House of Commons Hansard Debates for 24 May 1993

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pension funds--the ones with whom we are more materially concerned--will suffer most. Unless the Government say that they will apportion the assets to the closed pension funds--that is, to existing pensioners--and that if the existing railway fund pays better benefits, greater than the earnings can justify under the closed pension fund, they will make up the difference and meet that commitment, they will have made a blue chip promise. We would accept that. I do not think that they will say that. They will say that it is nothing to do with them, and the splitting up of the assets and the breaking up of the security of the fund will mean that the commitment cannot be met.

Mr. Milligan : The hon. Gentleman is right to say that a proper allocation of the pension fund assets is absolutely crucial. However, his argument about the balance between gilts and equities was the same argument that he used in Committee against the previous proposal for a closed fund. The whole point of the Government's new proposal is that combining existing pensioners with those who continue to work for the rump British Rail--and therefore continue to pay contributions--will enable the trustees to continue to invest in a mixture of equities and gilts, as they have done previously.

Mr. Prescott : An essential point is involved in this argument, which I hope the Secretary of State will clarify. The pension scheme will still be a closed fund ; it will simply be managed by the industry fund. Assets will be allocated to existing pensioners, but they will not continue in the broad strength of the industry fund-- [Interruption.] I want the Secretary of State to clarify the issue. My understanding is that the assets will be apportioned, probably under an order laid in the House, but eventually it will be a closed fund. In fact, I understand that that will happen before 1 April 1994, when most of the changes will occur. That closed fund, with its own assets, will be managed by the industry fund, so it will have the limitations that I have described. I agree that I have difficulty making my remarks today consistent with what I said in Committee, but that is because the Government have changed their position again. They constantly change position and we have to live with that. The hon. Member for Eastleigh knows that there have been changes virtually from day to day, so we do not have sufficient time properly to consider them.

Will the Secretary of State confirm that the assets will be broken up and given to the closed fund under an order laid in the House--which we assume he will lay before April 1994--so the possibility of the fund meeting its commitments will be determined by how much money the trustees can earn from the balance of assets and equities in the fund. That is a powerful judgment. Bigger funds have a better chance of achieving that. As a fund becomes smaller, the judgment becomes more difficult.

We must bear in mind what happens with closed and open funds. With an open fund, contributions come in and contributions go out. With a closed fund, no contributions come in other than the fund's earnings. There is no revenue from employee contributions. If the earnings of the fund are less than the amount paid out in benefits in the industrywide scheme, the fund cannot meet them. Indeed, no actuarial authority would allow it to be so unless the Government guarantee to meet the shortfall. They will not give that guarantee.

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The hon. Member for Eastleigh may be satisfied with the Secretary of State's promise, but the assets may not live up to that promise. We will not know until the order is laid. I ask the hon. Gentleman to join with us tonight and support us in trying to ensure that if there is a difficulty, the judgment will be that of the actuarial authorities, not of the Secretary of State. I would prefer the judgment to be in the hands of those who have to justify their action rather than in the hands of a Secretary of State who will simply bring a one-and-a-half-hour order before the House and bulldoze it through. There would be no justice for the pensioners in that. I say to the hon. Member for Eastleigh, beware of what the Treasury is doing. It is after the assets in the pension fund, but they do not belong to the Treasury. The hon. Gentleman has a choice tonight : he can either join us in trying to effect an insurance policy to protect the pensioners or he can accept the rhetoric of his Secretary of State, who gives him promises but nothing to back them up.

Mr. MacGregor : I join the hon. Member for Kingston upon Hull, East (Mr. Prescott) in his opening remarks about our late colleague, Robert Adley. As we embark on this Report state, we are all conscious of his very sad death. He took a great interest in all transport matters. I and, I am sure, all hon. Members pay tribute to him for all that he achieved. He had a deep knowledge of and passionate commitment to transport, but his greatest enthusiasm was for railways.

The hon. Gentleman said that Robert Adley and I had differences of view on some aspects of our proposals for the reform of British Rail. I quoted the key passages on television yesterday--

Mr. Prescott : Why not all of them?

Mr. MacGregor : Because it was a short programme. I should have been quite happy to quote all the passages, on many of which Robert Adley and I agreed. Indeed, about four fifths of the Select Committee's recommendations have been accepted either in whole or in part. There is no doubt that Robert Adley made a very constructive contribution and we agreed on many matters. We disagreed about vertical integration and one or two other issues, but it is possible to have two different but genuinely held views about vertical integration.

