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House of Lords

Friday, 19th June 1998.

The House met at eleven of the clock: The DEPUTY SPEAKER (Lord Ampthill) on the Woolsack.

Prayers--Read by the Lord Bishop of London.

Alliance & Leicester plc (Group Reorganisation) Bill [H.L.]

Lord Campbell of Croy: My Lords, I beg to move that this Bill be now read a third time.

For those noble Lords who have been unable to follow its progress in detail, the Bill has passed through its earlier stages outside this Chamber in accordance with the procedures for Private Bills on which Petitions have not been lodged or pressed. Indeed, the Bill has not been opposed at any stage.

I am glad today that there is an opportunity for interested Peers to speak and I am grateful to those who have indicated that they will do so. I should explain that I have a personal association with the promoters, though not a financial interest. I was a non-executive director for several years, first in the Alliance Building Society and then, after the merger, of the Alliance & Leicester Building Society, and finally, on the group board of the Alliance & Leicester Girobank. I retired seven years ago on reaching retirement age and I do not receive a pension. During the whole of that time I was also chairman of the Scottish Advisory Board. I am glad to sponsor the Bill on behalf of a successful financial institution--if I may say so, with modesty--that has grown and extended its functions in financial services as its achievements have continued.

The purpose of the Bill is to fulfil a parliamentary requirement when the kind of integration that is proposed of two subsidiaries of Alliance & Leicester plc is intended. The Bill concerns the integration of Alliance & Leicester plc; namely, Girobank Plc, and Alliance & Leicester (Personal Finance) Limited. The Alliance & Leicester, while still a building society, acquired Girobank, then a subsidiary of the Post Office, in 1990. The Alliance & Leicester established Alliance & Leicester (Personal Finance) Limited in 1988. The principal purpose of the acquisition of Girobank was to gain access to its expertise in banking services. ALPF was incorporated in order to enable Alliance & Leicester to pursue the business of unsecured lending.

In 1993 Alliance & Leicester promoted the Alliance & Leicester (Girobank) Act 1993 for the purpose of integrating the personal banking operations of Girobank into the then building society. That integration duly took place without difficulty and has proved successful. In April 1997 Alliance & Leicester converted from a building society to a public limited company listed on the Stock Exchange. The conversion was supported by a majority of 97.5 per cent. of investing members of

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whom over 70 per cent. voted, and by a majority of 97.7 per cent. of borrowing members of whom over 59 per cent. voted.

The restructuring that the Bill will permit is a natural progression in integrating the various remaining principal business operations of Alliance & Leicester which are still carried on outside the parent company. That is viewed as being particularly helpful in achieving closer integration with the business process, systems and culture of the group now that it is a public company. Since Alliance & Leicester is itself an authorised institution under the Banking Act 1984, it is unnecessary that it should have a separate banking subsidiary; namely, Girobank. That was not the case when Alliance & Leicester was a building society since having an authorised institution as a subsidiary was considered useful.

As regards the impact on employees, Clause 9 of the Bill provides that the existing contracts of employment with the staff of Girobank and ALPF rest in Alliance & Leicester. There are no changes to the terms and conditions of employees as a result of the implementation of the Bill. Continuity of employment is specifically preserved. Similarly, pension and other benefits are unaffected by the transfer of these undertakings. I should emphasise that both the promotion and implementation of the Bill are neutral as regards employee rights and conditions. Alliance & Leicester is aware that the Communications Workers Union (CWU) expressed concern about job security as a consequence of the Bill. However, there is nothing in it, and nothing planned as a consequence of implementation, which adversely affects the security enjoyed by employees of Girobank or ALPF. I make that clear because I know that one or two of the speakers are likely to ask questions about the conditions of employment once the Bill is passed, as I hope it will be. I should also make clear that pension entitlements and benefits for former employees of both Girobank and ALPF are unaffected by the promotion and implementation of this Bill.

I shall try to answer any points that may be raised during the debate, but I now commend the Bill to the House.

Moved, That the Bill be now read a third time.-- (Lord Campbell of Croy).

The Deputy Speaker (Lord Ampthill): My Lords, the Question is that this Bill be now read a third time. As many as are of that opinion will say "Content"; to the contrary "Not-content". I think the "Contents" have it--

Noble Lords: Oh!

11.13 a.m.

Lord Ewing of Kirkford: My Lords, I can understand the hurry. I am in a bit of a hurry myself this morning and therefore I promise that I shall not delay your Lordships for too long.

I begin by thanking the noble Lord, Lord Campbell of Croy, for placing so firmly on the record of our exchanges this morning the assurances that he has given on behalf of Alliance & Leicester that continuity of

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employment will be preserved once the Bill is on the statute book. I declare an interest in that for many years I have been a national honorary life member of the Communication Workers Union, and of its predecessor union, the former Union of Post Office Workers. Having said that, I think that it is worthy of note that Girobank was the brainchild of the trade union movement. It was conceived and introduced as a result of the initiative of the Union of Post Office Workers.

