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19 Oct 2004 : Column 235WH—continued
Pensions Scheme (Federal-Mogul)
4.1 pm
Mrs. Alice Mahon (Halifax) (Lab): I beg your indulgence, Mr. Deputy Speaker, because I would like to allow one or two of my hon. Friends to intervene on my speech as there is huge interest in what has happened to our constituents in connection with the pension scheme in question. Since I asked for this debate on behalf of my constituents who work or have worked for Federal-Mogul on the Bradford site, there has been some hopeful news and a rescue package could be on the cards. Nevertheless, it is important to debate the issues and the lead-up to the crisis.
The Minister will be aware of the Federal-Mogul pension crisis faced by 40,000 people in the UK, but the situation at the Bradford plant is, I believe, unique: the workers are to be made redundant as well. The plant is closing and work is being transferred to plants in Poland and Turkey, no doubt to take advantage of lower wages.
Diana Organ (Forest of Dean) (Lab): As my hon. Friend will be aware, the situation affecting her constituents in Bradford also affects my constituents in Lydney, where the closure of No. 1 foundry means job losses for 130 of 330 employees. I am sure that her concern, like mine, is for what happens to people who are made redundant now, in the midst of the corporate chaos over the pension scheme for deferred members.
Mrs. Mahon : We certainly share the same concerns, and we both have to face workers who are in despair.
I stress that although the employees of Federal-Mogul deserve the sympathy, help and support of us all, and I include the Government in that, I am firmly of the view that Federal-Mogul must foot the bill for the pensions. It is an asset-rich company, and it now looks as if the administrator and its pension fund trustee may make an offer. We all hope that a happy resolution can be achieved.
The problem started when the former employees of Turner and Newall and their unions were told that no money was available to fund their pension scheme, because the parent company in the United States faced insolvency. There were worrying aspects to the lead-up to the situation, as the company had chosen to take 15 of the past 18 years as contribution holidays, with Federal-Mogul responsible for three of the past five years. They were allowed to do that because the law in this country is inadequate.
In a very good emergency resolution at the TUC conference on 14 September, the seriousness of the situation was recognised and Amicus and the Transport and General Workers Union outlined the situation facing workers. I think it is worth quoting a little from that resolution, which was passed unanimously. It says:
"Congress recognised that whilst American workers in the same company are protected by an insurance scheme, workers in the UK, until April . . . are not. Congress supports the joint unions in asking the Government to investigate and if necessary intervene to
- bring about a successful resolution to the issue. Joint unions also believe that the inadequate insolvency law should be made stronger to protect workers and pensions."
That is what I want to talk about.
Mr. Marsha Singh (Bradford, West) (Lab): My hon. Friend the Member for Bradford, North (Mr. Rooney) and the Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Bradford, South (Mr. Sutcliffe), met the workers at Federal-Mogul in Bradford and were concerned about their dilemma and worries. Is it not time for the Government to act to protect workers' rights and pension rights, not just for the Federal-Mogul workers but for workers throughout the UK?
Mrs. Mahon : Hear, hear; I absolutely agree with my hon. Friend. That is why, although there might be a rescue for that particular pension scheme and although I know that the Government are undertaking a pension review and considering all aspects of the matter, I urge them to concentrate on that particular idea.
Since the TUC, events have moved on. All parties—the joint trade unions, the independent trustee, the administrator and the company—have been meeting to try to resolve the crisis. Hopes were raised when the company admitted that it had a moral and, indeed, a legal obligation to the workers. However, workers remained deeply concerned for many months because rumours persistently circulated that the company would not put in sufficient funds to honour the pensions commitment.
I have had a heartbreaking correspondence with constituents, particularly with someone whose retirement looked uncertain, and with a man who was 24 hours from being made redundant with his full pension rights, only to be told that he might have lost those rights. It was devastating, and when I met the workers—I, too, met them, as did my hon. Friends the Members for Bradford, North (Mr. Rooney) and for Bradford, South (Mr. Sutcliffe)—some were in despair.
However, a news item that offers hope appeared in the Financial Times on 14 October. The article, headlined "Hopes Rise for T and N pension rescue", says:
"Hopes of a rescue for some or all of the pensions of the 40,000 former and current employees of T and N, the car parts company in administration, have been raised by an 11th hour offer by Carl Icahn, the US investor. Terms of the offer were received by T and N's administrator and its pension fund trustee last night."
So, it looks as if an acceptable offer might be on the way. If that is the case, I am pleased.
Mr. Geoffrey Robinson (Coventry, North-West) (Lab): Is my hon. Friend aware that we have just come from a meeting where, I am pleased to say, the administrator and the trustee spoke robustly in defence of British interests, which are also before the court this week? Indeed, it seems that the clock will go right back to when chapter 11 was invoked and that despite all that has happened in between—even redundancies now being discussed in the constituency of one of our
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other hon. Friends—arrangements will be honoured in full as though the receivership or chapter 11 had never happened. One question, involving £80 million, is outstanding. In the context of what we face, that is a relatively small sum, and I am sure that my hon. Friend will join me in urging the American side to get over that last hurdle and fund the full amount.