The most important point is that Robert Adley brought his great knowledge to the House with great enthusiasm. He was a bubbly character. I had the pleasure of sharing an office with him when I first came to the House. He did not just serve the House well on transport matters ; he served the House with distinction in many other ways and he will be greatly missed. I am sure that we all wish to convey our heartfelt sympathies to his widow Jane and his family.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich) : Those of us who served with Robert Adley on the Select Committee learned to appreciate his total commitment to transport and his clear view about privatisation. I want to put on record the fact that we believe that the enormous work that he did on the Select Committee report and the pressures that were brought to bear on him unfortunately and undoubtedly had some effect.

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Mr. MacGregor : I certainly hope that that was not the case, but that underlines the detailed work that he put into the Select Committee-- and, indeed, into every other cause in which he believed. The Government are prepared to accept, in principle, the intentions behind new clause 3 and amendment No. 2, tabled by the hon. Member for Wrexham (Dr. Marek). They require a report to be published and laid before the House before an order can be made to amend the trust deed for the rules of any existing board pension scheme, contrary to the advice of the trustees.

It will not surprise the hon. Gentleman to know that I cannot recommend acceptance of new clause 3 as drafted, for three technical reasons. First, it would sit better as a paragraph in schedule 10 rather than as a complete new clause. Secondly, the phrase "existing board pension scheme" is not defined in the Bill, whereas "existing scheme" is defined in paragraph 1(1) of schedule 10. Thirdly, I am advised that it would be unwise to use the word "precisely" in primary legislation. Who can judge what "precisely" means? In any case, it would be better to publish the trustees' advice, whether or not it is accepted.

I assure the hon. Gentleman that it is my intention to accept the clear spirit of the new clause and the amendment. I assure the House that the Government will be in close touch with the trustees on such matters and will wish to bring their views to the attention of the House when laying any relevant draft statutory instruments. We would also wish to explain the reasons for not wholly accepting their advice. Of course, that position may never arise ; it is hypothetical.

I want to give further thought to the best method of achieving the intentions of the new clause, both in publication and announcement, and to bring forward a suitably drafted amendment at a later stage in the other place. I give a firm undertaking to do so. I hope that, with that assurance, the hon. Gentleman will not wish to press his new clause.

I cannot be quite so charitable to the hon. Member for Kingston upon Hull, East. I welcomed his opening remarks, which acknowledged the Government's position on so many of the issues in our final pension proposal, agreed and announced last week. However, that greatly contrasted with his quite outrageous remarks on "Newsnight" on Friday night and on "Breakfast with Frost" yesterday. He repeated some of those comments in his later remarks today. He said on "Newsnight"--I shall leave out a tiny bit of the quote--

[Interruption.] All right, I shall read the whole quote. He said : "So the only money that's available--and there is money available in the railways, Post Office and the Coal Board--is in the pension funds, something like £4 billion in each one of them, and what the Government is about to do is to raid the pension funds of £4 billion each."

The hon. Gentleman said on "Breakfast with Frost" yesterday : "Something like £8 billion belongs to British Rail pensioners and they are carving up the pension funds to get £4 billion off the pensions and into the Treasury."

Those remarks were outrageous on two counts. First, his remarks were not true ; it was scaremongering of the sort to which we have become accustomed in recent months, especially with pensions. Secondly, he raised quite unnecessary fears and concern among vulnerable sections of the community-- British Rail pensioners who are dependent on their British Rail and state pensions.

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From the beginning, I have gone out of my way to make it quite clear that the Government have no intention of doing what the hon. Gentleman has suggested, yet even after he saw the published proposals on Thursday he continued to repeat his allegations. I can only assume that he had not read our conclusions on Thursday. I should like to take him through the facts because they are terribly important.

Ms Glenda Jackson (Hampstead and Highgate) : If the right hon. Gentleman's statement on Friday was so important and comprehensive and would have stilled pensioners' fears, why did he not come to the House to make it? Why did we have to discover it in a written answer at the back of Hansard ?

5 pm

Mr. MacGregor : We were informing the House of our conclusions so that we could hold this debate today. I want to make the position absolutely clear. I gave a pledge at the outset, and I have repeated it in the House more than once, that British Rail's pension funds would not be used for any purpose besides paying pensions. In January, we produced our pensions document. It was clearly a consultation document in which we raised a number of issues and outlined two main options. It cannot be argued that we have done a U-turn or effected any changes since then. What is the point of offering options and going out to consultation unless, ultimately, we make a decision on one or other of those options?

