House of Commons Hansard Debates for 15 Jan 1997 (pt 5)

Bus Employees' Pensions

10.49 am

Mr. Kevin McNamara (Kingston upon Hull, North): I should first declare an interest as a member of the Transport and General Workers Union and as secretary of the parliamentary group of Labour Members associated with that union.

Two factors are critically important for those who consider participating in a pension scheme. The first is that they view pensions as wages deferred for the future, after they have retired and must rely on what they have put aside or invested for their golden years. The second is that a pension scheme is held in trust by a company for those who have chosen to pay into it, for the benefit of its members and beneficiaries--not for the benefit of the company or the directors, and certainly not for the benefit of the Government.

In no circumstances should the fate of employees who have invested a portion of their hard-earned wages in such a scheme be abused. In no circumstances should money held in trust by a company on behalf of pension scheme members be hijacked for the company's use or to facilitate gain for anyone other than legitimate members of the pension scheme. It should certainly not be used as a sweetener for privatisation--a bribe for bids for public sector assets based on the principle, "Just look at the pension scheme surplus."

After privatisation, approximately £1 billion has been taken from pension schemes, affecting approximately 1 million past and current public sector workers in various industries. After the 1990 theft from the bus employees' superannuation trust--BEST--pension scheme, as many as 80,000 retired bus workers are losing up to £20 a week of their pension entitlement.

On 6 September 1996, the pensions ombudsman ruled that the Government had unlawfully taken money, to the value of £168 million, out of the BEST pension scheme after privatisation of the National Bus Company. That scheme's rules stated that if the scheme were ever wound up any surplus should be divided among employees, up to the limit allowed by the Inland Revenue. The employer could receive a share only after employees had received the maximum to which they were entitled.

Prior to 14 November 1989, the scheme's original rule--rule 49(b)--stated that if a surplus were available on winding up:

"The excess shall be applied in providing additional amounts of annuities . . . for the benefit of all or any of the Beneficiaries."

Many people joined the fund on that basis. They did not subscribe on the basis of providing the Government with a surplus to use for whatever ends they deemed fit, which is what has happened. The surplus was to be used for the benefit of those who had invested in the scheme--a point that the Government have ignored. Instead, the Government have used the funds as a sweetener for privatisation.

The manner in which the Government were able to achieve such a windfall--the history of which can be found in the ombudsman's report--was due to the amendment of rule 49(b). The BEST trustee was put under pressure to alter the rule by National Bus Company management, who told the trustee that unless the rule was altered the company would suspend its contributions to the fund.

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In paragraph 72 of his decision, the ombudsman stated:

"The threat to exercise the power to suspend contributions was intended to persuade the Trustee to surrender powers which it held under the Scheme's winding up rules, powers which it was required to exercise in the best interests of the Scheme's members."

In the face of such pressure, the BEST pensions committee had no alternative but to recommend that rule 49(b) should be amended so that the surplus would go to the employer. The amended rule stated:

"If any balance remains, the same shall be repaid to the company, except to the extent that the company agrees that part or all of the same may be applied in increasing benefits."

After amendment of the scheme's rules, the Government and their allies launched a campaign of disinformation. Scheme members and Members of Parliament such as my hon. Friend the Member for Warrington, South (Mr. Hall), who questioned what had occurred, were told by the management, by Allen and Overy--solicitors for the pension fund--and by the Minister that the pension fund surplus had to be paid to the company. They were not told of the company's discretion in the matter, or that--in the fortuitous way in which these matters work out--any surplus would go to the Government when the company was wound up.

The information provided by the Government was incorrect, however, because the rules had been unlawfully amended and the surplus should have been used primarily for the beneficiaries' advantage. In my recitation of the facts, some people may think that I have understated the case and feel that events were more like daylight robbery. Many people believe the latter, and I share that view.

Paragraph 107 of the ombudsman's decision states that the amendment was unlawful and that

"the agreement to amend the winding up clause was obtained through a breach of the Company's duty of good faith and through a threat to commit a fraud on power".

The Secretary of State has acquired all the company's liabilities and rights following the dissolution order and must therefore take responsibility for that breach of good faith and that threat to commit a fraud.

As rule 49(b) was unlawfully amended, questions must be asked about the accuracy of information provided to the Public Accounts Committee when it was considering bus privatisation. Did the figures provided to the Committee include the £168 million that the Government had unlawfully taken from the pension fund, and was the Committee informed that the Government had taken the money? As the money never belonged to the Government, was information on it included in their deposition to the Committee?

Another interesting aspect of the debacle is that after the scheme was wound up two trustees were appointed, both of whom were civil servants employed by the Department of Transport--the Department which had taken the money from the pension fund. Those civil servants were supposed to act in the members' best interests in recovering the £168 million--which, with interest, now totals about £200 million--from the Department of Transport. That was a very difficult situation to put them in as they were civil servants in that very Department.

