Nuclear Decommissioning Industry: Pensions

Tuesday 21st March 2017 Westminster Hall

15:58

[Mr Gary Streeter (in the Chair)]

All the protagonists are here for our next debate, so we can start a minute and a half early.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

I beg to move,

That this House has considered pensions in the nuclear decommissioning industry.

I have been seeking to secure a debate on pensions in the nuclear decommissioning industry for some months, as I am deeply disturbed by the way workers have been treated and betrayed by the UK Government. I speak on behalf of those in my constituency of North Ayrshire and Arran who work on the Hunterston A site, but this matter is of material interest to all workers across the United Kingdom who share the sense of betrayal and treachery at the fact that their pensions have been treated as if they were of no account.

[Mr Philip Hollobone in the Chair]

The betrayal that those workers feel should come as no surprise to anyone who has followed events since the nuclear estate was privatised by the Thatcher Government in the 1980s. Guarantees were made requiring the new private sector employers to continue to provide pension benefits for those employed at the time of privatisation

“at least as good as those they were receiving in the public sector”.

Those guarantees and legal protections have now been abandoned.

That situation was made starkly clear by the Nuclear Decommissioning Authority and other employers consulting on reforms to two final salary schemes, seeking the views of members on changes such as moving to a career average, revalued earnings arrangement and a cap on pensionable pay. The UK Government decided that because the Nuclear Decommissioning Authority is classified as public sector, those schemes should be reformed under the Public Service Pensions Act 2013. Clearly, however, those pensions are not public sector ones, as I shall go on to make clear.

The erosion of decommissioning workers’ pensions is unacceptable. Radical reform of those pensions has already taken place in the mid-2000s, when they were closed to new entrants, who now have inferior defined-contribution pensions. Public sector reform takes no account of the fact that decommissioning sites are now in the private sector, nor that, unlike for other public sector workers, redundancy is an inherent part of decommissioning workers’ employment.

[Liz Saville Roberts (Dwyfor Meirionnydd) (PC)]

I congratulate the hon. Lady on securing the debate. Pension rights in the event of redundancy are particularly important for workers undertaking decommissioning at Trawsfynydd power station in my constituency because of the timescale for closure and the age profile of the workforce. I hope she agrees that we need a commitment from the Minister in her response that a solution will be found for employees of Magnox Ltd and other companies affected by the Enterprise Act 2016.

[Patricia Gibson]

I very much concur with the hon. Lady. We are seeking a response from the Minister that will show fairness and an understanding of what such workers have already gone through and of the assurances that were made. All future action should take full account of that.

As I said, redundancy is an inherent part of the employment of decommissioning workers, since cleaning nuclear sites is time-limited. The prospect of redundancy is therefore written into the job in a way that does not apply to any other. The job of a worker at a nuclear decommissioning site is highly technical, skilled and sometimes even dangerous. The prospect of redundancy being in-built in people’s jobs is bad enough, but to have their pension eroded at what increasingly looks like regular intervals is simply unacceptable. It creates disincentives for workers to enter or stay in the industry, and it is extremely bad for morale.

The uncertainty created by that erosion of pensions affects not only the workers, of course, but their families and their financial planning for their retirement, and it shows with crystal clarity that any legal protections offered by Governments to workers mean nothing when they can be ripped up and disregarded when convenient. I raised that very matter at Treasury questions two months ago and was told by the Chief Secretary to the Treasury that

“it is necessary to have terms and conditions that reflect the modern situation that applies across the economy as a whole.”—[Official Report, 17 January 2017; Vol. 619, c. 769.]

Will the Minister tell me how that response squares with the cast-iron guarantees made to workers when the nuclear estate was privatised? Were the workers told that those so-called cast-iron guarantees were actually written on water?

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

Is that not a constant theme? People take out pensions in good faith, whether state or private, to plan for something that might happen 20, 30 or 40 years later, but by the time they get there the goalposts have been moved.

[Patricia Gibson]

Absolutely, and I will discuss that later in my speech. There is indeed a chilling wider pattern and a broader narrative becoming increasingly apparent as each day passes.

