Forestry: Independent Panel Report
Lord De Mauley Excerpts(11 years, 8 months ago)
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The Parliamentary Under-Secretary of State, Department for Environment, Food and Rural Affairs (Lord De Mauley)
My Lords, I start by saying how grateful I am to the right reverend Prelate the Bishop of Liverpool for his leadership of the independent panel and for calling this debate today. Before going further, like him, I have to declare an interest—in my case as a woodland owner and lover. Under his leadership the Independent Panel on Forestry brought together senior experts for the land management, forestry, wildlife charity and wood business sectors, and produced an excellent report, setting out a compelling vision for the future of England’s trees, woods and forests. I am grateful to him for his kind words about our response to his panel’s report.
In his introduction to that report, the right reverend Prelate commented how, as a society, we had lost sight of the value of trees and woodlands. The panel’s report challenged all of us—the Government, the forestry sector and society as a whole—to value our nation’s woodlands more. We have embraced this challenge with passion and conviction. Our Forestry and Woodlands Policy Statement, published on 31 January, addressed all of the issues raised by the panel, and went further by setting out a new policy approach to our forestry responsibilities based on the clear priorities of protecting, improving and expanding our woodland assets. It also recognised the scope for realising more of our woodlands’ value through a better understanding of the benefits they provide and the importance of ensuring that we have the most effective and efficient delivery arrangements in place. It included over 30 new steps that my department and the Forestry Commission will be taking and it invited all stakeholders, including those involved in the panel, to work with us to deliver the new woodland culture envisaged by the panel.
At the heart of this new policy statement is a firm commitment to the public forest estate. It will remain secure in public ownership for the people who enjoy it, the businesses that depend on it and the wildlife that thrives in it. To achieve this, we will set up a new operationally independent body to manage the estate and hold it in trust for the nation. It will have greater independence from government, greater freedom to manage its resources sustainably and a clear remit to maximise the income it generates from the estate through entrepreneurial activity. The estate will, however, remain firmly in public ownership and the right safeguards will be in place for it to operate for the long-term benefit of people, nature and the economy. Our statement also recognises that there is an important job for the Government to do with the wider woodland and forestry sector, providing it with appropriate leadership and support so that we can grow our forests and protect what we have.
Last year’s outbreak of Chalara ash dieback, to which my noble friend Lord Framlingham referred, reminded us that our most urgent priority is to protect tree and plant health. I had the opportunity to see for myself the effects of Chalara fraxinea in Wayland Wood in Norfolk. I would like to thank my noble friend for his helpful suggestion about the benefits of more advanced notice of requirements for saplings. We are giving this careful thought.
In recognition of the scientific advice that it will not be possible to eradicate Chalara and that, on the basis of the experience in Europe, there is no effective treatment, we are now focusing our efforts on minimising the impact of the disease on our economy, environment and society, and discovering how we can build resilience to this and other tree diseases. The next step will be the publication of an updated control plan at the end of March, which will set out our approach around four key objectives. They are slowing the rate of spread; developing resistance in the UK ash population; encouraging citizen, landowner and industry engagement; and building resilience in UK woodland and associated industries.
In addition to the control plan, we have introduced tighter controls on the import of native tree species and established the independent expert task force—convened by Defra’s chief scientific adviser, Professor Ian Boyd—to examine further ways to prevent plant pests and pathogens entering the country. This task force will report later this spring.
Recognising the long-term investment needed into tree health, we have allocated £8 million from the existing but unallocated evidence budget for new research into tree health over the next four years and are working with partners and stakeholders to take forward further research. The Forestry Commission has also increased investment in tree health research from its existing resources by 30% over the next 3 to 4 years. In addition to protecting what we have, we also need to make more of what we have. This means improving our woodlands in order to help drive economic recovery.
Just under half of our woodlands in this country are unmanaged or undermanaged. We want to encourage landowners to bring neglected woodlands back into management, improving their resilience, supporting economic growth and delivering benefits for wildlife. To do this we need to remove barriers preventing them from doing so and to develop further the markets and supply chains that will help them realise an economic return from their woodlands. We therefore warmly welcome the initiative to develop the industry’s new action plan under the leadership of Dr Peter Bonfield. It is one of the most exciting developments for the sector in a generation.
