HL Deb 17 July 1995 vol 566 cc82-102

House again in Committee.

Clause 3 [Supplementary provisions as to the Authority's powers]:

Lord Haskel moved Amendment No. 26:

Page 3, line 20, at end insert: ("( ) The Authority shall not have the power to dispose of any undertaking unless provided for by a transfer scheme.").

The noble Lord said: This amendment is designed to prevent the United Kingdom Atomic Energy Authority selling off parts of itself other than by the process described in the Bill. In recent weeks the United Kingdom Atomic Energy Authority has announced a further nine businesses for sale in addition to AEA Technology. The process set out in the Bill should be used to ensure that the interests of the public and the employees will be protected as provided for by the Bill.

But the fact that those additional businesses have now been offered for sale brings into question the whole issue of why indeed we need the Bill. The purpose of the amendment is to bring this matter to the Minister's attention. Perhaps he can explain to us why those nine companies have been offered for sale while the Bill is under discussion. I beg to move.

Lord Fraser of Carmyllie

Unless the noble Lord wishes to resume the discussions that we have previously had on the desirability or otherwise of a unitary scheme for the disposal of AEA Technology, perhaps I may say to him that most disposals by the authority other than AEA Technology involve the sale of small operational units with few assets and only a handful of staff.

In such cases, sale by normal commercial contract is all that is required. Giving effect to all such sales—some of them are indeed very small—by way of a transfer scheme would be to make something of a mountain out of a molehill. For example, if AEA Technology is to be disposed of by way of a unitary arrangement, clearly a transfer scheme, as the Bill requires, is appropriate. In our view, it is not appropriate to require such an arrangement to be made in each and every circumstance when such a small disposal is carried out.

I am sure that the noble Lord appreciates that probably the least satisfactory way to go forward for AEA Technology would be an arrangement taking out this little part and that little part. It would be more desirable to regard the two matters separately and appreciate that the small disposals are rather separate from the major objective of the Bill, which is to deal with AEA Technology as a whole.

Lord Haskel

I thank the Minister for that explanation. We realise that these are small disposals. But I raise the point because at some time presumably someone will ask where the line is drawn. When does a small disposal become a large disposal and affect the privatisation that we are discussing? Having made the point, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 27 and 28 not moved.]

Clause 3 agreed to.

Clause 4 agreed to.

Clause 5 [Duty of Authority to assist Secretary of State in connection with transfer schemes]:

Lord Peston moved Amendment No. 29:

Page 4, line 2, leave out (", as far as practicable,").

The noble Lord said: This is a very simple probing amendment that was raised in another place. I should like a brief account from the Minister as to what he has in mind at this point. Clause 5 deals with the authority furnishing the Secretary of State with the information that the Secretary of State may require in connection with transfer schemes.

Subsection (2) deals with the obligation of the authority to: include a duty to secure, as far as practicable, that their subsidiaries furnish all such information and assistance as the Secretary of State may require".

I do not understand why the phrase "as far as practicable" is inserted. It seems to me that if it were taken out, the sentence would have exactly the same meaning. Obviously, a duty to secure means a duty to secure as far as practicable. What else could it possibly mean? Having a duty to do something does not mean there is a duty to do the impossible. It means that there is a duty to do what one can do.

This point was raised in the other place. I did not at that time see an answer that made any sense. I had hoped to receive an answer today. I always ask whether there is some clever point that I have missed. But, if I were to say that a Minister had a duty to do something, I should mean that within the bounds of what is practicable he must do it. It would not occur to me to say that he had a duty to do this and then add "as far as practicable".

The Minister may be aware that it is part of my campaign, which is often joined by some of his noble friends but they are not here this evening, to have Bills that we pass into law written in English as we know it. This passage may be an illustration of that. However, there may be some deep philosophical consideration that his officials may wish to draw to our attention on this occasion. If so, I should like to know it.

Lord Fraser of Carmyllie

Whether or not it is particularly clever, perhaps I may offer the following explanation. The subsection to which this amendment relates places an obligation on the authority to secure an equivalent degree of co-operation from its subsidiaries. The duty in relation to those subsidiaries is qualified by the phrase "as far as practicable". I understand that it is that phrase which the noble Lord wishes to remove. The effect would be to place the authority under the same duty to secure the assistance of its subsidiaries as it is under itself.

In fact, it would make the Secretary of State's task easier if there were to be an absolute duty on the authority to secure the co-operation of its subsidiaries. But there is a practical problem. The reason why the duty in Clause 5(2) is constrained is that a subsidiary of the authority, even if wholly owned, is a separate corporate entity. The authority's relationship to that company is one of shareholder. There are limitations to the extent of the control which a shareholder can have over a company. Accordingly, it would not be right for the authority to be placed under an absolute duty where it might not be able to discharge that duty. That is the reason for the qualification.

I should have thought that the noble Lord would agree that it is unreasonable to place the authority under a statutory duty which it may be unable to fulfil through no fault of its own. It may be an extremely technical explanation to offer to the noble Lord. Perhaps his ears will prick up when he hears from me that so far as concerns the Secretary of State the task would be easier if the words that the noble Lord wishes to remove were indeed removed.

Lord Peston

I have no objection to that, for fairly obvious reasons. I found what the Minister said most enlightening. Clearly, the obligation is there so that the Secretary of State can do his job. It is all about assisting the Secretary of State. I think the noble and learned Lord is saying that if we left out those words, then the sentence would not be construed to mean absolute duty within the bounds of reality; it would mean absolute duty no matter what.

The Minister is simply adding to my education. I take it for granted that a duty to do something always means a duty within the bounds of reality. The noble and learned Lord is saying that if I do not include "as far as practicable", the duty would somehow be interpreted to mean a duty whether or not it is practicable. That must be the way in which lawyers think—not the lawyers in your Lordships' Chamber, of course. I cannot think anybody else would think about the real world in that way.