Those workers are classed as public sector workers, but their terms and conditions are not devolved to the Scottish Parliament as they are for other public sector workers. Indeed, Scottish nuclear workers still have their severance and early retirement terms dictated by the UK Government. The goalposts are clearly being moved when it is deemed financially beneficial for the Government or the industry, while the pensions interests of the workers are a secondary consideration.

The Office for National Statistics classified Magnox as a public sector organisation, which means that the pensions of its workers are in scope of reform by the UK Government, despite the fact that they work on sites that have been privatised. The UK Government have proposed to reform IR35 tax arrangements for contractors working in the public sector or for public authorities. Draft guidance from the Government uses the definition of a public authority contained in the Freedom of Information Acts, which includes bodies specifically listed in schedules to the Acts, publicly owned companies and any other body designated as a public authority by the Secretary of State. Interestingly, Magnox is not listed in the schedules, and that is because it is a privately and not publicly owned company. Consequently, the Freedom of Information Acts do not apply to Magnox except where stipulated in employee contracts with the NDA, and so neither do the IR35 reforms.

Nothing but confusion and concern can be caused by the use of different definitions of the public sector in different legislation and UK Government proposals. That is a matter of concern to the Nuclear Decommissioning Authority as well as to nuclear decommissioning workers. The reason it matters so much to the workers at Hunterston A and other sites throughout the United Kingdom is the adverse financial impact such definitions will have on the employees of Magnox. The goalposts must not be moved and definitions must not be manipulated by the powers that be to the financial detriment of those who work on such sites day in, day out.

I wrote to the Secretary of State for Business, Energy and Industrial Strategy on that very issue, asking for the apparent confusion to be clarified. I sent my letter on 7 February but, to date, I have had no response—presumably the Secretary of State himself is trying to work out the apparent contradiction. I hope he is able to do so soon, because the workers in Hunterston A and the rest of the industry are waiting on tenterhooks for him to dispense his wisdom about such a bewildering state of affairs.

All of that comes hard on the heels of the punitive exit payments cap, which will have a hugely detrimental impact on the pensions and redundancy payments of over-55s made redundant after years of service. As I have pointed out, those workers are caught up in the problem because they have been classified as public sector workers, even though they are employed in the private sector. The only fair and reasonable thing to do would be for the UK Government to announce that those workers are to be exempt from the exit payments cap under the Enterprise Act 2016.

[Albert Owen (Ynys Môn) (Lab)]

I congratulate the hon. Lady on securing the debate. She is right to talk about the double whammy faced by nuclear workers. During the passage of the said Act, reference was made to their pensions not being touched. The Government, however, broke their word, which had been given not only at the time of privatisation but last year as well. I hope that the Minister will take note of that and respond, because it is unfair to those dedicated workers and their dedicated communities.

[Patricia Gibson]

Absolutely. My only disagreement with the hon. Gentleman is that, taking into account the reforms to those pensions in the mid-2000s, as well as the new exit payments cap reforms, we are actually talking about a triple whammy. I very much hope that the Minister will have something to tell us about the cap.

The exit payments cap for nuclear decommissioning workers was pressed to a vote in the Commons during the passage of the Act, but the Government voted us down. I hope—perhaps blindly optimistically—that the UK Government will be willing to reconsider. Talks have led to a new Nuclear Decommissioning Authority proposal, but the trade union consensus is that more must be done to put pension provision on a par with the public sector, including improvements for new starters in the defined-contribution scheme so that their pension is protected on any outsourcing.

Clearly, despite significant pension guarantees in the 1980s, the major pension reform in the mid-2000s and the exit payments cap, workers in the nuclear decommissioning industry are in the firing line. As has been mentioned, the fact is that this is part of a broader narrative from the UK Government, who are taking action to reduce public sector pensions across the board. We saw it with the way the WASPI—Women Against State Pension Inequality—women had their feet cut from under them as they approached what they thought was their retirement age, and we now see it with this catalogue of broken promises and betrayal of nuclear decommissioning workers, as everyone who is present would acknowledge.

It is clear that this Government, despite protestations to the contrary, see a pension not as a contract but as a benefit. To be clear, a pension is a contract, not a benefit. It is paid into, and people have reasonable expectations that what they can expect at the end of their working life should be clear and that they can depend upon it. Public sector workers, the WASPI women and now workers in the nuclear decommissioning industry have discovered to their cost that that is no longer the case. Those contracts can be torn up at will—or so it would seem. Assurances apparently mean nothing. Years of service and paying in mean nothing. If that is the case, what does it say about the relationship between the governing and the governed? What can one put faith in if not a contract with one’s Government?