Making more of what we have also means maximising the social contribution of our woods and forests, including recognising the health and educational benefits that they provide and supporting communities in playing a greater role in management of their local woodlands. We want to improve public access to our woods and forests, particularly those close to towns and cities, so that the greatest number of people can enjoy them for exercise, leisure and recreational purposes.
The panel rightly encouraged us to take the long-term view. We need to act now to ensure that we have resilient woodlands and a secure supply of timber in the future. England’s woodland cover currently stands at just over 10%, double what it was a century ago. We believe that there is scope for increasing this cover further to deliver economic, social and environmental benefits. We will therefore work with others to expand our woodland resources by creating new woodlands and increasing existing woodland cover where it will most benefit the economy, communities and the environment.
We want to see better quality outcomes for the environment, the economy and society, and that involves the contributions of all our network bodies. We are putting the public forest estate on track towards a sustainable long-term future in public ownership. It is right that we also consider our broader forestry functions alongside the outcomes of the triennial review of the Environment Agency and Natural England and the conclusions of the Tree Health and Plant Biosecurity Expert Task Force. We fully recognise the important work that our forestry experts within the Forestry Commission currently do and will ensure that any changes strengthen our national forestry expertise.
I turn now to the questions asked. The right reverend Prelate asked about the publication of a timetable for implementing the commitments. My department and the Forestry Commission are currently developing an implementation plan for the 37 commitments in the statement. This includes setting up significant projects, such as that to establish the new public forest estate body, and we will set out our progress in implementing these commitments later in the spring.
My noble friend Lord Eden referred to the value of silence. I agree with him about woodland noise rather than the noise of motors. I think there is—dare I say it?—a place for both, although I share his personal preference for the predominance of woodland noise. He asked whether leisure facilities have an adverse affect on the environment. I agree that there needs to be a fair balance struck between the two. He asked about the role of the private sector in the public forest estate. I agree with the points that he made. The public forest estate already works closely with private sector partners, including on joint ventures. My noble friend may be aware of Go Ape!, which is an excellent example of a joint venture with the private sector. We have made it clear that we will expect the new body to act entrepreneurially and work closely with the private sector. He made a point about the role of trees in flood alleviation, and I agree with him on that.
My noble friend Lady Parminter asked about funding through the common agricultural policy. She will know that we are currently negotiating the new rural development programme and very much hope that this will provide resources for the future. We cannot make any firm commitments about how much will be available to support forestry initiatives at this stage. We will, however, be consulting on its objectives in the spring. She asked about the functions of the various forestry bodies in the context of the triennial review. We have confirmed that we intend to retain forestry expertise within government and will set out our plans for delivering forestry functions after the triennial review has reported.
We are now considering the functions currently delivered by the forest services directorate of the Forestry Commission alongside the work to review the functions and form of the Environment Agency and Natural England in their triennial review. This work is separate to but following the same principles underlying that review, namely better integration, greater affordability and improved service to achieve better quality outcomes for the environment, economy and society. We will confirm the organisational arrangements through which the Government’s forestry functions will be delivered after the triennial review reports its preliminary conclusions in the spring.
The noble Baroness asked about stakeholder engagement. We agree that it will be vital to involve stakeholders as we implement and build on the policy statement. We have established the National Forestry Stakeholder Forum and have committed to bringing it together again to report on progress later this year. We are also including clear stakeholder engagement strands in the new projects that we are establishing to develop the new public forestry safety management body and to review the functions of Forest Services.
My noble friend Lord Courtown asked about the UK Forestry Standard active management plans. We recognise concerns over the size of the documentation. We have recently published a new quick-start summary of the standard aimed at enabling more landowners and businesses to understand and use it.
I apologise that I have run out of time. There are a lot of questions that I have not yet answered. I will take advantage of the invitation of my noble friend Lord Lyell to write to him about his question. May I write to other noble Lords?
I will try to address a couple of the important questions asked by the noble Baroness, Lady Royall. She said that I hinted that there might be a Bill in the Queen’s Speech. I actually said that Governments zealously guard the secrecy of what is in the Queen’s Speech. Her own Government did that, I am sure, as much as we do. She suggested that the Bill should be subject to pre-legislative scrutiny. That is a suggestion that I will take back, if I may.
