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Lord Brooke of Alverthorpe: My Lords, I support the amendment, as I did at Second Reading. However, I do not propose to repeat the arguments which I advanced then. I have considered many of the arguments proposed by my noble friend the Minister for Transport. I am sorry that he is not present at the moment to hear the points I make.

Throughout my noble friend's comments in favour of the PPP he has spoken most passionately on occasion in favour of providing the strategic partnership with the opportunity to spread itself into the rest of the world, certainly into Europe. A number of people are therefore convinced that changes will come about through the European open skies policy and that there is a case on those grounds for a new structure to be put in place. It is interesting to note that every air traffic control organisation throughout Europe--the new PPP may wish to enter into partnerships with those organisations--is state owned. Indeed, one of the PPPs which is bidding to take over NATS is being advised by three state-owned organisations, all of which will have state funded pension arrangements.

If the organisation appears attractive from a business point of view, it may seek to link up, or merge, with other European organisations. Those European organisations will bring civil servants, or people who enjoy broadly Civil Service terms, to the negotiating table. Their employees will have pension arrangements backed by their respective state or country. I believe that we ought to have on the face of the Bill similar arrangements in the strategic partnership in terms of conditions of employment so that we present broadly comparable terms and a more appealing and attractive proposition for those employees in other European countries who might be reluctant to contemplate joining strategic partnerships or mergers. If we adopt a common approach on pension arrangements to include ultimately backing from the state if anything goes wrong, that would present a better business case with which to go forward in the future.

This is a new argument which I advance, having listened to the passionate and compelling points made by the Minister for Transport. I hope that in view of the points which I and the noble Lord, Lord Brett, have made, we shall receive a more sympathetic response from the Government than we have received hitherto.

Lord Hoyle: My Lords, my noble friend the Minister is normally extremely sympathetic to our arguments. However, his response to this matter on the previous occasion we discussed it contained much Treasury "double speak" rather than a consideration of the needs of the employees. The employees need to be reassured on this matter. I believe that my noble friend Lord Brett said that the trustees of the pension scheme are so concerned about the matter that they are prepared to go to the High Court and spend up to

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£1 million if the assurances that are sought are not included on the face of the Bill. That shows the tremendous concern that people feel about this matter. Nothing concerns people more than the prospect of losing the benefits of a good pension scheme. They have reason to be concerned because, despite all the assurances given by my noble friend the Minister on a previous occasion--he spoke of this agreement and that agreement which do not allow changes to be made--I must remind him that the National Bus Company pension scheme did not stand the test of time. The workers of that company were sold down the river. That experience must not be repeated.

We are not asking for the moon or for something that has not been granted before. All the relevant safeguards were put in place at the time of the electricity privatisation. People will not understand--not just Members present in the Chamber tonight--the fact that an undertaking is already on the face of the Bill for those who work on the Underground.

On the previous occasion we discussed this matter my noble friend said that there might be fragmentation and the employers might change. That is why we are trying to reassure the employees. I believe that he used the words "more complex". But what could be more complex than the open skies policy if we are to merge with organisations in a number of different countries? Some people think--the workers in the industry think this and that is the important point--that there might already be proposals to fragment NATS as it exists at present. I hope that my noble friend will agree that these are good and extremely logical reasons why the assurance we seek should be included on the face of the Bill. Those involved in the industry cannot understand why an assurance can be included on the face of the Bill for those who work on the Underground but not for air traffic controllers. That is beyond me. I hope that my noble friend will be sympathetic to my arguments and will agree that the assurance we seek should be included on the face of the Bill.

Lord Clinton-Davis: My Lords, I entirely accept the arguments put forward by the noble Lord, Lord Hoyle. If my noble friend adduces the argument that this proposal has been put forward without adequate consideration--although I am not sure that he will-- I assert that that would be entirely wrong. The lawyers who have advised those who have tabled the amendment have said specifically that the proposal is perfectly all right. Therefore my noble friend puts forward that argument at his peril. I take the view that it is important that the employees should have confidence in the Government. The proposal is the way to ensure that. There is no other way. That being the case, I hope that my noble friend will accede to the arguments which have been forcefully made by my noble friends tonight.

