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20 Jun 2006 : Column 413WH—continued
The financial assistance scheme is a good idea, but it is far too limited in whom it will help. There is a strong case for considering length of service. For younger deferred pensioners who have years of contributions and have been re-employed, for example at the Celsa site, there is much less opportunity to build up a second pension entitlement. Celsa has contracted out much of the work that was previously in-house. Last weekend I met another ex-ASW worker, a forklift truck driver, who now does exactly the same job for a contracted-out firm. He has done the same job for 24 years, at the same site, but has lost his pension from ASW. He has had no opportunity to build up another pension, and his future looks bleak.
Will the Minister re-examine the financial assistance scheme? It has the basis of being a good scheme, but it needs to be extended. The ex-workers of Allied Steel and Wire have put up a magnificent fight for justice, and what has happened to them is one of the most unjust things that I have seen since I have been in the House. I wanted to use the debate to speak up for those people, who are campaigning to this very day. I urge the Minister to look sympathetically on the request to extend the financial assistance scheme to all who have suffered in such a way.
12.42 pm
Derek Wyatt (Sittingbourne and Sheppey) (Lab): I congratulate my hon. Friend the Member for Cardiff, North (Julie Morgan), on securing the debate. I also thank my hon. Friend the Member for Cardiff, West (Kevin Brennan), and the right hon. Member for Cardiff, South and Penarth (Alun Michael), who provided soft support when he was a Minister. He always saw us in the Lobby and asked what had been going on.
We know well the ASW case. My concern is the court case in Europe, on which I shall ask the Minister two questions. I have already tabled parliamentary questions, but as I have not had a response I hope that the Minister will answer them. In the court hearing on 1 June, the Government applied for a temporal limitation procedure on the Amicus and Community European Court of Justice case. If it is granted, the case would be relevant only to Amicus and Community, whereas we know that at least 165 occupational pension schemes are caught by the problem of negative equity. Was it not rather unethical and immoral for the Government to do that? Amicus and Community are acting on behalf of their members but there are implications for occupational pensions as a whole. Has the Minister sought the support of the Irish Government in seeking a neat temporal limitation procedure in the case? I could say more, but I recognise that the Minister must respond.
The Secretary of State said in the discussion on the White Paper that he is open-minded on further initiatives. How can we bring back for discussion the cases that my hon. Friend the Member for Cardiff, North, and others have raised in the House continually in the past four years?
12.44 pm
The Minister for Pensions Reform (James Purnell):
It is a pleasure to serve under your chairmanship for the first time, Mr. Bercow. I congratulate my hon. Friend the Member for Cardiff, North (Julie Morgan), on
securing this important debate and I pay tribute to her work. I pay tribute, too, to the work of my right hon. Friend the Member for Cardiff, South and Penarth (Alun Michael) and my hon. Friends the Members for Cardiff, West (Kevin Brennan) and for Sittingbourne and Sheppey (Derek Wyatt). In the previous Parliament, they played a crucial role in persuading the Government to introduce the financial assistance scheme. They have all been absolutely dogged campaigners on behalf of their constituents, and the whole House recognises the success of their campaign.
My hon. Friend the Member for Cardiff, North spoke eloquently about the loss suffered by members of the scheme, and Members on both sides of the Chamber recognise the plight that they must be in, as well as their disappointment, anger and frustration at losing their benefits. I should therefore like to go through the points that my hon. Friend has raised and to put on the record some of the background to our decisions.
The FAS was introduced through the Pensions Act 2004. We set it up to help members of underfunded pension schemes that commenced winding up between 1 January 1997 and 5 April 2005 and were sponsored by an employer that had experienced an insolvency event. The first qualifying schemes were announced on 25 October 2005, and as of 16 June there were 455 of them.
We set up the FAS operational unit in York as part of the Department for Work and Pensions and it opened on 1 September 2005. I pay tribute to the huge amount of work that the unit has done to collect scheme and member data, thereby allowing decisions to be made on whether schemes and individuals qualify for the FAS. Decisions can be made, and assistance can be paid to affected scheme members, only once that information has been provided, and that has involved a significant amount of work. I was particularly pleased that some ASW members were among the first to benefit from the scheme and I thank the scheme’s trustees for making a significant effort to ensure that that could happen.