Mrs. Gwyneth Dunwoody (Crewe and Nantwich): It is called insider trading.

Mr. McNamara: Or lack of trading in this case.

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When requested to reveal information on any negotiations that had taken place to recover members' money, the trustees--on the instructions of their lawyer--refused to reveal any information, despite the fact that it is a breach of trust law not to supply such information to a pension scheme member who properly requests it. They were thus not only failing to pursue recovery of the money but withholding information from scheme members.

It is worthy of note that following a company search undertaken by my union's legal advisers, it was discovered that the trustee company, which was supposedly independent, was in fact owned by the Secretary of State for Transport. Since then, new trustees have been appointed within the Office of the Official Solicitor. Again, however, one might question their degree of independence from the Government and the speed with which they are advancing the interests of trust members.

The Minister for Railways and Roads (Mr. John Watts): I must ask the hon. Gentleman to put it on record that he is not suggesting any impropriety on the part of the officials appointed as trustees. He will know that when the appointment was made, as the benefits had been insured, it was assumed that the company would have little or no business to transact. We asked the Official Solicitor to replace as quickly as possible those officials who, as the hon. Gentleman acknowledged, were in a somewhat invidious position, with trustees whom everyone can accept are independent. While the hon. Gentleman may wish to make allegations against me and my right hon. Friend the Secretary of State, I hope that he is not impugning the integrity of officials who, as he said, were placed in an invidious position.

Mr. McNamara: No, but I think I am entitled to question the speed with which they are processing the matter.

As matters now stand, members of the scheme have not received any of the pension fund surplus and many may die before their entitlement becomes available. Meanwhile, the Government have taken all the surplus and used it to subsidise the privatisation process.

In the case of the BEST pension scheme, the law is very clear: where a scheme states that a surplus must be distributed to the employees, that must be done. There is no question of the money being distributed elsewhere until employees have received the maximum entitlement under Inland Revenue rules. Altering the rules so that the employees no longer receive the surplus, following pressure from the company--and, thereby, from the Government--was unlawful. The ombudsman directed the trustee to

"recover the monies paid to the company on winding up, with interest at an equitable rate".

Regrettably, the BEST scheme is not an isolated instance of Government fingers in the till. The ombudsman's decision on the National Bus pension fund is expected in a few months. It is also expected that the ombudsman will find that £30 million was unlawfully taken from that fund. The National Grid has already been ordered to pay £55 million--a very modest estimate as some commentators believe that the true figure may be as much as £500 million--to the employees' pension fund after similar complaints from members. The Government

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have threatened to use a £55 million surplus in the Rosyth dock workers pension fund as a sweetener for privatisation. Rail companies plan to use a £500 million surplus in the British Rail pension fund, which existed prior to privatisation, for their own benefit.

Meanwhile, the TGWU, which is my own union, the National Union of Rail, Maritime and Transport Workers, the GMB, the Manufacturing, Science and Finance Union and others are investigating a series of complaints from members about what happened to pension funds when their industries were privatised. There are therefore a number of questions that I should like to put to the Minister.

It is most surprising that although the pensions ombudsman--a Government statutory appointee--has reached his decision, the Government, far from accepting what their own appointee has said, have turned to the trustees and said, "Sue us. Yes, we'll give you the money for your legal fees, but sue us." What message does that send to the nation about the Government's attitude? Their own appointee has found against them, so they play for time. A man who is distinguished in his knowledge of the law and of the industry finds the Government in "breach of good faith" and possibly committing "a fraud on power," but the Government, in order to delay matters, turn around and say, "Sue us."

My first question is why should this matter be brought to court for resolution when the ombudsman has so clearly stated that rule 49(b) was unlawfully amended? What is the motivation for the employment of such an obvious delaying tactic? After all, the office of the ombudsman is a statutory appointment created by the Government. One might suggest that the delay can only be exacerbated by the fact that the current trustees work in the office of the Official Solicitor and the Government are reluctant to proceed quickly.

Secondly, why did the Secretary of State mislead and supply blatantly false information to a number of interested and connected parties on the subject of the surplus? Not only were the management of Allen and Overy--solicitors to the fund--guilty of such action, but so was the Department in asserting that the surplus had to be paid to the company without at any time revealing the role of the pressure put on the trustees to alter the rule. On a related point, may we also have information about what was told to the Public Accounts Committee?

Thirdly, will the Minister publish the correspondence between the Government and the trustees, who in theory should have been acting in the best interests of the beneficiaries and not delaying matters to assist the Government when they were in fact working for a Government Department? If the Minister will not provide that explanation, he must explain why not. Under the law, a beneficiary is entitled to be given the information that he requests on such issues. Further to that matter, will the Secretary of State give some indication of when he expects the trustees to be able to take action? Has he given the trustees any indication of the time scale envisaged by his Department?