These moves have to be resisted. Workers in the nuclear decommissioning industry are currently considering an offer from the Government. I do not know the details of that offer, but sadly, I am pretty sure that it will mean a further erosion—to some degree—of those workers’ pensions. That is simply not acceptable, for all the reasons that we have heard. I say to workers who are not directly affected by this measure, “Next it may well be your pension.” That is why this issue should matter to us all. Who knows what group of workers will be next in the firing line? I urge the Minister and this Government to think again.

16:12

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Margot James)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate the hon. Member for North Ayrshire and Arran (Patricia Gibson) on securing this important debate and her passionate and informative speech. The Government understand the concerns of the workforce across the Nuclear Decommissioning Authority estate, including employees working at the Hunterston A power station in her constituency, about public sector pension reform. It is good to see my hon. Friend the Member for Copeland (Trudy Harrison) in her place, representing the interests of her constituents who work at Sellafield.

We recognise the vital decommissioning work that the NDA and the wider workforce across the estate deliver, while prioritising safe and secure operations in a difficult environment, and we remain firmly committed to supporting the nuclear decommissioning programme. The NDA was allocated £11 billion of taxpayer funding for the 2015 spending review period. However, in line with the challenges that the UK faces to balance the deficit, the NDA was set a proportionate programme of efficiencies and savings for that period of around £1 billion, and it was agreed in the spending review that some of those savings would come from reform of the two defined-benefit final salary pension schemes in the NDA estate.

Approximately 10,800 employees are members of those final salary pension schemes, which, as the hon. Member for North Ayrshire and Arran mentioned, closed in the 2000s. The aim of the NDA consultation is to reform those schemes into career average revalued earnings schemes, in the spirit of the recommendations made by Lord Hutton in his 2011 review of pensions. Since 2006, new starters have been offered membership of a high-quality defined-contribution pension scheme, which is out of scope for reform.

The Government acknowledge that CARE reform would require amendments to statutory pension protections that were put in place at the time of the privatisation of the electricity sector in the 1980s and by the Energy Act 2004, when the NDA was established. Those protections sought to provide pension benefits for existing scheme members that were at least as good as those they received prior to those reforms. That is why the Government have worked with the NDA to consider how best to implement pension reform.

As a first step, the NDA held discussions with the trade unions about the potential for non-legislative options as an alternative to CARE to realise the required savings. As a result of those discussions, the NDA launched a consultation document on 9 February setting out details of two options—the CARE option and a non-legislative pensionable pay cap option. The consultation was due to end on 10 March.[Official Report, 23 March 2017, Vol. 623, c. 12MC.]

During those discussions, several concerns were raised, which the Government and the NDA actively listened to and sought to address. Following a meeting in February between the NDA, national trade union representatives and the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Hereford and South Herefordshire (Jesse Norman), who has responsibility for energy, the NDA and trade unions reached agreement to table a third option for consultation with the workforce that better reflected the circumstances they face—a revised CARE pension reform proposal.

That option was announced by the NDA and the trade unions in a joint statement on 2 March. The consultation period has therefore been extended until 21 April to allow the NDA workforce to consider that new option. The trade unions have committed to hold consultative ballots on the proposal, described as the best achievable through negotiation, and support implementation if their members accept the proposal. Those ballots are due to take place in April and conclude by early May.

[Albert Owen]

The Minister is making an important point. I, too, welcome the progress that has been made on the pension, but will she deal with the exit payments cap? No discussions were held about that. An exemption was given to the Royal Bank of Scotland, to give one example. She is a reasonable person. Nuclear workers have been caught up in this. Will she agree to look into this serious issue and come up with a reasonable response?

[Margot James]

I thank the hon. Gentleman for raising that important point, which was also raised by the hon. Members for North Ayrshire and Arran and for Dwyfor Meirionnydd (Liz Saville Roberts). My Department and the NDA will continue to meet trade union representatives regarding the cap on exit payments. My hon. Friend the Energy Minister is listening to the important concerns of workers in the NDA estate about that cap and is in discussion with the Treasury.