The noble Baroness asked about redundancies and cuts. We continue, as she will know, to face very challenging financial circumstances, requiring hard choices to be made across the whole public sector. The Forestry Commission has had to bear its share of the cuts that we have had to make to bring public expenditure under control. The department has confirmed the Forestry Commission’s provision for 2013-14 at £39.2 million and we provided an initial £3.5 million as cover for loss of income from woodland sales that were to have been made, making a total of £42.7 million.
The noble Baroness asked about a charter and what a guardian will do. We will consult on the finer details of the organisation’s shape, structure and remit in due course and I hope that she will contribute to that process. I will write on the other questions, if I may.
Delivering on the vision of the panel and the objectives set out in our policy statement calls for creative thinking and partnership working to protect, improve and expand our woodlands and forestry assets. Success will see our environment, wildlife and economy thrive and create the new woodland culture that we all want to see.
Employment Tribunals Act 1996 (Tribunal Composition) Order 2012
Lord De Mauley Excerpts(12 years, 7 months ago)
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Lord De Mauley
That the draft order laid before the House on 6 February be approved.
Relevant document: 41st Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 19 March.
Lord De Mauley
My Lords, this first order permits but does not oblige judges to sit alone rather than, as at present, with two lay members on unfair dismissal cases. It is part of the wider package of reforms. It is not a silver bullet, standing on its own, but neither is it a risk to the just handling and disposal of cases.
As I said in Grand Committee, when we debated these orders on Monday last week, the order seeks to replace prescription with flexibility, and helps to secure value for money. It will allow employment judges to sit alone in unfair dismissal cases before an employment tribunal. It will provide discretion for judges to decide whether to sit with lay members, where appropriate. The criteria against which such decisions must be made are set out in primary legislation. It has been tried and tested for years in relation to other types of case to which it already applies.
Many of your Lordships here today were also present in Grand Committee last week. Noble Lords who then opposed the measure did not argue against flexibility for its own sake. Indeed, it is difficult to see how flexibility per se could be easily argued against in this context. Instead, some noble Lords, and some who debated the matter in the other place, seemed to distrust the motives underlying this reform. The perception seemed to be that this is the thin end of the wedge. Fairness, independence and justice must not be compromised. However, proportionality is key to all those concepts, and the Government have a duty to ensure that value is secured.
The safeguard of judicial discretion is real. As noble Lords themselves cited in Grand Committee, academic research demonstrates that employment judges value the input of lay members. Judges tell us that too. We have good evidence therefore—something noble Lords were rightly keen on drawing out in Grand Committee—to explain why we think panels will continue to sit where they are appropriate, and where they will add value. That is as it should be. There is also evidence of support for the proposal. Some, such as the British Chambers of Commerce, say that we should go further and abolish lay members altogether. Some say that we should row back and drop even this order. Some think we have got the balance right. We have considered the numbers, considered the substance of the arguments put, and made sure that we have listened carefully to all parties with an interest. Our conclusion is clear, and I am confident that it is right.
The Government value the role of employment judges, just as the Government value the role of lay members. Each group brings significant expertise and experience to the system. Judges are well placed to make decisions about how best to manage a case to hearing, including about how and where the respective expertise and experience is best deployed, and with what value. Employment judges are trained in active case-management techniques and to deal with cases in the unique fora of employment tribunals. The safeguards are real. The objective of securing value for money is important.
The purpose of the second order, the Unfair Dismissal and Statement of Reasons for Dismissal (Variation of Qualifying Period) Order 2012, is to extend the qualifying period for unfair dismissal from one to two years for individuals beginning work on after 6 April this year. It also extends in the same way the minimum period an employee must have been with the employer before being entitled to request a written statement of reasons for dismissing. The purpose of the statement of reasons is essentially one of evidence when making a claim for unfair dismissal. It is therefore closely linked to the right to claim unfair dismissal and it is logical that the qualifying period for both is kept consistent.
