House of Commons Hansard Debates for 2 Nov 1993

Mr. MacGregor : Will the hon. Gentleman give way?

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Mr. Prescott : There is no point in giving way to the Secretary of State, as some of my hon. Friends want to speak.

The chairman's letter continues :

"Third, your proposals, as presently stated, will effectively eliminate any possibility of actuarial surpluses arising. This is contrary to one of the basic principles underlying the Memorandum of Understanding."

The signature to it says it is contrary to what was agreed. Finally, he said that the Government IOU that would replace various funds and Transport Act payments would have serious implications for the fund. He went on to say the claims on the fund which the Government will now treat as an IOU that those claims on the fund will represent some 25 per cent. of the assets now, and that 10 years' later, "70 per cent. of the assets might be represented by the Government's IOU, thus moving close to an unfunded scheme". It is the chairman of the trustees saying that.

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The Secretary of State can disagree with me, but the trustees seem to have backed my interpretation. I have no doubt that nothing today or in the guillotine debate has put to rest my fears that perhaps not the Secretary of State but the Treasury intends eventually to work with the closed fund to an unfunded scheme where eventually the Government will take over control as they have now under the memorandum of understanding which, presumably, the Secretary of State will impose on the trustees.

The Secretary of State controls the fund. It will eventually move to an unfunded scheme and then the Treasury will make a deal with the pensioners, offering them a price-related, inflation-free business pension fund and they will have access to the £2 billion assets exactly as they did with the National Bus funds. Then, when they have established the formula, they will follow it through in the coal industry and the Post Office. These privatisations are solely about robbing the pensioners of their resources and assets, and that is why we will oppose the measure.

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10.45 pm

Mr. Bayley : The pensions issue has been a long and sorry saga, yet the Government still do not recognise that, for most railwaymen and women, their pensions represent their life savings. That is why there has been such an outcry from the pensioners about the Government's proposals for their scheme. The Secretary of State's motion to disagree with the Lords amendment would tear up the Government's obligation to contribute to the pension fund under the terms of the 1980 Act. That obligation arose because of the change in 1975 from a pay-as-you-go pension scheme--similar to the national health service scheme--to an asset-based, funded scheme.

In Committee, the Opposition sought a commitment from the Government that they would continue to meet their obligations under the 1980 Act. On 23 March, the Minister for Public Transport--I am tempted to say the Minister for Roger Freeman--said :

"In 1980, my predecessor--now the Home Secretary--made a commitment under the Transport Act 1980 for the Government to make contributions--now about £70 million per annum--to the pension scheme in order to fund the pre- 1975 unfunded liabilities for railwaymen and women. I give my hon. Friend a clear commitment that the Government will continue to make those contributions ; they are under an obligation to do so. I am happy to repeat the undertaking that those contributions will continue to be made in the future because the obligations continue."--[ Official Report, Standing Committee B, 23 March 1993 ; c. 915.]

The Minister could hardly have been more clear than that.

Mr. Freeman : So that there is no misunderstanding, I must clarify that the commitment that the hon. Gentleman cited was given before the meeting with the trustees in July, when they rejected the outcome of our discussions in Committee and said that they wanted a guarantee that the undertaking of cash payments under the 1980 Act applied to a set of circumstances where there was no state guarantee of an index-linked pension. Everything changed in July.

Mr. Bayley : I refer the Minister to the letter from Derek Fowler, chairman of the trustees, to the Secretary of State, dated 26 October :

"I certainly did not envisage the cash payments would cease indefinitely when I signed the memorandum, hence its reference to retiming."

If there is any misunderstanding, it is on the part of the Minister. In the memorandum of understanding signed on 20 July, the words agreed with the chairman of the trustees were :

"The Government remains committed to support payments to certain BR pension funds."

In October, it became clear to the trustees that that commitment had been abandoned and that the Government intended to return to their previous plan, outlined in their first consultation document on pensions, to grab the pensioners' cash.