The two main options were the closed fund in due course and a Government offer of a guarantee of index-linked pensions to all British Rail pensioners. We offered pensioners a fair and open choice. The hon. Member for Kingston upon Hull, East put his finger today on the difference between British Rail's privatisation in respect of pension funds and the privatisation of electricity. As he rightly said, the area board structure of electricity meant that the employees involved in that industry were not to be split up into all sorts of different organisations, so there was no need for a variety of pension funds. The hon. Gentleman rightly identified the fact that the Inland Revenue would not allow employers to cross- subsidise or deploy cross-arrangements as between one pension fund and another. That Inland Revenue rule is designed to avoid the risk of unfair treatment in the use of taxation.

Clearly, then, with British Rail we were faced with a situation that was not paralleled by electricity. We therefore had to find another solution. That is why, genuinely, fairly and openly, we offered these two alternatives to existing pensioners. It was not possible to say that they could for all time participate in open funds in which employees also participate because, with a large number of pension funds, and the large number of British Rail pensioners whom the hon. Gentleman correctly identified, that could overwhelm some of the new pension fund arrangements for employees. That is why, under the first option, in due course the fund has to become a closed fund.

In order to assure pensioners that there was an alternative of a guaranteed index-linked pension--all this is spelt out in the document--we offered the same sort of arrangements to British Rail's existing pensioners as obtain for the civil service. Clearly, the Government cannot undertake the liabilities that would arise in this

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respect without the transfer of the assets that were available in the pension fund to meet the pensions in the first place. I have had discussions with the pension trustees and with a great many others since the document was produced in January. They have recognised straight away that assets have to flow if liabilities are being incurred. If the Government, therefore, were to offer guaranteed index- linked pensions, they clearly had to have the right assets to pay for them. The process would be carried out independently, based on actuarial advice on all sides. That is why it was outrageous to say that the Government were going to purloin pension funds and use them for other purposes.

But the issue went further than that. Having consulted widely, I came to the conclusion that, as the second option, which had been fairly offered, was not favoured by most of those who responded to the document--a few did favour it--and as most preferred the first option, it was right to accept the option that most people wanted. That is what we announced on Thursday and it meant that there was no possibility, on Friday, Sunday or today, of the hon. Member for Kingston upon Hull, East correctly arguing that the Government were taking over pension fund money to use it for other purposes. Even so, the hon. Gentleman went on putting out his scare story, and at one point this afternoon he did it again. I want to ask him an important question--important from the point of view of pensioners. Given the background that I have outlined and the fact that the first option is the one that we have chosen, there can be no case for saying that the Government are taking 4 billion away from the pensions and putting it into the Treasury. I ask the hon. Gentleman to withdraw that allegation because it is not in the interests of pensioners or of anyone else to believe it. I invite him to withdraw it, now or at the end of the debate--

Mr. Prescott : I shall deal with it at the end of the debate. Mr. MacGregor : I hope that the hon. Gentleman will then be able to reach agreement with me on various other aspects of pensions, too. I want to talk about our conclusions based on the consultations that we held with trustees, the British Railways Board, large numbers of pension organisations and the rail unions. The Minister of State and I met the unions at least twice, and we have certainly consulted widel two of them, but the reasons for that were understood. I was grateful to my hon. Friend the Member for Eastleigh (Mr. Milligan) for what he said about the pension trustees' approach to what we have done. They understand how far we have gone to meet all their concerns.

It would never be--it never was--any part of my purpose to take away from pensioners any of their pension funds. I understand only too well how important pensions are to them and to existing employees. That is why I was anxious to reach the best possible arrangements within the terms of the new reforms.

Mr. Prescott : The right hon. Gentleman has said that people who are existing employees of British Rail and who go to another employer in the reorganisation will still

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belong, if they want to, to the British Rail fund--that is described as an indefeasible right. The industry welcomes that. Can the right hon. Gentleman, however, assure us that that right is not time limited? A document sent to his Department suggests that it might be.

Mr. MacGregor : If people choose to stay in the joint industry scheme, they can do so--that is the indefeasible right. I am happy to make that clear.