[Patricia Gibson]

I wonder whether I may hurry the Minister along and raise the question of the apparent confusion in legislation about whether these workers are public sector workers or private sector workers. Why do the goalposts apparently change when it is convenient that they should—but not to the workers’ advantage?

[Margot James]

I understand that point, which the hon. Lady also made in her speech and which I took note of. I gather that she wrote to the Secretary of State about that very point in early February and is still awaiting a reply. A reply will be forthcoming. I am very sorry that I am not able to be definitive today, but I can assure her that Ministers in my Department take her point and the point made by the hon. Member for Ynys Môn very seriously indeed. We are listening to the concerns of the workforce she represents, and, as I said, my hon. Friend the Energy Minister is in discussion with the Treasury to try to clarify the point, so that the workforce know where they stand. I absolutely sympathise with a workforce who do not know where they stand—it is an unsatisfactory situation, but I assure her that it is one that is approaching a remedy.

We recognise that nuclear decommissioning is a closure industry and many workers have devoted careers to the industry knowing that their sites may close before they retire. We are actively exploring the potential impact of the cap on workforces at sites that are being actively decommissioned and are on the path to closure, such as Hunterston A in the hon. Lady’s constituency. I will pass all hon. Members’ comments on to my hon. Friend the Energy Minister.

Once the consultation period on the pension issue has finished, the NDA will take account of the consultation responses and make proposals for Ministers to consider after that. The Government will not take a final decision before the consultation has concluded. However, we believe that the revised CARE proposal offers a fair and sustainable solution.

As the debate draws to a close—the hon. Lady will have a further say—

[Mr Philip Hollobone (in the Chair)]

Order. I am afraid that the hon. Member for North Ayrshire and Arran (Patricia Gibson) does not have a further say as this is a half-hour debate. The Minister has 10 minutes left, so there is plenty of opportunity for Members to intervene if they wish to do so, but the debate must finish no later than 4.30 pm.

[Margot James]

Thank you, Mr Hollobone. I am sorry, I thought the proposer of the motion had two minutes at the end. The hon. Lady may take advantage of your offer of further interventions; I would be delighted to give way. While I am on my feet, however, I will continue.

I reiterate that the Government recognise the concerns that the hon. Lady and other hon. Members have raised about the workforce across the NDA estate and pension reform. I emphasise that the aim of pension reform is to balance the legitimate concerns of taxpayers about the present and future costs of pension commitments with the workforce’s concern about maintaining decent levels of retirement income, to which they have contributed and which they have earned. It is right that we debate that important issue and I thank all Members for their views.

[Albert Owen]

I heard what the Minister said and appreciate that she will take this issue back to the appropriate Minister. Will she or the Energy Minister agree to meet a delegation of cross-party representatives from the nuclear workers’ areas? She will know about early-day motion 915, to which there are 120-plus signatories. This is an issue across the country. Can we meet to have further discussions? This debate is helpful, but we need further discussions.

[Margot James]

I will certainly pass on the hon. Gentleman’s kind invitation to meet to my hon. Friend the Energy Minister. He is gainfully employed at the moment, meeting the Treasury, with the interests of the NDA workforce very much near his heart. I am sure that he will consider the invitation proffered.

[Dr Philippa Whitford]

We had a debate regarding Hewlett-Packard’s takeover of Digital Equipment’s workforce. At that time, the Minister responding said that nothing could be done because it was a purely private company. However, in this instance, as my hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) said, the goalposts have been moved in the definition of public and private and back again, so the Government can do something for these workers.

[Margot James]

The hon. Lady makes a good point about the difference in the nature of the public-private definition. The industry has had £15 billion of Government and taxpayers’ support, so it sits where it sits. My officials will reflect on the views that all Members have given today, as we consider further the options for NDA pension reform. The Government will set out the next steps following the NDA consultation on pension reform.

Question put and agreed to.

[Mr Philip Hollobone (in the Chair)]

Order. At this point I would have gone on to the next debate, but the rules of engagement are that the Minister has to be present as well as the proposer of the motion. I intend to start the debate as soon as the Minister walks into the Chamber. The sitting is suspended until that point.

16:24

Sitting suspended.