However, at least we have the answer on the record. The point has been made. It does not make sense to me but I have at least obtained an answer and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 5 and 6 agreed to.

Schedule 2 [Successor companies]:

[Amendments Nos. 30 and 31 not moved.]

Lord Peston moved Amendment No. 32:

Page 16, line 9, at end insert: ("( ) The Secretary of State shall not dispose of more than one half of any of the securities issued to him under sub-paragraph (1) above.".).

The noble Lord said: As the Committee will be aware, when we dealt with an earlier group of amendments I thought Amendments Nos. 31 and 38, which involved consultation with trade unions, also covered the area of so-called "golden shares". However, we did not discuss them under that heading at that point. The Minister indicated that he would rather discuss this subject subsequently and this is the heading under which we are dealing with the matter.

As always with legislation, I find myself in the position of only beginning to understand it when we are a long way into it. I confess that when we were debating this matter at Second Reading, I did not understand this part of the Bill at all. But, looking at the relevant clause and schedule, it is clear that the possibility exists within the Bill of the Secretary of State retaining a share (which would be interpreted as a so-called "golden share"), and I now believe I am right in thinking—the Minister will correct me if I am mistaken—that the authority will also own such shares.

The question arises—the Minister gave some clue as to this earlier—of what the purpose of such shares would be. They may be connected with two things that come to my mind. First, they could influence some of the activities of privatised AEA Technology; and, secondly, they could influence who the successor company could one day be sold on to. The amendments were tabled for clarification. First, am I right to interpret this part of the Bill as relating to golden shares? Secondly, am I right that the purpose of such golden shares would be as I outlined? Thirdly, if I am right on both those accounts—this may be of complete irrelevance if I am wrong—should not such disbursal be a matter for consideration in your Lordships' Chamber and the other place rather than within government?

To put it at its mildest, there would certainly be considerable interest in Parliament if the events I described should occur. This is therefore a probing amendment so that I and others who are interested in the matter can learn something more about the Government's intentions. I beg to move.

8.15 p.m.

Lord Fraser of Carmyllie

Management, as well as everyone else who has looked at the position objectively, is clear that privatisation offers the best means of securing a prosperous and successful future for the business and its employees. Some have suggested that all commercial benefits of privatisation could be achieved in the public sector if AEAT were given greater commercial freedom. But I do not believe that that is the right way forward.

Full commercial freedom means the freedom to take risks and to reap the rewards. That is not consistent with a degree of public ownership. Where companies remain publicly owned, the Government are seen to be standing behind them. In that circumstance the Government have their ever-continuing obligation to protect the taxpayer's interest in such companies. That being so, it is less likely that they will have the free commercial rein that may be desirable.

There are no provisions in the Bill that relate specifically to special shares, on the view that none is necessary. The policy question as to whether a special share should be retained by the Secretary of State will be considered in the light of developments, in particular, should customers have any anxieties—and particularly government customers—as to the future ownership of the purchased entity.

I was asked a direct question and must offer a qualification. There are sets of qualifications which the noble Lord has, in a sense, teased out of me which I am not reluctant to give, but I would not want to indicate that behind all this we have a series of proposals which we are declining to reveal. The noble Lord asked the question and I must explain that these are options that are available, albeit that it is our view that at the present time they look remote. Certainly they are sets of suggestions which seem to be going well away from the first amendment that the noble Lord suggested was the right way forward if AEA Technology is to be privatised.

Lord Peston

I am sorry to interrupt the Minister. I thought it would be a convenient moment as he said something very definite and clear. If the Minister looks at page 16 of the Bill, Clause 2 of the Schedule has the heading, Government investment in securities of successor company The clause states: The Treasury or, with the consent of the Treasury, the Secretary of State may at any time acquire … securities of a successor company". There is something a little further on relating to the selling of securities in successor companies. I interpreted that, possibly erroneously, as being included in the Bill for a purpose; that is, that the Government would not sell 100 per cent. of the AEAT, but would have the opportunity to continue to own some of it. I interrupted the Minister, I am afraid discourteously, to ask whether that is a complete misinterpretation.

Lord Fraser of Carmyllie

The noble Lord identified in that provision that, The Treasury or, with the consent of the Treasury, the Secretary of State may at any time acquire … securities of a successor company, or … rights to subscribe for any such securities". In his opening remarks I understood the noble Lord to be asking whether a set of special share arrangements is contained in the Bill. There is not. There are these more general provisions but I am anxious to avoid suggesting to him that we have in any sense in a bottom drawer a set of proposals that we would pull out. The noble Lord may again think that we are being unduly cautious about this and that we ought to come forward and say exactly what is our preferred manner of disposal. However, I repeat that I would have thought it more appropriate to leave that until we get to the autumn.

Lord Peston

The noble and learned Lord may have misunderstood me slightly. I did not for one moment think that there was a bottom drawer or, even if there was, that he would tell me what is in it. I was simply trying to find out the purpose of the paragraph. Am I right that the purpose of the paragraph is to enable the Treasury, or the Secretary of State with the consent of the Treasury, to acquire some of these shares in the successor company? That is what it says. I assume, without pushing the Minister, that they would acquire them for a reason. I gave reasons, but that is different. I do not expect the Minister necessarily to agree with my reasons. I simply want to know whether I am right that that power is there so that the Treasury or the Secretary of State could acquire such shares. Otherwise it does not mean anything.

Lord Fraser of Carmyllie

At an earlier stage the noble Lord was anxious to ensure his reputation as one who wants plain and simple language in legislation. Looking to the terms of paragraph 2 of Schedule 2, it would seem to me clear enough that the Treasury may at any time acquire securities in a successor company. However, if I am wrong about that, I shall write to the noble Lord. I do not believe there to be anything strange in that. Indeed, I believe it to be simply a standard provision.

