they will benefit equally and indeed that they are equal in all respects.

6.30 p.m.

The Earl of Caithness

Amendment No. 26 seeks to make available for discretionary application by the trustees for the benefit of pensioners and deferred pensioners not less than 40 per cent. of any surplus. The difficulties of definition and application, as I will now explain, confirm my view that the Government's commitment to such pensioners is best dealt with by order rather than in primary legislation.

My noble friend Lord Peyton asks that not less than 40 per cent. of each surplus should be available for the benefit of pensioners and deferred pensioners in such manner as the trustees in their discretion decide. But on what basis would they wish the scheme's actuary to determine the surplus which the trustees are to consider? Would it be the total surplus at the date of revaluation? Would it be discounted to take account of future index-linking, as is normal? Would it be reduced to take account of an anticipated additional call on resources (or a slump in investment return) before the next revaluation? Are the trustees indeed obliged to consider distribution if, for example, the costs of doing so (when not all beneficiaries could benefit because of tax requirements) would be disproportionate?

Because of those question marks I remain unconvinced that it is right to circumscribe such complex matters in primary legislation.

Lord Clinton-Davis

Perhaps the Minister will give way. I cannot understand the argument that he adduced in seeking to say that these things are incapable of definition. Surely they are always taken into account in arriving at the surplus that is capable of being divided.

The Earl of Caithness

The noble Lord mentions an important point with which I shall deal in a moment. Uncertainties in the definition could present difficulties for all concerned, not least the trustees in the exercise of their fiduciary duties. No doubt that is why there are no precedents for doing that.

Turning to the point of the noble Lord, Lord Clinton-Davis—a point I intended to come on to in any case—the important aspect in regard to the surplus is that, when it comes to assessing the scheme at the end of a revaluation, a decision must be taken. That decision by the trustees depends on a great many issues. I have mentioned some of them. Yes, those are some of the issues that are taken into account at the present time. But the noble Lord has confused putting them on the face of the Bill with what happens with the present scheme. The present scheme for British Rail does not have a guarantee of up to 40 per cent. of any surplus for the pensioners. That has arisen from habit. It goes on the basis of contributions—that is in the scheme—which is 40 per cent. and 60 per cent.

That is the very point I make of the difficulties of the definition—that it is not in the scheme—because when one comes to the actuarial valuation there are so many issues to be taken into account at that time. That is why I believe—the noble Lord helps me make my case in this instance—that rules to the scheme coming through by order are the right way to make provision for the distribution of the surplus, which we have noted is firmly contained in the Memorandum of Understanding. It is not a matter of wishing to resile from that Memorandum of Understanding. It is a matter of wishing to make that work in the best possible way. The sheer complexity of the definition, for which the noble Lord has helped me make my case, is the reason for my belief that orders are the right answer and not primary legislation.

Lord Clinton-Davis

I am grateful to the Minister for giving way. I had not thought that I had helped him make his case but, if he believes that to be so, I am delighted. Can he give an assurance to the Committee that, having regard to the commitments that the Government have entered into morally so far as concerns the pensioners, the last thing in the world that they want to see is a repetition of the circumstances which applied in the electricity supply industry, as so graphically described by my noble friend Lord Stoddart? Can he give an undertaking that under no circumstances would that situation pertain?

The Earl of Caithness

I listened with care to what the noble Lord, Lord Stoddart, said. I do not know the rules of the scheme. I do not know how the trustees reached their decision. Therefore it would be quite wrong—I know that the noble Lord, Lord Stoddart, will understand—for me to make a comparison now without knowing the full facts of the case. But let me emphasise that the guarantors of the scheme will not remove or appropriate his share of any surpluses. The share of the surpluses would be used as a reserve against deficiencies and that would be in the long-term interest of the fund itself.

Lord Peyton of Yeovil

I shall be brief. The aim of the amendment is to guarantee to the pensioners a certain share in any surplus that might arise. I am deeply grieved not to have the support of my noble friend Lord Boyd-Carpenter. I shall simply have to seek what consolation I can for that. However, I should like to explain to him that the amendment was at least intended to echo and reflect the words in the Memorandum of Understanding. The actual verbiage of that memorandum has been much criticised and certainly lacks something in precision. I perfectly agree with that. I should be more than content if my noble friend would at least agree to look again at this matter and, in so far as the difficulty of definition is involved in my amendment, produce something better.

I am eminently reasonable in such matters. As my noble friend has kindly agreed to talk with me, breaking new ground on the question of guarantee, perhaps this subject might also be involved. I do not attach to this matter anything like the importance that I do to the guarantee. Perhaps my noble friend would give a brief indication of his thoughts on this point.

The Earl of Caithness

I shall be happy to discuss this matter with my noble friend when we meet to consider other matters. I do not put a difference of emphasis on it compared with the other matter. We are much closer on the other matter than we are on this one, where there are many more difficulties. Certainly I am happy to discuss it with him to see whether we can make progress. However, I believe that that will be harder to do on this issue, if I may say so at this stage without even having had such discussions, than on the previous amendment, where we are down to one fine point rather than a great many points which could arise.

Lord Peyton of Yeovil

As I said, this is only art attempt to echo and reflect the Memorandum of Understanding. If either the Memorandum of Understanding or my efforts to reflect it are deficient, then it is open to my noble friend to remedy the situation. I welcome the crumb of comfort that he has just thrown to me by saying how very close we were on the matter of the guarantee. That is very comforting to me. I was not quite aware of it before.

6.45 p.m.

Baroness Turner of Camden

Will the Minister take on board, in possibly agreeing to talk about this matter with his noble friend, that the whole issue of surpluses is a very emotive one? People become terribly worked up about what is happening to their surplus and so on. It arises from Maxwell particularly but is also strongly reflected in the correspondence that I have had from pensioners and potential pensioners in BR. It is a very important and emotive issue.

The Earl of Caithness

I agree wholeheartedly with the noble Baroness. Not only is the whole subject of pensions an emotive issue but the question of surpluses within that discussion on pensions is highly emotive. That is why we included it in the Memorandum of Understanding.

Lord Peyton of Yeovil

On the basis of what my noble friend has said, I ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Earl of Caithness moved Amendments Nos. 27 to 44:

Page 176, leave out lines 26 and 27 and insert ("so much of his pension rights as consist of or otherwise represent—

(a) in the case of a person who is a protected person by virtue of paragraph (a), (b) or (c) of paragraph 5 above, any pension rights which, immediately before the passing of this Act, he had under the existing scheme mentioned in the paragraph in question;").

Page 176, line 28, leave out from second ("person") to ("above") in line 29 and insert ("by virtue of paragraph 5(a) or (b)").

Page 176, line 30, after ("acquires") insert ("or has acquired").

Page 176, line 32, leave out from ("paragraph") to second ("in") in line 34 and insert ("(d) of paragraph 5 above, any pension rights which he acquires, or has acquired, after the passing of this Act and").

Page 176, line 35, leave out ("(h)") and insert ("(d)").

Page 176, line 36, leave out ("relevant existing scheme") and insert ("existing scheme mentioned in that paragraph").

Page 176, line 38, leave out ("relevant date;") and insert ("passing of this Act;").

Page 176, line 40, leave out from ("which") to ("and") in line 41 and insert ("before the passing of this Act, the deceased had under the existing scheme mentioned in the said paragraph (d)").

Page 176, leave out lines 46 to 48.

Page 176, line 50, leave out from second ("(a)") to ("and") in line 52 and insert ("of paragraph 5 above, the period beginning with the passing of this Act").

Page 177, line 3, leave out ("(d), (e) or (f) of paragraph 5(1)") and insert ("(b) of paragraph 5").

Page 177, line 10, leave out ("(h) of paragraph 5(1) above, the period") and insert ("(d) of paragraph 5 above, the period (if any)").

Page 177, line 12, leave out ("(h)") and insert ("(d)").

Page 177, line 18, leave out ("on or after the relevant date") and insert ("after the passing of this Act").

Page 177, line 21, leave out from beginning to (""surviving") in line 28 and insert:

("(6)An order under this paragraph may make provision for and in connection with the making of elections in a prescribed manner by protected persons for orders under this paragraph (other than orders by virtue of this sub-paragraph) not to have effect with respect to them or their surviving dependants except to such extent (if any) as may be specified in the election or subject to such conditions (if any) as may be so specified.

(6A) In sub-paragraph (6) above").

Page 177, leave out lines 31 to 37 and insert:

("(7)An order under this paragraph may make provision for such orders to cease to have effect in relation to a protected person if—

1. (a) the continuity of his period of employment is broken,
2. (b) he voluntarily withdraws from an occupational pension scheme, or
3. (c) he requests that his pension rights be transferred from an occupational pension scheme,

except in such circumstances or to such extent as may be prescribed.").

Page 177, line 50, at end insert:

("(aa) the terms of any pension scheme required to be provided by virtue of paragraph (a) above,").

Page 178, line 11, after ("(a)") insert ("(aa) and (b)").

The noble Earl said: I beg to move Amendments Nos. 27 to 44 en bloc. They are consequential on Amendment No. 9.

On Question, amendments agreed to.

Lord Clinton-Davis moved Amendment No. 45:

Page 178, line 12, at end insert:

("() An order under paragraph 6 above shall make provision requiring any person whose approval or consent is necessary in connection with the duties specified in sub-paragraph (1) above to ensure that any protected person to whom the order applies has the same opportunity to share in any surplus arising in the occupational person scheme of which he is or becomes a member as he would have had apart from the amendment, transfer or winding up, as the case may be; and whether that surplus arises upon the winding up of the scheme or otherwise").

The noble Lord said: The purpose of this amendment is to ensure that the surplus-sharing provisions in the existing pension scheme and indeed in any replacement scheme preserve the existing opportunity to negotiate improved benefits. It arises from the Memorandum of Understanding, which provides an intention to ensure that future pensioners should also have a reasonable opportunity to obtain benefits from any surplus there may be. The opportunity of existing and deferred pensioners to do so is spelt out in the Memorandum of Understanding but it is completely silent on the system which will allow future pensioners to do so.