The Government are committed to reviewing all aspects of employment law over the course of the current Parliament. We are doing this because we are serious about rebalancing the economy, supporting job creation and achieving strong, sustainable growth. We want new and growing businesses to thrive and feel confident about taking on more staff.
The legal framework of employment law today is quite different from that which obtained when unfair dismissal rights were first introduced in 1971—by a Conservative Government. In 2012, employees additionally have a wide range of day-one rights: the right not to be discriminated against; the right not to be dismissed for asserting a statutory right, such as asking to be paid the minimum wage; and the right not to be dismissed for making a protected disclosure, otherwise known as blowing the whistle.
The change we seek to make will not affect any of those day-one rights, but it will reduce the fears that many employers have—until a few years ago, I was one of them—that a minor procedural slip-up might land them with a tribunal claim. As the British Chambers of Commerce has noted, a single claim can wipe out a whole year’s profits for a small business. That is a burden that many small businesses are simply unable to bear. The British Chambers of Commerce also reported—this is particularly shocking—that 48 per cent of larger firms have been threatened with an employment tribunal claim in the past three years.
This change will have a relatively small impact on employment tribunal claims and individuals who might seek to bring a claim. We have made a conservative estimate that the increase in the qualifying period will bring about only a 4 per cent reduction in unfair dismissal claims. Furthermore, we have not taken account of the fact that employers will not be under such pressure to let employees go, as my noble friend Lord Razzall pointed out in our debate in Grand Committee on Monday of last week. They will have the extra time to give them a chance, to coach them and to train them. Also, as set out in the impact assessment, we estimate that more than half of unfair dismissal claims currently made by those with one to two years’ service are part of multiple claims, so we would expect them still to go ahead under one or more other jurisdictions.
The Government are taking other measures that will help employers and employees to resolve disputes outside the tribunal system. I am sure that many noble Lords will agree that this is most often preferable for all parties. We are increasing the role of ACAS in conciliating disputes before a claim is made. We are piloting a scheme to boost access to mediation among small businesses in Cambridge and Greater Manchester, and we will be considering how we can deal more quickly with straightforward employment tribunal claims.
Looking back over the history of unfair dismissal rights, a two-year qualifying period has existed for most of the past 30 years, so it is hardly an unprecedented measure, but it is one that we, and large numbers of businesses, believe will make a positive difference to employer confidence.
As I said, our top priority is to achieve strong, sustainable and balanced growth. We are tackling youth unemployment by ensuring that more and higher-quality apprenticeships are available. We are taking steps on issues such as tax, planning rules and access to finance to boost enterprise. Critically, we have a credible plan to reduce the deficit and tackle the UK’s debts, as set out in the Budget.
The extension of the qualifying period must be seen in the following contexts: the greater employment rights that individuals now enjoy; the Government’s measures to encourage early dispute resolution; and our focus on growth and business confidence.
The Government’s view that employers’ confidence and their perceptions of employment law will be improved by this measure is based not on anecdote but on the views of the businesses that responded to the public consultation and the thousands of businesses surveyed by the British Chambers of Commerce—
Lord De Mauley
My Lords, perhaps the noble Lord will allow me to make my case. There will be plenty of opportunity for him to speak later.
The Government’s view that employers’ confidence and their perceptions of employment law will be improved by this measure is based not on anecdote but on the views of those businesses that responded to the public consultation and the thousands of businesses surveyed by the British Chambers of Commerce, the Institute of Directors and the CBI. During the consultation, the CBI expressed the view that,
“the extension of the qualifying period will have a positive impact on marginal hiring decisions, particularly in smaller firms”.
That accords with my own experience as an employer in an IT company, which I ran for six years. I cannot emphasise enough how much time is needed for training and assessing people. I can categorically say that a year is not enough in every case, and it is a view that the Government share. There is a credible body of opinion that employers will have greater confidence to recruit as a result of this measure. I assure noble Lords that the Government will do everything practicable to monitor and assess the impact of increasing the qualifying period.
As set out in the impact assessment, we are committed to a post-implementation review of the Resolving Workplace Disputes policy package, including this measure, in 2016. The amendment laid by the noble Lord, Lord Young, calls for a review after 18 months. With respect, this will be too soon to be able to make an assessment of the policy’s effect, not least because the qualifying period will be two years and will apply only to those starting a new job from 6 April. No employee will therefore have reached the end of their qualifying period in 18 months’ time.