Lord Clinton-Davis

Perhaps I may look at this issue from another point of view to supplement what my noble friend Lord Peston has said. We take the view—this was clear in our Second Reading contributions and in today's debates—that AEA Technology will carry out work that is crucial to the United Kingdom. It is involved in research into decommissioning and the operation of nuclear power stations and in extensions of that research into other areas. It is undoubtedly a critically important industry. It is the kind of industry in respect of which in the past the Government retained a golden share, a golden share designed to be able to assert the national interest, notwithstanding the competition laws of the European Commission which permit, as I think the noble and learned Lord will agree, foreign ownership to be excluded as a matter of principle. Provided it can be asserted successfully by the Government that a vital national interest is involved, they are perfectly entitled to operate through those procedures.

Does the noble and learned Lord accept that in principle at least it is correct that one does not have to adhere to the ordinary rules relating to competition if one can establish that a vital national interest is involved and that foreign ownership—even ownership from within the European Union—would not be acceptable? That is a general legal proposition that I put to him. I do not expect him to assert with me that AEA Technology could fall into that category. What I want to do is establish that there is at least a point of agreement between us with regard to the law. The rest can take care of itself. I should like to hear what the Minister has to say about that.

Lord Fraser of Carmyllie

I can briefly answer the noble Lord by going back to what I said earlier. A wide range of options is available to the Secretary of State in taking this forward. However, I was seeking to emphasise to the noble Lord, Lord Peston, that as we looked at matters we did not see that there was any value to AEA Technology if we were to seek to continue to maintain a particular arrangement within it on the lines of special shares or the like. I then went on to spell out that in paragraphs 1 and 2 of Schedule 2 there are provisions which would allow the Treasury or the Secretary of State to acquire securities of a successor company. What I am at pains to emphasise is that there is nothing buried in the schedule that is to be taken as an indication of a particular model that we would wish to pursue in taking forward this privatisation.

Lord Peston

I thank the noble and learned Lord. Occasionally what I am asking is less than he assumed—and this is one of those occasions. I am particularly impressed with the argument that paragraph 2 of Schedule 2 is a standard clause anyway and therefore that the authority to dispose of any securities in Clause 7(2) is also standard. Given that, I am somewhat intrigued that nonetheless the power remains both to acquire securities of the successor company and to sell them. Therefore, even if the Minister would not want to do any of the things to which I have referred, someone else might want to do them, so that is an extremely useful clarification. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 33:

Page 16, line 9, at end insert: ("( ) Before any disposal by him of securities in any successor company the Secretary of State shall offer those securities for sale to the employees of that company.").

The noble Lord said: In moving this amendment it may be for the convenience of the Committee to take with it Amendment No. 39. The Minister said earlier—I hope I am not misquoting him: I am not against misquoting him but I do not want to do it deliberately—words to the effect that the Government are anxious to involve employees as much as possible in privatisation. With respect, the enthusiasm of the Minister has some limitations, as I hope to demonstrate in a moment or two.

If we are to go down the route of privatising this enterprise, we believe that the right thing to do in the light of the characteristics of this industry—the nature of the workforce, this being a "people control enterprise", and so on—is to have a preference in the Bill for a management/employee buy-out. It is important to do that for a whole variety of reasons, some of which were set out in an article in the Financial Times on 15th February 1994. The article referred to the desirability of selling the industry in a unitary way. It went on to say that, the assets being sold will consist largely of the employees' brainpower rather than plant and equipment. Valuing the business will therefore provide a special challenge to City advisers".

The leading article in the Financial Times on that day stated that, the ideal solution must be a management buy-out. This would create a sense of partnership among the company's employees, and guarantee the AEA the independence to underpin its credibility as a consultancy. However it may be too much to expect a state-owned scientific agency to make that sort of leap in one bound—particularly when it does not even have a chief executive".

In fact, it did acquire after that a chief executive.

That summarised the situation very adequately. However, the position of the Government is in marked contrast to that which was utilised in relation to the Railways Act 1993. In that Act, provision was made under Section 141, which gave financial assistance for employees who were seeking to acquire franchises or part of the board's undertaking. Therefore, they were given a priority which is singularly missing so far as this Bill is concerned. The Minister made an assertion that they are anxious to involve employees as much as possible in privatisation. What does that mean? Why is there a distinction drawn between the route that was followed under the Railways Act and the omission of such a provision from this Bill?

My amendment goes further than Section 141. The Minister could at least give us an indication tonight that the Government will be prepared to import just such a provision into this Bill. That would be a very good message. It is fair to say that, in relation to the Bill, although the Government said that they were quite satisfied I was wrong, in fact a priority of this kind might offend European Community law. The Government said I was wrong about that. Let us accept that for the sake of this argument. In those circumstances, why do not the Government show some consistency and say that Section 141 of the Railways Act provides an ideal model for what we should be doing here? That is the best way in which to translate into reality what the Minister said earlier. This is an appropriate amendment to pursue and therefore I have pleasure in moving it.

8.30 p.m.

Lord Fraser of Carmyllie

The noble Lord made reference to a number of observations which I offered earlier, not least by saying that I recognised that one of the management's key tasks, now as well as after privatisation, was to ensure that the staff were properly "incentivised". The noble Lord, Lord Peston, took exception to that word. I was scorched by his observation and instead I say that they should get the proper incentives to motivate them. I am happy to do that, because the performance and profitability of business depends on staff responding to incentives that are attractive to them.

The Government would be prepared to consider seriously any bid from a management and employee buy-out consortium. As the Committee will know, bids from MEBOs have been a feature of many competitive trade sales. Benefits can include increasing the level of competition, maximising sale proceeds, and, in many respects, pre-eminently maintaining the commitment of management and staff in the run-up to a sale. As I have already indicated as regards employee participation, the Government believe that it is indeed in the long-term interests of any privatised company that a significant measure of employee share ownership should be provided for. Accordingly, the Government will look carefully at any proposals for employee participation put forward by the management of AEA Technology or its successor.

