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Lord Hoyle: Surely, that will only be a consultative body, will it not? How often will it meet? As I remember, on Second Reading I described it as a watchdog which not only did not bite but which hardly barked.

Lord Macdonald of Tradeston: I do not share my noble friend's cynicism on that point. It will be an effective body which will meet about twice a year. It will have a broad membership. It will carry weight because it will be made up of representatives of NATS' employees and users of aviation. It will provide access to direct involvement in the company. It will offer a forum for discussion and will influence NATS' plans and arrangements for the provision of air traffic services. It will offer the opportunity for any member of the council to raise an issue regarding the provision of those services by NATS and its subsidiary or for those issues to come to resolution.

The council will pay particular attention to areas such as major investment projects, safety issues, standards of service provision, long-term investment plans and the development of new technology. Those are all on the agenda for the stakeholders council.

However, we recognise that the area of employee representation is important. Having listened to what has been said, the Government are prepared to strengthen their arrangements. The Government will have the right to appoint two, or perhaps three, partnership directors to the board of the PPP company. They will have the right also to appoint a trustee to the employees share trust. So we are proposing that we should consult staff representatives about the criteria that we shall use in selecting those appointees so that the staff can feel comfortable about those appointments. We propose also that the

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government trustee be appointed as one of the partnership directors. That person, although bound by the rules of both appointments, would be uniquely informed on matters of interest to staff.

I hope that noble Lords will agree that these measures, together with staff representation on the stakeholder council, as already referred to, will provide sensible working arrangements that will be of benefit to all parties involved.

These matters are essentially for the partnership documentation, and that is where I undertake to place them. They would, however, be out of place on the face of the Bill. In view of the reassurances I have given, I hope that the noble Lord will withdraw his amendment.

Lord Clinton-Davis: Will we have the amendments, not only with regard to the stakeholder committee but with regard to the board, before Third Reading?

Lord Macdonald of Tradeston: I suggested that they should be put within the partnership documentation, and that is where I shall endeavour to place them. We shall try to ensure that our partnership directors have direct roles. I refer not only to the trustee and employees' share scheme, but to direct involvement in the stakeholder council and, indeed, the safety committees that we propose them to attend.

Lord Brett: I thank the Minister for his response, which, in some ways, is a curate's egg. He demurs at a representation on the board and says that that is highly unusual in a joint stock or public company. The truth is that this will be a highly unusual company. It is not normal to sell off 46 per cent of shares and give controlling interest to the person who buys them.

I am slightly confused as to how the private sector status could be in jeopardy if the majority of shares, the 46 per cent plus the five per cent of staff shares, are clearly not owned by a public body, namely, the Government. We shall look carefully at that aspect when we read Hansard tomorrow and perhaps return to it at a later stage.

I am pleased to hear the Minister's contribution as regards the second point; that is, how better to represent the interests of staff at board level in whatever form. I am prepared to accept that if an agreement can be reached which is satisfactory to the staff representatives in the discussion that he indicated will take place, and they are content with the proposed format, I certainly would be content. My only immediate response is that having someone who is a trustee and on the board might involve a potential conflict of interest. However, that can be discussed in detail. I welcome the movement the Minister has made in that regard.

I refer to the question of whether the provision is on the face of the Bill or in the strategic partnership agreement. I believe that it is more important to have a form of representation in which the staff will have confidence. I would have no great objection if that

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happens and the provision appears in the strategic partnership agreement. With those caveats, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 52 [Loans]:

[Amendment No. 86 not moved.]

Clause 52 agreed to.

Clause 53 [Guarantees]:

[Amendments Nos. 87 to 89 not moved.]

Clause 53 agreed to.

Clause 54 [Grants]:

[Amendment No. 90 not moved.]

Clause 54 agreed to.

Clause 55 agreed to.

Clause 56 [Shadow directors]:

[Amendment No. 91 not moved.]

Clause 56 agreed to.

Clause 57 [Extinguishment of liabilities]:

[Amendment No. 92 not moved.]

Clause 57 agreed to.

Clauses 58 to 61 agreed to.

Clause 62 [Exercise of functions through nominees]:

[Amendments Nos. 93 and 94 not moved.]

Clause 62 agreed to.

Clause 63 agreed to.

Schedule 6 agreed to.

Clause 64 agreed to.

9.45 p.m.

Baroness Thomas of Walliswood moved Amendment No. 95:

    After Clause 64, insert the following new clause--


(" .--(1) NATS or any transferee company will be a non-associate member of the Civil Aviation Authority Pension Scheme (CAAPS).
(2) Payments by NATS or any tranferee company into CAAPS will be at the rate agreed between the participating employers, the CAA, Highlands and Islands Airports Ltd (HIAL), NATS and the CAAPS trustees following advice from the scheme actuary.
(3) The strategic partner shall make provision for increases in pensions and capital sums to which this section applies to each increase in official pensions under the Pensions (Increase) Act 1971 and section 59 of the Social Security Pensions Act 1975 ("an official pensions increase").
(4) This section applies to a pension or capital sum at any time if--
(a) at that time it is a pension in payment, a deferred pension or capital sum or a pension or capital sum to which a person's future entitlement is contingent on the death of another person, and
(b) the CAA either made provision for an increase in it broadly corresponding to an official pensions increase or would have done so if it had been within paragraph (a) at a time when the CAA made provision for increases broadly corresponding to an official pensions increase.

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(5) But where it was the practice of the CAA, when making increases broadly corresponding to an official pensions increase, in any circumstances--
(a) not to make provision for an increase, or
(b) to make provision for an increase of a reduced amount,
subsection (1) does not require NATS to make in similar circumstances provision for an increase in excess of any for which the CAA would have made provision.").