On 15 October, the chairman of the trustees wrote to the Secretary of State saying :

"the main purpose in writing to you is to record my grave concern, and that of the Trustee Board, at your decision to change the provisions of the Memorandum of Understanding in relation to support payments to certain BR pension funds under the 1980 Act If payments under the 1980 Act cease and are substituted by a non-marketable Government IOU, the implications for the Fund would be very serious indeed. We calculate that in 10 years time the capitalised Transport Act payments would represent some 25 per cent. of the assets of the closed fund. 10 years later ... over 70 per cent. of the assets might be represented moving close to an unfunded scheme"--

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such as was first suggested by the Government and which was withdrawn because of the outcry from the pensioners.

Back in the spring, the Government withdrew their cash grant scheme because the pensioners--the people whose money it is--did not want it. Through a process of leakage of funds that the Government currently have an obligation to pay into the scheme, we shall find in 20 years' time that 70 per cent. of the value of a fund has been removed and replaced with worthless pieces of paper with no tradeable value. The fund's real assets will be progressively replaced by IOUs. They are not cash and cannot be spent by the fund. It would be inflationary for the Government to print £70 million to place in the fund. As the IOUs have no tradeable value, if the pension fund wants in future to invest in works of art, it can hardly go to Sotheby's and say, "We want to buy a Rembrandt, will you accept our IOU?" If it wants to buy property, it cannot go to Jackson, Stops and Staff and say, "We want to buy this industrial estate. We want to buy this mansion. Will you accept our IOU?" If it wanted to invest in the equity market, it could not go to a stockbroker and offer an IOU. The Government seek to do by the back door that which they sought to do earlier by the front door--remove the fund's assets. Instead of simply grabbing the cash and putting it into the Treasury, the Government intend to dispense with their obligation to fund the scheme to the tune of £70 million a year.

The second development that arises from the debates in another place is the change in the way in which the fund's surplus will be applied. Pensioners currently have a guarantee that their pensions will rise each year by at least the rate of inflation, and they have the opportunity to benefit from any surplus from the scheme. That has been replaced by an inflation guarantee--I acknowledge that--but also by an ability to benefit from a maximum of only 40 per cent. of any surplus.

Earlier, the Secretary of State told the House that the balance of 60 per cent. will remain in the fund, but will it remain as part of the assets that the trustees will control, or will it--as I understand will be the case--fall under the control of a Government-appointed commissar? If so, it will be part not of the pension fund but of a separate, Government- controlled fund.

I would like some of the pensioners to speak for themselves. I represent a large number of British Rail pensioners, and 350 of them wrote to me. Not one was in favour of the Government's proposals. A Mrs. Pratt wrote :

"I fail to understand the dishonesty of the Treasury, who want to steal our fund to try and get themselves out of the mess they have got themselves into. They seem to have no respect for the elderly, who went without luxuries to pay into the fund."

Mr. Waite wrote :

"How they contemplate such an act and condemn Maxwell for exactly the same behaviour makes one gasp."

Mr. Backshall wrote :

"Comparisons with the morals of the late Mr. Maxwell are hard to resist."

Mr. Carey wrote :

"The sterling work done by the administrators in building up the fund's assets has already benefited British Rail, relieving them of their commitment to contribute to the fund for quite some time I trust you will do all your best to persuade the Transport Secretary to refrain from his intention to take the funds belonging to the railway staff past and present."

These funds were those guaranteed under the 1980 Act, and the Government have an obligation to pay £70 million a year into the scheme as a consequence of the change from

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an unfunded to a funded scheme. Those are late payments on behalf of people who paid for and accrued their pensions before 1975. For the Government to pay with IOUs is not to meet their obligation to many of my constituents.

It is not good enough. The Government may think that they are winning a great victory tonight by forcing through the Bill and this pension change on a guillotined vote, but it will come back to haunt them at the next election. Rail pensioners will not tolerate their life savings being tampered with by the Government, and the Government will face their Waterloo at the next election because of the way in which they have treated the rail pensioners.

Mr. Alan Williams (Swansea, West) : I shall be very brief. Ministers' record on pensions has been deplorable and devious. As the other place will confirm, there are lies, damn lies and ministerial memoranda.