In the course of this Committee stage, on a number of occasions I have been asked to draw parallels with other privatisations. They do not seem to be wholly apt, although in many respects at the end of the day the aim is the same. They are not wholly apt because we are not seeking to privatise the complete entity. Here we are seeking to extract part of it, albeit a very important part. I should prefer to rest on the basis that the undertaking that I have given on behalf of the Government, with the assurance that we look at such a proposal very favourably, is the right one, rather than offering, as I understand, particularly the provisions of Amendment No. 39, which state: Before disposing of its securities in any successor company the Authority shall offer those securities for sale to the employees of that company". There may be a prospect that such an arrangement would be desirable, but to impose such an absolute duty would not be appropriate. I hope that, in view of the assurance I have given, the noble Lord will be satisfied.

Lord Clinton-Davis

The Minister is always extremely pleasing and helpful up to a point. However, I do not believe that he has gone far enough. I draw a parallel, but one of principle. Perhaps I may deal very briefly with the history of this particular concession made by the Government in the Railways Act. The noble Lord will remember that the Railways Bill was the subject of considerable controversy. The Government met hostility not simply from this side and from the Liberal Democrats, but from a number of their own Back-Benchers, and, indeed, from all round the House.

One of the issues which was sharply focused on was the question of a management and employee buy-out. Frankly, I am not thrilled about it in the context of the railways. I believe that the utmost caution should be expressed by people involved in the railway industry at the present time before engaging in that kind of enterprise. I am not dealing with particulars of the railway industry here, but the principle.

The Government saw fit to provide that there should be some help given to the promotion of MEBOs. They went to the extraordinary lengths of providing that not only a measure of priority but a whole series of financial assistances should be given to the proposed management and employee buy-out so that they could get their act together. Therefore, it is perfectly reasonable to ask, if that was good enough for the railway industry, then why not here?

The Minister says that he does not want to be under any duty. There was a duty here. He says that one cannot consider other precedents because they may not apply. He says that in this case one is not privatising a whole entity, but neither were they doing so in the case of the railways. It was a question of bidding for a franchise, which is very different from going into a complete privatisation.

I ask the Minister to give an undertaking to the House tonight that, in the context of this amendment—on reflection, I should have preferred simply to graft on to it tonight the provision of the Government's own Act, and we may come back on that basis—he will consider his reply in the wider context of looking at that particular section of the Act and will say, "I shall reflect further on the matter". In so doing it does not mean that he has to accede to a MEBO. He would be giving it some assistance as regards its formation, so that it could rival more powerful organisations engaged in a similar enterprise. I ask the Minister to reply to that. I shall withdraw the amendment, but I should like to hear what he has to say in principle about these issues.

Lord Fraser of Carmyllie

I do not believe that there is much point in pursuing whether the examples given are exact parallels or not. I understand the point that the noble Lord, Lord Clinton-Davis, is making. I repeat that I have some concern about introducing particular rights which might require a degree of inflexibility that would serve no one any valuable purpose. However, I say to the noble Lord—and I hope that this will satisfy him— that I shall be prepared to examine the scope for offering assistance, which is somewhat in the nature of the language to which he made reference; namely, the scope for offering assistance to a management and employee buy-out. But I repeat: MEBOs should compete on all fours with other prospective purchasers. I hope that that is sufficient assurance for the present purposes.

Lord Clinton-Davis

I am grateful to the Minister, but he almost spoiled what he was saying in his last sentence which was in conflict with his own Government's philosophy. In the light of his response, I look forward to returning to the matter on Report and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 34 and 35 not moved.]

Schedule 2 agreed to.

Clause 7 [Disposal by Authority or Secretary of State of shares in successor companies]:

Lord Haskel moved Amendment No. 36:

Page 4, line 13, leave out subsection (1).

The noble Lord said: The purpose of the amendment is to seek some clarification because under the Bill as drafted the Secretary of State is not obliged to act in the national interest. The amendment requires the Secretary of State to be of the opinion that sales of shares in successor companies would promote the national interest.

It is difficult to understand the need for Clause 7(1). Presumably the Secretary of State would not order a sale of shares unless he thought that it was in the national interest. The clause simply allows the Secretary of State to do things that he does not consider to be in the national interest. I should be interested to know whether the Minister can give us an example of what the Secretary of State would do which is not in the national interest. I beg to move.

Lord Fraser of Carmyllie

It is a neat point and the noble Lord clearly enjoys it. There is no question of the Government acting against the national interest. The whole point of Clause 7(1) is to remove any possibility that the provisions of the 1981 Act might be held to limit the powers of sale provided by this Bill and prevent the Secretary of State or the authority from securing the sale of AEA Technology on a basis which they believe best serves the interests of the nation.

As I have said repeatedly in this Committee, the Government are committed to putting AEA Technology into the private sector on the basis which secures the best possible future for the business and its staff, maximises its contribution to UK competitiveness and provides best value for money for the taxpayer. That is what we are working to achieve. That is what we are determined to achieve. Therefore, I reassure the noble Lord that in that fabled bottom drawer there is no proposal which is designed to secure a sale which would be contrary to the national interest.

Lord Haskel

I thank the Minister for that reply, but I must confess to being a little disappointed because I had hoped that we would all be enlightened by it. However, in view of the Minister's reply, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 37 to 40 not moved.]

Clause 7 agreed to.

Clause 8 agreed to.

Schedule 3 agreed to.

Clause 9 agreed to.

Schedule 4 [Pensions]:

8.45 p.m.

Baroness Turner of Camden moved Amendment No. 41:

Page 29, line 3, leave out ("sub-paragraphs (2) and (4)") and insert ("sub-paragraph (2)").