We recognise that there will always be frustrations with such cash-limited schemes. We are therefore extremely grateful for the support that was expressed at the time for extending the FAS and for the welcome that the proposal has been given today. As with any cash-limited scheme, there will always be people on the margins who do not qualify, and we recognise the frustration that they feel.
In setting out the context within which we took our decisions, it is important to say that the FAS is not a compensation scheme. The Government are not saying that they are liable for pension schemes that have faced such problems. We put the FAS in place because of the plight of those involved, not because we recognised liability. That is why we have targeted the money at assisting them in the difficulties that they face, not at restoring their benefits. Given the limited amount of money that we had available, it was correct to target it at those closest to retirement, who have the least time to make up any pension shortfall.
My hon. Friend mentioned the plans announced on 25 May to extend the scheme. To respond to her question, we envisage that about 40,000 members, or a third, will qualify out of the 125,000 who are affected. Essentially, the population breaks down as follows. One third are
not covered by the scheme because they have lost less than £520 a year, and the scheme does not make payments for losses below that level. Then, there are those who do not qualify because they are within 15 years of scheme retirement age. Finally, there are the roughly 40,000 who will be covered by extending the scheme.
As my hon. Friend said, that represents a significant increase in the amount of money being provided. We estimate that extending the scheme in that way will mean providing another £1.92 billion over the lifetime of the scheme, on top of the £400 million over 20 years that we had already committed. That is a cash figure; if Members want the net present value figure, it is £540 million.
On the administration of the scheme, I know that some Members have been concerned about the speed of payments. Administration needs to be seen in the context of the work that has been needed to identify the qualifying schemes, because we are dependent on trustees providing us with information both on qualifying schemes and on the members who are eligible for assistance. However, a huge amount of work has been done and we have now identified the 455 qualifying schemes and can start making payments. I believe that we have now reached a figure of 93 payments made.
Nevertheless, we recognise that members and people affected by the situation want to see the payments made as quickly as possible, which is why we have announced that we shall review the administration of the financial assistance scheme to ensure that it is delivered most effectively. The review will examine a full range of delivery and organisation options to ensure that that is the case. We want to ensure that benefits are delivered to as many people as possible, as quickly as possible, and we have asked that the review produce its report before the summer recess. At the same time we shall continue to make as many payments as possible to members.
My hon. Friend mentioned the current deliberations in the European Court of Justice. The Government believe that they have met their obligations under article 8 of the European insolvency directive, as have successive Governments since implementation of the directive in 1983. As the matter is currently before the court, it is inappropriate for the Government to comment further. However, I reject the accusation made by my hon. Friend the Member for Sittingbourne and Sheppey that what we have done is immoral, and I point him to the fact that normal legal procedures apply. I would reassure him that I shall answer his questions in full as soon as possible—there was no intention to do anything other than follow the applicable legal procedures in ECJ cases.
Hon. Members have also mentioned the process that the Commission is undertaking. The Commission is reviewing how the complete regulatory framework of all member states complies with the directive.
Mention was also made of the ombudsman’s report, which I know has been of concern to many Members. It is important to clarify the Government’s position on the £15 billion, because it has been misunderstood—possibly deliberately—in some quarters. That figure is not misleading; it has been calculated by the Department’s professional economists, who have estimated the cost of implementing the ombudsman’s proposals. On 16 March,
the Secretary of State told the House that the cost would be between £13 billion and £17 billion, and he made it absolutely clear that the figure was in cash terms. That is the way the Government express the figures, and it is the right way to ensure that public expenditure is controlled: Budget and spending review documents are costed in cash terms.