Mrs. Mahon : Absolutely. There are things that need to be ironed out, but we have reason for hope. I agree with my hon. Friend that the amount left is small compared with the massive amount on the table. That offer is clearly welcome and we all hope for a positive conclusion.
However, I want to move on because it is clear that the Government action in making pension schemes more secure has been welcomed by us all. We were all incredibly relieved when the Government took action, albeit with private pension schemes, but more needs to be done. From talking to my constituents, it seems to me that Federal-Mogul could have walked away from its responsibilities to those workers, despite the fact that it was clearly responsible. That is why I urge the Government to act. The workers, the unions and everyone involved have been magnificent in their fightback. They have been on the "Today" programme, and people with no experience of the media whatever have taken up the cudgels and fought. I know that my hon. Friend has formed a little group of Members here with interests in this matter and we have tried our best to highlight what would be a great injustice.
The Government must tighten the law to ensure that this does not happen again. Imagine people working for 20 or 30 years thinking that they have paid in to secure their future and looking forward to some kind of retirement—pension schemes are deferred wages, when all is said and done; they are what we have earned—only to be told, 24 hours from being made redundant or retiring, that their pension schemes are up for grabs.
I congratulate the Government, because the proposed pension protection fund legislation due to come into force in April 2005 represents possibly the first time that any Government have done anything like that in this country. That is to be welcomed because we are relieving a great many people from anxiety, but I would like to see the law made retrospective. I know that it is good that we shall have the fund, but I would like the Government to think again and make it retrospective, because there is a huge welter of misery out there among people who have been caught up in such cases. If the scheme had collapsed, another 40,000 workers would have been added to the 65,000 who are already seeking a share of the pension protection fund. That is why the pension protection fund should be made retrospective.
Mr. Terry Rooney (Bradford, North) (Lab): The pension protection fund will be there only when schemes fail. The objective must be to stop schemes failing. Two lessons have come out of all the collapses of the past couple of years. One is that the minimum funding requirement calculation has been woefully inadequate, whether that is because of the legislation, the auditors or the actuaries. The other concerns the Treasury rule
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that says where a scheme is more than 105 per cent. funded, the employer has to take a pension holiday. If that 105 per cent. is based on too low a valuation in the first place, a problem is created. Those factors need sorting out to prevent similar situations in the future.
Mrs. Mahon : I am grateful to my hon. Friend for intervening, because he is a bit of an expert on pensions and benefits, and we need that expertise. I am grateful that he spelt the matter out so clearly. The firm has also been responsible for other things, not least the very bad health of its employees due to asbestos, and so on.
Mr. Michael Clapham (Barnsley, West and Penistone) (Lab): I am pleased to hear that there may be a positive outcome to the pensions issue, but my hon. Friend will be aware that many pensioners are also victims of exposure to asbestos. They were facing a horrendous double whammy, but it now appears that all that needs to be sorted out is the compensation for exposure to asbestos. I am advised by the administrator that the people who have been exposed to asbestos by Turner and Newall may receive in compensation only a small proportion of the full value of their claims.
Mrs. Mahon : That is tragic. I know that my hon. Friend has done years of work in this area. He deserves all our thanks for what he has done and how he has exposed such a dreadful abuse of workers.
Tom Levitt (High Peak) (Lab): I hear what my hon. Friend says, and I am sympathetic to what she says about the pension protection fund, but does she agree that on this occasion it has been right not to look for ways for the Government to bail out the company, so as to ensure that it lives up to its responsibilities? The changes that we have seen during the past few days are clear evidence that that pressure has been working.
Mrs. Mahon : Oh yes, I made it absolutely clear at the start of the debate that the firm has the responsibility. It is an asset-rich company and can afford it.
It is good, for now, that the workers of Federal-Mogul have some kind of happy solution, but I urge the Minister to draw on that experience and feed it into the pensions review. We must ensure that our laws protect workers, so that they can have decent security in their retirement. They have worked hard for it and they deserve it.
4.16 pm
The Minister for Work (Jane Kennedy) : I congratulate my hon. Friend the Member for Halifax (Mrs. Mahon) on securing a debate on this important topic, which is of relevance to us all. Her generosity in allowing colleagues to comment was a model of how such short debates can be used, especially as people throughout the country are affected by the problem.
As my hon. Friend will appreciate, I am not the Minister for Pensions, so I shall tread carefully. He apologises for not being able to attend. However, he participated in an earlier debate and I shall draw my hon. Friend's attention to his comments a little later.
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Many hon. Members will have constituents who have been affected by the winding-up of underfunded pension schemes such as the one that we are considering. Most of my comments will be general because of the nature of the company's position. Indeed, legal proceedings have been started and detailed negotiations are continuing as we speak. Many of us have met people who have suffered such devastating losses. We agree that everything that can be done should be done to help to ensure that Turner and Newall workers do not find themselves in that position.