As requested by almost all the interested parties, we will set up a joint industry scheme for the railways to succeed the British Rail scheme. I know that that has been widely welcomed. We have made it clear that staff serving when the Bill gains Royal Assent will have a right to remain in the scheme while they are still in the railway industry. That is what is meant by an indefeasible right--the right of existing employees to remain in the joint industry scheme. Both it and any scheme subsequently set up by employers must offer benefits no less favourable than those in the existing scheme to people who are members of the scheme when the Bill gains Royal Assent. There will be no penalties for involuntary breaks in employment. The matching of additional voluntary contributions--known as the British Rail additional superannuation scheme--will continue, and there will be safeguards for pension funds when franchises change hands. That is a clear set of commitments to employees.

As for new employees entering the railway industry, it will be for employers to negotiate their own arrangements with them. The hon. Member for Kingston upon Hull, East has tabled an amendment on that aspect, but as he did not refer to it, I shall not do so either now--but I make that point clear.

On pensioners, I have already said that we are going for option 1, so there is no question of any funds being transferred to the Government in return for a Government commitment on a guaranteed, inflation-proof pension. It is correct to say that pensioners will eventually enter the closed scheme--I will explain why later--but they will remain with British Rail employees in the short term and the closed scheme will be managed as part of the joint industry scheme. The funds will continue to be managed by representative trustees, as now. The division of the funds to reflect the trustees' liabilities and decisions will occur in due course, after a new revaluation. A revaluation is currently under way, and clearly we must wait for it to be completed. I make it absolutely clear that the fund splits will be based on independent actuarial advice, as one would expect. As the hon. Member for Kingston upon Hull, East said, Government contributions under the Transport Act 1980 will continue. I shall explain shortly the purpose of the Ways and Means resolution and the new clause that has been tabled.

We have met fairly well, with one exception, the main requests made of us. The orders for putting those schemes into effect will be subject to statutory consultation with the trustees--I will refer again to that point in relation to the hon. Gentleman's amendment--and to affirmative resolution of both Houses.

I cannot accept new clause 29 and the consequential amendment No. 253, because there is no need for them--the purpose has been covered already. The concept of the joint industry scheme is wanted by everyone whom we

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consulted. In particular, the British Railways Board and the railway trade unions were keen for such a joint scheme, which they felt could best continue to provide the benefits that staff already enjoy. I made clear in my written answer last week, as earlier, that the scheme will be established.

Consultation with the board and with the trustees has already begun and will continue until the joint industry scheme is formally established. We make it clear in the Bill that Parliament will have an opportunity to debate the statutory order establishing the scheme, because all such orders will be subject to the affirmative resolution procedure. If the trustees disagree with any part, then, in the spirit of the hon. Gentleman's amendment, we will report to Parliament and that will be reflected in an amendment in another place.

The hon. Member for Kingston upon Hull, East referred to the aftermath of the Maxwell affair and to the Goode committee. He made a fair point, and I understand the concern among pensioners as a result of that affair. My constituents have been affected and I have had many surgery and other discussions with them. That is why I was particularly cross that Opposition Members tried to stir up unnecessary fears among pensioners.

When the Goode committee reports, the timing will be such that we should be able to take into account those recommendations that are accepted in any of the arrangements when we come to deal with the orders. In other words, I hope that we will be able to reflect that committee's recommendations.

New clause 29 is therefore redundant. We have already given our commitment to consult and that consultation has already begun. This afternoon, the hon. Member for Kingston upon Hull, East made different points--and they are not relevant to the new clause. I do not see how it would achieve the objective that he set himself this afternoon. It is therefore redundant in more than one way.

Mr. Prescott : The Secretary of State will know the difficulty of devising acceptable new clauses. If he will take that new clause together with many amendments, he will see that we chose to make one principal point --that nothing can move on the right hon. Gentleman's order unless the actuarial authorities say that there is instability. All the other points are embodied in later amendments. Given the limited time available for debate, we cannot discuss them all because there is much to cover in two days--as the Secretary of State knows from our negotiations.

Mr. MacGregor : I know also that pensions are very complicated. As to actuarial instability, the actuaries must address that key issue when they come to the eventual split of the funds. They would not want to establish a closed fund that was inherently unstable. Clearly, the trustees will be watchful on that issue.

As to the "no less favourable" question, I will be completely fair with the hon. Gentleman.

Mr. Prescott : This will be the first time.