The noble Baroness said: We now reach a group of amendments on pension entitlement. In moving Amendment No. 41, I should like to speak also to Amendments Nos. 42 to 46, 46A and 49. This group of amendments is intended to allow UKAEA employees to remain in their pension schemes after privatisation. The amendments are similar to a series moved in Committee in another place. They were opposed by the Government then and I hope that in the intervening period there has been time for the Government to think again. The reasons advanced for opposing them then were far from convincing.

As we know, we are talking about a sophisticated and highly trained workforce. It is usual in such circumstances for employees also to be committed to their pension scheme and to value their scheme membership very highly. As I understand it, the scheme is a fairly standard public sector scheme. The benefits are reasonably good and, among other things, contain provision for complete indexation of pensions in payment. I understand that the Government's argument is that it is not government policy to allow membership of the scheme to continue. It is, however, said that the benefits provided will be "equivalent", whatever that may mean. It certainly does not seem to mean that they will be the same. Indeed, I believe that full indexation may not be envisaged. This is an important point.

The staff who joined the authority became civil servants. They knew that they would be doing so and therefore expected, as part of the package, that they would be members of a public sector scheme guaranteeing certain benefits. I cannot stress too strongly that many people nowadays—perhaps always as far as this type of employment is concerned— structure their lives very much on what they may expect to receive when they retire. Until recently, it had always been public perception that such Civil Service jobs, although perhaps not as lucrative as many in a more entrepreneurial environment, had the compensating factor that there was security both in regard to the employment itself and in relation to ultimate retirement benefits.

However, along came the Government with wide-ranging plans to privatise. That sense of security disappeared almost overnight. Removing the right to remain in the pension scheme after privatisation is therefore of considerable detriment. The Government may argue, as they did in the other place, that there will be provision of an equivalent standard. That is not good enough when many people fear that they may lose the vital element of indexation. I understand that continued membership was allowed some years ago when Amersham International was privatised. I gather that the Government argue that most of Amersham International's employees eventually opted for transfer to the private sector AI Pension Scheme. That may well be so, but it was a matter of choice for the individuals who had the opportunity of looking at the relative benefits.

According to what has already been said, the Government do not intend that to happen in this case. I think that that is wrong. I remind the Government—my noble friend Lord Clinton-Davis has already done so in relation to other aspects of the Bill—of the problems that they encountered over pensions when railway privatisation was under consideration in your Lordships' House. Eventually the Government had to shift from their original position and make some concessions. I hope that they may be persuaded to do so in the present case. I beg to move.

Lord Fraser of Carmyllie

I appreciate the desire of the noble Baroness to allow employees to remain in the authority's pension scheme. However, I am bound to say that there can be no question of employees staying in such schemes once they are in the private sector. Standard practice in transfers of employees from the public sector, whether in privatisations or contracting out, has been to end public service scheme membership on the move to the private sector. Given her expertise in such matters, I am sure that the noble Baroness knows (whether she likes it or not) that that practice has been consistently followed.

Government policy is clear. We do not believe that it would be appropriate to allow private sector employees to remain as members of a pension scheme that was set up for members of the authority. The authority, as an employer, has devised its public service scheme to provide what it considers to be appropriate pensions for its employees. It is for the private sector employer to develop arrangements appropriate for its employees and for the operation of its business.

I understand that the core of the concern expressed by the noble Baroness is whether there should be index-linking. I must advise the noble Baroness that nothing in the Bill rules out index-linking, but although it is common for private sector schemes to provide some element of index-linking—your Lordships will be aware that the Pensions Bill will impose some minimum requirement—it would be wrong of me to suggest that full index-linking was a common feature of private sector schemes.

Obviously, I cannot say at this stage what terms an employer may wish to propose, but whatever happens the terms must be no less favourable overall. In coming to a view on whether or not the scheme is no less favourable employee representatives have to be consulted. I have no doubt that at that time they will make their views known on all of the features of the package. I say to the noble Baroness that if full index-linking was included in the new scheme it would reduce the scope for increasing other benefits. As she has pre-empted me, it is interesting to note that when last offered the opportunity, the overwhelming majority of Amersham's employees decided to join Amersham's own scheme, even though that scheme did not guarantee full index-linking.

We have moved a long way since the introduction in 1981 of the legislation relating to the pensions of Amersham's employees. We have written statutory safeguards into the Bill, to which we shall turn later. We shall ensure that employees can join a scheme that overall is no less favourable than the authority's scheme. Therefore, employees should have no fear about their future pension scheme.

Amendment No. 46 also suggests that employees who have already left the authority's employment should be allowed back into the authority's schemes. That is considered to be wholly unacceptable. It would reopen the basis on which the businesses were sold earlier. It would be a substantial breach of faith with the purchasers who bought the authority's operations on one basis only to be told several months later that, with regret, it would have to be rewritten. It would also create substantial uncertainty for the employees involved and potentially put their jobs at risk.

I have no doubt that the noble Baroness wishes to see the staff treated fairly. That is a desire which I endorse. However, given the range of options available, it would not appear to me to be the outcome of this amendment.

Lord Clinton-Davis

Is the Minister aware that in relation to the sales the situation was not resolved? The purchasers were under no illusion about that. They understood that this was a matter that Parliament had to consider and there was a possibility of the situation being resolved in a different direction from that which the Minister might prefer. They have gone into it with their eyes open. Consequently, I suggest to the Minister that that argument is not open to him tonight. Though I do not charge him with bad faith, my information is as I have recorded it.

Lord Fraser of Carmyllie

I am grateful to the noble Lord for not accusing me of bad faith in this matter, but what I seek to convey is the principle at the centre of what we want to do. While there are certain fixed points which we believe cannot be offered, such as full indexation, we shall ensure that employees who join any scheme find that overall the scheme is no less favourable than the authority's scheme. Clearly, if such a scheme is put forward, there will be full consultation.