We do not seek with this amendment to give any right to improved benefits. The amendment does not specify a 60:40 division as did the amendment of the noble Lord, Lord Peyton—not that I take issue with him about that, but this amendment does not so specify—or indeed any other specific division as to the appropriate ratio of benefit improvements and contribution reductions.

In the current arrangements that prevail, the members of the scheme have only an opportunity or expectation that they will share in any surplus. But it is right to say that the matter has gone beyond that point in the sense that judicial recognition has given legal protection to that expectation. There was a case involving the LRT pension fund in which it was said that the expectations that members might legitimately harbour that discretions would be exercised in their favour would be protected by the law wherever appropriate even when there was no question of a breach of good faith or abuse of a fiduciary power.

The case in question concerned a pension scheme similar to the existing British Rail scheme. Employers were required to pay a fixed minimum multiple of employee contributions and the court held that the expectation that members had as a result, that a surplus would be generated and divided between benefit improvements and reduced contributions, would be protected. So the employer was not able unilaterally to remove the obligation to pay a minimum multiple of employee contributions. The existing members of the existing British Rail pension scheme have the same legally protected expectation. We contend that it should be in no jeopardy whatever. The memorandum of understanding indeed recognises this because it states the principles which are to be followed by the memorandum, but then it fails to pick up the point specifically. This amendment goes a long way to curing that problem. I believe that it is perfectly reasonable and the Government should accept it. I beg to move.

Lord Stoddart of Swindon

I rise briefly to support my noble friend Lord Clinton-Davis and to confirm that pensions are indeed an emotive issue. I worked in the electricity supply industry and I was also a trade union negotiator in the electricity supply industry. Pensioners believe that the pension funds belong to them. They do so because in my experience during negotiations—certainly in the public sector where I negotiated—the employers always came back to me, when I wanted more money or when I wanted comparison with and the same as in the private sector, and said, "Ah yes, Mr. Stoddart, but they don't have a good pension scheme. The pension scheme is yours. We contribute a lot of money to it and so do you, but nevertheless, in the last analysis, you are the beneficiaries from that scheme". Therefore, we had to make do with rather smaller wage rises than would be the case if we did not have a pension scheme. That is why pensioners feel very strongly that, although the employers make a contribution, or appear to make a contribution, they themselves are making that contribution by taking lower wages than they otherwise would if they did not have a pension scheme.

When my noble friend and others say that this is an emotive issue, it is an emotive issue. That is why it is an emotive issue. They have always been led to believe that the pension scheme moneys belong to them. Therefore, when there is any surplus, they believe that not just 40 per cent. of the surplus should go back to them—I have to tell the Minister that—but that 100 per cent. should go back to them. I have spoken because the noble Earl might not have appreciated how people feel. He may not have been in such a pension scheme. I just wanted to explain to him why it is an emotive issue and why people in pension schemes feel as they do about surpluses and why they must be protected.

The Earl of Caithness

I quite understand the points raised by the noble Lord, Lord Stoddart of Swindon, with regard to the question of pensions. It is an enormously important issue for all of us. That is why we have spent so much time and trouble trying to get it right on this occasion, with the guarantees that we have been able to agree and which I have reiterated to the Committee.

Turning to Amendment No. 45, I have to say to the noble Lord, Lord Clinton-Davis, that the arguments that he uses are very similar to those that my noble friend Lord Peyton used in moving Amendment No. 26 and that therefore my answers are very much the same. Amendment No. 45 seeks specific provision for the protection of pension rights of protected persons transferring to a new scheme to include opportunities to share in future surpluses as at present. The whole issue of the protection of existing pension rights is highly complex and is far better dealt with by order than in primary legislation. Furthermore, I would say to the noble Lord, Lord Clinton-Davis, that we also want to reflect on the recommendations of the Goode Committee on this topic.

Lord Clinton-Davis

I am not at all satisfied with that answer, and the people who are emotively moved by the circumstances to which my noble friend Lord Stoddart drew attention will not be much impressed by that argument. The Minister keeps saying that this is more appropriately dealt with by order in council but we cannot amend orders in council. We can get no assurance that the Government will get this right. That has to be said over and over again.

This amendment does not include the provision of specific division of benefits in the way that the amendment moved by the noble Lord, Lord Peyton, did. I am honoured to feel that the argument is a similar one to that of the noble Lord, Lord Peyton, because I thought that he adduced a very persuasive argument. It was certainly persuasive so far as I was concerned. As the Minister has been totally unyielding, I have to say that if the time were otherwise I would force a Division. I urge him to reflect further on the matter although he does not give any indication of being prepared so to do. Meanwhile, I shall wish almost certainly to come back to this matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 46 not moved.]

The Earl of Caithness moved Amendment No. 47:

Page 178, line 26, at end insert:

("Entitlement to participate in the joint industry scheme

7A.—(1) The Secretary of State may by order make provision conferring upon any person to whom this paragraph applies—

1. (a) who is participating, or who at or after the making of the order begins to participate, in the joint industry scheme, and
2. (b) who fulfils the qualifying conditions,

the right to continue to participate in the joint industry scheme, in accordance with the rules of that scheme, unless and until the termination conditions become fulfilled in the case of that person.

(2) The persons to whom this paragraph applies are—

1. (a) any person who immediately before the passing of this Act—
   1. (i) is an employee of the Board or of a subsidiary of the Board; and
   2. (ii) is participating in an existing scheme; and
2. (b) any person not falling within paragraph (a) above—
   1. (i) who either is, immediately before the passing of this Act, an employee of the Board or of a subsidiary of the Board or has at some earlier rime been such an employee;
   2. (ii) who has participated in an existing scheme before the passing of this Act; and
   3. (iii) who fulfils prescribed conditions.

(3) For the purposes of this paragraph a person fulfils the "qualifying conditions" if—

1. (a) the continuity of his period of employment has not been broken during the intervening period;
2. (b) he has not withdrawn voluntarily from an occupational pension scheme during that period; and
3. (c) he has at all times during that period been in the employment of an employer engaged in the railway industry.

(4) In sub-paragraph (3) above, the "intervening period" means the period which begins at the passing of this Act and ends—

1. (a) at the time when the person in question begins to participate in the joint industry scheme, or
2. (b) at the coming into force of the order under this paragraph which confers upon that person the right mentioned in sub-paragraph (1) above (or which would have conferred that right upon him, had he satisfied the qualifying conditions),

whichever is the later.

(5) The "termination conditions" become fulfilled for the purposes of this paragraph in the case of any person if—

1. (a) the continuity of his period of employment is broken;
2. (b) he withdraws voluntarily from the joint industry scheme; or
3. (c) he is not in the employment of any employer engaged in the railway industry.

(6) Circumstances may be prescribed in which—

1. (a) a break in the continuity of a person's period of employment,
2. (b) a person's voluntary withdrawal from an occupational pension scheme, or
3. (c) a period during which a person is not in the employment of an employer engaged in the railway industry,

shall be disregarded for the purpose of determining whether the person fulfils the qualifying conditions or whether the termination conditions have become fulfilled in his case.

(7) The employers who are to be regarded for the purposes of this paragraph as "engaged in the railway industry" are those who carry on activities of a class or description specified for the purposes of this sub-paragraph by the Secretary of State in an order under this paragraph; and the Secretary of State may so specify any class or description of activity which, in his opinion, falls within, or is related to or connected with, the railway industry.

(8) An order under this paragraph may—

1. (a) impose on the trustees of the joint industry scheme, or on the employer (if any) of a person for the time being entitled to the right conferred by virtue of sub-paragraph
   1. (1) above, duties with respect to—
      1. (i) the participation of that person or that. employer in the scheme, or
      2. (ii) the payment of contributions by that employer under the scheme,
      in accordance with the rules of the scheme; and
153
2. (b) make provision requiring any person whose approval or consent is necessary in connection with the doing of anything required to be done by virtue of an order under this paragraph to give that approval or consent.

(9) An order under this paragraph may make provision for the purpose of preventing a person who would otherwise be entitled to the right conferred by virtue of sub-paragraph (1) above from continuing to participate in the joint industry scheme in circumstances where his continued participation in that scheme would in the opinion of a prescribed person—

1. (a) prejudice any approval of that scheme for the purposes of Chapter I of Part XIV of the Income and Corporation Taxes Act 1988 (retirement benefit schemes); or
2. (b) prevent the scheme from being a contracted-out scheme for the purposes of Part III of the Pension Schemes Act 1993 or Part III of the Pension Schemes (Northern Ireland) Act 1993.

(10) An order under this paragraph may include provision—

1. (a) for disputes arising under the order to be referred to arbitration; or
2. (b) for provisions of the order to be enforceable on an application made to a prescribed court by the Secretary of State or by a prescribed person or a person of a prescribed description.

(11) An order under this paragraph may make provision for and in connection with the making of elections in a prescribed manner by persons who would otherwise be entitled by virtue of sub-paragraph (1) above to the right there mentioned for orders under this paragraph (other than orders by virtue of this sub-paragraph) not to have effect with respect to them.

(12) Sub-paragraph (9) of paragraph 6 above shall have effect for the purposes of this paragraph as it has effect for the purposes of that paragraph.").

[Amendments Nos. 48 to 56, as amendments to Amendment No. 47, not moved.]

On Question, Amendment No. 47 agreed to.

Lord Peyton of Yeovil had given notice of his intention to move Amendment No. 57:

Page 178, line 26, at end insert: ("Funding Guarantee

7B.—(1) The Secretary of State shall be under a duty to guarantee the funding of any occupational pension scheme which is established under paragraph 2 above or amended under paragraph 3 above and provides pension benefits exclusively for pensioners and deferred pensioners who are protected persons to the extent that, if the scheme shall at any time fall into deficit, he shall pay to the Trustees, at such times and in such manner as the scheme's actuary shall decide, sums determined under sub-paragraph (3) below for the purpose of extinguishing such deficit.