What on earth is the value of this so-called memorandum? The Secretary of State tried to argue that it has validity. We all know that it has no validity against statute law, which is what we are dealing with tonight. The terms of the statute are what will be judged in the court.

The IOU, like so many other provisions of the Bill, is yet another expression of the Government's inability to work out what they want to do. This is their latest gimmick. What is the point of the IOU? Does it count against public expenditure for the year when it is given? Is it real? Is it an asset that can be used by the pension fund? Of course not. As my hon. Friend the Member for York (Mr. Bayley) said, assets cannot be bought, or good investments made, with an IOU.

The feature of the pension fund has been the good judgment of its trustees, which has been recognised time and again by the Minister for Public Transport, who has paid tribute to the trustees for the way in which they have managed the money. They cannot manage IOUs. What will be the value of an IOU in 10 or 15 years?

It is not good enough for the Minister to pretend that this spurious memorandum offers any protection. The one common feature of the Bill and of the pension proposals has been the Minister's attempt to take powers that go well beyond any that he should need if his objectives are as modest or as honourable as he has claimed. For proof, one has only to look at paragraphs 2, 3 and 4 to schedule 10, under which the Secretary of State may amend, may decide who is in or who is out, who contributes, what proportion the employee or employer contributes, what amendments are to be made to the old and new schemes, when the schemes will be wound up and even what proportion of assets will be transferred between an old and a new scheme.

The Minister says that the Government will guarantee the new scheme. What is worrying is that they have control over the amount of assets that can be allocated from the old scheme to the new one because, as guarantor of the new scheme, they have a vested interest in transferring as much as possible. There is a clash of interests. The Bill offers the Government the unprecedented ability to take private assets from people without proper compensation by offering them IOUs that will have a

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diminishing value in real terms. What protection is there? The Bill proposes that Ministers will consult. Who can be taken in by any pretence that this Government will consult?

I remember the consultation that took place on my local hospital becoming a trust hospital. The representations were about 9 : 1 against, and virtually every authority of any importance was opposed to the idea. The Minister involved refused to publish the names of those who were in favour but, at the end of the day, he could say that he had consulted, and the hospital became a trust hospital. Consultation does not mean taking note. It is no good the Minister saying that he wants agreement, because the Bill does not state that he needs agreement ; the Bill states only that he needs to consult, after which all he needs is an order.

11 pm

In Committee, I referred to one of the tragedies of any party that has been in office too long. I say this without meaning to be patronising, but there are now too many Conservative Members who have never been in opposition and been kicked around by Ministers. Those hon. Members who entered the House when I did, or shortly afterwards, can look back and see how many affirmative orders have been defeated over the years.

What happens when a Minister introduces such an order and the Whips put the squeeze on their Back Benchers? What has always happened will happen with today's rebellion. Let us also bear it in mind that an order is debated for only one and a half hours, so hardly anyone has the opportunity to participate. In addition, an order cannot be amended--one either accepts it or turns it down.

The Bill gives Ministers the power to do what they like with other people's assets. What would the Conservatives think if a Labour Government told them that they intended to do the same with private pension funds in which their constituents had an interest? We may disagree politically, but that is a genuine question because it could happen, although I would hope that we would not do anything so outrageous. However, let us suppose that we did-- how would the Conservatives feel? What reassurance would they find in the unamendable affirmative procedure and a one-and-a-half hour debate? What satisfaction would they be able to give to their constituents? That is how we feel now when talking about the people whose interests we are trying to represent.

Mrs. Dunwoody : One of the most depressing aspects of this utterly depressing Bill is the shiftiness with which the Government have dealt with pensions. I do not think that the Government understand the extent of the outrage felt by railway workers about the Government's behaviour. That outrage is valid among people who have contributed to pension funds all their lives but are suddenly being told that the control of those funds is being transferred from the proper trustees and put in the hands of the Government.

During our consideration of this part of the Bill, Ministers said that the original idea was to have agreement. During the negotiations, however, they came to believe that they did not need agreement after all ; they merely needed to consult. I am amazed that the Government think that they can treat the House and our constituents with such contempt.