Mr. MacGregor : I am always fair with the hon. Gentleman. I hope that he will be fair and withdraw his accusations later.

Mr. Prescott : There would be no reason.

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5.15 pm

Mr. MacGregor : The hon. Gentleman knows that his accusations were wrong--but I suppose that it would be a precedent for him to withdraw them, knowing that he is wrong.

I want to be fair about the hon. Gentleman's specific point. He rightly explained why we could not distribute the pension liabilities of existing pensioners around a whole series of funds. We had to find another solution, and we offered two options. The solution adopted is to move eventually to a closed fund.

The hon. Gentleman tried to argue that that would not give pensioners a "no less favourable" commitment--but by that, we mean retail prices indexed. Also, if there is a surplus in the fund at any time, the trustees can decide what can be distributed from that surplus. There is never any guarantee about a pension fund's future performance, but there are 60 closed funds in British Rail at present. Their history is good and they have been able to find surpluses, despite the issues that the hon. Gentleman raised as to the balance between equities and gilts--I well understand that point, which is why we are allowing time for moving to a closed fund. We have found the right solution and the one that pensioners, pension fund trustees and others want. We have gone for the closed fund because that is the only way under the new arrangements. The hon. Gentleman's new clauses would not make any difference. As the hon. Gentleman did not raise amendment No. 190, I will not refer to it, but I revealed that we could not accept it.

As to Government amendments Nos. 106 and 107, we have already said that we intend to continue payments in support of the historic underfunding of British Rail pension schemes. The purpose of the amendments--this touches on the hon. Gentleman's point about the Ways and Means resolution--is to take account of changes in future pension arrangements that will occur on privatisation.

It is a matter not of changing our mind and deciding to continue the Government's commitment to payments to support that historic underfunding but of recognising that we had to make changes to the Bill to enable that commitment to continue under the new arrangements. Having realised that, we needed a Ways and Means resolution to put the amendments forward. That is the reason and no other. It is actually quite technical.

As the hon. Gentleman said, those support payments date back to the 1974 capital reconstruction of British Rail, when the Government decided that British Rail would be unable to meet all the pension liabilities inherited under the Transport Act 1962 and therefore assumed responsibility for funding the unfunded portion of the pre-1975 pension obligations. I am sure that the hon. Gentleman is with me so far ; this can get a little complicated.

Those obligations included pensions, the cost of some early retirement schemes and the provision of cost-of-living increases for pensioners from some early BR schemes that had no provision for index linking. The method of payment of Government support was changed by the Transport Act 1980 because the Public Accounts Committee criticised the previous system, particularly on the ground that it involved payments being made in advance of need.

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Payments are therefore currently made on an emerging cost basis-- [Interruption.] I am talking about the PAC, not the public sector borrowing requirement, and about the propriety of Government funding. Payments were made on that emerging cost basis so that the Government's contribution is made only as and when payments are made to pensioners. Those arrangements can be changed again only by further primary legislation. Payments made since 1981 total £1.3 billion at present- day prices. I hope that the hon. Member for Kingston upon Hull, East acknowledges that that is a substantial contribution.

Mr. Prescott : But it is an obligation.

Mr. MacGregor : I grant that, but it is a very large contribution. Under the 1980 Act, a determination was made of the unfunded proportion of pre-1975 liabilities of each of the funds. The determinations were on a once-and-for-all basis. There is no provision for further determinations under the 1980 Act, regardless of whether the state of the funds' assets has changed. That was deliberate, so that British Rail would have an incentive to manage the funds effectively.

Why do we need to make these changes? As the 1980 Act stands, we have no powers to make periodic payments to other than a British Rail pension scheme, as defined under the Act, nor to make

once-and-for-all payments to pay off the remaining liability to any scheme. We might want to do that, for example, where that liability to a scheme with a few and a diminishing number of members is very small. It makes sense to do that.

Another problem is that at present when a transfer value is paid to another scheme on an employee leaving British Rail, any unfunded proportion of the transfer payment is reimbursed immediately to the transferral scheme. I have a detailed brief, which I could read out, but it may be simpler if I tried to explain it in my own words. This is to meet the Public Accounts Committee's point.