(2) An occupational pension scheme shall be deemed to have fallen into deficit if the scheme's actuary determines that the assets of the scheme are or are likely to be insufficient to meet the cost of benefits from time to time payable out of the scheme; and for this purpose the cost of benefits payable out of the scheme shall include the cost of providing for and in respect of the members pensions increased (whether in payment or in deferment) annually in line with the index of Retail Prices published by the Central Statistical Office.

(3) Sums payable by the Secretary of State under sub-paragraph (1) shall be determined using the formula—A× B/C

where

A = the total benefits paid by the scheme during the financial year;

B = the amount of the deficit in the scheme determined by the scheme's actuary pursuant to sub-paragraph (2) above on the most recent occasion before the beginning of the financial year; and

C = the total liabilities of the scheme determined by the scheme's actuary pursuant to sub-paragraph (2) above on the most recent occasion before the beginning of the financial year.

(4) Any sums required for making payments under sub-paragraph (1) above shall be paid out of money provided by Parliament.").

The noble Lord said: We discussed this amendment at some length earlier on and we decided that that was not the moment to seek the opinion of the Committee—indeed we could not seek the opinion of the Committee. I do not believe that this is the moment at which to do so. I look forward more than I can say—with great eagerness—to the talks which I shall have with my noble friend, particularly in the light of what he has said about our being so close to each other. I had not realised that before.

[Amendment No. 57 not moved.]

[Amendment No. 58 not moved.]

The Earl of Caithness moved Amendment No. 59:

Page 178, line 30, leave out from ("Board),") to ("after") in line 32 and insert ("for the words "Subject to the provisions of this section and section 58," there shall be substituted the words "Subject to the provisions of this section and sections 52A to 52D and 58,".

(1A)").

The noble Earl said: In moving this amendment I shall, with the leave of the Committee, speak also to Amendments Nos. 65 and 68. I shall deal first with Amendment No. 65. The other amendments in this grouping follow on from that.

The Committee will recall that I announced earlier that the Government have reached an agreement with the trustees and the BR Board that would meet our common objective of fully protecting the pensions of existing, deferred and future BR pensioners after privatisation. In Committee, I read into the record part of the text and I have also placed copies of the memorandum of understanding in the Library. I think it would be appropriate, with the leave of the Committee, if I read out another part of the memorandum of understanding which I did not read out at the Committee stage. It deals with future BR pensioners: The arrangements outlined above will, for existing and deferred pensioners, underpin the Government's undertaking that the treatment of pensioners after privatisation will be fully safeguarded. The Government recognises that this safeguard should extend to those who leave BR employment, other than on transfer to another railway pension scheme, after the establishment of the closed fund. At that point, those continuing in employment with BR will belong to the BR section of the joint railway industry pension scheme, and will receive precisely the same benefit entitlements as at present. The Government, the Pension Trustee Company and the BR Board recognise that, as more staff leave BR and the balance of employees and pensioners changes, special arrangements may be needed to provide that continuing safeguard. We have therefore agreed on these arrangements, as follows: The Government restates its commitment to ensuring that people retiring from BR do so on terms no less favourable than hitherto; the Government Actuary will be joint actuary of the BR section of the joint industry scheme ('the fund'); if the joint actuaries certify the instability of the fund, the Secretary of State shall be under a duty to consider how to secure the delivery of the Government commitment restated above, and to take steps accordingly; any change in contribution rates and any benefit increases above the level of RPI-indexation shall require the approval of the Secretary of State".

That concludes the reading of that part of the memorandum of understanding which I believe it is important to put on the record.

That memorandum sought to protect the pensions of existing, deferred and future BR pensioners after privatisation while protecting the taxpayer's interests. The solvency guarantee for the closed fund and the agreement that pensioners may benefit from up to 40 per cent. of any future surplus secures the future for pensioners; the provisions of this amendment are designed to protect the taxpayer's interest.

The Committee will recognise that it would be anomalous, and not in the taxpayer's best interest, to continue the supply of public funds under Section 52 of the Transport Act 1980 in circumstances in which they were not yet required because the scheme had received a guarantee of solvency backed by public funds.

Amendment No. 65 therefore introduces three new sections (Sections 5 2B, 52C and 52D) to Part III of the Transport Act 1980. The purpose of Section 52B is to terminate the support contributions payable under Section 52 of that Act in respect of the unfunded obligations acquired by any new pension scheme which has been given a solvency guarantee. In place of these continuing contributions a new obligation is proposed under which substitution payments will be made in circumstances to be prescribed by order.

We intend to apply these arrangements principally to the proposed pensioners' closed section of the joint industry scheme in line with the memorandum of understanding. However, Section 52B could equally be exercised in relation to the residual BR section of the joint industry scheme if that section were also to be given a solvency guarantee in the event of instability at some time in the future, as was also envisaged in the memorandum.

These arrangements require in sub-paragraph (4) for there to be a determination of the capital value of the unfunded obligations. Sub-paragraph (6) (c) provides for the substitution payments to be made in circumstances prescribed in the substitution order. Until these payments have been made or the scheme has been wound up, the Government's liability will not be discharged. Sub-paragraph (7) provides for interest to accrue, and the formulation is sufficiently wide for an interest rate to be specified which can equate to that which could otherwise have been earned by the scheme if the trustees had received the cash. In other words, the Government's liabilities to a guaranteed new scheme will not be extinguished but will continue to accrue, with interest on the outstanding balance, as assets of the scheme until the prescribed circumstances provide for the substitution payments to be made.

As payments made under Section 52 in any financial year are determined before the start of that year, the new Section 52C provides for adjustment to correct the amounts actually paid in the period up to the termination date specified in an order made under Section 52B. Sub-paragraph (3) provides for a direction to be given to the persons administering the scheme requiring them to furnish the information required to calculate the adjustment, and sub-paragraph (7) provides for interest to be payable.

The new Section 52D includes provisions relating to various directions contained in Sections 52A and 52C and the orders contained in Section 52B. The Committee will note that orders under Section 52B will be subject to the negative resolution procedure in common with the other order-making power in Part III of the 1980 Act. However, Section 52D(1) requires prior consultation with the trustees on any such order. My right honourable friend the Secretary of State will also be required under Section 52D(3) to lay before each House, when making an order, a copy of the solvency guarantee, the consent required by the Transport Act 1962 to the giving of that guarantee and any conditions attached to that consent.

Turning now to the remaining government amendments in this group, as I indicated earlier, they are technical amendments following on from Amendment No. 65. Amendment No. 59 introduces into Section 52 of Part III of the Transport Act 1980 the three new Sections, 52B, 52C and 52D introduced by Amendment No. 65. Amendment No. 68 is a consequential amendment to paragraph 9 to extend the designation of schemes as existing schemes for the purposes of Part III of the 1980 Act to include the power to make payments to them under the new Sections 52B and 52C introduced by Amendment No. 65.

I believe that these government amendments fairly meet the understanding reached in the memorandum relating to changes in the arrangements for making government support contributions to new guaranteed schemes and also protect the position of the taxpayer. I commend them to the Committee. I beg to move.

Lord Clinton-Davis

I am sure the Minister will concede that this is very tough stuff. We shall certainly need to look carefully at what he has said in seeking to deal with these matters. The Committee will be grateful to him for the way in which he did so. I am bound to say that I did not follow every word. But then he will blame me. I think the Minister is saying that he is not very surprised.

The Earl of Caithness

I am very surprised.

Lord Clinton-Davis

The Minister is very surprised. I now invite the Minister to explain again, without the benefit of his brief, precisely what he said. I was not able to follow every word. Is the Minister prepared to do that or at least to offer a resumé of what he was saying, because I did find it extremely difficult? It may be that I was obtuse; I do not know. I plead guilty to that. But the Minister owes it to the Committee to explain in simple terms what this is about.

The Earl of Caithness

The noble Lord is having a lot of fun today. He can read the Official Report. It is all there.

Lord Clinton-Davis

It is not all there. I suspect that the Minister did not comprehend precisely what he was reading out. That is why I want him to explain to the Committee what this is all about.

The Earl of Caithness

Amendment No. 65 is the key amendment. I am wondering whether the noble Lord is listening.

Lord Clinton-Davis

Yes, I am.

The Earl of Caithness

That is very good indeed and I am delighted to hear it. Amendment No. 65 introduces three new sections—Sections 52B, 52C and 52D—to Part III of the 1980 Act.

Lord Clinton-Davis

I did not want the Minister to repeat what he had read out. I wanted him to offer a resumé so that we could understand it rather more comprehensively than we were able to by just listening to him.

The Earl of Caithness

I am giving the noble Lord a resumé. I am not repeating what I said before, although some of the words which I use will of course be a repetition of what I said. The purpose of Section 52B is to terminate the support contributions payable by the Government under Section 52. In their place a new obligation will arise whereby substitution payments will be made in circumstances to be provided by order. The power to make substitution payments can only be exercised in relation to new schemes which have been given a solvency guarantee by the BR board. There is a requirement for there to be a determination of the capital value of the unfunded obligations. The substitution payments will be equal in aggregate to the capital value of those obligations and will be made in circumstances provided in the substitution order. Until these have been made or thè scheme has been wound up, the Government's liability will not be terminated.

Section 52B(7) provides for interest to accrue, and the formulation is sufficiently wide for an interest rate to be specified which can equate to that which would otherwise have been earned by the scheme if the trustees had received cash payments under Section 52. The Government's liabilities to a guaranteed new scheme will not be extinguished but will continue to accrue with interest on the outstanding balance until paid or the scheme has been wound up. As payments made under Section 52 in any financial year are determined before the start of that year, the new Section 52C provides for an adjustment to correct the amounts actually paid before the termination date specified in the order.