We are all aware of the difficult situation faced by members of pension schemes that wind up underfunded and without enough money to secure in full the benefits that people may have accrued over a working life. I empathise with all members of pension schemes who do not receive the benefits that they were expecting—and with their families, who are also affected by such circumstances.
The Government appreciate the concerns that many people have about their occupational pension schemes. That is why we have taken action in the Pensions Bill, to which my hon. Friend referred, to prevent people ever again having to suffer the injustice of paying into a pension fund for a lifetime only to find that their pension cannot be paid in full, or even at all.
As I said, negotiations are still ongoing at Turner and Newall. We heard that a meeting upstairs between the chief executive of Federal-Mogul and representatives of the company and its employees will be listening carefully to what is said in this debate. The Minister for Pensions spoke in an earlier debate. Hon. Members and others listening to the debate may want to read the record of that debate to see what he said on the subject.
It would be wrong to pre-empt the outcome of those discussions, or for us to assume that the scheme will wind up. We are sympathetic to the position of members of the Turner and Newall pension scheme, who are left in great uncertainty at present, but we continue to monitor the situation closely and look forward to positive developments.
Only last week, I was pleased to read in the press about further progress—namely, the new offer from US investors that is being considered by the administrator and trustees of the pension scheme. We hope that the company will meet its obligations to the employees and achieve a beneficial outcome for all parties. However, the recent developments support our view that it would be wholly inappropriate for any of us to draw conclusions about the future of the schemes until the discussions are complete.
The Government have made it clear that we believe that a pension promised should be a pension honoured, and that members of final salary schemes should have confidence that the benefits that they have accrued will be paid when they fall due. That is why we have set out to bolster pension security and to protect people from the risks involved with saving in occupational pensions. We are all too aware of the impact of the wind-up of underfunded schemes and the subsequent loss of confidence in saving for retirement. Our reforms set out
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to restore confidence, so that people can save for their retirement safe in the knowledge that their pension is protected and that they will not face poverty.
The pensions regulator introduced in the Pensions Bill will give better protection to members of work-based pension schemes and reduce the burdens of compliance for well-run schemes. It will focus on protecting the benefits of pension scheme members and concentrate its efforts on schemes where it assesses that there is a high risk of fraud, bad governance or poor administration. The proposals mean that pension scheme members' benefits will be better protected by a regulator that has the flexibility and powers to take a targeted and proportionate approach to protecting the funds held in pension schemes.
The Pensions Bill will also establish the pension protection fund, to which my hon. Friend referred. The PPF will help final salary pension scheme members by providing meaningful compensation should their employer become insolvent and have to wind up the scheme underfunded. I suppose that all hon. Members should declare an interest at this point, as we are all members of such a scheme. The fund will significantly improve protection for pension scheme members and confidence in pensions in general. More than 13 million members of final salary pension schemes could benefit from the security and peace of mind afforded by the PPF.
In May, the Government announced the introduction of the financial assistance scheme, which will offer help to people who lose out before the PPF is introduced. There is a great deal of interest in the scheme from people whose final salary pension has been affected because their pension scheme wound up underfunded and their employer was unable to make up the deficit. Details of the FAS, including who will be eligible and the assistance to be provided, are being developed in consultation with stakeholders such as pension scheme members, trustees, trade unions and key business representatives. We believe that the FAS will greatly increase people's confidence in pensions. It will benefit not only those directly affected but pension providers and the pension industry.
It is not only those measures that will strengthen confidence. Regulations already in force mean that the debt on a solvent employer whose scheme winds up is calculated on the basis that the scheme should be able to meet the full benefits that scheme members have accrued and expect to receive, as well as the full costs of winding-up. Trustees can utilise the regulations if their scheme started to wind up on or after 11 June 2003.
In advance of the PPF, for schemes that start to wind up on or after 10 May 2004, we have amended the priority order to ensure that assets are shared more fairly between non-pensioners and pensioners. We have achieved that by moving pensioners' future indexation down the priority order, after the accrued rights of non-pensioners. That has a significant impact on the rights of non-pensioner scheme members.
In conclusion, I again congratulate my hon. Friend on taking time today to debate the situation faced by employees of Turner and Newall. I am grateful that neither she nor any other hon. Friends asked any technical questions that I might have found a tad embarrassing. We will maintain this debate, both
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through discussions in this Chamber and on the Floor of the House and through the open dialogue between the Government and my hon. Friends who represent pensioners from Turner and Newall. My hon. Friends are aware that the Government wish to keep that open dialogue very much in process.
I am sorry that I cannot offer more specific assurances to employees that their pension will be protected, but I am sure that hon. Members agree that it would be
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wholly inappropriate for me to make any promises to scheme members at this stage. We hope that the situation is resolved soon with a positive outcome for all, so that employees can look forward to a secure retirement. In the meantime, we will continue to monitor the situation closely.
Question put and agreed to.
Adjourned accordingly at twenty-six minutes past Four o'clock.
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