If the existing scheme changed to the new arrangements under the joint industry scheme, technically speaking that would be a change. Therefore, the overall lump sum payment would have to be made at the moment, although underlying it there would be no change at all in the liabilities. That would certainly be criticised by the Public Accounts Committee. That is why we have made the changes. It is to overcome these difficulties in the new arrangements that our proposed amendments will allow for varying the method and timing of payment to individual schemes, or in respect of different classes of member within a scheme. I do not need to weary the House, unless any hon. Member wishes to ask me questions, with precisely how that will be done. However, the fact is that that is all that the amendments seek to do.

The amendments would reverse the action that was taken by the Government in 1980 to respond to criticisms by the Public Accounts Committee about how the support payments were being made at the time, particularly in relation to the very small payments point. I can, however, reassure the House that the primary reason for amending the 1980 Act is to ensure that the bulk of the payments can continue to be made, whenever practicable, on the present pay-as-you-go basis.

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I hope that the House will accept our amendments. I have already said why I am unable to accept the amendments and the new clause that the hon. Member for Kingston upon Hull, East wants. The most important point about the debate, and why I am glad that it is taking place so early on Report, is that it enables me to give the reassurances that pensioners and employees were seeking about their pensions and to emphasise that in the decisions that we have now announced we have met the vast majority of the representations made to us.

The pension trustees have acknowledged that we have approached this issue extremely fairly. I fully understand and completely sympathise with the concerns of pensioners about their pensions. I hope, therefore, that the hon. Member for Kingston upon Hull, East will withdraw and not repeat the shameful allegations that he has made.

Mr. John Heppell (Nottingham, East) : I have to declare an interest, as I did in Committee. I am an ex-British Rail employee. I am also a deferred member of the British Rail pension scheme. I am grateful to the Secretary of State for telling me that I should now be reassured by what he has told me, but I must say to him early in the debate that he has not reassured me.

I was told that I could speak on my interest in the pension scheme, because it is not significant enough to prevent me from speaking and voting. However, my pension is significant to me. It will decide what happens to me in the future. It will be my security for the future. It is significant to me and to hundreds of thousands of others like me. It may be the deciding factor in whether I live in relative comfort in my old age or in poverty.

I do not take kindly to having to discuss my personal finances in front of the House of Commons and the country and I consider it to be in very bad taste that the Secretary of State has made me do so. I disagree even more with the fact that the Secretary of State and the Minister for Public Transport should feel that they can tinker with my pension without my express permission.

It is important to recognise to whom this pension belongs. It does not belong to the Government ; it does not belong to my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) ; it does not belong to the hon. Member for Eastleigh (Mr. Milligan). It belongs to me and to the other pensioners. If that fact is recognised, all these matters are put into their proper context.

Over a year ago I thought--naively when I look back on it now--that my pension was safe. We had seen the tragedy of Maxwell and what could happen to pensions, but I knew that the trustees of the British Rail pension scheme had done a good job in the past. I had faith in them and had no worries about the future. I was even more reassured in July last year when the Government said in their White Paper : "Privatisation will not affect pensions already being paid from or preserved in British Rail schemes."

I regard that as a guarantee and as a promise. It proved not to be a guarantee and, if it was a promise, that promise has not been kept.

I was not reassured for long. Before long I saw that the Government had two options. The Secretary of State still tries to portray those two options as a choice for pensioners and for deferred pensioners, like me. If they provide a choice, it is Hobson's choice. For me the choice

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is between whether I should be burgled or mugged. It means, in effect, that my pension is going to be tampered with and reduced by the Government, without my say-so under either option.

Under the second option, it is clear that the Government will take my money. However, under the first option

"an appropriate portion of each fund"

will

"be set aside as a closed scheme."

If an appropriate portion is to be set aside for a closed scheme, what will happen to the other portion? I hope that the Secretary of State will tell me what is to happen under the second option. The first option means that the funds will be stripped and that there will be a change to a closed scheme. That scheme will die as the pensioners die. The scheme is terminal. It gives the Government the opportunity to evade and escape from the responsibilities that they had in the past. It provides no opportunity for shortfalls to be met by employee contributions.

The first option is unacceptable. The second option effectively allows the Government to take over all the assets of the pension fund. They promised me that my pension would rise in line with the retail prices index. But I already had that, and something else : I knew what my scheme was all about. I read the annual reports every year. It is no use Conservative Members shaking their heads. I know more about the British Rail pension scheme than any of them. I am a member of it.

The Government say that they will take all my assets and that in return my pension will rise in line with the RPI, but I already have over and above that in my present scheme. The trustees have looked after that scheme. Neither of the Government's options offers the same security or the same benefits as that scheme does.