Lord Peston

Happily, I am not in the position in which these employees will find themselves. I have an index-linked pension. I would be horrified if anything happened to take that away from me. One of the things I was told by my late mother when I started my career was that I should get a job with a good pension. It reminds one of the standards that applied in the old days when pensions were index-linked. One does not think about it when one is a young person, but the time comes when one finds that one draws a pension. This is a matter of serious concern to the individuals involved.

The Minister, his predecessor and his honourable friend in another place have all used expressions like "equivalent to or no less favourable than". If I were an individual employee of AEAT and believed that my pension was not equivalent or less favourable, whom would I sue? Would I take legal action against the successor body or the Government? Perhaps that is not an easy question to answer from the Dispatch Box at this time, but the employees may be quite interested to know the answer. It will be noted that I ask what an individual employee will do if he takes that view.

Lord Fraser of Carmyllie

The idea that following the change there will be an opportunity for each individual member of the pension fund to engage in a discussion about it and have an opportunity to sue, seems to be unrealistic. I have indicated, I hope not too harshly but clearly enough, that matters have moved on since the Amersham scheme. What I sought to do in drawing that parallel was to give broad reassurance to those who might be deeply suspicious, like the noble Lord's mother, that if any change was made it must necessarily be to the individual's disadvantage. I believe that approximately 90 per cent, of those in the Amersham case, when given the choice, selected the Amersham scheme. I believe that that ought to be a matter of reassurance and that when words such as "broadly", "comparable", "no less favourable than", or whatever it may be, are used, though they may not be identical, once the various benefits are looked at, individuals will not have serious cause to complain.

Lord Clinton-Davis

I ask the Minister to reflect on the fact that the Amersham International case is now quite considerably removed in time. I believe that it occurred in 1981. I differ from him on the interpretation of Amersham; but let us leave that aside. During the course of the passage of the Railways Bill, the Minister, although he did not participate in it, may well recall the furore that accompanied the discussion on pensions. I believe that the Government had to make concessions far wider than the provision made in this Bill. The Minister may say that one privatisation has nothing to do with another, but I believe that the employees of this enterprise may well ask why railway workers should achieve a better result, simply because Members of this House primarily were absolutely amazed by the way in which the Government went about it at the very beginning. Your Lordships on all sides in effect drummed into the Government the necessity to change their view.

I am convinced that the provision that is to be made for these employees is materially less good than that accomplished for the railway industry. That is not equitable. I believe that the Minister ought to look again at the situation which arose in the course of those debates and use his best endeavours to ensure that the people employed in this industry are not treated differently from employees in the railway industry. I believe that is a perfectly fair proposition to make. The Minister has been very fair this evening. Though he has not made concessions, he has said that he will look at various matters. All I ask him to do now is look again at this situation in the light of the debates which then took place. It would be wrong to differentiate between one group of workers, albeit far fewer in number in this instance, and those engaged in the railway industry. The Government had to give a great deal of thought to that. I am not satisfied that the end result was even proper in that case. However, the Government made one concession after another, and the result was infinitely better than that which could have been imagined at the beginning. I ask the Minister not to be hidebound by what appears in the Bill at the present time and to say that the Government will look at it again, without any commitment, to ensure that justice is done to these employees.

Lord Fraser of Carmyllie

The noble Lord, Lord Clinton-Davis, has the advantage of me. I confess that I do not have intimate knowledge of the details of the pension arrangements under the Railways Bill. The employees of AEA Technology have a proper concern that if they move from one pension scheme to another, what they receive at the end of the day is no less favourable than that which they enjoy at the moment. Paragraph 6 of Schedule 4 imposes a duty upon the Secretary of State or the authority to ensure that just that is secured.

I said previously that perhaps no one could sue, but I am advised that I may have mis-stated that point. Should an individual be dissatisfied, there might be a redress against the Secretary of State, or the authority, as appropriate. I give the undertaking to the noble Lord, Lord Clinton-Davis, that I shall look at what he said about the Railways Bill, because I do not know enough about it. I rest with the broad proposition that when one is looking at pension schemes, people moving from one to another should be allowed to see what they enjoyed previously and what they will enjoy, rather than looking at a different group of prospective pensioners.

9 p.m.

Baroness Turner of Camden

I thank the Minister for that response. We are glad that he has given an undertaking to look at what was agreed in relation to the Railways Act, because, as my noble friend Lord Clinton-Davis said, many concessions were obtained from the Government during the passage of that Bill. As a result, the railway employees on whose behalf we were speaking were much more satisfied than they were when the Bill first started.

The Minister says that the terms offered will be no less favourable. That is not necessarily the same as we are seeking. My noble friend Lord Peston made it clear that indexation matters a great deal to people in this situation. Public service employees value highly the fact that, generally speaking, their pensions are subject in payment to full indexation relative to the RPI. That does not apply generally throughout the private sector. However there are private sector schemes where it does apply.

In any event, I understand that under the TUPE regulations there is a commitment to provide comparable benefits. A comparable benefit must be that people have protection against inflation when their pensions are in payment. However we are obviously not going to press this matter at this time of night. We shall look forward to hearing what the Minister has to say on Report. It is to be hoped that by that time he will have had the opportunity to consider the arguments mounted tonight and to look at the situation with regard to the Railways Act. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 42 to 46A not moved.]

Baroness Turner of Camden moved Amendment No. 47:

Page 30, line 2, after ("transferred") insert ("such that each year of service in the Authority pension scheme gives rise to at least one year of service in the pension scheme to which the amounts are transferred").

The noble Baroness said: It may be for the convenience of the Committee if I speak also to Amendments Nos. 51, 52, 53, 57, 58 and 59. The intention of the amendments is to give year-for-year transfer benefits from the authority pension scheme to the new one. Without the amendments, it is up to the Secretary of State or the authority to decide how transfer values to the new pension schemes are calculated.