I have literally hundreds of railway pensioners in my constituency--men and women who, despite very low rates of pay, have contributed to pension schemes all their

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lives. They believed that their interests would be protected and that the future of the railway industry was such that they would always have the security of knowing that in their old age they would have proper pension provision. They now feel seriously--

Mr. Raymond S. Robertson (Aberdeen, South) : On a point of order, Madam Deputy Speaker. As someone who is still relatively new to the procedure of the House, may I ask whether it is in order for an hon. Member who chaired part of the Committee's proceedings to take part in the debate when the matter comes back to the Floor of the House?

Madam Deputy Speaker (Dame Janet Fookes) : There is no rule on that.

Mrs. Dunwoody : Actually, Madam Deputy Speaker, I have consulted the House authorities, and you may like to know that, in the view of the Chairman of Ways and Means, Lords amendments are not comparable. I chaired one sitting of the Committee, to assist a member of another party who was in a difficult situation. There is no reason why I should have to excuse my behaviour. My constituents require me to speak on their behalf. The intervention by the hon. Member for Aberdeen, South (Mr. Robertson) shows how ashamed Conservative Members are of the Government's behaviour. They do not even dare to listen to Opposition Members making a legitimate case for their pensioners.

The Government would like that case to go by default. They do not want an open discussion ; they always want to hide behind semantics and presentation, and to suggest that they are offering genuine guarantees. Tonight, for their own ends, and certainly for their own financial advantage, the Government seek to introduce a scheme which, far from protecting railwaymen, railwaywomen and future railway industry pensioners, puts those people in a less advantageous position and damages their interests.

I believe that the Minister is an honourable man, but I do not think that he realises that many people outside the House are capable of understanding what is happening here. They may not know the difference between an affirmative and a negative procedure, and they may not understand the procedures of the House of Commons or of another place, but they understand something much simpler. They understand that what is important between a Government and the people who vote is trust, faith, understanding, commitment and, above all, the belief that a Government will not seek by some shabby manoeuvre to deprive them of their legitimate rights. People know what the Government are doing, and in due course they will make them pay.

Ms Glenda Jackson : Those who served on the Standing Committee know only too well that the question of what will happen to the British Rail pension fund after privatisation is a nut that the Government have significantly failed to crack time and again. Either they had no proposals prepared, or those that they presented were totally unacceptable not only to the Committee but to the pensioners and to the trustees of the pension fund.

The Secretary of State opened our debate on pensions tonight by saying yet again that he wanted to clarify the position, to calm fears and to allay suspicions. The right hon. Gentleman said that he wished to make four points, although if my memory serves me well he managed to

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cover only three of those subjects : assets, solvency and what a good deal the Government were giving BR pensioners--as though the pension fund were his to give.

With regard to the assets, the one chink of light and the one way forward for pensioners seemed to come from the memorandum of understanding signed by the Minister--on behalf of the Government, I presume--and by the chairman of the British Rail Pension Trustee Company Ltd. and by a board member. That document was signed on 20 July, but on 26 October the chairman of the trustees wrote to the Minister expressing grave concern about changes that he thought were taking place, although he had believed the memorandum to be binding on all parties.

In one letter, the chairman deals with the issue of assets. He says :

"The indefinite cessation of cash payments under the 1980 Act will accelerate the realisation of marketable assets to pay pensions. It is only on those assets that the Trustees can earn real increases. As those assets are realised the non-marketable Government IOU will represent a larger proportion of total scheme assets, thus diminishing the scope for real increases and disadvantaging pensioners."

In a letter of 26 October to the Secretary of State, the chairman of the British Rail Pension Trustee Company Ltd. touches on the issue of solvency, which the Secretary of State assured us tonight is entirely safe because it is in the Government's hands. He says : "I am sufficiently experienced in public expenditure matters to know that Government guarantees cannot be given lightly and without sensible controls which protect taxpayers' interests. Those requirements were recognised in the Memorandum of Understanding. What I had not foreseen when I signed the Memorandum was that the Secretary of State would be given powers to virtually take over the fund if the solvency guarantee were to be invoked."