Section 52C(3) provides for a direction to be given to the persons administering the scheme, requiring them to furnish the information requested to calculate the adjustment and Section 52C(7) provides for interest to be payable. There is a new Section 52D, which provides for consultation with the trustees and for such orders to be subject to the negative resolution procedure.

Amendment No. 68 is a consequential amendment to paragraph 9 of Schedule 2 to the Bill, and Amendment No. 59 is a technical amendment to introduce in Section 52 of Part III of the Transport Act 1980 the three new subsections.

Lord Clinton-Davis

I am grateful to the Minister for reading that so well.

On Question, amendment agreed to.

The Earl of Caithness moved Amendment No. 60:

Page 178, line 36, leave out from ("52(1)") to ("relevant") in line 38 and insert ("in relation to that scheme, to the extent that that liability relates to so much of the").

The noble Earl said: Amendment No. 60 and Amendments Nos. 61 to 64 are of a minor technical nature. I beg to move.

On Question, amendment agreed to.

The Earl of Caithness moved Amendments Nos. 61 to 64:

Page 179, line 4, leave out from ("liability") to end of line 6 and insert ("to make payments under section 52(1), so far as relating to the pension rights identified in the notice under subsection (1); and").

Page 179, line 39, leave out from ("52(1)") to ("for") in line 40 and insert (", so far as relating to the pension rights identified in the notice,").

Page 180, line 17, at end insert:

("(8A) In any case where—

1. (a) notice has been given under subsection (1), the effect of which (whether taken alone or with other notices under that subsection) is that notice has been given under that subsection in respect of all pension rights under the scheme in question, and
2. (b) for that financial year in which the notice mentioned in paragraph (a) is given, the aggregate amount of the payments made under section 52(1) in relation to the scheme requires adjustment for the reason set out in section 52(3) (a) or (b), but
3. (c) the required adjustment cannot be made as mentioned in section 52(3), because (in consequence of the notice mentioned in paragraph (a)) no payments under section 52(1) fall to be made in relation to that scheme for subsequent financial years,

payments by way of adjustment, of an amount equal in the aggregate to the amount of the required adjustment, shall instead be made by the Minister to the persons administering the scheme or, as the case may require, by those persons to the Minister, before the expiration of the period of six months beginning with the date on which the amount of the required adjustment is determined.

(8B) The Minister may give a direction to the persons administering a B.R. pension scheme requiring them to furnish to him—

1. (a) information from which the proportion mentioned in section 55(1) (a) can be finally determined for the financial year mentioned in subsection (8A) (b) in the case of the scheme; or
2. (b) information about any such unforeseen increase or reduction in the aggregate amount of the pensions, increases and expenses payable under or incurred in connection with the scheme for that financial year, as is mentioned in section 52(3) (b).

(8C) Where payments by way of adjustment fall to be made under subsection (8A), interest shall be payable from the end of the financial year in which the notice mentioned in subsection (8A) (a) is given, by the person liable to make those payments, at such intervals and rates as may be determined by the Minister, on so much of the aggregate amount of the payments in question as for the time being remains unpaid.

(8D) So much of—

1. (a) any payment by way of adjustment under subsection (8A) which falls to be made, or
2. (b) any interest accrued under subsection (8C),

as has not been paid shall be treated as a debt due.").

Page 180, line 19 leave out from ("obligations") to end of line 40 and insert:

("(10) For the purposes of this section, the "capital value of the attributable unfunded obligations", in the case of any B.R. pension scheme, means such amount as is, in the opinion of the person determining that capital value pursuant to subsection (4), the capital equivalent of the payments that would, apart from this section, have been expected to be made by the Minister under section 52(1), so far as relating to the pension rights identified in the notice under subsection (1), for the successive financial years beginning with the one mentioned in subsection (2) (a).").

On Question, amendments agreed to.

The Earl of Caithness moved Amendment No. 65:

Page 180, line 43, at end insert:

(1B) After the section 52A inserted by sub-paragraph (1A) above, there shall be inserted—

"Power to substitute obligations under this section for liabilities under s.52(1).

52B.—(1) The Minister may make a substitution order in relation to any occupational pension scheme

1. (a) which is a new scheme, within the meaning of Schedule 10 to the Railways Act 1993;
2. (b) which is designated under paragraph 9(1) of that Schedule (designation of schemes which are to be treated as B.R. pension schemes for certain purposes of this Part); and
3. (c) in relation to which a guarantee has been given by the Board under section 14(3) of the Transport Act 1962;

and any reference in this section to a "guaranteed pension scheme" is a reference to such an occupational pension scheme.

(2) For the purposes of this section, a "substitution order" is an order under this section the effect of which is—

1. (a) to terminate, from the termination date, the Minister's liability to make to the persons administering the guaranteed pension scheme in question payments under section 52(1) in relation to the scheme; and
2. (b) to impose on the Minister, in substitution for that liability, an obligation to make to those persons, subject to and in accordance with the following provisions of this section, one or more other payments (the "substitution payments") in relation to that scheme.

(3) Subject to the following provisions of this section, the amount of the substitution payments to be made in the case of a guaranteed pension scheme shall be equal in the aggregate to the sum of—

1. (a) the amount specified pursuant to subsection (4) (a) as the capital value of the unfunded obligations in the case of the scheme; and
2. (b) the aggregate amount of any interest which is dealt with as mentioned in subsection (7) (b) (ii) in the case of the scheme.

(4) A substitution order must specify—

1. (a) the capita value of the unfunded obligations in the case of the guaranteed pension scheme in question, as at the termination date; and
2. (b) the date which, for the purposes of this section, is to be the termination date in relation to that scheme, being a date not earlier than one month after the coming into force of the substitution order.

(5) Any determination for the purposes of this section of the capital value of the unfunded obligations in the case of a guaranteed pension scheme shall either—

1. (a) be made by the Minister; or
2. (b) if the Minister so requires in the particular case, be made by the actuary to the guaranteed pension scheme in question and approved by the Minister.

(6) A substitution order may specify—

1. (a) the amount or amounts, or the method of determining the amount or amounts, of the substitution payments,
2. (b) the date or dates on which the substitution payments are to be made,
3. (c) circumstances (which may, if the Minister so desires, be defined by reference to the opinion of any person) in which substitution payments are to be made,

and may provide for the obligation to make substitution payments to be discharged if the guaranteed pension scheme in question has, in the opinion of a person specified or described in, or nominated under, the order, been wound up.

(7) A substitution order must provide—

1. (a) for interest to accrue from the termination date on the outstanding balance of the capital value for the 160 time being at such rate, and at such intervals, as may be specified in, or determined under or in accordance with, the order; and
2. (b) for any such interest which accrues
   1. (i) to be paid to the persons administering the guaranteed pension scheme in question, or
   2. (ii) to be added to the outstanding balance of the capital value
   (or to be dealt with partly in one of those ways and partly in the other);

and the provision that may be made by virtue of paragraph (a) includes provision for the rate of interest to be calculated by reference to any variable or to be such rate as the Minister may from time to time determine and specify in a notice to the persons administering the scheme in question.

(8) For the purposes of subsection (7), the "outstanding balance of the capital value", in the case of a guaranteed pension scheme, means the capital value of the unfunded obligations in the case of the scheme, as specified pursuant to subsection (4) (a),—

1. (a) reduced by the amount of any substitution payments made in relation to that scheme; and
2. (b) increased by any additions of accrued interest under or by virtue of subsection (7) (b) (ii) in relation to that scheme.

(9) Nothing in this section affects the liability of the Board in respect of any relevant pension obligations.

(10) Any sums required for the making of payments under this section by the Minister shall be paid out of money provided by Parliament.

(11) In this section—

"the capital value of the unfunded obligations", in the case of any guaranteed pension scheme, means such amount as is. in the opinion of the person determining that capital valise pursuant to subsection (5), the capital equivalent of the payments that would, apart from this section, have been expected to be made by the Minister under section 52(1) in relation to that scheme after the termination date in the case of that scheme;

"occupational pension scheme" means an occupational pension scheme as defined in section 1 of the Pension Schemes Act 1993;

"the terminal period", in the case of any guaranteed pension scheme, means—

1. (a) if a financial year of the scheme ends with the termination date, that financial year; or
2. (b) in any other case, so much of the financial year of the scheme in which the termination date falls as ends with that date;

"the termination date", in the case of any guaranteed pension scheme, shall be construed in accordance with subsection (4) (b);

"the termination year", in the case of any guaranteed pension scheme, means the financial year of the scheme which consists of or includes the terminal period;

"trustees", in relation to a guaranteed pension scheme, includes a reference to any persons who, under the rules of the scheme, are under a liability to provide pensions or other benefits but who are not trustees of the scheme.

Adjustments arising in connection with orders under s.52B.

52C.—(1) As soon as practicable after the termination date in the case of any guaranteed pension scheme, there shall be determined, for the terminal period, what proportion of the pensions, increases and expenses payable under, or incurred in connection with, the scheme corresponds to the relevant pension obligations.

(2) Any determination under subsection (1) shall either—

1. (a) be made by the Minister; or
2. (b) if the Minister so requires in the particular case, be made by the actuary or auditor to the guaranteed pension scheme in question and approved by the Minister.

(3) The Minister may give a direction to the persons administering a guaranteed pension scheme requiring them to determine the aggregate amount of the pensions, increases and expenses payable under or incurred in connection with the scheme for the terminal period or the termination year and to notify him in writing of their determination.

(4) As respects the termination year of a guaranteed pension scheme, the extent of the liability of the Minister to make payments under section 52(1) in relation to that scheme shall be restricted to a liability to make payments of an amount (the "termination year amount") equal in the aggregate to the product of—

1. (a) the proportion determined under section 54(1) for that scheme;
2. (b) the proportion determined pursuant to subsection (1) in the case of that scheme; and
3. (c) the aggregate amount of the pensions, increases and expenses payable under or incurred in connection with that scheme in the terminal period;

and payments by way of adjustment shall be made by the Minister to the persons administering the scheme, or (as the case may be) by those persons to the Minister, before the expiration of the period of six months beginning with the date of the last of the determinations made under subsection (1) or (3) with respect to the scheme.