While respecting and preserving the important employment rights that have been established over the years, we must give proper weight to those currently outside the labour market: the school leaver looking for the first job, the long-term unemployed striving to get back into work, and the person who was let go during the first year of employment because the employer was unsure whether they would come up to scratch. These are the real beneficiaries of this order, and I commend the orders to your Lordships.
Amendment to the Motion
Lord Lea of Crondall
My Lords, I have three points. First, perhaps I may pick up on the points made by the noble Lord, Lord Razzall, if I have his attention. He made what I would call a Sudetenland remark—the one made by Neville Chamberlain about “peace in our time”. If only that were so. Does he want a guarantee, a white piece of paper in his pocket that he can wave, promising that there will be no more legislation if this order is passed? Well, we shall see.
I also congratulate the noble Lord, Lord Jones of Birmingham. His joke about crèches is the worst joke I have heard in the House in the 12 years that I have been here.
My first substantive remark is about the evidence base. In Committee, I pointed out that the evidence paper presented to us as part of the background material did not give evidence as you would normally understand that term—that it was clear what would happen if you moved from one year to two years; instead, it was evidence about perception. It is probably worth repeating that the Minister said that perception is as powerful, if not more powerful, than evidence.
Today, having been given the challenge that if you have a problem of perception, your job should be to counter perception by evidence—to change the perception by talking to people—the noble Lord said, “Exactly. That is what we are trying to do”, which caused an intake of breath on these Benches. The Minister has reinforced that today by saying, “I want to meet the challenge that there is evidence of perception”. I am sure he has evidence of perception—that becomes a circular argument—but there is still no evidence.
My second remark is that noble Lords repeated three or four times the Americanism about how many people we should let go. I do not think I am alone in finding that American usage distasteful. I deplore the idea that these people want to be let go. Do they come up and say, “Please let me go”, to which the answer is, “All right, I will let you go”? They are being sacked, they are being dismissed, they are being thrown out, they are being put on the scrapheap. That is the language. I have never heard in a pub in Burton upon Trent anyone saying, “I think they’ll let me go”, when they mean that they are going to be dismissed. Does the Minister appreciate that that is not the industrial language in this country?
Finally, I echo the remarks of my noble friend Lord Whitty, supported and reinforced by my noble friend Lord Monks. If legislation through statutory instrument as deep-cutting as this goes on and on, one is cutting the legs off primary legislation. We have a growing problem in the role of the House of Lords—second only, perhaps, to the Money Bill question. We are seeing more and more statutory instruments which are not playing around with minor detail of the primary legislation but, bit by bit, salami-wise, cutting the legs off primary legislation. Does the Minister think that we can go on taking 3 million, another 3 million and another 3 million out of the scope of primary legislation without making nonsense of the conventions about the use of secondary legislation?
Lord De Mauley
My Lords, perhaps I may start by agreeing with the noble Lord, Lord Jones of Birmingham, most strongly about the quality and value of debate in your Lordships’ House. Today is no exception. We have had a good debate today, as indeed we had a good and full debate in Grand Committee on Monday last week, in which nine noble Lords from the opposition Benches participated, as did two from the Cross Benches and four from the coalition, as well as me.
Many of the questions and issues raised today were debated when we discussed the orders on that occasion, and my answers have not changed much since then. I am also well aware that noble Lords on all sides want to get on with the next business, so I hope that they will forgive me if I focus on the key issues.
The words flexibility and discussion have been deployed liberally throughout our debates, particularly by noble Lords on my side of your Lordships’ House, and my noble friend Lord Risby used those words today. Those concepts are at the heart of what the first order, the tribunal composition order, is about. The amendment of the noble Lord, Lord Young, suggests that the order will reduce the justice and fairness of employment tribunals and risk increasing costs through a greater number of appeals. These concerns are unfounded. I explained in this debate and in Grand Committee last week why they are unfounded but perhaps I may repeat what I said.
