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Spink, Dr Robert

Spring, Richard

Sproat, Iain

Squire, Robin (Hornchurch)

Stanley, Rt Hon Sir John

Steen, Anthony

Stephen, Michael

Stern, Michael

Stewart, Allan

Streeter, Gary

Sumberg, David

Sweeney, Walter

Sykes, John

Tapsell, Sir Peter

Taylor, Ian (Esher)

Taylor, John M. (Solihull)

Taylor, Sir Teddy (Southend, E)

Temple-Morris, Peter

Thompson, Patrick (Norwich N)

Thornton, Sir Malcolm

Townend, John (Bridlington)

Townsend, Cyril D. (Bexl'yh'th)

Tracey, Richard

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Tredinnick, David

Trend, Michael

Trotter, Neville

Twinn, Dr Ian

Vaughan, Sir Gerard

Waldegrave, Rt Hon William

Walden, George

Walker, Bill (N Tayside)

Waller, Gary

Ward, John

Wardle, Charles (Bexhill)

Waterson, Nigel

Watts, John

Wells, Bowen

Wheeler, Rt Hon Sir John

Whitney, Ray

Whittingdale, John

Widdecombe, Ann

Wiggin, Sir Jerry

Wilkinson, John

Willetts, David

Wilshire, David

Winterton, Mrs Ann (Congleton)

Winterton, Nicholas (Macc'f'ld)

Wolfson, Mark

Wood, Timothy

Yeo, Tim

Young, Rt Hon Sir George

Tellers for the Noes :

Mr. David Lightbown and

Mr. Sydney Chapman.

Amendment accordingly negatived.

Main Question put and agreed to.


That this House welcomes the publication of the Government's latest economic forecast, which shows growth continuing at a steady and sustainable rate and inflation remaining within its target range ; and congratulates the Government on its economic policies which have laid the foundations for the non-inflationary growth, rising industrial production and falling unemployment that is now being seen.

It being after Ten o'clock, Madam Speaker-- put the Question which she was directed to put at that hour, pursuant to Standing Order No. 53 (Questions on voting of estimates, &c.).


That a further sum, not exceeding £116,027,407,000, be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges for Defence and Civil Services for the year ending on 31st March 1995, as set out in House of Commons Papers Nos. 276, 277, 278 and 447.

Bill ordered to be brought in upon the foregoing Resolution by the Chairman of Ways and Means, Mr. Chancellor of the Exchequer, Mr. Michael Portillo, Mr. Stephen Dorrell, Sir John Cope and Mr. Anthony Nelson.

CONSOLIDATED FUND (APPROPRIATION) BILL -- Mr. Stephen Dorrell accordingly presented a Bill to apply certain funds out of the Consolidated Fund to the service of the year ending on 31 March 1995 ; And the same was read the First time ; and ordered to be read a Second time tomorrow, and to be printed. [Bill 150.]

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Railway Pensions

10.17 pm

The Minister for Public Transport (Mr. Roger Freeman) : I beg to move,

That the draft Railway Pensions (Transfer and Miscellaneous Provisions) Order 1994, which was laid before this House on 7th July, be approved.

The House will recall that, when we debated the Railway Pensions (Protection and Designation of Schemes) Order 1994 and the Railways Pension Scheme Order 1994-- [Interruption.]

Madam Speaker : Order. Hon. Members who are having conversations must do so outside the Chamber. They must move on quickly. [Interruption.] The doors must be closed, and hon. Members must move out quietly.

Mr. Freeman : The House will recall that, when we debated the Railway Pensions (Protection and Designation of Schemes) Order 1994 and the Railways Pension Scheme Order 1994 on 23 May, I indicated that a further affirmative order would be required to transfer the pension rights and assets in the BR pension scheme to the railways pension scheme and to allocate them between the sections of the RPS. We have long agreed with the trustees that when the time came to transfer funds from the British Rail pension scheme into new schemes, that would have to be done on an agreed actuarial basis and that, unless the BRPS was in deficit, the accrued rights of all active and pensioner members should be adequately funded. Since that was agreed, we have built on the policy considerably and now have the one railways pension scheme and its sections. The original policy on transfer of funds is safeguarded in the order. The order also has the effect of allocating between the sections any initial surplus that there may be in the scheme--and it is likely that there will be an initial surplus.