(5) Where, in the case of a guaranteed pension scheme, the funding of the relevant pension obligations has, by virtue of subsection (3) of section 54, been left out of account in making a determination under subsection (1) of that section, the termination year amount in the case of that scheme shall be the difference between—

1. (a) what that amount would have been, apart from this subsection; and
2. (b) the amount of any income accruing for the terminal period which may be applied towards the payment of such of the pensions, increases and expenses payable under or incurred in connection with the scheme as correspond to those obligations.

(6) The Minister may give a direction to the persons administering a guaranteed pension scheme requiring them to determine the amount mentioned in subsection (5) (b) and to notify him in writing of their determination.

(7) Where payments by way of adjustment fall to be made, interest shall be payable, as from the termination date, by the person liable to make those payments, at the rates and intervals from time to time applicable for the purposes of section 52B(7) (a) in the case of the scheme in question, on so much of the aggregate amount of the payments in question as for the time being remains unpaid.

(8) So much of—

1. (a) any payment by way of adjustment which falls to be made, or
2. (b) any interest accrued under subsection (7),

as has not been paid shall be treated as a debt due.

(9) Any sums required for the making of payments under this section by the Minister shall be paid out of money provided by Parliament.

(10) In this section, "payments by way of adjustment", in the case of a guaranteed pension scheme, means—

1. (a) if the Minister has made payments under section 52(1) in relation to that scheme for the termination year which, in the aggregate, exceed the termination year amount, payment to the Minister by the persons administering the scheme of an amount equal to the excess;
2. (b) if the Minister has made no payments under section 52(1) in relation to that scheme for the termination year, payment by the Minister to those persons of the termination year amount; or
3. (c) if the Minister has made payments under section 52(1) in relation to that scheme for the termination year which, in the aggregate, fall short of the termination year amount, payment by the Minister to those persons of an amount equal to the shortfall.

(11) Expressions used in this section and in section 52B have the same meaning in this section as they have in that section.

Orders and directions under sections 52A to 52C: supplemental.

52D.—(1) Any power to make an order under section 52B shall be exercisable by statutory instrument made by the Minister after consultation with the trustees of the guaranteed pension scheme to which the order relates.

(2) A statutory instrument containing an order under section 52B shall be subject to annulment in pursuance of a resolution of either House of Parliament.

(3) At the time when a statutory instrument containing an order under section 52B is laid before each House of Parliament pursuant to subsection (2), the Secretary of State shall, if he has not already done so, also lay before each House of Parliament a copy of—

1. (a) the guarantee mentioned in subsection (1) (c) of that section;
2. (b) the consent required by section 14(3) of the Transport Act 1962 to the giving of that guarantee; and
3. (c) any conditions subject to which (by virtue of section 28 of that Act) that consent was given;

but this subsection is without prejudice to the validity of the order in question.

(4) Any power to make an order under section 52B includes power, exercisable in the same manner, to make such incidental, supplemental, consequential or transitional provision as may appear necessary or expedient to the Minister.

(5) Any order under section 52B may make different provision for different cases or for different classes or descriptions of case.

(6) It shall be the duty of any person to whom a direction is given under section 52A or 52C to comply with and give effect to that direction; and compliance with any such direction shall be enforceable by civil proceedings by the Minister for an injunction or interdict or for any other appropriate relief.

(7) Any power to give a direction under section 52A or 52C includes power to vary or revoke the direction.

(8) Any direction under section 52A or 52C shall be given in writing.

(9) In this section—

"guaranteed pension scheme" has the same meaning as in section 52B;

"trustees", in relation to a guaranteed pension scheme, has the same meaning as in section 52B."").

On Question, amendment agreed to.

[Amendments Nos. 66 and 67 not moved.]

The Earl of Caithness moved Amendment No. 68:

Page 181, line 5, leave out ("or 52A") and insert ("52A, 52B or 52C").

On Question, amendment agreed to.

7.15 p.m.

Lord Clinton-Davis moved Amendment No. 69:

Page 181, line 7, at end insert:

("() The Secretary of State shall so designate any occupational pension scheme to which the pension rights of protected persons within the meaning of paragraph 5(1) (c) and (d) are transferred.").

The noble Lord said: In moving amendment No. 69, I hope that it will be for the convenience of the Committee if I speak also to Amendment No. 70. Amendment No. 69 deals with the question of protected persons within the meaning of paragraph 5(1) (c) and (d). "Protected persons" are pensioners, deferred pensioners and dependants. The Secretary of State has power to protect their interests as protected persons under paragraph 6—although, as we have mentioned previously, it would be desirable to make this a specific duty on the Secretary of State rather than to provide him with a power. The protection available under paragraph 6 is the right to enjoy pension benefits which are "no less favourable" after amendment, transfer or winding up, and in our view, this should include indexation of benefits in line with that currently available.

What is missing in terms of the "absolute solvency guarantee", which is referred to in the Memorandum of Understanding, is an obligation imposed on the Government to fund pension increases if the new closed section is unable to afford them. Paragraph 9(1) would enable the Secretary of State to bring the new closed section within the regime of Part III of the Transport Act, which does not require the Secretary of State to make the designation order, but he would be obliged to consult and, having consulted, if he chose not to designate the scheme, his decision could only be challenged if it were irrational.

Amendment No. 70 also refers to the Memorandum of Understanding, which contains a commitment on the part of the Secretary of State to consider how to pay for the pension rights for future pensioners if the joint actuaries certify that the BR section of the joint industry scheme is "unstable". This obligation is not reflected on the face of the schedule. The amendment places an obligation on the Secretary of State to consult the trustees, and to consider the exercise of his power of designation, which, if exercised, would bring the section within the regime of Part III of the Transport Act 1980. That would require him to make annual payments into the scheme to pay for unfunded accrued pension rights and pension increases. The Secretary of State would be required to make annual payments for, among other things, pensions increases up to the level of RPI indexation. The purpose of this amendment is to put upon him a duty so to do, not merely to empower him.

We have observed in previous debates that the effectiveness of the insolvency guarantee is watered down if the timescale over which the Secretary of State is required to make good the guarantee is left open-ended. Bringing the new closed scheme within the regime of Part III of the Transport Act 1980 avoids this problem because the Secretary of State's obligation there is to make annual payments in respect of each financial year, calculated on a year-by-year basis. I beg to move.

The Earl of Caithness

These amendments are unnecessary. The pension rights of protected persons will be protected by orders under paragraph 6 of Schedule 10. It is the pension rights of such protected persons which will be relevant and not the source of that funding. By forcing the Secretary of State to designate all such schemes for the purposes of the 1980 Act, the amendments may have the effect of preventing payment of a fully funded transfer value from an existing BR scheme to a new scheme. In certain instances, the Government might wish to pay up in full in respect of the unfunded relevant pension liabilities when a protected person is transferred, as would otherwise be the case under Section 52 of the 1980 Act. With these amendments in place, to achieve the same desired effect would require an order first designating the scheme under paragraph 9 and then the issue of a notice under Section 52A of the 1980 Act. I am sure that the noble Lord would agree that that is very convoluted.

Lord Clinton-Davis

I have listened to what the Minister had to say. He says that the amendment is unnecessary. I shall read with care what he had to say. Meanwhile, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 70 not moved.]

The Earl of Caithness moved Amendments Nos. 71 to 75:

Page 181, line 9, after ("are") insert (", or are to be,")

Page 181, line 11, after ("are") insert (", or are to be,").

Page 181, line 15, after ("are") insert (", or are to be,").

Page 181, line 53, at end insert ("and as if no payment representing the pension rights in question had been made)")

Page 182, line 5, at end insert:

("(8A) Without prejudice to sub-paragraph (8) above, where in any financial year the whole or any part of a person's accrued pension rights under a B.R. pension scheme are transferred to a designated scheme, it shall be assumed, for the purposes of any determination of the aggregate amount of the pensions, increases and expenses payable under or incurred in connection with the B.R. pension scheme in that financial year, that the payment of any sum representing those pension rights had not been made.").

On Question, amendments agreed to.

The Earl of Caithness moved Amendment No. 76:

Page 183, line 27, at end insert:

("() At or before the time when a draft of a statutory instrument containing an order under paragraph 3 or 4 above is laid before each House of Parliament pursuant to sub-paragraph (1) above, the Secretary of State shall also lay before each House of Parliament a copy of any comments on the order in question—

1. (a) which have been made in writing to the Secretary of State by the trustees mentioned in paragraph 3(4) or, as the case may be, paragraph 4(4) above;
2. (b) which are designated by those trustees as comments which they wish the Secretary of State to consider as comments on that order; and
3. (c) which have been received by the Secretary of State before the expiration of such period as has been notified by him to those trustees as being the consultation period in relation to the order in question;

but this sub-paragraph is without prejudice to the validity of the order in question.").

The noble Earl said: Amendment No. 76 provides a new sub-paragraph to be added to paragraph 11 of Schedule 10. It requires that the written views of the trustees of a BR pensions scheme are to be made available to members of each House of Parliament in time for informed debate whenever a statutory instrument containing orders amending an existing BR pension scheme, or transferring pension rights between schemes, is debated under the affirmative resolution procedure.

It has always been the Government's intention that pension scheme trustees would be consulted fully about the changes that would be necessary in order to safeguard pension benefits after privatisation. Nevertheless, a commitment was given on Report in the other place that the views of the trustees of a pension scheme should be available in time for the consideration of the orders that would be necessary to put the new arrangements in place. The amendment fulfils that commitment. In fact it goes further than the new clause tabled in the other place by the honourable Member for Wrexham. That is because it applies also to orders proposing to transfer pension rights between schemes as well as to orders amending existing schemes, and it also requires the Secretary of State to publish the trustees' comments even where he proposes to act precisely in accordance with their advice.