Baroness Thomas of Walliswood: My Lords, the noble Lord, Lord Brett, in moving the amendment, reminded the House that in Committee a similar amendment was tabled in my name. I continue to think that he received rather better advice in tabling his

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amendment than I did. That is why I have not resubmitted it. It is right and proper that we should support him in his endeavour. I do so because it is a matter of justice. Those whose working conditions are altered through no desire of their own should have protected one of their most valuable assets; namely, their pension. That should be clearly stated on the face of the Bill. I hope that we can convince the Government that that is the correct approach to take in this case.

Lord Berkeley: My Lords, I support the amendment. I pick up a point made by my noble friend Lord Hoyle about the National Bus Company employees. I recall that when my right honourable friend the Deputy Prime Minister was an opposition transport spokesman he campaigned long and hard against the Tory plan which many of us felt sold the pensions of those employees down the river and allowed the fund to be raided on privatisation. The fact that it has taken my right honourable friend three years since the election to achieve anything in this regard shows how hard he has tried. My gut feeling is that is probably because the Treasury fought long, hard and perhaps "dirty" to stop that happening. I believe that employees are suspicious of the Treasury not wanting the measure we are discussing. However, as my noble friends have said, the amendment seeks to safeguard the pensions of a valuable set of employees at a time of great uncertainty and should be taken extremely seriously. As I say, I support the amendment.

7.30 p.m.

Lord Brabazon of Tara: My Lords, I am grateful to the noble Lord, Lord Brett, for explaining once again his amendment on this issue. I well remember the subject of pensions being discussed during every privatisation. I sat through a good many of them when I was on the other side of the House. Therefore, for the life of me I cannot understand why the Government are so resistant to putting an amendment such as this on the face of the Bill.

Furthermore, I am most grateful for some briefing that I have received from the IPMS, the union responsible for air traffic controllers, which, like the noble Lord, Lord Hoyle, and others, is so concerned about this matter. The trustees of the Civil Aviation Pension Scheme are prepared to make available up £1 million for legal action as regards this issue. It must surely be an issue of major concern to the Government.

I do not intend to rehearse all their arguments, but I have received a detailed response rebutting many of the points made by the Minister in Committee. I look forward with great interest to what the Minister has to say in reply to this amendment. My inclination is to support the noble Lord, Lord Brett.

Lord McIntosh of Haringey: My Lords, my starting point now, as at Committee stage, is entirely consistent with what the noble Lord, Lord Whitty, said at Second

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Reading. Nobody can value the staff of NATS more than we do; nobody can feel more strongly than we do that they deserve proper treatment in every respect, not just as regards pensions. However, they deserve proper protection in particular for their pensions.

We have reflected on the points made in Committee. I can assure noble Lords that we have done so in great detail. Pensions affect us all. I can well understand why the issue is so important to NATS employees. We fully support the need to protect the pensions of NATS staff and we would not do anything to put them at risk.

I understand the issue of confidence to which the noble Lord, Lord Brett, refers; namely, that these fears were very real throughout the privatisations of the 1980s and early 1990s. If I were the noble Lord, Lord Brabazon, I would not refer to them in quite such a cheerful way. During those years tens of thousands of public servants passed from the public sector to the private sector without adequate reassurance about how their pensions would be protected. Sometimes they were denied access to a pension scheme as good as the one they were leaving. Sometimes they were confronted by invidious choices about what to do with their accrued service in the public sector pension scheme, which meant that one way or the other they would loose.

In three privatisations--coal, electricity and rail--the previous administration used primary legislation to give statutory protected person rights to employees in those industries regarding their access to occupational pension schemes after transfer to the private sector. In every other case no such protection was given and the range of outcomes was extremely variable. Noble Lords will remember the privatisation of London Buses. I take that as a particular example of the bus industry generally to which the noble Lord, Lord Berkeley, referred. London Transport staff were forcibly separated from their pension scheme with no effective safeguards as to the quality of its replacements.

That was the legacy we inherited in 1997. We set to work on reform. In 1998 interim new guidance was issued by the Cabinet Office under the title "Better Quality Services". This re-emphasised the importance of protecting staff pensions in restructuring involving private sector partners and required that the quality of that protection should be a factor in assessing bids for partnership. Then, in June 1999, the "wicked" Treasury issued definitive guidance under the title "A Fair Deal for Staff Pensions" which was subsequently incorporated into broader guidance on the treatment of staff by the Cabinet Office at the beginning of the year.