Under the British Rail pension fund, pensions have increased by a third since 1984--not because of RPI increases, but through the use of surpluses. Widows' pensions have increased by even more--they now receive a half- payment rather than a third of a payment because of the surpluses created by good investment. The employer enjoyed a five-year contribution holiday thanks to surpluses in the fund. Other employees, but not me, had been enjoying a thirteen-and-a-half year half-payment contribution holiday which would not have ended until 2004, all because of the fund's surpluses. I was going to lose all those benefits under either of the Government's options.

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The fund is a living fund, and I use that word deliberately. It regenerates itself and keeps going because, as people die, new employees join, balance the fund and keep it balanced. For example, as at 31 March 1992, there were 295,478 people in the British Rail pension fund ; 131,478 were contributing members ; 40,000 were, like me, former members with preserved benefits ; and 123,984 were beneficiaries. A balance was achieved between the new employees and people who were receiving benefits. The fund was stable not only in terms of numbers but financially. The accounts showed that the money coming in from employees was similar to that being paid to beneficiaries. The scheme worked and it was going to carry on working.

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The figures for the same year show that 10,346 new members joined the scheme whereas 3,631 left. There were unfortunately 400 deaths in service and 4,022 retirements. The balance was set to continue and could have existed for ever if the Secretary of State had not interfered. He gives the impression that he is trying to be helpful to me and the pensioners, but I can only say, "Thanks but no thanks. I don't need it". I like the scheme as it is. I am happy and satisfied with it and I want to continue with the scheme that has given me such benefits.

The scheme provided me with as many guarantees as anyone can expect from any pension scheme or from anything else in life. There is no doubt that it worked well. Everyone agreed about that--the trustees, the Government, the unions, the pensioners and the contributors. If it ain't broke, why has the Secretary of State got to fix it? I have heard people say that the Secretary of State and the Minister for Public Transport have made changes and granted concessions as they went along. They have, and sometimes very rapidly. I am sure that the hon. Member for Eastleigh has sometimes been as confused as I am by the rapidity with which the Government have changed their mind. They began by saying that the new scheme would be "comparable". I am not sure what tht means, but the phrase was changed and it was said that any new scheme would be "no less favourable". Whether it is comparable or no less favourable will be a decision not for me as a deferred pensioner, for other pensioners or for the trustees, but for the Secretary of State. He is the same Secretary of State who has already told me that options 1 and 2 are comparable with the scheme that I already have. It ain't true. This is the same Secretary of State who offered me options 1 and 2 after telling me initially that privatisation

"will not affect pensions already being paid from or preserved in British Rail schemes."

With respect, would I not be a little more naive than the hon. Member for Eastleigh if I were now to accept that my future and that of the other 200,000 people involved was to be left to the Secretary of State's interpretation of the phrases "comparable" and "no less favourable" when, only a few minutes ago, he was telling us that it was very difficult to describe what "precisely" meant? If he cannot tell us what "precisely" means in law, it will be very difficult for him to tell us what "comparable" and "no less favourable" mean in law. People have been caught by such phrases before.

My hon. Friend the Member for Kingston upon Hull, East referred to previous BR privatisations when employees were told that their pensions would be mirror images of British Rail pensions. Were they mirror images? There was not a single scheme in which the contributors or pensioners did not lose out as a result of the change to the "mirror image" pension schemes. If I am wrong--I do not think that I am because it is a matter of record--or if the Secretary of State can tell me of one BR privatisation scheme which worked out better for pensioners and contributors, or one which worked out just as well, I should be very happy to hear about it. However, I have investigated them all and I could not find one.

I ask the Secretary of State what is wrong with continuing with a truly open scheme, not one that is open only at present? I noted that in Committee the Minister referred to the proposals as an open fund for the present, but the Secretary of State now refers to them as a closed

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fund in due course. It may be a question of semantics, but the delay is leading to a closed fund which, in the end, will be worse for me and for the present pensioners. The closed fund will be introduced not at my request or that of the trustees, but at that of the Secretary of State.