I commend the amendment to the Committee. Specifically, it requires the Secretary of State to lay before each House a copy of any comments he has received from the relevant scheme trustees on the order in question, at the time, or before, the draft of the statutory instrument containing the relevant order or orders is laid before Parliament. The comments must be in writing and must be designated by those trustees as the comments that they wish the Secretary of State to consider. The trustees are required to make their comments so that they are received by the Secretary of State before the consultation period specified by him has expired.

In that manner, the Secretary of State is obliged to show to each House any such comments that have been made about each proposal to make orders. Therefore, our debate and that of another place will be better informed. I beg to move.

Lord Peyton of Yeovil moved, as an amendment to Amendment No. 76, Amendment No. 77:

Line 3, leave out ("paragraph 3 or 4") and insert ("paragraphs 2, 3, 4, 7B, 7C and 8").

The noble Lord said: I can deal briefly with the amendment. Amendment No. 76 which my noble friend has just moved is welcome, so far as it goes; but I wonder why it does not go further. Why does it not apply to new schemes, to RPI-linked solvency guarantees, to additional protection for future pensioners or the Transport Act 1980 payments? It is somewhat esoteric, but I am advised that that is so. It seems odd that it should be. I wonder whether my noble friend will explain why those important matters should be excluded. I beg to move.

The Earl of Caithness

My noble friend is not often mistaken, but I believe that he may be so on this occasion, because by his amendment he is seeking to extend the influence of the trustees where it is either impractical or they have no locus.

The government amendment which this amendment seeks to amend requires the Secretary of State to lay before Parliament any comments he receives from the trustees about proposed statutory orders amending the rules of existing pension schemes or transferring rights between schemes. The amendment proposed by my noble friend seeks to extend that requirement in three ways. They are as follows.

First, to orders establishing new schemes under paragraph 2 of Schedule 10. However, trustees cannot be consulted on a scheme which does not yet exist and which would not have trustees. Proposed appointees generally have no responsibility for a scheme until they are appointed under the order on which it is proposed they be consulted. Therefore, while I cannot accept the amendment because there will not be trustees of the scheme to consult, I do understand the point that is being made and I can confirm that in practice we will be going along with the spirit of it. I can assure my noble friend that we are already in consultation with the present BR pension trustees about the proposed rules of the joint industry scheme, and intend them to be fully involved at all stages.

Secondly, to the new provisions proposed by Amendments Nos. 57 and 58 which add two new paragraphs to Schedule 10 guaranteeing funding for the pension scheme and protection for future pensioners. Neither of those amendments contains any order-making powers, and therefore the Secretary of State will not be laying any orders on which the trustees can comment.

Thirdly, to the provisions of paragraph 8 of Schedule 10, as amended by Government Amendment No. 65 which provides an order-making power in the new Section 52(B) of the Transport Act 1980. This is a matter of public expenditure which must be a primary concern of the other place, as my noble friend recognised. It will not be appropriate to require the trustees' comments to be laid before each House. For those three reasons, I cannot accept the amendment.

Lord Peyton of Yeovil

I have taken careful note of what my noble friend has said. For the moment, I am disposed to say that I am content to have put forward an amendment that he found so easy to deal with. Some of the other amendments have occasioned him more difficulty. I shall look at what he has said with some care. In the meantime, I beg leave to withdraw the amendment.

Amendment No. 77 to Amendment No. 76, by leave, withdrawn.

On Question, Amendment No. 76 agreed to.

7.30 p.m.

Lord Simon of Glaisdale moved Amendment No. 77A:

Page 183, line 28, leave out ("apart from the provisions of this sub-paragraph").

The noble and learned Lord said: In moving Amendment No. 77A, I shall speak also to the two subsequent amendments which are linked with it. As the Committee knows, this place has a special procedure for the consideration of those who may be affected adversely as individuals by public Bills (the hybrid instrument procedure). Paragraph 11(b) of the schedule nullifies and makes unavailable that procedure.

The amendment reinstates the procedure. I am sorry that the amendment is starred on the Marshalled List, but, except in one particular, it is only technically different from the amendment tabled last week, and is the result of expert advice to which I and my co-signatories have deferred. The only respect in which there is a difference is that last week we suggested a cut-off point of 28 days. That was in deference to the argument put forward by the Minister earlier that what we proposed—in other words, the hybrid instrument procedure—would cause delay. We therefore cut down the maximum period of delay. However, it can be represented that 28 days is too short for the consideration that would be required by the Statutory Instruments Committee. We have therefore proposed 40 days. That is the only substantial difference.

The amendment differs from an amendment which was moved earlier in Committee by the noble Lord, Lord Tordoff. It proposed the full procedure laid down in Standing Orders for hybrid instruments. My amendment proposes an expedited procedure which is also covered by the Standing Orders. The main difference is that everything can be done by the Joint Hybrid Instruments Committee itself, as I hope to explain in a moment. At the end of 40 days a guillotine is brought down and the order will normally proceed by way of an affirmative resolution order.

The amendment is of great importance, due in part to the fact that it affects a great number of pensioners and billions of pounds are involved. If ever there were a case for close parliamentary scrutiny it is this. The other reason is the constitutional consideration; namely, the Bill seeks to obviate a procedure which is peculiar to this Chamber and which has been instituted and used for 70 years for the benefit of individuals who might be adversely affected by Public Bills. It also goes directly in the face of the clear indication of the Delegated Legislation Scrutiny Committee of your Lordships' House. Again, that is a peculiar parliamentary institution of this House. Its advice, which appears quite plainly, is flouted by the Bill, and the amendment seeks to follow the advice.

I mentioned the constitutional position. Behind it lies a matter that is not often expressed but is increasingly at the back of our minds as legislators. It is the question of who governs Britain. Is it Westminster or Whitehall? Who legislates? Is it Parliament or is it the Executive? In both cases the Bill proposes that the Executive shall legislate by subordinate legislation and parliamentary scrutiny by the Hybrid Instruments Committee in the form that I have indicated is obviated. Therefore, those large constitutional issues are involved.

There is also the question of pensions. They have been admirably analysed and discussed today and in an earlier debate. I wish merely to emphasise one point. The pensioners who are concerned enjoy their pensions under contract. Furthermore, they are, in effect, parliamentary contracts. The Bill proposes that those contracts may be rewritten by the Executive by subordinate legislation and not subject to the scrutiny that I have indicated.

We were recently reminded of some valuable political concepts; basic principles. I am bound to ask the Minister whether it is a basic principle that, ordinarily, contracts ought to be observed. Is that in his view and in the view of the Government a basic principle? The matter was put more strongly on the Housing and Urban Development Bill, with which we dealt earlier in the Session. It was asserted that contracts were sacrosanct. I do not go so far as that. There may be circumstances in which an overwhelming public interest demands the rectification of some contract. But surely that can be done only afar the most careful scrutiny by an independent parliamentary body. Does the Minister agree with that? Are contracts, in particular parliamentary contracts, normally to be observed and only to be disrupted and revised by the other party to the contract if an overwhelming case is shown and if the matter has been independently scrutinised and not merely at the whim of one of the contracting parties?

On that contractual basis, I return to consider the constitutional points. The first relates to the Joint Select Committee on Delegated Legislation of 1972–73. That was a powerful committee of both Houses and was chaired by a greatly honoured and experienced parliamentarian, the late Lord Brooke of Cumnor. I shall read the actual words of the report, if my eyesight stands up. No, it does not but I can cite the paragraph of the report. The committee stated that the hybrid instruments procedure had been a valuable safeguard for 50 years—that was 20 years ago—and should be preserved. In fact, the committee wished to see it extended to the other place when time permitted but stated that in the meantime it should be preserved in your Lordships' House. When the report was debated, that recommendation was accepted in both Houses. On behalf of the Government, does the Minister accept that? I should welcome a specific answer to that matter because it disposes of this amendment.

As I read the report, the only circumstance in which the Brooke Committee considered that the hybrid instruments procedure could be dispensed with was when there was an alternative investigation., as is often the case under local government Acts: otherwise it had to stand.

That is the background as regards the Hybrid Instruments Committee. It is set up at the beginning of each Session. It was set up at the beginning of this Session. If ever there was a case where it is needed, this is it. Therefore, I ask the noble Earl why it is now to be obviated. I know that he has said that it will take time but that was not a consideration that the Brooke Committee considered to be adequate. If the noble Earl will allow me to say so, he was not very convincing on that point in any event and we have gone some way towards meeting him by using the expedited procedure laid down in Standing Orders.

The other aspect to which I have referred is the Delegated Powers Scrutiny Committee. For many years there was criticism of the way in which delegated legislation was abused by the government. That was not purely in your Lordships' House. It was stated strongly by a highly respected Member of the other place—Mr. Cryer, the chairman of the Joint Select Committee on Statutory Instruments. It was as a result of those criticisms that the Jellicoe Committee was set up to consider the committee organisation of your Lordships' House.

The Jellicoe Committee recommended a number of new committees, including the Delegated Powers Scrutiny Committee. Of all the recommendations, that was the only one to which reservation was expressed by the Government. Anybody with experience of government knows exactly what happened. Sir Humphrey and his confreres got together at the Athenaeum or Reform Club and expressed alarm that delegated legislation, so convenient to the Executive,

might be scrutinised. Fortunately the reservation was brushed aside by your Lordships' Procedure Committee and the Delegated Powers Scrutiny Committee was set up under the chairmanship of the noble Lord, Lord Rippon of Hexham.

That Committee has now made five reports. The first report was a report which it was asked to make setting out its criteria; and that was accepted. It has since made four reports on Bills. The fourth report is on this Bill and it makes two observations. Clearly it thought that the alteration of statutory contracts should be carried out by primary legislation and not, as here, by secondary legislation. We are not pressing that because the report went on to express far more strongly the view that paragraph 11(2), obviating the procedure of the Hybrid Instruments Committee, was objectionable. I ask the noble Earl again whether he accepts that and if not, why not. It is a matter of great importance that your Lordships, having set up that committee and it having operated to acclaim, should not allow it to be whittled away at executive convenience.

