LORDS AMENDMENT IN LIEU (Hansard, 27 November 2000)

§ Lord McIntosh of Haringey
My Lords, I should like to reassure the House right from the beginning that the Government regard the matter of pensions protection for air traffic control staff as one of great importance. Pensions affect us all, and I can well understand why this is a matter of such importance to NATS employees. I must therefore make it clear that we would not act in any way that would put them at threat. We are not doing so.
We have looked in some detail at the adequacy of protections for NATS employees. We believe that there are already a number of non-statutory protections in place which amount to a very strong regime of safeguards, even before the amendments I am now moving and the new guarantee I shall describe in a moment. I shall attempt to explain, as briefly as possible, the existing protections. Some of this will, of course, be very familiar to the House because we have discussed these matters before on more than one occasion. None the less, these are key points on which the House needs to be clear.
First, the Civil Aviation Authority pension scheme, to which NATS staff currently belong, is to be amended to make it possible for staff employed by the public/private partnership to remain members of that scheme. This will involve NATS becoming a non-associated employer within the scheme. This arrangement will prevent cross-subsidy between the new NATS section of the scheme, which will relate to a company classified to the private sector, and the CAA section of the scheme, which will remain in the public sector. It will enable NATS staff to continue to enjoy the benefits that they currently enjoy.
Secondly, current pensioners and deferred pensioners within the scheme will remain unaffected by the PPP. They will remain in the Civil Aviation Authority pension scheme and they will be in the CAA section of the scheme, which will also include current CAA staff. This section will, as I have just said, remain in the public sector. Both groups of pensioners will continue to receive benefit in exactly the same way as they do now.
Thirdly, returning to the position of existing NATS staff, we have made it very clear to all those bidding to be our strategic partner in the PPP that securing the continued participation of current staff in the scheme is a fundamental condition of being considered for that role. In addition, we will be putting into the strategic partnership agreement a binding commitment, enforceable at law, that guarantees the continuation of that right on terms at least as favourable as those now existing. This is a very significant safeguard, underpinned by the Government's continued participation in the PPP.
1236 Fourthly, NATS staff will also enjoy the protections on pensions that exist under the law of the land, such as the Pensions Acts of 1993 and 1995. These provide, among other things, protections for accrued benefits and funding levels.
Finally, but most importantly, yet another level of protection exists in the scheme's trust deed and rules. These are unusually restrictive and protective of members' interests. It is not uncommon for the sponsoring employer of a pension scheme to have the ability to reduce the level of benefits for future service (known as "prospective benefits"). However, no employer who participates in the Civil Aviation Authority pension scheme has that particular power, because the restrictive power of amendment in the trust deed provides that amendments cannot be made to reduce prospective benefits. Let me spell that out. Under the CAAPS, the future benefits have to continue to be at least as good as the accrued ones. This is a very valuable protection indeed. For the avoidance of doubt, let me make it clear that the new strategic partner will not have the ability unilaterally to change the trust rules. They are embedded so that change can come only with the consent of the trustees.
My noble friend Lord Brett tabled Amendment No. 31, which this House approved on Report, and with which the Commons subsequently disagreed. We consider that the amendment has some technical flaws that cause difficulties, in particular, for the trustees of the Civil Aviation Authority pension scheme. I believe that my noble friend would not disagree with this. Instead, the Government are proposing a package that meets the legitimate concerns on pension arrangements of both the trustees and NATS staff who will be employed by the PPP. The measures I am about to describe are new since this House last considered the issue and add further protections over and above those that I have already mentioned.
The package is made up of two elements. First, the Government have tabled Amendments Nos. 31B and 31C, which we propose should replace Amendment No. 31. The purpose of these two amendments is to meet the concerns that have been expressed with regard to the pension arrangements by the scheme trustees. Amendment No. 31B provides the Secretary of State with a power to make an order by negative resolution which will enable him to allocate the assets, rights, liabilities or obligations of the Civil Aviation Authority pension scheme between different sections of the scheme. Amendment No. 31C confirms that the power can be exercised only after the trustees of the scheme have been consulted.
I am sure that noble Lords will recall from our previous debates that the scheme is to he divided into two sections. The first section is the CAA section, which will cover CAA employees, together with all pensioners, irrespective of whether they were employed by the CAA or NATS prior to the establishment of the PPP. The second section is the NATS section, which will embrace all current staff who are in the employment of NATS when the PPP is created.
1237 The responsibility for making an equitable division of assets and so forth between the two sections rests with the trustees. They are understandably concerned at the prospect of a disaffected member mounting a legal challenge to any decision they may reach, and wish to guard against this eventuality. As was made clear on Report, they were intending to make an application for a court order to provide them with the necessary protection. Noble Lords will be well aware that court proceedings could become lengthy and costly. The order made by the Secretary of State under the terms of our amendment will provide the trustees with the protection that they are seeking and so avoid the need to resort to court action.
I come now to an important point. The amendment ensures equitable treatment for all scheme members and their dependants by specifying that in making an order for the division of the fund, the Secretary of State must secure that every potential beneficiary is in materially at least as good a position, as regards pension arrangements, as a result of the order. I am sure that the House will welcome this addition of a protection of staff to the face of the Bill. I imagine that the trustees will welcome these amendments as well.
The second element of our package does not involve making an amendment to the Bill. Its aim is, however, broadly the same as that which my noble friend wished to achieve with Amendment No. 31. That aim is to provide protection for the pension benefits currently enjoyed by NATS staff. I understand that staff have particular concerns over a possible future change of ownership or a "TUPE" transfer of part of NATS' current activities, or a change of attitude on the part of a future government.
The Government have, therefore, devised a scheme that I shall explain to the House. The scheme will give the fullest possible protections in the circumstances of concern to staff. It is, for staff, as good as having protection on the face of the Bill yet, at the same time, does not cause the Government the problems that would flow from offering the protections in that form.
The essence of the scheme is as follows. The Government would, as part of the PPP, ensure that each and every NATS employee at the time of the sale is required to be permitted to stay in CAAPS—or a scheme that is at least as good as CAAPS—in the opinion of the courts or an independent trustee—and continue to build up CAAPS benefits on the same basis as they do now. I shall come back to the role of the trustee shortly.
On that basis, there is no way that NATS could erode that right or those benefits without the consent of each individual concerned. If NATS tried to do this, the employee would have the individual right to go to court to prevent NATS from cutting back on his or her benefits, and to require NATS to continue to provide for the benefits that he or she has or could reasonably be expected to earn under CAAPS.
1238 The Government would also create a process for an independent third party—called a "trustee of promise"—to have the role of guaranteeing the implementation of this promise. The third party chosen would almost certainly be an independent trust, such as, for illustrative purposes only, the Law Debenture Trust Corporation, although we have not yet approached that body. The Government will examine the possibility of involving staff representatives in this in some way. The third party could act quickly and relatively informally to ensure that NATS was adhering to its promise. Using legal rights to be given to it, either under general trust law principles or under the Contracts (Rights of Third Parties) Act 1999, the third party would have the ability to enforce its decisions if it was necessary to do so.
I hope that the House will agree that this two-part package gives the fullest possible protections to both the trustees and to NATS staff. It is, for staff, as good as protection on the face of the Bill, without causing the Government the problems that would flow from offering statutory protection. It will also serve to remove the difficulties presented by Amendment No. 31.
Moved, That the House do not insist on their Amendment No. 31 to which the Commons have disagreed for their reason numbered 31A, but propose Amendments Nos. 31B and 31C in lieu thereof.—(Lord McIntosh of Haringey.)