As I have said, we have long agreed the broad principles of this order, but, in past month or so, we have had intensive discussions with the trustees. The trustees' officers kept the trustee board members closely informed about that process. We went out formally to consultation on this with the trustees, the employers and the trade unions on 29 June, and laid the order before Parliament on 7 July. The result of all those consultations was that the Government's proposals were changed in some points of detail as we explored the issues with the trustees and others. The provisions of schedule 11 to the Railways Act 1993 required us to consult the trustees on the provisions in the order relating to the transfer of pension rights and the pension scheme assets, and also the amendment of existing schemes, and further to lay before Parliament copies of the trustees' written comments. I am pleased to tell the House that we reached full agreement with the trustees, and that they do not wish to make any comments. I have placed in the Library a copy of their letter of 6 July confirming that.

The trustees have a fiduciary duty to all members of the scheme, both participating members and pensioners, and also, of course, to the participating employers. Both we and the trustees consider the transfer provisions equitable in the interests of all concerned. Article 2 of the order has the effect of transferring the existing members of the main BR pension scheme, the BRPS, together with the assets and pension liabilities, into

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the railways pension scheme, the RPS, on 1 October--with the BRPS then being wound up. Provision is made for the assets and pension rights to be allocated as appropriate to one or other of the pensioner sections or, in respect of serving staff, into the BR open section. In due course, participants may be moved, under the provisions of the scheme, out of the open section into the new sections of other employers as they are established.

Schedule 1 makes detailed provision for the allocation of assets between sections on a basis which, as I said earlier, we and the trustees consider to be fair both to serving staff--the

participants--and to pensioners, existing or deferred. Once assets related to additional voluntary contributions, which are separately invested, and any contributions paid by an employer during the period of the current contribution holiday have been allocated to the appropriate section, the remaining assets will be apportioned between the sections on a "share of fund" basis--that is, in proportion to the respective pension liabilities.

For that purpose, the existing reserves for contribution holidays or reductions will count as pension liabilities of the open section, and the open section liabilities will also take account of any pensionable pay increases agreed on or before 30 September 1994 for implementation before 1 January 1995. The liabilities of the pensioners' sections will include an allowance for future administrative expenses because those expenses in respect of the pensioners' sections can no longer be met out of future contributions. The proportions of any pension rights funded under the Transport Act 1980 are excluded from the calculation of liabilities because Government support payments will be made direct to the relevant section.

Provision is made for the assets to be allocated net of apportionment costs, but those costs are likely to be minimal as BR will reimburse the actuary's costs in carrying out the valuation--the only substantial cost of making the apportionment.

The Government's and the scheme's actuaries have agreed the detailed actuarial assumptions set out in part III of the schedule. We have made provision for the trustees to make an initial allocation of assets, but have specified in the order certain minimum proportionate holdings of certain categories of assets in the final allocation of assets to the pensioners A section, again with the trustees' agreement. That ensures that the investment policy of that section has an appropriate degree of caution from the outset.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich) : The Minister will be aware that railway pensioners have been exceedingly upset by the suggestion that, as part of its current campaign, Railtrack might withhold some of the assets liable to be handed over to the funds. Will he assure us that under no circumstances will Railtrack be in a position to withhold any part of the pension funds or assets due to railwaymen and women and which they have paid for many times over ?

Mr. Freeman : I give that assurance. It may help the hon. Lady if I explain the position. There is a substantial pay restructuring reserve of approximately £600 million currently within the pension fund. If an agreement is reached in the present dispute with the signalmen, for example, on new pensionable pay rates before 30 September this year, it will be possible, on the vesting of

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the new pension scheme, to allocate a suitable proportion of the total pay restructuring reserve direct to the account of individual signalmen who contribute to the pension fund.

I assure the hon. Lady that Railtrack has no power to withhold the allocation of those funds. If no agreement is reached on improved pensionable pay for the signalmen, the pay restructuring reserve moneys go to the account of the open section of the fund. All that happens is that the signalmen and women who contribute to the British Rail pension fund will not have the specific allocation of funds that would otherwise be their right as at 1 October. The rest of the restructuring reserve will fall into a generality of funds allocated to the open section of the fund, but the money remains within the pension fund.