Therefore, we propose that the accelerated procedure should be adopted. As I understand it, that procedure operates in this way. The Government, at their own convenience and in their own good time, lay the order. The Chairman of Committees then scrutinises it as to whether or not it is hybrid. If it is hybrid, it goes to the Hybrid Instruments Committee. I believe that some but by no means all of the regulations under this schedule will be hybrid; in other words, some of them may affect adversely some individual pensioners. I shall return to that in a moment in view of the noble Earl's assurance on that point.

But, the matter having gone to the committee, petitioners who feel aggrieved have 10 days from the laying of the order to set out their grievance, if they feel one. The committee then considers whether the petitioner has locus standi and whether he has presented a real grievance—in other words, whether the petitioner has suffered hardship by a rule which we must accept is laid to cover due fairness in the generality of cases but which may cause hardship in some particular case which has been overlooked.

If there has been no petition, if no petitioner has locus standi or if no real grievance is shown, the committee then so reports and the guillotine comes down in any event at the end of 40 days. The order then proceeds as an ordinary affirmative resolution order.

The question of this amendment has really been clinched at an earlier stage of the debate in the very closely argued debate on Amendment No. 4 in the name of the noble Lord, Lord Peyton, because on that amendment the Minister again and again said that the Government's scheme will be designed, and is sufficiently flexible, to ensure equity, absence of hardship and no unfairness to any individual. I took those words down as he said them and I can cite them. If he is right, then there will be no petitions and no time wasted. On the other hand, the noble Lords, Lord Peyton and Lord Clinton-Davis, and my noble friend Lord Marsh expressed some apprehension that the scheme might not be completely watertight. If they are right, then this procedure is necessary. Therefore, if the noble Lord is right, he loses nothing by accepting the amendment. If he is wrong, the amendment is necessary. I beg to move.

Lord Tordoff

When the noble and learned Lord, Lord Simon of Glaisdale, has made such an impassioned speech, one is tempted to say: "Game, set and match", and that nothing further is necessary. However, having put my name to the amendment and having proposed it at an earlier stage, I feel that I must say a few words.

The amendment is an attempt to overcome the objections made by the Government at an earlier stage to the involvement of a hybrid procedure. Their argument, as I remember it—and as other Members of the Committee doubtless will—was that the hybrid procedure would cause delay and uncertainty and that it is to the advantage of pensioners and contributors not to have the right to petition against an order because it would delay matters for them and set up a series of problems.

However, the truth of the matter is that pensioners are worried. Indeed, we are constantly receiving letters from pensioners and from organisations that represent them which show just how worried they are. The object of the amendments is to reassure those people that, as the noble and learned Lord, Lord Simon of Glaisdale, most adequately said, the Executive will not ride roughshod over the rights of individual members of the pension funds.

The Government offered as an alternative to publish the views of the trustees before placing an order before Parliament. That was a step forward. However, it is not a major step forward because, as we discussed earlier, the trustees do not really represent everyone. Certainly, as things stand at present, they do not directly represent pensioners. We must bear in mind the fact that existing pensioners outnumber employees by a significant factor.

I hope that the Government will at least give the series of amendments a fair wind, mainly in the interests of the individuals who are likely to be affected. There may be very few of them; indeed, none of them may be involved. But at least there should be the opportunity for people to petition Parliament who feel themselves to be suffering because of orders that are about to be made.

We heard from the noble and learned Lord, Lord Simon of Glaisdale, that there are plenty of safeguards. But if those people do not have locus standi or if their cases are frivolous they will not be admitted. In any case, the time-scale is a maximum of 40 days. The Government can surely so organise their orders so that 40 days will not throw the whole legislative process out of gear.

It is against that background that I beg the Government to take the proposed amendment seriously to see whether they can reach the kind of compromise which is being put forward tonight. On the last occasion, we sought to delete the whole section. The Government, understandably, did not agree because of the potential delays. However, I believe that those delays have now been obviated and I trust that the Government will now accept the amendments.

Lord Clinton-Davis

My name is also attached to the amendments. I congratulate the noble and learned Lord, Lord Simon of Glaisdale, for the way in which he moved them. On the previous occasion, the Government indicated that they would consider the issues afresh. We await with interest to hear the Minister's reply tonight. However, as the noble Lord, Lord Tordoff, said, the concession that has been made regarding the publication of the trustees' views is really not adequate in the circumstances and does not compensate for the way in which the Government seek to overcome the views of the Scrutiny Committee and to overturn established procedures. That is the issue with which this Chamber is rightly concerned.

When we previously debated the issue the noble Earl indicated that he thought that the Chamber would be overwhelmed with objections or petitions. However, I believe that it is quite clear from speeches made both then and today that that is a very unlikely situation. But, in any event, the safeguards have been inserted by the noble and learned Lord, Lord Simon of Glaisdale. That is very clear.

Another suggestion was made during the earlier debate by the noble Lord, Lord Henderson of Brompton. If the Minister feels inclined to reject the present amendments, it would be helpful if he could indicate the Government's response to that specific suggestion. I refer to the debate in Committee on 21st July in which the noble Lord, Lord Henderson, said: I suggest that it should be for this Chamber to disapply standing orders in any particular case when they come before us. I ask the noble Earl, Lord Caithness, whether he will consider proceeding in that way; in other words, that he will withdraw the proposal that the disapplication of the standing orders should be enshrined in the statute and, instead, agree that each order should be subject, as it perfectly well can be, to a Motion in this Chamber to disapply it".—[Official Report, 21/7/93; col. 737.] I personally prefer the amendments tabled this evening. However, if the Minister is not prepared to accept them, perhaps he will indicate his views on the suggestion put forward by the noble Lord, Lord Henderson of Brompton.

8 p.m.

The Earl of Caithness

I listened with great care to what the noble and learned Lord, Lord Simon of Glaisdale, said when he introduced the amendment. Let me make it absolutely clear at the beginning of my remarks that the Government have no quarrel with the hybrid instrument procedure. However, the question—and, indeed, it has always been the question—is whether the procedure is appropriate in the present case. For the reasons that I set out in Committee and which I shall repeat again today, I do not believe that it should be applied.

Members of the Committee will recall that on 21st July when the Chamber voted on the principle of the issue of applying the hybrid instrument procedure, I explained why the Government did not consider the procedure appropriate for orders such as these. It was as much the principle of the issue as the type of procedure. Therefore, I was somewhat saddened, disappointed and surprised to see the amendment tabled in the name of the noble and learned Lord, Lord Simon of Glaisdale. In Committee we discussed various alternatives to the hybrid instrument procedure. Indeed, we discussed the expedited procedure and also the various alternatives put forward by the noble Lord, Lord Henderson of Brompton, which I said I would consider. Moreover, I told the noble Lord, Lord Tordoff, that I should like to consider all such matters. However, the noble Lord decided to test the opinion of the Committee on the issue, which included the principle of the hybrid procedure, and the amendment was rejected. Therefore, as I said, it was somewhat sad for me to find that the noble and learned Lord had tabled the amendment.

The arguments that I used in Committee are founded not only on delay and on the uncertainty that that brings, but also on the appropriateness of the hybrid procedure to this particular case. Those considerations are still relevant today, even though it is specifically an expedited procedure that has now been proposed. We maintain our argument about the appropriateness of the procedure in the present case and the question of delay. We have examined other cases where the full procedure has been used. Nearly all of them concerned judgments between public and private interests, or the interests of different public bodies. Recent cases have involved enquiries into the development area orders made by Ministers and petitioned against by local authorities and others, or orders under fair trading legislation petitioned against by private companies

However, the administration of pension schemes is about reconciling a series of private interests. It is true that there could be a dispute between the Government and the trustees of existing schemes, but we covered that point by arranging for the nature of the dispute to be made public before or when the orders are laid in draft. Further, the trustees themselves do not want the hybrid procedure because they see it as undermining a role which is properly theirs and for which they are best equipped to deal.

The hybrid instrument procedure is ill-suited to disputes between private interests. If there is a petition from a group of beneficiaries and they succeed, it will almost certainly be at the expense of other beneficiaries, or employers. It is the trustees who normally judge whether a fair balance has been struck between those interests, and their judgment would be called into question. That brings in the question of the trustees' role in all this. It is the fiduciary duty of trustees to represent the interests of all the contributors and beneficiaries of a pension scheme. This Committee should not, I submit, be providing explicitly for dissenters within a pension scheme to circumvent the role of the trustees and to seek to frustrate the representations of the trustees made on behalf of all contributors and beneficiaries.

It would have been more reasonable to have proposed an expedited hybrid instrument procedure where only the pension fund trustees could petition. However, we have adopted a different and. I believe, a better means for the trustees to make their views known whenever they wish to, prior to the Secretary of State making an order under Schedule 10. That is the procedure for publishing the trustees' views which we have just debated.

The Committee will understand that the pensions aspects of privatisation should march reasonably in step with others. But that cannot be assured if even the expedited hybrid instrument procedure were applied. So far as we can establish, the expedited procedure appears only once in a statute—the Offshore Petroleum Development (Scotland) Act 1975—and has never been used. We are therefore wholly in the dark as to how it would work. I paid particular attention to the argument of the noble and learned Lord, Lord Simon of Glaisdale, when he mentioned a period of only 40 days and the fact that Standing Order 201A provides that, proceedings terminate when the prescribed period ends". However, I must ask the noble and learned Lord whether that would be the case in practice. Is there not the chance that the Committee, despite sitting long hours and diligently working through the petitions, would find that 40 days less the time for petitioning was not enough? What a temptation there would be to say, "Let it continue; let the Government not move the resolution until they have heard the Committee's report". The Chamber is in charge of its own procedures and that is quite right too. I do not want to dwell overly on delay, but I do want to warn the Chamber what might happen in practice.