It is possible that the Government would consult the Government Actuary, but the unions representing the employees are not all that happy about that. Their fears have already been made plain at previous stages of the Bill when it was discussed in the other place. Therefore a simple, easily understood formula is required, and this is the formula suggested. In view of what has been said on the previous amendments, I am afraid the Government are not likely to take kindly to Amendments Nos. 57 and 58.

The intention of those amendments is to compel a new scheme to provide like-for-like benefits, apart from injury and redundancy benefits which we understand cannot be part of a tax-exempt scheme. Without the amendments, the Secretary of State or the authority could trade off between the terms of the old and the new pension schemes and other terms and conditions of employment.

I understand that the Government position—I had some hint of it on the previous amendment—is that new pension schemes should be able to offer a different mix of benefits, but again that mix of benefits could result in the loss of index linking. As I have already said, the unions and the employees whom they represent would view that with a great deal of concern.

I understand that the Government may be relying on advice from the Government Actuary's Department, but the GAD bases its advice and its assumptions on the idea that inflation may never rise above 5 per cent, per annum. We all hope that it will not, but it may well do in the future. Therefore the employees concerned would value an index-linking arrangement without a ceiling of 5 per cent, per annum. I know that 5 per cent, is common in private sector schemes, but that has not been the case with public sector schemes. For those reasons we want to maintain the ability to have complete coverage for the future. I beg to move.

Lord Fraser of Carmyllie

When I spoke earlier to Amendment No. 16, to which the noble Lord, Lord Thomson, spoke, I made a number of observations relating to redundancy benefits. This is not his fault; it is entirely mine. When I said to him that the amendments did not add anything to the protection already available under the TUPE regulations, I was in fact referring to Amendments Nos. 14 and 15 which were not moved but which he may recall were part of the same group. Rather than write to the noble Lord and others later, it might be helpful if I were to clarify the position.

Under the Bill, employees will benefit from the protection given by TUPE. Their consent, or that of the trade union acting on their behalf, would be required before changes in the contractual redundancy terms could be made. I hope that that brief clarification is helpful.

Despite the fact that the amendment was moved briskly by the noble Baroness, perhaps I may take a moment or two to explain our position on pensions. That may save us time and allow for some consideration of the Government's position before we return to the matter on Report.

As I said previously, every privatisation and related set of pension provisions is different, but that is not to go back on what I have just said about the Railways Act. The provisions have to be tailored to the particular circumstances applying. We have sought to tailor the pension provisions in the Bill to the particular circumstances of AEA Technology.

Some public sector companies already had funded pension schemes which were in the private sector mould and so could be transferred and continued on privatisation. In some cases whole industries were being moved from the public to the private sector and the specialised nature of the work of those employees was likely to lead to movement between many new employers emerging from a single public-sector organisation.

In those circumstances it was not unreasonable that some additional protection was given to employees to ensure that their pension rights could continue to accrue on the same basis while they remained in that industry. However, protection of that kind has been very much the exception rather than the rule. In other privatizations—for example, the privatisation of the Property Services Agency —there were no specific pensions provisions at all because they were not considered to be either appropriate or necessary.

The United Kingdom Atomic Energy Authority pension schemes cannot be directly converted into private sector tax exempt occupational pension schemes. It would, therefore, not be possible to replicate the authority schemes in the private sector. At the risk of repeating myself, the approach that we have taken is to ensure that those employees transferring who participate in an authority scheme will be able to join another pension scheme, either a new or an existing scheme, operated by their new employer. The Bill provides the protection that it must be no less favourable overall than the authority scheme.

The phrase "no less favourable" means that the benefits overall must be at least equivalent to the benefits in the authority scheme, although, as the noble Baroness indicated, the mix of those benefits may be different. For example, if a pension in the new scheme was based on one-sixtieth of pensionable final pay for each year of service rather than one-eightieth, as in the authority schemes, that could be a significant improvement. There would then need to be a reduction in other benefits to compensate for that improvement.

The Government Actuary, who has wide experience in these matters, would be asked to verify that the new scheme met the requirements of the schedule; that is, taken as a whole, that it was no less favourable than the authority scheme. The Government Actuary is completely independent and impartial in these matters. In coming to his view, he would make the criteria that he had used available so that interested parties could scrutinise them for themselves. I do believe that the actuary is independent, but should there be any suspicion that he is not, I believe that that assurance is most important.

The amendments proposed would restrict the ability of the vendor to decide that a new scheme was comparable when the provisions of the scheme were taken as a whole. Leaving aside redundancy and injury benefits, they would effectively require each and every other benefit to be at least as good as at present. That is not possible. As I have already indicated, there are some features of the authority schemes which cannot be reproduced in a tax exempt occupational pension scheme. While they include certain redundancy and injury benefits as reflected in the noble Baroness's amendments, they are not the only examples of the point. There are other benefits in the authority schemes which mean that if the amendments were accepted the new scheme could not be a tax exempt scheme.

I am not sure that employees would thank the noble Baroness if they had to pay tax on their own and their employers' pension contributions and also on lump sum benefits paid from the scheme. That might be the effect of the amendments and represents one very good reason why they are unacceptable.

I have a number of further detailed points to make, but I believe that I have probably spelled out sufficiently our reservations on the amendments. Clearly, the noble Baroness will want to reflect on what I have said. Indeed, I expect that she will want to return to the matter at a later stage. However, for present purposes I hope that I have given sufficient explanation on at least some of the amendments and certainly of the fundamental basis upon which exception has to be taken to them by the Government.

Baroness Turner of Camden

I am obliged to the Minister for the statement that he made in response to the amendments. We shall certainly read very carefully what he has said in Hansard when we get the opportunity. However, there are one or two points which I should like to raise with the noble and learned Lord and I wonder whether now is the appropriate time.