Mr. Brian Wilson (Cunninghame, North) : It would be helpful if the Minister could clarify this matter now to save time later. We are discussing a sum of about £100 million. Am I right in thinking that, if that money does not go to the signalmen because the dispute has not been resolved, when the Minister says that it goes to the "generality" of the fund, he means that it would be divided on a 53 : 47 per cent. basis like the rest of the surplus in the fund ?

Mr. Freeman : The initial surplus as at 1 October, which includes a large measure of the pay restructuring reserve released for allocation to the closed and open sections of the fund, may result in £200 million or £300 million being allocated to the closed fund and a fraction more to the open fund. Those proportions have been fixed by the actuaries, not by the Government or Railtrack. I confirm that the part of the surplus allocated to the open section of the fund must, in due course, be allocated to the various employers in the rail industry, such as Railtrack, the British Railways Board and the franchised train operations. So that surplus will be allocated to specific sections of the pension fund.

If the strike is not resolved and no agreement is reached on higher pensionable pay for signalmen, they must join other members who contribute to the BR pension fund in claiming their right to that surplus in due course, possibly in terms of higher pension payments. There is no question of the money being removed or of Railtrack controlling its use.

Mr. John Heppell (Nottingham, East) : Is there a chance of the date of 30 September being changed so that an extra factor does not enter the signalmen's dispute and the threat of losing money from their pensions is not held over their heads as blackmail ?

Mr. Freeman : It is not a question of blackmail. There has long been agreement with the trustees that 1 October was the target date for vesting. I remember an exchange with the hon. Gentleman in Committee on this very subject. The present dispute has arisen since the target date was fixed. I pay tribute to the trustees and their officers, who have been working with the Department to that target date, which is entirely achievable and realistic. It is in the interests of all existing and deferred pensioners within the railway industry that those outstanding difficulties should be resolved. We have worked extremely hard in the past six months to fulfil our pledge on a guarantee of the pensions in the closed section of the fund, both for the existing and deferred pensioners, and the indefeasible right of all those

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who were employed by British Rail on 5 November 1993 to remain in the pension scheme. We have agreed that, on voluntary transfer, there will be a continuous period of employment for purposes of calculating pensions. We have fulfilled all the obligations that my right hon. Friend the Secretary of State and I have given, and we have ended up with a situation with which I think all parties--but represented by the trustees--now agree. To move the date, or even to hold open the prospect of moving the date, would be in the interests of no one.

Mr. Heppell : Is it not a fact that the money that the Minister is talking about removing from the signalmen's pensions will effectively be used to cushion the Government's past guarantees in relation to solvency ? The 47 per cent. that was intended for signalmen and drivers under the restructuring schemes will be going into the closed fund. Now it is in the closed fund, and effectively making it more difficult for the Government ever to have to honour that solvency guarantee, because they will have a cushion of approaching £300 million.

Mr. Freeman : I think, with respect, there is a confusion between two points.

Railtrack suggests reforms to the structure of the pay of signalmen and women, consolidating into basic rates of pay allowances that are in general not pensionable. If that happens before the vesting date, there will be an allocation of part of the pay restructuring reserve specifically for the benefit of the signalmen and women.

The rest of the pay restructuring reserve--the rest of the surplus that is agreed by the actuaries--will be allocated between the open and closed sections of the funds, not by Government diktat but by agreement between the two scheme actuaries. There is likely to be a significant surplus for allocation, and that is to the benefit of the pensioners as much as it is of those in the open fund, because they have that much greater a degree of security. That has arisen through good investment management of the fund, not by Government policy. Schedule 2 makes detailed provision for the allocation of pension rights between the appropriate sections, and for the members with those pension rights to be allocated to the relevant sections. Article 3 makes drafting amendments to clarify the meaning of the Railway Pensions (Protection and Designation of Schemes) Order 1994, which came into force on 31 May following the undertakings that I gave to the House to reconsider some of the drafting. We have honoured the undertaking that I gave. The amendments, however, do not change the substance of those earlier orders.

Article 4 introduces schedule 3, which amends the trust deed of the BR 1974 pension fund to enable BR staff who are transferred to new employers to remain in certain schemes that are included in that fund, and to enable those schemes to be wound up when appropriate. Schedule 3 also makes a standard amendment to certain schemes other than the BRPS, for which the trustee company acts at present. That amendment would give the trustee company, and its directors and officers, an indemnity from the participating employers in those schemes against liability for honest mistakes but not wrongdoing, and a power to take out indemnity insurance

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similar to the provisions contained in clauses 2E and 2F of the RPS trust. It will formalise the existing indemnity in respect of those schemes which the trustee has from BR.

