Digital Equipment Ltd: Pension Scheme

Tuesday 17th January 2017 Westminster Hall

14:00

[Corri Wilson (Ayr, Carrick and Cumnock) (SNP)]

I beg to move,

That this House has considered Digital Equipment Ltd’s pension scheme.

It is a pleasure to serve under your chairmanship, Mr McCabe, and to move this motion on behalf of my constituents. I am grateful to those Members who are here to take part in the debate. I am sure that they share my belief that this is an important topic.

Digital Equipment Ltd started in Massachusetts in the 1950s, in the days when computers were so big that they filled whole rooms. Its story is one of a dramatic rise and fall. From humble beginnings, it became a leading vendor of computer systems, including computers and software. By 1977, when Digital came to Ayr, it had grown into an entrepreneurial computer company boasting $1.5 billion in annual sales. In the ’70s and ’80s, computer technology changed rapidly, and Digital was at the forefront of that change. It quickly became a major employer not just in my constituency but across Scotland and the UK. At its peak, it employed around 1,500 people in Ayr.

Unfortunately, the company failed to adapt successfully after the rise of the personal computer eroded its minicomputer market, and it was acquired in June 1998 by Compaq, which merged with Hewlett Packard in 2002. Some parts of Digital were sold to Intel, but the plant in Ayr met its end. From the accounts given to me by my constituents, Digital was considered a good place to work, and it is remembered locally with fondness. It seems that its approach to technology—it was at the forefront of networking computers as peers—was mirrored in its corporate approach, with management structures that treated its people as equals.

The pension scheme was open to all employees and started paying pension from the age of 60 for both men and women. Although pension indexation was not guaranteed and Digital was not legally bound to award increases, the company made it its practice to do so. Staff were reassured that that custom would continue when Compaq acquired Digital in 1998, and Compaq continued to pay discretionary increases to pensioners. That trend was broken only following Hewlett Packard’s acquisition in 2002. In October 2006, the assets and liabilities of the Digital plan were transferred to the Digital section of Hewlett Packard’s retirement benefits plan, which provides for increases of pre-1997 pension rights at the discretion of the principal employer.

Since 2002, Digital pensioners in the UK have seen only two increases to their pre-1997 pensions, each amounting to 1%. In the past 14 years, the value of those pensions has stagnated. Those pensioners’ buying power has diminished and continues to shrink year on year, in contrast with their former colleagues in Europe. Pensioners in Hewlett Packard’s European subsidiaries have received regular cost of living increases, because only the UK Government have set an exclusion for pre-1997 contributions. The former staff of Digital in the UK do not feel quite so equal now.

I appreciate that HP is a huge multinational company that operates in around 150 countries and pays its pensioners in full accordance with the law in each of those countries, and I did not secure this debate to beat it about the head with a stick for not fulfilling its obligations to my constituents. However, I have great sympathy with those Digital employees who trusted their employer and paid into what they saw at the time as a great pension scheme, but have found that it does not support them in their old age and rely on Government support to get by. Many of my constituents paid into their Digital pensions for more than 20 years, and the bulk of their contributions were paid before 1997. Those who have not reached pensionable age do not yet know how little their pensions will be worth to them.

When this issue was first brought to my attention, I wrote to the Pensions Minister on behalf of my constituents to find out how the Government intended to resolve some of the issues with defined-benefit pension schemes such as the Digital scheme. I am grateful to him for his prompt response, in which he stated that

“the Government has no plans to force schemes to pay any increases to the pre-1997 pensions—beyond those that are already required by scheme rules”

and outlined that Government interference would be wrong and liability increases for which an employer had not planned or could not provide could lead to widespread scheme closures and risks. But I have a host of constituents who had planned for their retirement but have found that their pension scheme does not support them.

The Government have made it clear that, if the demands of the Hewlett Packard Pension Association, which has campaigned about this issue, were met, the additional liability on employers would mean that they would need to find extra money, and the Government do not plan to make them do that. I understand their position on that point. However, according to the Office for National Statistics occupational pension schemes survey, in 2015, there were around 5.2 million defined-benefit schemes in payment in the UK with rights accrued before 1997, of which more than 90% paid an increase. Just 8% of schemes like Digital’s used their discretion to deny any cost of living increase to their pensioners. Despite the fact that indexation is not mandatory for rights accrued before 1997, it appears that many schemes voluntarily apply some form of inflation protection to pensions in payment, and many apply limited price indexation retrospectively to service before 1997.