I have only three points. The first relates to Clause 6 (1) on the transfer of employees. The contract is regarded as having been agreed with Alliance & Leicester rather than with the transferee, Girobank. That has caused some concern in the CWU.

I turn secondly to Clause 9, about which the noble Lord has given assurances. As I said, those assurances are welcome, but I should like to hear from the noble Lord an undertaking that the Transfer of Undertakings (Protection of Employment) Regulations will be strictly observed by the company when the transfers take place. That has been at the heart of the concerns of the CWU.

I hope that Alliance & Leicester will not take my third point amiss as I venture, somewhat adventurously, to give the company some advice. Girobank was not created because the management ignored the trade unions; it was created and became an outstanding success because of the close co-operation between management and unions. They built Girobank between them and they made it an outstanding success. I find it sad that, as we come to the end of this century, the successful and forward-looking company that is Alliance & Leicester--I pay tribute to it and bear it no ill-will--should have seen fit to ignore--I was trying to think of a milder word than "ignore" but I cannot--the trade union movement and the negotiations that should have taken place and has instead used legislation to transfer employees' contracts from Girobank to Alliance & Leicester.

I hope that the company continues to prosper and builds on the success of Girobank, which it acquired for the knock-down price of £123 million. However, I say in all honesty that it will not build on that success if it continues to ignore the representatives of its employees who have been so successful in building up Girobank and adding to the prosperity of the company.

In wishing the company well and all who work in it, I again thank the noble Lord, Lord Campbell of Croy, for the absolute assurances about job continuity that have now been placed on the record. I am content with what I heard from the noble Lord as he moved the Third Reading of this private legislation.

11.17 a.m.

Baroness Gardner of Parkes: My Lords, I rise to support the Bill. I do not think that I have to declare an interest, although like most people who had an account with the Alliance & Leicester Building Society I got my 250 shares which were valued at £5.33 each on 21st April 1997. I have been delighted that their value has risen considerably since then.

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I am speaking today because I knew that the noble Lord, Lord Ewing of Kirkford, intended to raise a specific issue. I refer to the question of absolute guarantees about future employment. I have served for 20 years or more on industrial tribunals and I believe that our employment law is very good. Indeed, the noble Baroness, Lady Turner of Camden, who is to speak after me, has done much in this House to ensure that our employment laws are very good. It would be totally unreasonable for any organisation to have to guarantee permanent employment for everyone everywhere. There would be no surer way of killing off a business. Although everyone wants as much protection as possible, there is no protection for any employee if the whole business folds simply because the pressure of retaining everyone was so great that it could not be done. There are, however, adequate redundancy packages should the need arise, but I hope that it will not. Indeed, I note what my noble friend Lord Campbell of Croy said, but who can look ahead 10 or 20 years? No one knows what the future holds. It is worrying that the communication workers should take it upon themselves to ask the noble Lord, Lord Ewing, to speak on this issue, as presumably they have. Does it reflect upon employment law that has been changed recently to give people protection after one year instead of two years?

The noble Lord said that Alliance & Leicester should have used the trade union instead of legislation. I do not believe that one rules out the need for the other. Technically, legislation is required to do this. I should like to be corrected if I am wrong, but I understand that legislation is essential to bring the organisations together in this way, and that is the whole purpose of the Bill. This is a technical procedure and logical progression from Alliance & Leicester becoming a plc and taking in these other organisations that have always been part of the group. The Bill establishes the legal right to bring them all together.

It was interesting to note that this week the President of the Board of Trade spoke about both mergers and the minimum wage. She has shown a clear understanding of the need for business to have the right to make business decisions. That is not just in the interests of shareholders but in the long-term interests of anyone who works for any organisation. If one works for any group one wishes it to continue and to be successful. Therefore, the rights of the workers, the union and the business are all closely related. No unfair pressure should be placed upon any one section of the community. I have some worry that today there is a direct union wish for all of these matters to be recorded in Hansard.

The transfer of undertakings legislation is well covered. There is such strong case law that there is no question that all employees' rights will be transferable. As I understand it, their situation will not be changed in any way by the combination of these various groups. I cannot see any harm in this Bill; rather, I can see a great deal of good in it for the future. I was glad to hear the noble Lord, Lord Ewing, wish the organisation well for the future. I support the Bill.

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11.22 a.m.