Article 5 introduces schedule 4, which amends the schedule to the Railways Pension Scheme Order 1994, containing the trust and rules of the RPS. One amendment extends the limit of liability and indemnity in the RPS trust to any liability for breaches of trust transferred from the old trustee to the new. Another provides for the trustee of the RPS to amend the scheme before 1 October 1994, with the consent of the Secretary of State. It is the intention to use that provision to make amendments agreed to between us-- inter alia, to clause 8C, which deals with transfers out of the trust, and to rules 13, dealing with surplus assets, 14, dealing with shortfall, and 16, dealing with winding up of the pensioners sections. The trustees' solicitor is currently preparing a deed of amendment for execution once that order has been approved.

The other amendments effected by schedule 4 include clarification as to eligibility to join the scheme and sections of it, and amendments to the model deed of establishment and participation to clarify the continuation for participants in open sections of the RPS of the present BRPS contribution reductions/holiday.

Article 6 introduces schedule 5, which designates sections of the scheme for the purpose of enabling or requiring the payment of Government support contributions under the Transport Act 1980. Article 7 introduces schedule 6, which makes consequential amendments or modifications to existing legislation.

Although we have still to lay a substitution order under section 52B of the 1980 Act varying the timing of Government support payments to the pensioners' sections on the basis already agreed with the trustees, the provisions to be implemented under the order complete the delivery of the undertakings given by the Government. They provide the promised security, protection and peace of mind to BR's existing staff, pensioners and deferred pensioners. They provide no mechanism for the Government to get hold of the funds, as my right hon. Friend the Secretary of State has made clear right from the outset. I hope that the House will support the order.

10.35 pm

Mr. Brian Wilson (Cunninghame, North) : On one level, the order is non-controversial ; on another, it is deeply controversial and raises fundamental issues. It also relates directly to some topical matters that I hope we can explore during the debate, and to which my hon. Friend the Member for Crewe and Nantwich (Mrs. Dunwoody) has rightly referred.

It is important to put on record the fact that, every time we debate the future of the railway industry pension fund, there is no consensus in the House, no cosy agreement, no technical agreement that everything is fine and that we are progressing on a bipartisan basis towards satisfactory conclusions. It is the Opposition's view that the railway industry pension fund should never have been interfered with and should not be broken up, and the fact that it is being broken up is entirely a by-product of the unwanted fragmentation of the railways with a view to their privatisation. We do not believe that there is any public support for those policies. We do not believe that there is any political support for them outside the narrow clique promoting them

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within the Conservative party. The reprehensible aspect is that a great deal of concern has been caused to railway pensioners throughout the country, not specifically by the order but by the fact that their pension fund has been tampered with by a Government who have been acting not in the best interests--or indeed, any interests--of those pensioners, but who instead have been driven by the political imperative of fragmentation and privatisation of the railways.

That is the context in which we debate the order. While there will be agreement on the narrow basis of the order and although we may not divide the House--depending on what we hear later--there will be no agreement on the wider framework. Even now, when we believe that we have beaten back the worst intentions of the Tories towards the pension fund, there are still many, many railway pensioners who remember their original intentions only too well. They remember the intention to split the fund in two and transfer half of it to the Treasury, to be set against the public sector borrowing requirement. They remember the intention that there be no increases in benefits to pensioners other than the rate of the retail prices index. We and the railway pensioners remember all that, which is why they are right not to trust the Tories or to take anything that they say at face value. I have been told, as the Minister has, that the pension fund trustees have no specific objections to the order. I am satisfied that, on purely actuarial grounds it is non-controversial. However, I stress that the context within which it arises is, and will remain, controversial and, in our view, downright wrong.

There is a direct relationship between what we are discussing tonight and the signalmen's dispute, as I shall show later in my speech. One thing that I want to get out of the way and firmly on the record is that if anyone says that previous settlements for railway workers have not taken account of past productivity gains--gains that have already been delivered--that is quite simply an untruth. That means that the Government's position, and therefore Railtrack's position, in the present dispute is based on the same

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