[Nicky Morgan (Loughborough) (Con)]

The hon. Lady is making an excellent case on behalf of her constituents. Does she agree that not only Digital or Hewlett Packard employees but those of other companies are affected? She mentioned that only 10% of defined-benefit pension schemes do not pay indexation. Campaigners are asking not for indexation to be backdated but for this issue to be corrected going forward. Does she also welcome the fact that the Pensions Minister has agreed to meet some of my constituents? I welcome the way that he is engaging with this debate.

[Corri Wilson]

The right hon. Lady makes a valid point that campaigners are not asking for indexation to be backdated, which would cause considerable difficulties for the companies involved. I will come to that point later.

I empathise with Hewlett Packard and other businesses that inherited defined-benefit schemes through expanding their operations during the boom years. They are all experiencing a global turnaround and an extremely challenging marketplace. Difficult decisions have to be made, and looking after the former employees of businesses that have long since been subsumed has to be balanced with current business concerns and the welfare of current workforces. Hewlett Packard is breaking no laws, and I understand that it fully appreciates the impact of its decision on its pensioner population and that is taken into account during annual reviews. However, I have greater sympathy for the concerns of the pensioners who have pensions with HP that will be frozen due to not being covered by legislation, and I would like the UK Government to take action to address the problems with defined-benefit schemes.

The Hewlett Packard Pension Association claims that withheld cost of living increases have so far cost pensioners an average of £24,000 compared with their colleagues whose contributions were made post-1997. That has led to severe financial hardship for many of those pensioners and has resulted in them being unable to afford an ordinary living pattern, being on the verge of poverty and requiring Government subsidies in the form of income support benefits.

[Sir Peter Bottomley (Worthing West) (Con)]

I speak because one of my constituents has been in contact with me. I have explained that I cannot stay for the whole debate. Is the hon. Lady essentially saying that it is the older, poorer pensioners who do not get increases, and the younger ones, who earn more, who do?

[Corri Wilson]

I thank the hon. Gentleman for his intervention. The people who have paid in for the longest are getting the least benefit back from the scheme, although I recognise that pension schemes have changed.

I would like to hear from the Government what options, if any, are open to scheme members. The Pensions Minister has stated that defined-benefit schemes will be looked at early this year and he intends to consider what the Government can do to tweak the environment of those schemes. Is indexation increases for all defined-benefit pension schemes one of the tweaks that he will look at? The change that HPPA is seeking is for the discrimination between pre-1997 and post-1997 contributions to be removed from legislation, and the minimum permissible increases for all defined-benefit pensions in payment in future to be indexed in line with increases in the retail prices index. Will the Government look at that in their forthcoming Green Paper?

The Scottish National party is committed to ensuring dignity in retirement for all pensioners in Scotland, and although many recent debates have focused on reducing the statutory minimum requirements rather than increasing them, it is important that we examine closely what will bring about fairness and sustainability and deliver that dignity. Those are the issues I want to address in opening the debate. I know that other hon. Members wish to participate, so I will draw to a close by appealing to the Minister to take into account the situation that, as we heard earlier, people—not just Digital pensioners—find themselves in.

Pension plans are made over decades. They are long-term investments in our future to ensure that we can survive when we are no longer working and to ensure that we are not a burden on the state or our families. However, it appears that plans that seemed sound at the time have turned out to be considerably less appealing 20, 30 or 40 years later. Too often, people pay into pension pots—whether private company pensions or indeed state pensions—all their lives but find that, when they retire, the goalposts have been moved. To paraphrase our national bard, the best laid schemes have indeed gang a-gley. I look to the Government and the forthcoming Green Paper to start addressing some of those issues on behalf of my constituents, and so that future generations can plan for their retirement.

16:40

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

This is a particular issue for Ayrshire. As my hon. Friend the Member for Ayr, Carrick and Cumnock (Corri Wilson) pointed out, a large Digital site there got taken over by Compaq and then by Hewlett Packard. The problem is that this is not like the BHS scenario—it is not that the company has ceased to exist. The company does exist, but it is choosing not to upgrade these people’s pensions. As was mentioned, under HP, in 15 years, those people have had a miserly two upgrades of their pre-1997 contributions. The problem with that is that their buying power is almost cut in half—as was mentioned, they have lost £24,000 each.

Currently, the guidance basically says that pensionable contributions after 1997 get the consumer prices index rate or 5%, whichever is lower, and those after 2005 get CPI or 2.5%, whichever is lower. All those people want is to change that bit of wording so that everything before 2005 qualifies for 5% or CPI, with 2.5% for everything after. They are talking about CPI, not even RPI, and, as was mentioned, they are not asking for it to be backdated. Their pensions are withering on the vine and, as they get older, they will continue to wither. As the hon. Member for Worthing West (Sir Peter Bottomley) said, it is indeed the older pensioner who will have a larger chunk of pre-1997 pension and therefore find that it does not give them the return they counted on.