On the issue of the good deal, the chairman, in another letter to the Secretary of State, says :

"your proposals, as presently stated, will effectively eliminate any possibility of actuarial surpluses arising. This is contrary to one of the basic principles underlying the Memorandum of Understanding."

So a man whose entire professional life has been dedicated to the management of pensions funds and who has written to the Secretary of State about the assertions that he made to the House and the country tonight-- that the assets of the pension fund are safe, the solvency of the pension fund is safe and pensioners will continue to get a good deal from the fund- -believes that the Secretary of State is being so economical with the truth that he puts Scrooge in second place. One of the points made by the Minister tonight was that there could be no power of veto over Government expenditure. Clearly, that point had occurred to the trustees in the light of the changes that the Government were making to what they had supposed was a binding agreement--the memorandum of understanding.

The British Rail Pension Trustee Company Ltd. sought legal advice, which I quote :

"the new Sections 52B to 52D give to the Government a far greater degree of flexibility than is envisaged in the Memorandum ... These powers are very broad".

If the powers are taken out of the hands of trustees, they will be exercised to the detriment of scheme members.

"The Government's control over public expenditure only exists because Parliament has given it the necessary powers through legislation. Parliament can therefore impose constraints on those powers."

If only the Government had given Parliament sufficient time to debate that issue.

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The legal adviser to the British Rail Pension Trustee Company Ltd. says that there are precedents which discount the Government's argument that they would be handing over the power of veto to the trustees :

"Section 33(3) of the British Telecommunications Act 1981 provides a precedent for the imposition of duties on the Secretary of State in making orders. We believe that there may be numerous other examples on the statute book".

I do not think that anyone can argue that the opinions and the evidence that I have presented in this debate come from a party political stance. As hon. Members know, I have the great honour to be a Member sponsored by the Associated Society of Locomotive Engineers and Firemen [Interruption.] It never fails to amaze me that I continue to give Tory Members the benefit of the doubt that they can read and hear. This is by no means new information, yet every time I say it, certain Tory Members react as though it is the first time in their lives that it has been presented to them.

My constituents also include British Rail pensioners and their dependents. They believe that, in this as in so many issues, the Government have shown a marked lack of trust for, and sense of duty to, pensioners.

We know that the Government hold pensioners in fairly low esteem. They intend to introduce a whole range of measures that will impinge on pensioners' life styles with great cruelty. In this regard, however, I feel that the Government have absolutely no right to any respect. As Opposition Members told the Secretary of State earlier, the way in which the Government have attempted to take the British Rail pension fund away from the people to whom it most justifiably belongs in order to buy their way out of their economic incompetence is disgraceful, and they should resign.

11.15 pm

Mr. Heppell : I shall not speak for long, because I spoke for some time in the guillotine debate. However, I should like some guarantees from the Secretary of State.

I take great exception to being patronised by the Secretary of State about what he has given me. The fact that I will get an inflation-proof pension, the fact that I shall be able to share in some of the surpluses and the fact that I now have a pension that guarantees solvency do not make me feel a great deal better, as I enjoyed all those benefits before. I had no guarantee, but I had solvency.

I had an inflatributions holiday for both my employer and myself : the surpluses were that healthy. The scheme was completely solvent : no one had any worries about its solvency until the Government introduced their privatisation plans.

I will not thank the Secretary of State for his guarantee of solvency. I will not say thank you for something that I had in the first place, which the Government then took away from me ; nor will I say thank you to the Government for giving me interest on money that they borrowed from me.

Let me quote from a statement made by the Minister on 22 April. It is similar to what others have quoted. There is no doubt in my mind that the Secretary of State made a

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promise--a promise like many others that I have been given by him and the Minister about my pension. The Minister said :

"The Bill does not yet contain amendments to the Transport Act 1980. These are likely to be necessary in order to continue the payment of Government contributions to successor schemes--a commitment the Government have already given. These amendments will be brought forward at a later stage."- -[ Official Report, Standing Committee B ; 22 April 1993 ; c. 1296.]

