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EDUCATION (STUDENT LOANS) BILL [MONEY]
Queen's recommendation having been signified--
Motion made, and Question put forthwith, pursuant to Standing Order No. 50A(1)(a),
The Parliamentary Under-Secretary of State for Education and Employment (Mr. Robin Squire):
I beg to move,
The order will allow my right hon. Friend the Secretary of State for Education and Employment to authorise a private sector company to administer the teachers superannuation scheme in England and Wales. An executive agency in my Department, the Teachers Pensions Agency, administers the scheme at present. The TPA provides a good service to members of the scheme and the Government have never argued otherwise. The TPA has also achieved its key efficiency targets.
Administering the scheme, however, does not come cheaply. It is a huge scheme with almost 1.25 million members who are, rightly, increasingly interested in their pensions. The TPA's running costs last year were more than £15 million; that is big money. We owe it to the taxpayer to see whether we can make savings in those running costs.
I therefore announced on 1 November that the Government were inviting six private sector companies to tender for a contract to administer the scheme. All six companies judged that they could administer the scheme for less money than it would cost the TPA and to at least as high a standard. Inviting them to submit tenders will allow them to show whether they can do so.
Mr. Peter Kilfoyle (Liverpool, Walton):
The Minister has mentioned the six companies that were invited to tender. How did the Government decide on those six companies from the original 14 that had shown an interest in the privatised scheme?
Mr. Squire:
The hon. Gentleman may recall that we invited expressions of interest and that we received a significant number. The companies were then invited to complete a 50-page questionnaire and inquiries were made, in the case of the six companies, with clients to establish their reputations and bone fides. As the hon. Gentleman knows from the names of the companies, either they are large companies or they have significant assets.
Mr. Harry Greenway (Ealing, North):
I do not have a direct interest now, but I contributed for 23 years to the teachers superannuation scheme. I was always hugely satisfied with it and, like many teachers, I am extremely worried about any possible change. Can my hon. Friend assure me first, that teachers will lose nothing in pension entitlement as a result of changes in administration and secondly, that the new administration arrangements will be even more efficient than the current ones? If they are to be more efficient, they will have to be extremely good.
Mr. Squire:
I assure my hon. Friend that the answer to both his questions is an unqualified yes.
Mr. David Blunkett (Sheffield, Brightside):
How?
Mr. Squire:
To take up a sedentary comment by the hon. Member for Sheffield, Brightside (Mr. Blunkett), we
Mr. Blunkett:
Will the evaluation of "value for money" be similar to that of Yorkshire Water, which is that the customer does not get water but the company gets increased profits?
Mr. Deputy Speaker (Mr. Michael Morris):
Order. That was not in order.
Mr. Squire:
I sense that if I were to pursue that avenue--or is it lake?--you would pull me up, Mr. Deputy Speaker.
Members of the scheme naturally want to know what letting a contract would mean for them, and my hon. Friend the Member for Ealing, North (Mr. Greenway) made that point clearly. I should like in turn to make several points of clarification, because there have been some misconceptions with which I have sought to deal in correspondence outside the House. I shall be happier still to make those points clear for the benefit of the House this evening.
First, there is no question of privatising teachers' pensions and, of course, there never has been. Any contract would be for the administration of the scheme only. Whether we let a contract or not, the scheme itself will stay in the public sector. My right hon. Friend the Secretary of State for Education and Employment will remain responsible to the House for the scheme, and she--not any contractor--will retain control over decisions affecting entitlement to benefits under the scheme or the amount of those benefits.
Secondly, letting a contract would not affect the size or safety of a teacher's pension one iota. Indeed, it is impossible for it to do so, not least because the scheme does not have a real pension fund. The pension contributions go straight to the Exchequer, which guarantees the payments to which members of the scheme are entitled. Those payments therefore cannot be at risk. Since a contractor would not be managing a pension fund, he could not make a profit from it. To quote King Lear,
Thirdly, we will not allow the standard of service to fall. Any contract would require a standard of service and performance that will be at least as high as that which the TPA would provide. We shall make sure that any contractor meets that standard, and all six companies intend to do so.
Fourthly, we are absolutely committed to ensuring that the scheme continues to operate smoothly and without interruption. We shall expect--
Ms Hilary Armstrong (North-West Durham):
What will happen at Darlington?
Mr. Squire:
I will come to that matter, if the hon. Lady restrains herself for a moment. We shall expect the
Mr. Kilfoyle:
Why are the Government seeking to introduce the measure at this particular time? A next steps feasibility study was carried out in 1990 which investigated the proposal that agency status be given to what was then the pensions branch of the Department of Education and Science. The conclusions of the study were a complete contradiction of what the Government are now saying. What has happened in the intervening five years to change the Government's opinion on the privatisation of the service?
Mr. Squire:
We commissioned a report by KPMG, which we received in December 1994. It claimed--among other things--that the scheme could be operated with significant savings. We owe it to the taxpayer to ensure that if significant savings can be made--I have covered the quality of service angle--we should explore those. I should have thought that the hon. Gentleman would support the Government in that.
Mr. Kilfoyle:
I am sorry to labour the point with the Minister, but the KPMG report was sought on the basis of only one option, which was the contracting out of the administration of the scheme. I repeat my question. Why did the Government change their mind in the intervening five years? What changed so markedly to lead the Government to commission that report on the basis that there was no option other than privatisation?
Mr. Squire:
I can add little to what I have said to the hon. Gentleman, beyond reminding him that the Government seek to make savings to the taxpayer whenever and wherever we can. The size of the pension scheme would alone have given justification for us to return to the matter periodically, and the hon. Gentleman will be aware that the TPA expects to make savings of some 7.5 per cent. in a three-year period.
Mr. Harry Greenway:
Just so it is clear beyond peradventure, am I to understand that the administration of the scheme--currently based in Darlington--is to be paid for by the taxpayer? Is the administration not financed out of the scheme itself, and therefore paid for-- directly or indirectly--by teachers?
Mr. Squire:
I have sought to make a distinction between, on the one hand, a pension fund with all that that might imply and, on the other hand, the simple fact that teachers' pensions are paid, year in year out, by the agency at Darlington. I concede, in light of the sad events of the past decade, that there is the possibility of a pension fund or part of such a fund going astray, but that possibility does not exist in this case. The cost of the teachers' scheme is a straight charge on the taxpayer. Teachers themselves are taxpayers, and if the cost of administering the scheme can be significantly reduced, it is self-evidently in the interests not just of teachers but of taxpayers in general.
That, for the purposes of any Act resulting from the Education (Student Loans) Bill, it is expedient to authorise the payment out of money provided by Parliament of--
That the draft Contracting Out (Administration of the Teachers' Superannuation Scheme) Order 1995, which was laid before this House on 15th November, be approved.
"Nothing will come of nothing."
If we proceed, however, we shall pay the contractor an agreed fee for administering the scheme.
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