To summarise, although delay is an important factor, we believe that the use of the hybrid instrument procedure, even the expedited procedure proposed by this amendment, is the wrong process. I said that in Committee and we voted on that in Committee. I say it again today. We have no intention of depriving the Chamber of its right fully to examine legislation that appears to interfere as between public and private interests. But that is most emphatically not the case here because we are providing an alternative means for representations. The BR pension trustees support us in that view and are content with the arrangements that we are putting in the Bill for them to report each and every time that an order is to be debated in the Chamber. The Committee will therefore have an adequate opportunity to consider the views of those responsible for representing the interests of the pension schemes.

At this point I would say to the noble and learned Lord, Lord Simon, that we believe that we have put a sensible alternative before the Chamber. We are not deliberately trying to negate the Brooke Committee's recommendations. There is an alternative method of representation. I hope that on reconsideration the noble and learned Lord—I know that he feels strongly about this issue as he has written to me on the subject and I have written to him—will not seek to press his amendment.

Lord Simon of Glaisdale

Before I deal with the arguments that the noble Earl has put forward, I wish to draw attention to the matters that he has not dealt with. I asked him specifically whether the Brooke Committee did not state that the hybrid instrument procedure had for 50 years proved itself a valuable safeguard for the interests of private individuals. That point was not answered. The noble Earl did not say either whether the Government still accepted that point. I believe it is serious if these kind of parliamentary safeguards are being whittled away in the interests of the Executive.

Neither did the noble Earl deal with the following point that was put to him. If he is so satisfied that the scheme he proposes is watertight, or will be watertight, and that no individual can be prejudiced, does it not immediately follow that there will be no petitions, no locus standi and the guillotine falls? The noble Earl did not deal with the point made by the noble Lord, Lord Clinton-Davis, reminding him of the suggestion made by my noble friend Lord Henderson of Brompton. The noble Earl skated by that entirely.

I now turn to the arguments that the noble Earl put forward. The first is that there will be representation by the trustees. That entirely loses sight of the fact that what we are concerned with is the individual pensioner who may be penalised by a scheme which is generally fair and which we can assume will be put forward as being generally fair, and which the trustees also may think is generally fair. But time and again a generally fair scheme may be prejudicial to some individual and it is that individual who is being denied the chance of putting his case forward.

In view of those matters it seems to me that the Minister gave a thoroughly unsatisfactory answer. I am sorry to say that because the noble Earl has aroused such admiration by the way in which he has conducted this Bill, but I am afraid that on this issue it is a clear case of Executive encroachment on parliamentary procedures and on individual rights—rights that are of great importance because, as I said, what the Government are proposing to do is to rewrite contracts to which they are in effect a party. They are proposing to do that by secondary legislation. They are flying in the face of the Scrutiny Committee.

It is now late and the Chamber is empty. I would have no hesitation in asking those who have heard the debate to stand up and be counted, but I know very well that the Whips are bound to have people outside who can come in and be "discounted". Therefore it would be idle to try to divide the Committee on this matter tonight, but I hope that the noble Earl will excuse me if I say that the Government reply was so unsatisfactory that the matter must be revised on Report before a full Chamber. In the meantime I ask leave—

The Earl of Caithness

I am grateful to the noble and learned Lord for giving way. I wish to make one point absolutely clear if I did not make it clear in my reply earlier. I believe that I have answered precisely the point about the Brooke Committee that the noble and learned Lord accused me of not having answered. I have said that this instance is very different from the use to which the hybrid procedure has been put in the past. In this particular instance the fiduciary duty of the trustees is being challenged under the hybrid instrument procedure by private individual interests, as a result of which, if one section of the private sector interest benefits, another section of the private sector interest is likely to be disbenefited. That is an issue which the trustees will have had to take into account in the first instance.

Therefore, it is not that we believe that the Brooke Committee was wrong or that the hybrid procedure is no longer relevant. It is highly relevant. However, the argument which I put forward at Committee stage is the same as the argument I have put forward today: it is not appropriate in these particular circumstances.

The noble and learned Lord knows my views on this matter. At Committee stage we voted on the principle of this whole procedure. We shall have to vote again on the principle of the procedure today.

Lord Simon of Glaisdale

I am afraid that that will not do. The noble Earl has not stated whether he accepts what the Brooke Committee said, namely that this was a procedure which for 50 years had proved itself a valuable safeguard for individual rights. He merely said airily that it would not be appropriate here without saying why not, except perhaps because the trustees can express their views. That fails to meet the point that the draftsmen of the order and the trustees may approve of a generally fair scheme which may operate harshly on some individual pensioner. It is the individual pensioner who is the private interest with which the Brooke Committee was concerned and with which the amendment is concerned.

When the noble Earl intervened I was about to say that this matter must be considered by a full Chamber. As I said, it involves executive encroachment on the machinery of your Lordships' House. The matter is far too important to be decided in a Chamber in which only 20 Peers have heard the argument. Therefore, in withdrawing the amendment I give notice that it will be revived at Report stage before an adequate House.

Lord Tordoff

I am grateful to the noble and learned Lord for giving way because I wanted to intervene before he seeks to withdraw the amendment. First, I wish to support him in what he has said. It is not a question, as the noble Earl suggested, of an all-seeing, all-wise group of trustees being able to represent everybody's views. The noble and learned Lord is rightly saying that this does not leave sufficient room for individual petitioners to have the opportunity to have their voice heard in circumstances of which the trustees may not be aware.

Secondly, I have a dreadful suspicion that the noble Earl, Lord Caithness, is seeking to negative the amendment which the noble and learned Lord is seeking to withdraw. I caution him not to do so. It does not matter what he does to me if I move an amendment. He can defeat me, or whatever he likes. However, to seek to negative an amendment moved by so distinguished a Member of your Lordships' House as the noble and learned Lord, Lord Simon, would be a gross breach of courtesy in this House, to say the very least.

The Earl of Caithness

There would certainly be no personal discourtesy to the noble and learned Lord, Lord Simon of Glaisdale The noble and learned Lord and I have agreed on many issues in the past. We have disagreed on some issues in the past, from the Home Office to my present position. I have found the noble and learned Lord one of the most courteous of noble Lords and I would not wish to be discourteous to him.

The point I was making, and which the noble Lord, Lord Tordoff, rather glossed over, was that we have already voted on the principle. It happened to be on an amendment in the name of the noble Lord, Lord Tordoff. We voted on the amendment at an earlier stage in July. The same principle is being raised today. That is why I was saddened by the fact that the noble arid learned Lord had put his name to the amendment.

8.15 p.m.

Lord Simon of Glaisdale

I meant to deal with that point. What was invoked in Committee was the wider provision of the standing orders relating to hybrid instruments. The noble Earl objected that that might cause undue delay. Therefore, perfectly in accordance with the rules of order of this Chamber, this amendment is now brought forward in narrower terms making use of the next standing order.

If I am refused leave to withdraw the amendment I shall regard it as an absolutely disgraceful abuse of your Lordships' House. The matter is of great importance to your Lordships' procedures and standing in the constitution. If I am refused leave to withdraw the amendment so that it can be brought forward at Report stage, and if all the minions who have been gathered outside are brought in to refuse leave, I can only express myself as strongly as it is in my power and say that that would be a disgraceful abuse of your Lordships' House. I beg leave to withdraw the amendment.

Lord Clinton-Davis

Before the noble and learned Lord withdraws the amendment perhaps I may say on behalf of the Labour Opposition that we fully support the view that he has expressed. It is all very well to say that this is an issue which has been dealt with in principle. The noble Earl himself indicated in the course of discussion that he was prepared to listen to and consider other views. However, he is saying effectively that because there was a vote he is no longer prepared to do that. That is not consonant with his duties as a Minister or with the duties of the Government towards this House on a matter of this kind. I plead with the noble Earl not to seek to negative this. It is a matter which is appropriate for further debate.

The noble Earl knows how sensitive this Chamber already is about the Government's conduct of this Bill. That was the subject of an earlier debate. The Government have not covered themselves with glory on this matter. Consequently I urge the Government to listen to what the noble and learned Lord, Lord Simon of Glaisdale, has said and to take no abrupt action to seek to terminate the debate. In any event, I do not believe that they would succeed. Whatever the noble Earl says tonight I would argue that this was not decided as a matter of principle in the narrow context he suggested; the issue which has been raised by the noble Lord, Lord Henderson of Brompton (or something along those lines) would still be applicable at Report stage. I do not believe that the noble Earl can frustrate debate in the way he has suggested.

Amendment, by leave, withdrawn.

[Amendments Nos. 78 and 78A not moved.]

The Earl of Caithness moved Amendment No. 79:

Page 183, line 31, at end insert:

("Transitory provision S.1. 1975/1503 (N.1. 15)

12. In this Schedule, and in any amendment made by this Schedule to any other enactment,—

1. (a) any reference to section 1 of the Pension Schemes Act 1993 shall, until the coming into force of that section, be construed as a reference to section 66(1) of the Social Security Pensions Act 1975;
2. (b) any reference to Part III of the Pension Schemes Act 1993 shall, until the coming into force of that Part, be construed as a reference to Part III of the Social Security Pensions Act 1975; and
3. (c) any reference to Part III of the Pension Schemes (Northern Ireland) Act 1993 shall, until the coming into force of that Part, be construed as a reference to Part IV of the Social Security Pensions (Northern Ireland) Order 1975.").

The noble Earl said: I beg to move the last of a very long list of consequential amendments.

On Question, amendment agreed to.

On Question, Whether Schedule 10 shall be agreed to?

Lord Tordoff

Perhaps I may revert back to the subject that we discussed at the beginning of the day; namely, government amendments that have been put down today. I am grateful to the Minister for sending to me and other Members of the Committee a description of government amendments that are being tabled today. We shall obviously study those before Report stage. I am faintly amused that the document comes in an envelope marked "Parliamentary. Immediate at all stages. Please deliver by 6.30". It arrived at 7.20.

Schedule 10, as amended, agreed to.

House resumed: Bill reported with amendments to Schedule 10.