HP is not skint. HP is a big company, making a lot of money. It sells a lot of IT in the UK and it accounts for 25% of public IT contracts. Along with other FTSE 100 companies, it pays much more out in dividends to shareholders than to correct its deficits—five times, it is estimated, what it puts in to cover deficits. Perhaps the Government should be looking at that. We hear that defined-benefit pension schemes are struggling because the companies cannot afford to put the money in. If they would be willing to pay 20% into correcting deficits and 80% to shareholders, that seems to me already a pretty generous solution, rather than leaving the pensioners to struggle.

That brings us back to situations we have debated multiple times in the Chamber, such as Equitable Life, the Women Against State Pension Inequality Campaign and BHS. People at the start of their working lives are investing, whether in state or private pensions, and they do so on trust that, when they reach whatever the retirement age is, they will be able to live in dignity. They have taken the trouble to open a pension. We are now making people enrol. What will happen in 20, 30 or 40 years’ time? Will we be discussing auto-enrolment pensions that people were forced into that still do not give a return? It is our role as legislators to ensure that the goalposts are set and dependable so that people who sign up to pensions know what they will get.

To call for pre-1997 contributions to be treated the same as those between 1997 and 2005, without backdating, is a reasonable request from the pensioners. I call on the Minister to respond.

16:45

[Sir Peter Bottomley (Worthing West) (Con)]

I apologise in advance: I will not be here at the end because I will be in a meeting with Equitable Life, which was just mentioned by the hon. Member for Central Ayrshire (Dr Whitford). May I make one positive suggestion, almost as an intervention, open to those pension funds, trade union funds and insurance companies that hold our money and own Hewlett Packard shares? They should ask HP whether it thinks it is socially responsible to discriminate between the different groups of UK employees it has taken over by acquisition. It seems that it should be asked to say to its shareholders—whether or not at the annual general meeting—whether it thinks the savings it is making are justified and whether it would like to illustrate what the pension arrangements are for their top executives and what those are for those who were in businesses in Ayrshire and other parts of the United Kingdom when it made its decisions. Is it lawfully open to putting the pensioners in the situation suggested by the hon. Members for Ayr, Carrick and Cumnock (Corri Wilson) and for Central Ayrshire? If so, it should do that without delay.

[Steve McCabe (in the Chair)]

I will now call the Front Benchers. You will have noticed that we have more time than we might have expected, which means we can allow about 10 minutes—probably no more—for the SNP and Labour Front Benchers and about 20 minutes for the Minister. You are not obliged to take that time, and make sure you leave at least three or four minutes for the mover of the motion to wind up.

16:46

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you, Mr McCabe. It is a pleasure to serve under your chairmanship.

I commend my hon. Friend the Member for Ayr, Carrick and Cumnock (Corri Wilson) for securing this important debate, and the HP Pension Association for its work and all it has done to highlight the issue, particularly the indexation of pre-1997 defined-benefit schemes. I am here on behalf of my hon. Friend the Member for Ross, Skye and Lochaber (Ian Blackford), our pensions spokesperson, who unfortunately is in the Chamber and unable to attend. Hon. Members will have to forgive me if I do a bit more reading normal.

On defined-benefit and defined-contribution schemes, my hon. Friend the Member for Central Ayrshire (Dr Whitford) covered the issue of trust nicely. If we expect members of the public to be opted into those schemes, they should expect a reasonable return, and they should have trust that their pension scheme will pay out what it said it would. That is particularly true of young people coming into schemes, with the possibility that the state pension may not kick in at 65 or 67 in the future—it may be 70 by the time I get there. We do not know what the state pension age will be at that stage. We need to ensure that people pay into private pensions, so we need to keep up the level of trust in private pension schemes, which has been eroded in recent years.

The UK Government recognise that it is important that the state pension keeps up with inflation. That is why they have committed to the triple lock, and there has been support for that from throughout the House. However, it is not right that we have that for the state pension, but elsewhere there is effectively, if not an ability to dodge that, then almost a loophole. There is a gap, with a lack of legislation committing organisations to sticking to that, particularly in relation to the pre-1997 situation.