There is nothing ambiguous about that. The Government are going to continue to pay their contributions to the scheme. And so they should : a promise was written into the Transport Act 1980 that, because the Government had underfunded my pension scheme, they would guarantee contributions each year.

At about 8.30 pm on 25 March 1980, the Parliamentary

Under-Secretary of State--the right hon. and learned Member for Rushcliffe (Mr. Clarke), now Chancellor of the Exchequer--made that promise. It may be necessary to bring him to the House to explain to the Secretary of State and the Minister what that promise meant. They are seeking to welsh on it-- to welsh on me, and on other pensioners. I do not think that that should be allowed. There is no reason why those contributions should be removed.

However, there is a memorandum of understanding. It seems that the Secretary of State's understanding is different from that of the trustees. I do not like that memorandum and would criticise my trustees for signing it. I do not see why I should be obliged to lend the Government money from my pension fund. The trustees are obviously much more generous than me, recognise the difficulties of the Government, the Treasury and the Chancellor of the Exchequer, and have decided that, instead of taking the contributions, they will lend them to the Government, who can have them on loan.

I should be happy if it were merely a loan, but I have no doubt that it is not a loan. If I am wrong, I am happy to give way to the Minister or the Secretary of State so that I may be told when the loan will be paid back. A loan involves lending money and, at some stage, receiving it back. However, I have heard nothing from the Government to tell me when I will get my money back. One issue that is worrying the trustees now is the fact that the Government sent out a letter to their Back Benchers to placate them and assure them that the trustees were happy.

The trustees have written to say that the letter is wrong. In their letter to Back Benchers, the Government said :

"we all acknowledge that whilst the liability to make payments under the Transport Act 1980 would remain, actual cash drawings under this arrangement should be made only when the Fund needed the cash payment."

Who decides when that payment is needed? That was why the clause had to be included in the memorandum. The trustees recognised the importance of the clause because the loan could be made and the timetable for repayment could be made only with the agreement of the trustees. The Government seek to remove the undertaking that they gave to the trustees. I understand why the trustees are angry. As part of their privatisation process, the Government wanted to take part of my pension. They wanted to take the surpluses in my pension because they thought that I was receiving too much. In Committee, some Conservative Members asked me what I was moaning about, as I received a good pension. I do not think that I should receive merely a good pension ; I think that I should have the best pension that those funds can provide. Every other

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pensioner is entitled to that. The Government have no right to take part of my pension to stick it in the Treasury because they think my pension is too good--that is not on.

The Government have made it clear, first with their two options and now by their actions, that their intention throughout was to take my money. The biggest irony of the Bill is that, while the Government talk about competition and privatising, they have nationalised my pension.

Mr. Patrick Cormack (Staffordshire, South) : I intervene for only one reason : out in the country, tens of thousands of pensioners and potential pensioners are deeply worried. Although many of the issues raised were entirely legitimate and I would like to hear the answers to some of the questions asked by the hon. Member for Hampstead and Highgate (Ms Jackson), the pensioners do not have to worry about the fundamental facts. Their pension is protected, they will receive at least as much as they have always expected or hoped to receive, and nobody is bent on filching anything from them.

If the individual pensions to be received by my constituents and those of other hon. Members were to be tampered with in any way, does any hon. Member believe that a Government of any persuasion would get away with it? Of course they would not.

Ms Hilary Armstrong (Durham, North-West) : Will the hon. Gentleman give way?

Mr. Cormack : The hon. Lady, who seeks to intervene and to whom I shall give way in a moment, knows that as well as I do.

Trust has been talked about in the Chamber this evening. There are plenty of hon. Members in the Chamber who always put party interest way below any other. If any Government of any party sought to engage in the sort of pilfering exercise that has been talked of, they would not get away with it. I do not believe for a moment that my right hon. and hon. Friends would ever engage in such an exercise. They know very well that there would be sufficient on the Conservative Benches to stop them if they tried.

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