Can the Minister tell us whether the Government have sought the views of the trustees in relation to their propositions? The noble and learned Lord mentioned that the mix of benefits would be different. Of course, we realised that fact and that is one of the reasons why we tabled the amendments. We did not know what the mix would be and we felt that it could conceivably prove to be not as popular with the staff as the present arrangements.

The Minister said that there would be a sixtieth instead of an eightieth scheme, with the public sector being in eightieths, and that that would be of benefit. But, on the other hand, I would remind the noble and learned Lord that, if it is a standard one-eightieth scheme in the public sector, that is usually because there is an opportunity to have a lump sum commutation which goes with the eightieths but which amounts to sixtieths when it really comes to it. Therefore, we would not expect to have any adjustments made, so to speak, to pay for sixtieths. Presumably the lump sum would disappear because one-eightieths would be replaced by sixtieths. Can the Minister confirm, as we are in Committee, that there will be negotiations with the unions with regard to the terms of these schemes? It is important that there should be an opportunity to negotiate on the new mix which is proposed as regards the employees. Have the trustees expressed a view and have the Government asked for that view?

9.15 p.m.

Lord Fraser of Carmyllie

So far as I am aware, the trustees have not been consulted. First of all, I am advised that there are no trustees under the authority scheme. But the more fundamental point is that before anyone could offer up a judgment we would have to see what is being proposed. As I have indicated, the Government Actuary in his independent position is probably best placed to do that. Of course if there are any changes there would be an opportunity for some discussion and negotiation on them. What it is important that we establish within this Bill is that there will not be a significant diminution of the rights of employees as they move from one pension scheme to another.

Baroness Turner of Camden

Before the noble and learned Lord sits down, he said there would not be a significant diminution; we do not want any diminution at all.

Lord Fraser of Carmyllie

I apologise to the noble Baroness. I was looking for an elegant variation which clearly was not elegant. I shall stick to the terminology that is provided within the Bill and say something that is no less favourable. I shall stick with that terminology; it is probably safer.

Baroness Turner of Camden

I note what the Minister has said. As I indicated earlier, we shall withdraw these amendments and return to the matter on Report. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Turner of Camden moved Amendment No. 48:

Page 30, line 11, at end insert ("which shall include any trade unions representing any such employees.")

The noble Baroness said: In moving Amendment No. 48 I wish to speak also to Amendments Nos. 50, 54, 56, 60 and 62. This represents a kind of fallback position because we intended this option to apply if the Government did not like our preceding amendments. It provides for consultation with the unions regarding amendment to pension provision. It is a good proposition in that it allows flexibility in a way that perhaps the Government did not feel the previous amendments did. It answers the Government's objections which they made in another place that unions may unreasonably exercise a veto, as Amendment No. 50 clearly indicates that there is a case for overruling what is proposed if it is felt that there has been an unreasonable veto. That is provided for in Amendment No. 50. The Minister has indicated in his previous response that the matter would in any event be subject to negotiation with the unions representing the staff, and I hope that in those circumstances he will be prepared to write this onto the face of the Bill to indicate that that is the Government's position. I beg to move.

Lord Fraser of Carmyllie

I appreciate the desire of the noble Baroness to ensure that trade unions are consulted by the Secretary of State or the authority. I believe I can set her mind at rest. It is undoubtedly the case that the trade unions are persons who, under the provisions of the Bill, represent the employees. I can therefore assure the noble Baroness that all the relevant trade unions will be consulted and, accordingly, her amendments on this point are unnecessary.

Amendments Nos. 50, 56 and 62 would in effect give the unions, or indeed any other person consulted, a power of veto over the direction to be issued to allow employees to remain in the authority's pension schemes and over the shape of the new pension scheme. I have noted, too, that the noble Baroness has made a subtle change to the amendments compared with those discussed in another place.

Lord Clinton-Davis

She is just more subtle.

Lord Fraser of Carmyllie

Indeed, she is much more subtle. She has added the phrase, unless that person has unreasonably withheld his satisfaction". But that does not really change the effect of the amendments. What may appear to be reasonable to one person may not be to another. The amendment would be a recipe for litigation. Moreover, a person consulted may have reason to be dissatisfied with a particular aspect of a new scheme, however minor, even when it was perfectly reasonable for the Secretary of State to take the view that the benefits provided by the new scheme were overall no less favourable. This amendment would, therefore, still give those being consulted an effective power of veto unless they had no reason at all not to be dissatisfied.

We are placing a statutory duty on the Secretary of State or the authority to be satisfied that there is a scheme which, taken as a whole, is no less favourable than the authority scheme. This duty reflects the long-standing practice of the Government. However, our intention is to reassure employees by placing it on the face of the Bill. With that explanation, I hope that the noble Baroness can withdraw her amendment.

Lord Peston

I am certain that my noble friend will withdraw the amendment but I want to make certain that I did not mishear what the Minister said. He said that where consultation with the representatives of employees is specified in the Bill, that means without a shadow of doubt the trade unions, where they exist. I think he said that, but I was not listening quite as attentively as I should. Will he confirm that that is what he said?

Lord Fraser of Carmyllie

Unless I said what I did not intend to say, what I said was that it was undoubtedly the case that, under the provisions of the Bill, trade unions are persons who represent employees. Accordingly, I give the assurance to the noble Lord, which will be welcome to him, that all the relevant trade unions will be consulted. I therefore invite the noble Baroness to withdraw the amendment on the basis that it is unnecessary.

Baroness Turner of Camden

I am much obliged to the Minister for that assurance. On the basis of that assurance, I am happy to withdraw the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 49 to 62 not moved.]

Schedule 4 agreed to.

Clause 10 [Extinguishment of certain liabilities]:

[Amendments Nos. 63 and 64 not moved.]

Clause 10 agreed to.

Clause 11 [Membership of the Authority]:

[Amendments Nos. 65 and 66 not moved.]

Clause 11 agreed to.

Remaining clauses agreed to.

House resumed: Bill reported without amendment.