Inflation is important. If a pension scheme is not keeping up with inflation, things are less affordable, so pensioners cannot support their retirement in the ways they expected. It is therefore key that the term “inflation” is used, and that we look at that rather than at a certain defined percentage increase.

On the pre-1997 rights and the estimated 3,500 pensioners in the HP pension scheme, as has been said already, according to the HP Pension Association the buying power of their pensions has diminished by almost 50%. That has cost each pensioner an average of £24,000 in cost of living increases compared with those whose contributions were made post-1997.

The HP Pension Association estimates that the average pension paid to Digital pensioners in 2002 was £6,008 per year. If that had kept up with inflation it would now be £9,070 per year—a difference of £3,000 per annum. That is a significant amount of money that people do not have to spend, and it means that people do not have the retirement that they expected. If Brexit causes a period of rising inflation—the current situation has happened over a period of relatively low inflation—the problem will be compounded even further, and it will be even more difficult for people to survive and have the quality of life they expected from their pensions.

Data from the Office for National Statistics occupational pension schemes survey showed that 5.2 million pensioners were in receipt of pensions with pre-1997 rights, of whom 400,000 were not receiving inflationary increases. Some 40% of those with pre-1997 accrued rights received increases of 2% or more, which was down from 85% a year earlier. There has been a significant change, possibly because companies are seeing that they do not have to pay extra. I therefore think it would be sensible for the Government to consider looking at the issue. I understand that there is going to be a Green Paper, in which I hope the Government will touch on it.

[Dr Philippa Whitford]

Does my hon. Friend agree that it is also outrageous that Hewlett Packard pays cost of living rises to its pensioners in Europe but not those here? That shows that this is totally related to the loophole in the UK guidance.

[Kirsty Blackman]

That is a real discrepancy, and it shows that those payments are affordable. Hewlett Packard can afford to pay the increases if it is doing so in other places. The UK Government have a responsibility to consider that and see what changes they can make.

We are all aware of the widely reported challenges that defined-benefit schemes are facing, including from increased life expectancy—companies did not expect to have to pay out such amounts of money for such a long period of time—and the impact of declining yields, while the increase in many schemes’ deficits has been highlighted in the past. The UK Government and Parliament have discussed changes to the rules that govern those pension schemes and to uplifts, but we do not want a situation in which we are putting the schemes before the people. We need people’s rights to be protected and the schemes to continue to be affordable. It is important that we take the pensioners into account first.

My hon. Friend the Member for Ross, Skye and Lochaber tells me that the Government’s Green Paper will offer an opportunity to examine this issue. He asked me, on behalf of the Scottish National party, to commit to working constructively with the Minister, to see whether we could find an affordable way to offer protection to those with pensions with pre-1997 rights. We are keen to have that constructive conversation, and my hon. Friend, who is our pensions spokesperson, would be keen to go ahead on that basis.

As has been said, in the case of the Digital pensioners we are talking about the difference between pre-1997 and post-1997 contributions. The Government could specifically consider that in their Green Paper. Many recent debates have focused on reducing the statutory minimum contribution requirements, and as I have said, we need to make sure that do not further erode those requirements and that we put pensioners first.

This is the kind of issue that ought to be looked at by a pensions and savings commission. The SNP has called for that before and will continue to do so, because this issue will not go away. Pensions will be ever-increasing in importance, as both inflation and life expectancy increase and as possible future changes to the state pension come through. It is now time for a pensions and savings commission to go ahead. That would benefit not only the pensioners in the Digital scheme but pensioners in all schemes and in no scheme. I appreciate the Minister taking the time to listen to the debate, and I again thank my hon. Friend the Member for Ayr, Carrick and Cumnock for bringing the debate to the House.

16:54

[Alex Cunningham (Stockton North) (Lab)]

It is an extra special pleasure to serve under your chairmanship, Mr McCabe—I prepared a seven-minute speech, you suggested I might get five minutes and I now have 10. That is so unusual in this place.

I congratulate the hon. Member for Ayr, Carrick and Cumnock (Corri Wilson) on bringing this matter to the House for us to debate. I am pleased she has the time do so, as she is doubtless preparing for a series of suppers over the next couple of weeks to mark the special day set aside for Robert Burns. Had he been alive today, he would, I believe, have been a constituent of hers.

Other hon. Members have explained the background to this issue. The pension plan changed hands from Compaq, which acquired Digital Equipment Ltd, to Hewlett Packard when it acquired Compaq in 2002. Hon. Members have also highlighted the legislation that determines that payments prior to 1997 are not entitled to increases in line with inflation. I welcome all the contributions that have been made.