The object of these reforms was perfectly simple: to take the fear out of public sector reform and sales as far as pensions were concerned and to set a common standard of protection which all projects should pass. What we have now is a comprehensive framework of protection which represents a huge improvement in the standard of treatment of staff. It is a fair deal not

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only for the staff, but also for the private sector businesses bidding to enter into partnership to deliver public services.

That is the background against which we have looked at the NATS employees. Our common goal is to reassure NATS staff about the pensions they have a right to expect in their retirement. I believe that I can give the reassurance which is needed without the need for amendments to the Bill.

Perhaps I may explain how. The Civil Aviation Authority Pensions Scheme is to be amended in order to make it possible for staff employed by the PPP to remain members of that scheme. Technically, the CAAPS is already a centralised scheme for non-associated employers because Highlands and Islands Airports Limited is a non-associated employer within it. Amendments to the scheme are necessary to reflect requirements such as the elimination of cross-subsidy which is now much more relevant given the much greater size which the NATS PPP section would have within CAAPS.

That means that staff will continue to enjoy the benefits that they currently receive. They will be able also to enjoy such new benefits as are agreed from future surpluses. They may also draw some comfort from belonging to an excellent public sector scheme, one that is very comfortably funded. For example, at the most recent evaluation of CAAPS on 31st December 1998, the minimum funding ratio was in excess of 190 per cent. Since the MFR represents what I might call the statutory floor for the funding of pension schemes, a funding ratio of 190 per cent represents a substantial excess. As regards benefits, pensions in payment are index-linked and pension benefit is calculated not just on base salary, but includes overtime and certain other fluctuating remuneration.

Perhaps I may digress to cover the position of current pensions and deferred pensioners. I can assure the House that the position of those two groups will remain unaffected by the PPP. They will remain in CAAPS; they will be in the CAA section of the scheme, which will also include current CAA staff. They will continue to receive benefits in the same way as they do now.

Returning to the NATS public/private partnership, we have made it very clear to all those bidding to be our strategic partner in the PPP that securing that current staff can continue to participate in CAAPS is a fundamental condition of being considered for that role. In addition, we will put into the strategic partnership agreement a binding commitment, enforceable at law, that guarantees the continuation of that right on terms at least as favourable as those now existing.

Then there is the protection of pensions that exists under the law of the land, such as the pensions Acts of 1993 and 1995. These provide, among other things, protection for accrued benefits and funding levels.

A further level of protection exists in the CAAPS trust deed and rules to which my noble friends have referred. These are unusually restrictive and protective

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of members' interests. Although it may not always have been the case, it is now universally accepted and buttressed by statute that accrued rights--that is to say, the pension which an individual has earned by each day at work--cannot be adversely affected by amendments to pension schemes. By contrast, it is entirely usual for the sponsoring employer of a pension scheme to have the ability to reduce the level of benefits for future service such as prospective benefits. However, no employer who participates in CAAPS has that power because of the restrictive power of amendment in the trust deed which provides that amendments cannot be made to reduce accrued or prospective benefits. When this restrictive power is allied to the continuing interest of the Government in the PPP as shareholder, quite apart from the express contractual provisions in the strategic partnership agreement, I believe that the House will agree that there is a very substantial set of protections for the current NATS staff.

Those who argue for statutory protection--additional protection on the face of the Bill--accept these points. But they go on to make two other claims: first, that it would have the value for NATS staff of offering them firmer assurances than those that I have just outlined; and, secondly, as has been argued tonight, that the proposal is precedented in past privatisations and indeed in Clause 243 of the Bill for Underground railway staff in London. That is true, but it is not the whole story. Let me deal with the issue of London Underground.

The case is much more complex than that of NATS. In the case of NATS, we are arranging for a once-and-for-all transfer of the company to the private sector. There is no break-up of the company. There is no reorganisation of the industry into a number of parts, so there is no need for provision to deal with the subcontracting that occurs in the railway industry. There is no provision for the return of some parts to the public sector. Nor are the trust deeds of the two schemes or the arrangements for changes to those deeds comparable--the power of amendment to the London Underground deed is not as restrictive as with CAAPS. In particular, unlike CAAPS prospective benefits could be adversely changed.

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