Baroness Turner of Camden: My Lords, I thank the noble Lord, Lord Campbell of Croy, for his explanation of this Private Bill. He is aware that both I and my noble friend Lord Ewing of Kirkford have been briefed by the Communication Workers Union which has a large membership involvement. My noble friend Lord Ewing is a member of that union, although I am not. No doubt I have been approached by the union because I have a reputation for speaking up on employment rights.

I emphasise that the union is not opposed to the Bill in principle and certainly it has not asked me to speak in opposition to it. It has, however, expressed some concerns about the effect upon its membership and its future negotiating position. I know that the noble Lord, Lord Campbell of Croy, is aware of these concerns because he said so this morning.

As I understand it, the Bill gives the directors of Alliance & Leicester the power to transfer customers from accounts with Girobank and Alliance & Leicester (Personal Finance) Ltd. to accounts with Alliance & Leicester plc. The Bill also provides for the dissolution of Girobank plc. This will save administrative and other expenses that result from the status of Girobank as an institution that is authorised to take deposits under the Banking Act. At present there is, in effect, dual regulation because Alliance & Leicester plc is also subject to regulation. As I understand it, the ending of the dual regulation would substantially reduce the regulatory burden. That arrangement would enable Alliance & Leicester to earn a higher return on its assets. I believe that all of that is entirely beneficial and the union does not object to any of it.

The problem arises because, as the union sees it, the Bill gives Alliance & Leicester plc power to transfer to it contracts of employment from Girobank. I welcome all of the assurances that have been given this morning by the noble Lord, particularly those relating to pension rights. However, my understanding is that the Bill does not contain the same protection that existed in the Lloyds TSB Bill with which I was also concerned some time ago. In that case there was a proviso that those provisions were without prejudice to the Transfer of Undertakings (Protection of Employment) Regulations. That protection is absent from the Bill now before the House.

The union is naturally concerned that there may not be adequate protection. It is the view of the union that transfers of employment should be resolved by collective bargaining or individual agreement, not by automatic private legislation. I am sure that those matters can be resolved by negotiation but this has not happened so far because representations to the company by the union have been rejected. I also understand that a job security agreement was due to expire. I do not know the status of that agreement, but clearly it is important in view of the fact that reorganisation of this kind is bound to lead to feelings of insecurity among the staff.

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I accept what has been said by the noble Baroness, Lady Gardner of Parkes. No one can expect a job for life or to have his employment guaranteed for ever. That is not the purpose of the submissions of the union. The union is concerned to ensure that its negotiating rights continue and that it is able adequately to represent staff in the future, which is clearly important. I therefore welcome any further comment that the noble Lord is able to make in respect of the issues that I and my noble friend have raised this morning.

11.26 a.m.

Lord Campbell of Croy: My Lords, I am grateful to noble Lords who have spoken, and in particular to the noble Lord, Lord Ewing, for his kind words about the record of Alliance & Leicester, its history of mergers, including Girobank, and his good wishes for its future prosperity. As I am no longer connected with it I can echo that thought. The noble Lord referred to Clauses 6(1) and Clause 9. He said that he was grateful for the general assurances that I had been able to give but both he and the union remained concerned about the protection of employment. I can only repeat that the Bill makes no difference to the terms and conditions of the employees and continues to recognise the trade unions and their negotiating position.

I was a little surprised to hear the noble Lord suggest that Alliance & Leicester had ignored the trade unions. Having retired seven years ago, I can make no immediate comment on that, but I was much concerned as a non-executive director with the negotiations when Alliance & Leicester and Girobank merged. I was very much aware that a building society dealt with staff associations and in the past had not been accustomed to dealing with unions such as the one that has been mentioned. However, I am glad to say that the negotiations and the arrangements took place with the agreement of everyone and the building society at that time had no difficulty with the unions. I am surprised that it should appear to be ignoring the unions.

As my noble friend Lady Gardner said, the Bill is necessary for parliamentary and legal reasons and certainly is not a means of trying to avoid negotiating with the unions. The negotiating position will not be altered by the passage of the Bill. My noble friend Lady Gardner, with her great experience of industrial tribunals, pointed out that businesses cannot give assurances or make statements about what the position will be many years ahead. However, the Bill will not make any alterations or have any adverse effects on the employees.

I am also grateful to the noble Baroness, Lady Turner, for raising various matters. I am sure that the promoters of the Bill will examine carefully what has been said during the debate. If there are details to be dealt with, I am sure that they will be in touch. All those points are now clearly on the record.

I wish to thank all those who have spoken. I am glad that it has been accepted generally that this is an organisation which has for many years provided dependable and simple opportunities for savers to open and use interest-bearing accounts as investments, and

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has also assisted many people to become home owners, then extending into financial services and banking. I am grateful for the contributions that have been made. I commend that the Bill be now read a third time.

On Question, Bill read a third time, and passed, and sent to the Commons.

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