I confess that, until Wednesday of last week, I was not aware of this particular failure, which has resulted in what appears to be the unfair and inconsistent treatment of thousands of pensioners who have a defined-benefit pension with Hewlett Packard. Despite legislation being in place that states that pension providers are under no legal obligation to increase the value of a pension in line with inflation, we are facing a situation, not unlike that facing the Women Against State Pension Inequality campaign, in which people find themselves at a disadvantage simply because they were born in a particular timeframe or had worked prior to particular legislation being introduced.

Through my research, I found that the average pension paid to Digital pensioners in 2002 was £6,008, which would now be worth £9,070 if it had kept in line with inflation—that is 50% more, and would go a long way in anybody’s home. As we have heard, when the pension plan was held by Digital Equipment Ltd and then Compaq, both companies made discretionary increases. However, once the plan was acquired by Hewlett Packard, it received only two token 1% rises, with no increases in the past 14 years. That is not good enough. The value of the pensioners’ money has decreased, the cost of living has increased and we once again face the crisis of vulnerable people facing increased difficulty and being on the verge of poverty in many cases.

[Sir Peter Bottomley]

The thought going through my mind is that, when I go back to my office, I find Parliament-supplied equipment made by Hewlett Packard. I also bought my own printers from Hewlett Packard. I am beginning to wonder whether I knew enough to regard it as a reputable firm that I should go on patronising.

[Alex Cunningham]

I certainly wonder the same thing; I have something to say to the Minister specifically on that—not about my personal choices or the hon. Gentleman’s, but about the Government’s.

Hewlett Packard can hide behind the law, and has for years, but that does not mean that what it is doing is right. When we—a group of north-east England MPs—meet representatives from Hewlett Packard a week on Monday, I intend to challenge them specifically on the decision. Despite being a large company with a substantial UK turnover, it is clearly shirking its responsibility to ensure that people who worked for a company that it took over receive the same level of support as before. Another parallel between this case and the plight of the WASPI women is that there has been no real opportunity for the people affected to make up for the shortfall in the value of their pension.

How has Hewlett Packard dealt with other pensioners in its group? Much, much better. Pensioners in all of Hewlett Packard’s European subsidiaries, except in the UK, have received regular cost of living increases. This is a case not of a business being unable to increase pensions in line with the cost of living, but of a large international corporation using a loophole in UK legislation to give it a window to not fulfil what is a moral duty. I wonder what its problem is with treating its British pensioners the same as others.

As we have heard, Hewlett Packard is not a struggling business that cannot make ends meet. It is actually the Government's largest IT supplier, and makes sales of more than a £l billion a year to the Government alone. It is a company that, in 2015, had revenues of $139 billion—not million—and profits of $7 billion. The UK Government spent £1.2 billion with the company in 2014-15, which was 25% of Hewlett Packard’s British turnover. Its highest-paid UK director received £1.64 million in 2014 and £920,000 in 2015. It would cost that company about half the cash paid to that one UK director to pay a cost of living increase this year—half the cash that one person earned in wages last year.

The pensioners affected served their time working for HP and the companies it took over. They thought they were safe in the knowledge that they had a pension and were doing everything they were supposed to. I believe the Minister should put pressure on Hewlett Packard, as I will a week on Monday, to fulfil its moral responsibility, although not a legal one, to ensure that those workers are treated fairly in retirement.

Are the Government really content with doing more than £1 billion-worth of business a year with a company that has cocked a snook at this group of British pensioners? I hope the Minister will agree that even though companies are not legally required to pay annual cost of living increases in line with inflation for workers who made contributions prior to 1997, it is a scandal that there are thousands of pensioners in this country right now whose pensions’ value has dropped significantly, and who are probably now relying on social security benefits to get by.

[Dr Philippa Whitford]

As the hon. Gentleman has pointed out, this is not a legal failure of Hewlett Packard but a moral one. Does the responsibility not therefore lie in this place to ensure that the law and guidance are very clear? It is our job to protect the pensioners.

[Alex Cunningham]

I certainly agree with that. Dealing with the situation retrospectively is extremely difficult, and I do not think that is possible, but we have various Green Papers coming through the system in the near future, and I hope the Minister is listening carefully about the problems we have seen. There are so many schemes out there, and we have schemes that are not operating effectively for the people who have paid into them, whether they are turkey sandwich makers or whoever.