§ Lord Brett
My Lords, I rise to express the appreciation of myself and of my noble friends on this side of the House who proposed and persuaded noble Lords that Amendment No. 31 was valid. I apologise in part because, of course, we found that there were technical problems with that particular amendment. However, I am most grateful for the initiative shown both by Treasury officials and by Ministers in seeking to provide the degree of protection that is equal to that which would be available were there to be a statutory provision on the face of the Bill. This has gone a long way and, indeed, will go a tremendous way towards reassuring the staff of NATS that their pension concerns have been taken on board. It will also be of comfort to the trustees.
I have two points for clarification. I should like confirmation that there will be close liaison and consultation with the CAAPS trustees on these matters. Secondly, can my noble friend the Minister confirm my understanding on the following key point? I have in mind a situation where, for example, a contract currently operated by NATS at an airport, or elsewhere, is lost to another provider of services whereby the staff would normally he cheaply transferred. However, subsequently, down the track, there is a requirement for technology and so on which results in redundancy of former NATS staff. If my interpretation is correct, that would fall within the 1239 NATS pension scheme, and those employees would be entitled to all their pension and redundancy benefits, which are tied into the NATS pension scheme. These are the accrued entitlements about which the staff are most concerned at this most difficult time. I am sure that my noble friend can confirm those two points. I should like, once again, to express my appreciation for the efforts that have been made in this respect.

§ Lord Lea of Crondall
My Lords, I wish to welcome this most useful amendment. It will stand the employees in good stead. I should like to thank my noble friends and the Government for the constructive spirit in which the negotiations were carried out and for the wider understandings reached. The words used by my noble friend the Minister regarding the rights of all members of the scheme over and above the particular amendment will be on the record. We are very content with my noble friend's explanation.

§ Baroness Thomas of Walliswood
My Lords, can the Minister confirm something that I believe he said in his introduction; namely, that those employees remaining with the CAA will be in exactly the same position in relation to their pension and other benefits as they would have been if NATS and the CAA had not been separated?

§ Lord Brabazon of Tara
My Lords, I congratulate the Minister and the Government on coming forward with the amendments. I also congratulate the noble Lord, Lord Brett, on his persistence in bringing this issue forward. I believe that this House has done a valuable job. When we achieved an amendment on Report on this issue, I believe that the Government 1240 then said that nothing needed to be done. I am glad that the Government have reconsidered the matter and I congratulate them on that.

§ Lord McIntosh of Haringey
My Lords, I am grateful to all noble Lords who have taken part in this brief debate. I think that I can give all the assurances which have been asked for.
The noble Lord, Lord Brett, asked me to confirm that the Government would remain in close liaison and consultation with the trustees. I can certainly give him that assurance. He asked me what would happen if NATS staff have to transfer to another employer, for example, because NATS loses the contract for services at an airport. I confirm that the noble Lord is correct in thinking that their terms and conditions, including pensions and redundancy terms, would be the same as if they were still employed by NATS. In the situation that he described, the scheme would provide individual legal rights for qualifying staff to stay in the CAA pension scheme, or a scheme at least as good as the CAA pension scheme. This would involve the successful bidder either joining CAAPS as a further non-associated employer, accepting the need to make contributions to the scheme at the level required to maintain the benefits of staff, or persuading the independent third party or the courts that any alternative scheme is at least as good as CAAPS.
The noble Baroness, Lady Thomas, asked me for confirmation that those remaining with the CAA—I think that she meant those remaining with the CAA pension scheme—would not lose out in any way. That is indeed the case. Their scheme will remain in the public sector. I commend the Motion to the House.
On Question, Motion agreed to.
House adjourned at seven minutes past ten o'clock.