There are, of course, different ways of considering future costs. The alternative way is by a net present value calculation. In this case that produces the figure of £3 billion that was quoted by the hon. Member for Cardiff, Central (Jenny Willott). However, we entirely reject the accusation that the figures have changed or are misleading; they are the same as the figures that the Secretary of State gave to the House when he made his announcement. We promised that we would explain the calculations and present the figures both in cash and net present value terms, and that is exactly what we have done. The figures were not different; they just concerned two different ways of presenting figures such as these for the long-term future: in cash terms—the normal way of Government budgeting—and in net present value terms, which we have also given.
My hon. Friend the Member for Cardiff, North mentioned long service. I understand completely the point that she makes. We return of course to the question of what the financial assistance scheme is for. I know that this will be of no comfort to the constituents that she mentioned, but the scheme is not intended to be one of compensation, nor it is meant to restore people’s rights; it is intended to help those in the greatest need. The Government judged that the most effective and efficient way to do that was to target the money at those closest to retirement.
I understand that the other difficulty with seeking to calculate people’s contribution records is that data on length of service are not always readily available. That point was made to us by the pensions industry when we were devising the financial assistance scheme and trying to find a simple way of administering it.
Julie Morgan:
Does my hon. Friend accept that the hardship suffered by those long service deferred pensioners should be recognised by the Government? Does he not think that there might be a case for
looking further at the financial assistance scheme, as I believe was said when the White Paper was introduced to the House?
James Purnell: We would of course be very happy to continue to meet with Members concerned about the financial assistance scheme. Other Members raised concerns about employees of companies still solvent. I am happy to meet my hon. Friend to discuss that further.
Of course, we recognise the injustice that those members will feel they suffered. Everybody recognises that. The difficulty is that the scheme is cash limited, and although we have been able to extend it significantly, the amount of money that we have is not sufficient for all 125,000 people involved. We have therefore had to target the money in the way we felt was most appropriate.
The Government took the view that the way to do that was to focus on those closest to retirement because they have the least time in which to make up loses and provide themselves with a pension. I recognise that that will not minimise their frustration nor bring any comfort to those who were in the service of a company for a long time, such as those mentioned by my hon. Friend.
We extended the scheme significantly because we recognise the plight in which individuals have found themselves, but we decided to target the money in the way that we have because it was administratively the most simple and because those people were closest to retirement. I do not want to give my hon. Friend false hope by pretending that I have a solution in my back pocket, but I am happy to meet her and her colleagues to discuss the issue.
This has been an important debate, and again I congratulate my hon. Friend on securing it. As I said, I would be happy to discuss the issue further with hon. Members, as we are doing with the financial assistance scheme overall. We recognise clearly that not everybody benefits from that scheme and therefore people who fall outside it will be frustrated. On the other hand, I hope that the House will recognise that we have extended the scheme significantly; it has gone from £400 million over 20 years to £2.3 billion over its lifetime. That is a significant recognition of the plight of the individuals concerned, and I hope that it will be seen as a sign of the good faith of the Government in trying to address the issue.
Rail Services (Exeter to the South-West)
12.59 pm
Richard Younger-Ross (Teignbridge) (LD): There is a debate going on in Devon at the moment about who is the greatest Devonian. I shall not take the House along that line; however, a gentleman who was not a Devonian but was born in Portsmouth had probably the most significant effect on the west country and, indeed, other parts of the UK. He was Isambard Kingdom Brunel, who designed and built the Great Western railway. That line brought business and trade to the south-west and later brought thousands of tourists pouring into the beautiful seaside resorts in my constituency—Teignmouth and Dawlish—and those further west in south Devon and Cornwall.
Those who constructed the original line ran across problems. A line of hills in south Devon called the Haldon hills reaches up to the north. They were a barrier to communications between the east and west for years. Indeed, only one or two passable or navigable roads existed over the top of the hills in the last century and the one before. Tunnelling was not uncommon in the Victorian era, but it was considered and rejected. Isambard Kingdom Brunel, in his usual way, took a bold decision, against much advice, to go along the sea and the sea wall, carving tunnels and creating a stretch of track between Exeter through Dawlish and Teignmouth to Newton Abbot.