What is wrong with asking new employees to make a choice? What is wrong with asking them whether they want to contribute to a joint industry fund which is open to all, to take out a private pension or to join the pension scheme offered by the new operators? What is wrong with offering people that choice? Anyone with any sense will want to stay with the joint industry scheme which is open and is--I use the word again--a living scheme that will not disappear. If the Secretary of State thinks that the delay is a sop or that it will persuade me that he is doing something for me, he is wrong. Pensions work on a long-term basis. I disagree with my hon. Friend the Member for Kingston upon Hull, East because I do not think that the new scheme will be introduced in 1994. I believe that it will be introduced later, but does it matter if it is introduced in one, two or three years? Does it help me if it is introduced in five or 10 years? The answer is no. I shall not be drawing my pension for 20 years, but 20 years matter because by then the Secretary of State will have made his changes and will have made my pension a closed scheme. By virtue of its being a closed scheme, the trustees will not have the leeway to invest wisely to ensure that I receive proper benefits.

I refuse to be grateful for the Secretary of State's concessions because none of them is a proposal that in any way matches or even comes close to what I have now. At the moment, I have a pension scheme with which I feel safe and secure--a pension scheme which means that I can sleep at night without worrying that it will disappear. The Secretary of State seems to be proposing something that will not allow me to sleep at night and, more importantly, will not allow hundreds of thousands of other people to sleep at night. I have an edge on all those people because I have a House of Commons pension. What an outcry and what a Back-Bench revolt there would be if the proposals for the railway pension scheme applied to the House of Commons pension scheme. How would Conservative Members react then? If they feel passionately--as I hope they do--that people should be protected, they should put themselves in the position of those hundreds of thousands of railway employees.

Ms Jean Corston (Bristol, East) : Does my hon. Friend share my concern about what will happen to the surplus in the pension fund? Little has been said about the surplus. As I understand it, in law the surplus in any pension fund is the property of the employer. In this case the surpluses

Mr. Bowen Wells (Hertford and Stortford) indicated dissent.

Ms Corston : Conservative Members shake their heads. I have had the point clarified in Committee on another matter. The surplus in the railway pension fund is owned by the Government. Does my hon. Friend agree that we need assurances from the Secretary of State that the Government do not intend to do anything with the surplus in the fund, other than to disburse it for employees and pensioners?

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Mr. Heppell : I agree with my hon. Friend. There is a need for further reassurances. We get reassurances about the present, but not about the future. I do not wish deliberately to draw comparisons between Maxwell and what is happening now. However, although it may be legal for the Government to take my pension, I do not think that it is moral. In the Maxwell case, it was neither legal nor moral. The problem is that, although I accept the assurances of the Secretary of State that I should not worry because the Government are not taking my pension now, I still have grave concerns and doubts about whether the Secretary of State plans to take my pension in the future. I am not willing to accept guarantees that are given to me in the form of words such as "comparable" or "no less favourable". I want something written into legislation that protects me now. My hon. Friend the Member for Kingston upon Hull, East was quite right. We were told in Committee not to worry because something would be provided on Report to reassure us. We are now being told that there will be an order in the future to reassure us. It has already been stated that we shall be able to debate the order, but that we shall not be able to amend it. The Whips will be on. When that happens, there will be an hour and a half's debate and, although the hon. Member for Eastleigh may be outraged by the Government's betrayal, the vote will go through. We all know how things work in Parliament. I am not prepared to be grateful for any concession. Why should I be grateful for someone throwing me crumbs when they have stolen my loaf? Someone is stealing something that belongs to me ; it may be legal, but it is not moral.

How will the two-tier system created by the Secretary of State affect the work force? All new employees will be expected to take a new and, I suspect, substandard, second-rate pension scheme instead of the one currently on offer. In future, people will be worse off and I want to fight that. I want not only to look after myself and the present pensioners, but to ensure that the people who come after us will have a decent pension scheme. People have the right to expect a decent pension scheme. Why should we have legislation that worsens the scheme?

What about the existing employees? We shall create two types of employees : the employees who have low pension costs and those who have high pension costs. The House should mark my words. It will not be long before the private operators and the unscrupulous realise that it is cheaper to employ people on the new pension schemes. People who presently work for the railways will be shed because they will be more expensive. That will happen, just as full-time jobs are being lost across the country to make way for part-time jobs in which the beneifts are not so good for the employees, but in which the costs to the employers are less. By fair means or foul, new employers will recognise the savings and will make the changes.

d apply for ever and that nothing was certain in life. I accept that on many issues ; I accept that there will be change, whether we like it or not. Changes are often for the good, so we should not resist just for the sake of resisting change. However, there is one matter about which people-- I am certainly one of them--expect to have some certainty : their pensions. They

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