As I said, some of the people affected may be relying on state social security. Why is the British taxpayer having to foot that social security bill, while the Government are handing out such lucrative contracts to a company that makes vast profits from them? Clearly we need to ensure that legislation will never again allow a company to shirk its responsibilities, and I would welcome the Minister’s view on that. I hope he will also take action to resolve this injustice by sending a direct message to Hewlett Packard that if it can afford to pay cost of living increases to pensioners in other European countries, it can pay the same increase to pensioners in the UK.

17:02

[The Parliamentary Under-Secretary of State for Pensions (Richard Harrington)]

It is a pleasure to serve under your chairmanship, Mr McCabe. I congratulate the hon. Member for Ayr, Carrick and Cumnock (Corri Wilson) on securing this debate and am grateful for everybody’s contributions. I quite understand that the hon. Member for Ross, Skye and Lochaber (Ian Blackford), who is the SNP’s spokesman on this issue, is probably on Front-Bench duty in the Chamber at the moment. I always listen to him very carefully, as I did to the hon. Member for Aberdeen North (Kirsty Blackman), who eloquently stood in for him.

This debate is about making retrospective changes to pension legislation. Doing so, we contend, would have significant financial implications for the schemes involved. I read in preparing for this debate the information provided by the HPPA, which has been used by Opposition Members. It is a very well argued paper, but I must say that I picked up one inconsistency in it. The briefing paper says, as indeed Opposition Members who have spoken do, that the effects of making these changes retrospectively would be minimal. As far as I can see, a few schemes would fit into this, but I see no evidence from any of the figures that the effects would be minimal.

I intend to do some further work and would be grateful for further data, to assess what the actual cost would be. I have not seen anything in the information provided. That is not a criticism of the general information at all; these things are just very difficult to work out. Of course, expressions such as “minimal” or “a lot” can mean different things to different people. I am not trying any political tricks or pretending something is the case that is not, but I do not know, for example, what it would cost Hewlett Packard to make this change.

The Government have a broad principle in legislation, which I think is generally fair, of not imposing such retrospective changes, because of uncertainty. There is no doubt that this kind of change—this is not the only one we are lobbied about—will place unexpected and significant costs on employers. We all know that in the defined benefit world, schemes and businesses are at risk at all times because of pensions. It is part of our whole policy, and of the policy of Governments of any political party, to try to bring some stability to defined benefit schemes, which involves considering the interests of employees and pensioners and of the sponsoring employers. However, I accept that Hewlett Packard is a very substantial company—a point made clear by all speakers.

[Dr Philippa Whitford]

That is one of the points—Hewlett Packard could carry this on its shoulders an awful lot more easily than individual pensioners. Frankly, it is individual pensioners who are facing retrospective changes. They think they are signing up to and investing in a secure retirement, but when they get there, they find that it has disappeared.

[Richard Harrington]

I fully accept that point. However, what matters to individual pensioners is quite clearly the amount of money that matters to them, but as far as a company is concerned—be it Hewlett Packard, which I accept is very substantial, or a small company—it may be a very significant amount of money. If there were to be legislation, it would have to cover all of them, to be reasonable. No Government could select one company and not another one because it is one of the world’s biggest companies, but I take the hon. Lady’s point.

Normally it is not appropriate or right for Ministers to talk about individual companies’ schemes, so I will try to circumvent that as much as I can. I have listened carefully to what has been said. I listen very carefully to what the hon. Member for Stockton North (Alex Cunningham), Her Majesty’s loyal Opposition spokesman on pensions, says, as indeed I do to the SNP’s spokesperson. Like the hon. Member for Stockton North, I was not aware of this issue until it was brought to my attention quite recently. I therefore cannot say that I have considered this for weeks or months, but it is important. I will come on to the Green Paper in a moment.

I strongly believe, as I am sure hon. Members in this Parliament or indeed any others do, that employers should stand by their pension promises unless there is very good reason not to and that schemes should have to act within the law. It has been accepted in this debate that the legal position is clear: pensions accrued after 1997 have a level of inflation protection, and pensions accrued pre-1997 have indexation requirements only in relation to certain contracting-out arrangements, but not generally. In fact, the hon. Member for Ayr, Carrick and Cumnock confirmed that the company had broken no law.

The argument seems to be that the company has a moral responsibility, but that it is for Government to change the law if the company will not accept that. My hon. Friend the Member for Worthing West (Sir Peter Bottomley) is not in his place; he explained perfectly well why. As he said, it is very legitimate for institutional shareholders, which may include trade unions or pension funds—everything is very circular in pensions, with them owning a lot of shares in it—to use pressure on Hewlett Packard.

