HL Deb 19 December 1996 vol 576 cc1619-21

11.32 a.m.

Lord Berkeley asked Her Majesty's Government:

For what purposes the trustees of the pension funds of privatised rail and bus companies may authorise distribution of surpluses from those pension funds; and whether Her Majesty's Government intend to take any action.

Viscount Goschen

My Lords, the trustee company of the joint railway pension scheme may authorise distribution of surpluses, taking account of the rules of the schemes and its duties to employers, members and pensioners. It will be receiving from the pension committee of the individual section funds proposals to reduce the levels of surpluses revealed at the recent valuation. The trustee company has already agreed the proposals for the pensioners' section, which will lead to a real increase in pensions for its members. The treatment of any surpluses in the pension funds of private bus companies is dependent on the rules of the fund concerned. The management of such funds is a matter for their trustees.

Lord Berkeley

My Lords, I thank the Minister for that very clear Answer. Behind this is a scandal. Back in 1993 the Minister's predecessor, the noble Earl, Lord Caithness, said during the Second Reading of the Railways Bill that, pensioners will be able to benefit from any future scheme surpluses that there may be".—[Official Report. 15/6/93; col. 1430.] This week the Secretary of State for Transport is quoted in the Guardian as saying that he is satisfied as an employer that new employers can use money from a pension holiday for their own purposes. The Government are reneging on commitments made to this House that pensioners and not owners of private companies would receive the benefits of any pension fund surplus. Can the Minister please explain this miserable U-turn which is benefiting the fat cats of the industry at the expense of pensioners? Will he set up an independent inquiry into what I believe is a scandalous situation?

Viscount Goschen

My Lords, that is nonsense and an unworthy accusation. Pensioners will benefit. In the private sector, where a new employer steps into the shoes of an old employer when there is a change of ownership of a company, it is common practice for that company to take on the liabilities and, therefore, if there are surpluses, to participate and benefit in the distribution of those surpluses in the form of pension holidays. That is what is occurring here. It is also what occurred when British Rail was in the public sector in 1991. A similar situation arose of a considerable surplus—it was bigger, I understand, than in this case—and there were 18 months of discussions between employees and employers about the distribution. There was a distribution, with British Rail getting a certain percentage and employees getting another percentage. The procedures to arrive at those percentages were just the same as they are in this case. There is no scandal whatever. It is a perfectly proper procedure. There are categoric protections for pensioners in the legislation, and those have been stuck to.

Lord Campbell of Alloway

My Lords, surely this Question raises a matter which is one for the courts. Is it suggested that the existing law is inadequate and that therefore it ought to be amended in some way or that the courts are incapable of applying it?

Viscount Goschen

My Lords, in the first place it is a matter for negotiation between employers and employees. That has always been the case. That it is how it was taken forward under British Rail. The same procedures are being used here. No protections have been removed by privatisation. Noble Lords will remember that during the passage of the Bill copper-bottomed guarantees were given to existing pensioners. As I said, the first step is one of negotiation.

Lord Clinton-Davis

My Lords, is the Minister aware that we disagree fundamentally with everything he said and the approach the Government take on this issue? Is he further aware that we resent the Government's rejection of the pensions ombudsman's report which said that there was a breach of trust here as far as concerns the pension rights of the National Bus Company? We take the view that to have an uncovenanted benefit for these privatised companies which have contributed not one penny to the pension funds and nothing for the members who are entitled to a share in the investment success of the funds is scandalous and resembles very much the Maxwell-like activities which were condemned by the whole country.

Viscount Goschen

My Lords, that is utter nonsense. The noble Lord is wrong in his understanding of pension law and he is wrong in his understanding of what is occurring in this case. The facts are clear. The employers, the employees and the existing pensioners participate in the surpluses. Had there been a deficit, the company involved would have had to make up its end. When the new companies came in to make their assessments of the value of the companies for which they were bidding they would have taken into account the likelihood or otherwise of a surplus or deficit in the pension fund.

The second point concerns the bus companies. That is an entirely different point. They are two different situations governed by different rules. The companies were privatised in a different manner. Noble Lords opposite shake their heads but that is the case. The noble Lord referred to the pensions ombudsman. The direction was to the trustees of the fund and the pensions ombudsman has made clear that he has not carried out an investigation or made a determination with respect to the department.