Problems arose immediately afterwards, because of cliff falls on to the track. Other difficulties included waves occasionally breaking over the wall. In the last century, the rail companies and British Rail considered alternatives and in the 1930s came up with an alternative route, to cut inland, tunnelling under the Haldon hills and coming out over the beautiful little village of Bishopsteignton on a big viaduct, then travelling down into Newton Abbot. That scheme was rejected on the grounds of cost. It was decided then that the problems on the sea wall were not insurmountable and that the cost of coming inland was too great.
Today the same problems exist. They include a crumbling cliff face and problems with waves and storms breaking over the railway line. I recall from my early days living in Teignmouth—we moved from Exmouth to Teignmouth—that I had been up in London and was travelling down one night during a great storm. The train was held up at Dawlish while the storm broke over. Track men worked on the line to keep it open in fairly hazardous conditions. I clearly remember what it is like to be sitting in a static train with the waves breaking over the carriage. Shortly afterwards we arrived in Teignmouth; I met my wife and we had a pleasant evening.
During the 1990s other storms and flooding caused further problems, but many of those attributed to the section of track that I am talking about had nothing to do with that section. Many of the delays in the 1990s were to do with a bridge east of Exeter that was damaged by flood waters coming from Tiverton, rushing under the bridge and damaging its support, or over the track, cutting services from the west to London.
In the late 1990s and in part of the new millennium we have of course seen dramatic pictures of storms, including trains stuck on the track with the waves beating over them. Some of those delays were caused
by problems with the track: damage to the rock face and to the surface of the track, particularly where the waves would break over the track, wash the gravel from under it and pull it out. To deal with that, Network Rail has spent a vast sum on securing the rock face and stabilising the track. It had problems with signalling, because the signals were shorting. That problem has also been dealt with and should not occur in future.
There was a problem for which the great storms were blamed which was actually a man-made problem—it was a design error. Virgin Trains had its wonderful new Voyagers, which are beautiful trains. I went on one of the early runs from Paignton to Exeter. It was the fastest run. That was on a clear day, and the trouble was that when the waves broke over and hit the top of the trains, it would bring them to a standstill. There were problems with the electrics and the heating on the trains and with the doors. So we were in the terrible position in which a Virgin Voyager would be stuck on the track for four hours. Often it had to be towed away by a 25-year-old high-speed train belonging to another company, or by one of Virgin’s own. That problem has been resolved. Network Rail has put in a large sum to resolve some of the problems relating to the track and the cliff face, and the design problems that Voyager faced have now been resolved. I hope that the lessons from that have been learned and that new rolling stock will not succumb so easily to the vagaries of British weather.
That prompts the question—one that I have asked many times—what the effect of climate change will be. The Hadley centre, which is part of the Met Office, has made predictions about what the net effect will be in the south-west. A letter from Paul Hardaker of the Met Office says that
“the Hadley Centre model from 1860-2100”
“of 0.4 metres. About 0.1 m of this has already occurred so we expect a further rise of 0.3 m over the next 100 years.”
It goes on to say that a further study
“showed that by 2080, assuming a medium-high emissions scenario, a further 0.3 m sea-level rise and including land movement, that the 1-in-50 year highwater event will increase by about 0.5 m around the S. Devon coastline.”
Some people have concluded from that that it is all up for the line: it will no longer be sustainable.
Indeed, if we were to read The Observer—my paper of choice on a Sunday—from a few weeks ago, we would believe that the line is in imminent peril and threat of closure because of climate change. Nothing is further from the truth. The sources quoted, by the newspaper, by other campaigners and by Members of this House have not quoted but misquoted both the Met Office and Network Rail. The Met Office has been clear. It has said that the line may have to close if we do nothing, but as the gentleman from the Met Office said to me last week when I visited it, “Actually, if you do nothing, the railway will have to close anyway because even if there were no climate change or rise in the sea level, the current storms would close the line for you.” Maintenance is a factor of that railway, one that was recognised by the builders of the rail line and by British Rail when it rejected the inland route. It is certainly recognised by Network Rail today.
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