The noble Baroness said: Amendment No. 95 seeks to protect the pension rights of NATS employees. Since we tabled this amendment, a more detailed amendment with a slightly different emphasis has been tabled by the noble Lord, Lord Brett, and his noble friends. To be perfectly frank, I am not prepared to argue my amendment against theirs. We felt that this was the right way to go about this. On the other hand, there may be better ways.

The principle in the detail is probably more important than either amendment; and the principle is that those people who transfer to the new company should retain the same pension rights as they would have had if they had remained with NATS. That is such a simple principle to express that I shall leave the matter there and allow the noble Lord, Lord Brett, to give a more lengthy exposition of his much longer amendment. I beg to move.

Lord Brett: It may be appropriate for me to speak now to Amendment No. 96 in my name and that of my noble friends. I am at one with the noble Baroness, Lady Thomas, in believing that the wording of amendments concerning pensions issues are fraught. The advice that we received did not come without some expense; it was prepared by experts in the field.

Essentially, I am sure that Amendments Nos. 95 and 96 aim at precisely the same end. I believe also that Ministers aim for the same target. The question is whether there are sufficient guarantees in the verbal assurances so far given to sustain us over the years when the debate is long forgotten, when the PPP has long prospered, and we have entered what I may call "Faulkner's world"--the ever-changing situation in Europe which could be quite different in five years' time with quite a different growth of air traffic control centres. They may then be fewer in number, greater in size and scope but with a smaller number of employers.

Basically, the one thing above everything else about which the staff of NATS are concerned is the potential impact of privatisation on their pensions. Employees of NATS are currently members of the CAA scheme. The Government have assured us that if the PPP goes ahead, the NATS PPP could continue to participate in the scheme as a "non-associate" employer. Existing employees of NATS could then remain in the CAA pension scheme. However, many of the obligations to finance the scheme will pass to the strategic partner and we do not believe that the Government's assurances, however well meant, are sufficient. They do not offer sufficient protection and that is why we believe--this is a fundamental confidence-builder for staff--that such protection should be on the face of the Bill.

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We obtained expert advice on this matter. That is why the amendment is long and detailed. But it is designed to deal with several simple tasks. When NATS becomes a PPP, it is important to ensure that sufficient funds are segregated within the Civil Aviation Authority pension scheme to reflect liabilities--new subsection (3). Incidentally, the trustees of the new pension scheme are so anxious to have that provision included in the Bill that, if it is not, they will test the position at law. We also want to ensure that NATS employees can remain in the CAA scheme even after the subsequent transfer--new subsection (4).

At least one representative from the employees and one from the employers should be represented on the board of the CAA pension scheme, in accordance with new subsection (8). But the new NATS PPP employer, or anyone thereafter, must contribute to the scheme to a level to protect the accrued rights and guaranteed benefits on winding up; not simply at the level required by the minimum funding requirements, as specified in new subsections (9) to (11).

The new NATS employer, or any future employer--we know dilution is on the cards and there could be, if not a change of ownership, certainly a spread of ownership with perhaps new participating shareholders with different ideas from those in the shareholders' minds at the start of the PPP--shall provide future benefits at least as good as those available in the CAA pension scheme at the transfer date, in accordance with new subsection (12). Finally, new subsection (13) seeks to ensure that no amendment may be made to the scheme which would result in a reduction of the accrued or future rights of protected beneficiaries.

We have tested with the same legal advice the assurances given to the trade unions by the Minister. They believe that it will not be sufficient to rely on those assurances, not through lack of good will, but simply because we cannot guarantee the future.

It is true that the amendments to the CAA pension scheme--the protectors--are quite strong. However, this is not the case when you consider the contribution rate payable. Contributions are covered under the relevant clause where reference is made to the schedule of contribution as it is expressly stated (as it has to be legally),

    "as agreed between the trustees and the company".

Therefore, the trustees do not have unilateral rights to set the contribution rate. Of course, you could take it to the extreme, as I mentioned earlier. You could find an attempt to push the funding rate down to the minimum requirement rather than, as we would like to see, a level of funding that would cover the full buy-out of any benefits if the scheme were to be wound up tomorrow. Further, even if it is contained within a strategic partnership agreement, we do not know how long that agreement would remain inviolate when there is a fair chance of dilution. Therefore, we do not know how relevant that agreement will be in a number of years time.

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There has recently been correspondence with the trustees of the CAA pension scheme. They are very concerned to ensure that anything covering pensions should be included in the Bill. Any agreement that imposes a contractual commitment on the PPP would not bind the trustees because they are not party to it. Therefore, provision in the Bill would make it far easier for the trustees to ensure that the necessary safeguards were observed.

What we propose is not revolutionary; it is not without precedent; and, indeed, it is not new. In fact, it may be familiar to noble Lords on the opposite side of the Committee. It has been taken from the privatisation of electricity supply, which took place a decade ago. It is not even new or a precedent within this piece of legislation, because it has been found possible, necessary and agreeable to include the London Underground on the face of the Bill. I return to the comment of my noble friend Lord Whitty that the staff are crucial to the future of NATS, with which we agree.

It would not be possible to explain to NATS staff why the Government say that it is unnecessary to have on the face of the Bill protection of their pensions, despite the fact that the legal advice and the trustees of the pension schemes to which they currently belong wish to see it. It would be difficult to explain to them why it is possible to put in the same Bill the protection of the pensions of London Underground staff. There may be slight differences in that respect, but they are not sufficient to suggest different treatment. I hope, therefore, that Members of the Committee will feel able to support this amendment and that the Minister will be able to accept our proposal to protect the pensions of staff transferring to the PPP. I beg to move.

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