The hon. Member for Stockton North represents the former seat of Harold Macmillan. I just read his biography. I look forward to the day when Harold Macmillan’s successor one nation Conservatives take the constituency back, but the hon. Gentleman is doing an excellent job in the interregnum. He said that the fact that the Government spend significant amounts of money with Hewlett Packard could be used as a point of pressure. I cannot really comment on that. I do not have anything in my office, to the best of knowledge and belief, from Hewlett Packard, but I know that the Government have strict rules about things they can and cannot use as investment criteria.

[Alex Cunningham]

Harold Macmillan was in fact the last Conservative to represent any part of my constituency, until he was sacked by the people of Stockton. He was a man who believed in playing fair, and that is what we want here: we want Hewlett Packard to play fair. What opportunities does the Minister have to contact the company and say, “Look, you can do it in Europe. Why can’t you do it in the UK as well?”?

[Richard Harrington]

I thank the hon. Gentleman for that intervention and his comments about Harold Macmillan. He asks what pressure the Government can put on Hewlett Packard. In preparing for this debate, I have not received Hewlett Packard’s position. There is no record of any information that I have had. I look forward to receiving a report from the meeting that hon. Members are having with Hewlett Packard. I would be happy for those who attend the meeting to come and discuss it with me as a result. I suspect that the people at the company will say, “Look, we comply with the law,” and in fairness to them, they do. To use a European comparison is really saying, “Well, in Europe they comply with the law.” I am sure that their policy is, “We comply with the law wherever we are in the world.” That is what any company of that magnitude would say.

[Dr Philippa Whitford]

Is that not, therefore, why this issue should go into the Green Paper and we should consider tightening up that loophole in our law? It is not just Hewlett Packard; it is 3M, Chevron, Unisys—it is other big multinational companies who know that here they do not have to do that for the pre-97. As we heard, 90% of them do, but there is obviously a cohort of companies that are just not bothering so we have to tighten it up.

[Richard Harrington]

I agree with the hon. Lady that the company’s obligation appears to be a moral obligation—that point has been made clearly. The Government’s obligation is to pass laws that have to take everybody’s views into consideration. As I have learnt, because it has dominated my life since last July, with pensions and defined-benefits schemes, particularly on the private side, there are the interests of employers and the interests of employees and pensioners. As Governments of all political complexions—all three, if we include the coalition—have done, the Government have had to find ways to take consideration in from the others. I will come to the Green Paper a bit later on.

[Kirsty Blackman]

I fear that we might end up going round in circles about whether or not it would be affordable for lots of companies to do this, without having the data. I appreciate the Minister’s commitment to look at obtaining more data about how this might work, or the potential costs, and would appreciate it if he would consider sharing those data once he has gathered them, so that we are all in a position to understand the costs.

[Richard Harrington]

I think that is very reasonable. As I said, I am not trying to hide any data—nobody is—because I am sure that the HPPA would have included them in its paper, had it known. I suppose that in the end, they can just be estimates because we do not actually know for the moment what companies fit into this category. From speaking to people since I became aware of this issue, I believe it is true that one of Hewlett Packard’s predecessors—I cannot remember if it was Digital or Compaq—did increase the pension rates most years to some criteria for inflation, although I do not know exactly what criteria.

As I said, I have not come across any views that Hewlett Packard has broken the law, but I will say that many things that companies do are beyond the law in many ways. They have policies on this and policies on that, and many of them have moral, socially responsible policies in many areas. That is the sort of thing that boards of companies decide. They do not just have to comply with the law—that is the minimum. Obviously everybody, individuals and corporates alike, has to comply with the law. In a way, that is why we are all here in this building.

I want to make progress, although Mr McCabe has kindly allowed ample time for interventions if there are any. We believe that the Government retrospectively changing the legislative requirements on indexation would be inappropriate and would have a significant impact on the schemes of employers involved. The legislation introduced in 1995, by Harold Macmillan’s successors in a Conservative Government, was introduced to provide a limited level of inflation protection. The then Government were conscious of this balance between protection against inflation and the ability of the schemes, and the employers who stand behind them, to afford such protection. Of course, the financial deficits in defined-benefit schemes are very much a topic of conversation in this House and in the press—particularly the trade press—and are something that will be discussed in the Green Paper.

I am not a great believer in providing people with straws to clutch on to. Many politicians across the House do so in politics, and probably the reason for my lack of progress, compared to certain people of my age in all political parties, is that I try to be as candid as possible. I do not want to give a straw to clutch on to, but I do think that hon. Members have to remember that costs of business are also a factor to consider. Hewlett Packard, Compaq and Digital before them have been regarded as good employers; they employ a lot of people in this country and help to generate the prosperity of this country.

I accept the point made by the Opposition spokesman, the hon. Member for Stockton North, that there are people in Hewlett Packard who earn big money—it is all relative—but that is also true about footballers and many other people. It is not the actual position—I know that it makes a good comparison in a speech, but the fact is that the quantum of pension fund commitments that Hewlett Packard took on amount to many, many millions of pounds. The company knew that when it was acquiring the business. I am sure that if it felt that was far too much, it would not have done so. It would have calculated the cost and taken it into account.

I had better make some progress now, Mr McCabe, because time is running out.

[Alex Cunningham]

Will the Minister give way, very briefly?

[Richard Harrington]

Certainly.

[Alex Cunningham]

I accept everything the Minister is saying, but will he, following this debate, write to the company telling it that we have had this debate and ask it to consider its position?

[Richard Harrington]

I am happy to meet the hon. Gentleman and other hon. Members here after their meeting with the company so that we can formulate some kind of opinion on it. This is not to take away from the standing of this debate, but rather than send a letter as a result of this debate, it would be more appropriate to meet after you have met with the company. I am sorry, I did not mean you, Mr McCabe; I meant the hon. Gentleman. I got carried away, such is the excitement of this issue.

The pensioners with a pre-1997 defined-benefit occupational pension that was contracted out of the additional state pension could be receiving some inflation protection on that pension from the state, because their pension entitlement includes a guaranteed minimum pension, or GMP. I understand from officials that that applies to many of the Digital Equipment pensioners. When the additional state pension was introduced in 1978, employers were allowed to contract their employees out of its provision in return for the employer and employee paying lower national insurance contributions. In order to contract out, the employer had to promise to pay a pension that was at least as good as the additional state pension that had been given up, in effect guaranteeing a pension payment that was as a minimum equal to the state pension—hence the name.

The state pension, through a complex calculation that I agree is difficult to understand, provides for some indexation of the GMP for those individuals who reached state pension age before April 2016. Those who reach state pension age from 6 April 2016 will benefit from transitional arrangements in the new state pension. The majority of people who were contracted out will do better over their lifetime than under the old arrangements. In short, although the members may not be receiving the full inflation protection as part of their scheme rules, as demanded by their representatives and Members here today, they are likely to receive some mitigation and protection due to GMP arrangements. As I said, my understanding is that that applies to some Digital Equipment pensioners.

I can only repeat that the Government have no plans to impose retrospective changes on pension schemes, but as the hon. Member for Stockton North and other hon. Members have stated, there will be a Green Paper shortly. I said that would happen in the spring; I hope that that will be in spring in the south of England rather than in parts of Scotland, based on my experience of very nice, if rather cold, spring holidays elsewhere. The Green Paper will look at many aspects of defined benefit schemes, including methods of valuation of schemes, index-linking criteria and the consolidation of pension schemes, among others.

I do not want Members to think that we have plans specifically to impose retrospective changes on pension schemes such as the one we are discussing, but many aspects of pension rules will be considered in the Green Paper, and I believe that will include several issues that are relevant to this matter. Obviously I cannot go into more detail because the Green Paper is an official document, but it will look generally at defined benefit schemes. There are a lot of different factors, some of which are genuine complaints and difficulties on behalf of employers, and some of which are fundamental things about protecting pensioners and prospective pensioners—people working and paying into schemes now. Obvious related examples include the rules of the pension regulator, which, although not relevant today, certainly are relevant to defined benefit schemes.

Today’s debate and the preparation work for it—the briefings and other things that I was provided with, including from the House of Commons Library and the Hewlett Packard Pension Association—have led to a lot of thinking on my behalf about this matter, and I thank hon. Members for raising it. I look forward to hearing Hewlett Packard’s response and I am very happy to meet with it, after that stage, to discuss the situation.

17:19

[Corri Wilson]

I thank hon. Members for coming along today and welcome their contributions. I am also pleased that the issue is now on the Minister’s radar. If the Government are encouraging people to save for the future, people need to know that the goalposts will not change. As has been mentioned, trust is key. When people enter their retirement years, the last thing they want is to discover that they do not have enough to live on and that their pension is not what they thought it was, with absolutely no time to do anything about it. A contract is a contract and it needs to be transparent. Going forward, including through the Green Paper, I hope that the Government will look at the wider issue of having pension legislation that protects employees and employers.

Question put and agreed to.

Resolved,

That this House has considered Digital Equipment Ltd’s pension scheme.

17:22

Sitting adjourned.