Aviation: UK Civil Aviation
Lord De Mauley Excerpts(12 years, 9 months ago)
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Baroness Gibson of Market Rasen
My Lords, I am very pleased to introduce this short debate this evening on this important and indeed timely topic. I thank the Airport Operators Association for its assistance with my speech.
Lord De Mauley
My Lords, will noble Lords leave the Chamber quietly so the noble Baroness can make her speech?
Baroness Gibson of Market Rasen
My Lords, in my capacity as a council member of the Air League, in my work with Youth in Aviation, as president of an air training corps, and as a member of the Air Cadet Council, I take a close interest in all matters relating to aviation. The civil aviation industry in the UK employs around a million people—352,000 directly, a further 344,000 people indirectly, and many more in its vital role in inbound tourism. It also contributes £50 billion to GDP and more than £8 billion to the Exchequer, according to a report published last year by Oxford Economics.
We are world leaders in designing and building aero-engines and airframes, in the design, construction and operation of airports, and in the safe and efficient management of scarce air space. Aviation is vital to any country and to any economy. However, it is especially vital to the United Kingdom for two clear reasons. First, and most obviously, it is because we are an island. It is the most efficient and sometimes the only way in which goods and people can get to and from the United Kingdom. Secondly, it is because we are and have been for many centuries a trading nation; a full 55 per cent of all our exports beyond Europe are carried by aeroplane, and we are all aware of the importance that the ever growing BRIC economies will have in the recovery of our nation.
All the nations and regions of the UK rely on good air links to connect them to the emerging world markets. Inward investors also need good air links not just to fly in essential parts and equipment but to ensure that their senior managers, executives and technicians have ready access to their offices and plants in the UK. Access to an airport with good global connections is vital, and there is another reason why we need to maintain and expand our aviation connectivity with the world. Tourism is already an important industry for the UK, with over 2.5 million jobs and £115 billion of GDP dependent on it. Shortly after he came to power, the Prime Minister expressed as one of his ambitions to make the UK one of the top five tourist destinations in the world. Given our heritage, our global positioning and the quality and quantity of the visitor attractions that we have to offer, this should not be an overambitious target. Indeed, the Tourism Alliance believes strongly that there is a need for aviation capacity to be expanded. It believes that that would support the goals that the Government have set for tourism growth, which should include consideration of current capacity, mid-term growth and an infrastructure for delivering long-term capacity.
Two big issues are preventing the aviation industry from playing its full part in helping to expand the economy and create more jobs. The first of these is taxation. I understand that the UK already has the highest level of aviation taxes in the world. The government standard or top rate of air passenger duty is up to 8.5 times the EU average, and the Chancellor has said that he proposes to raise it yet again by twice the rate of inflation during his Budget in March. This is at a time when aviation has just entered the EU Emissions Trading Scheme, which will add another layer of cost and complexity.
I urge the Government to think again about this tax rise. In the short term, it may raise extra revenue for the Treasury, but in the medium and long terms it will scare away airlines and routes and damage employment prospects for thousands of people. Other EU countries are lowering or scrapping their domestic aviation taxes as the EU Emissions Trading Scheme is phased in, and the Government should seriously consider doing the same.
The other big issue that is having a highly detrimental effect on UK civil aviation and preventing it playing its full role in boosting the economy and creating jobs is capacity. The whole of the UK and its regions rely on good air links to attract inward investment to facilitate the efficient deployment of key personnel, to open up access to new markets and to facilitate the export of goods. Airports are privately funded; they are looking not for government money, just for government support and permission to grow as and when extra capacity is required.
We are all aware that it is in the south-east of England that the problem is most acute. As European airports expand and plan for four, five or even six runways, Heathrow—currently our only hub airport—is stuck on just two. All three main parties have set their faces against additional hub runway capacity, but it is up to the Government to come up with a viable solution. There are a number of schemes requiring consideration relating to Heathrow, Gatwick and Stansted, through to a brand new airport in the Thames Estuary or, indeed, elsewhere. There are pros and cons associated with every solution and tonight I do not have a firm proposal to make. However, it is the job of the Government to examine all these options and come up with a speedy solution. The alternative will be that Schiphol becomes the UK’s hub airport, just as Europort became our capital’s seaport by default. This would result in the loss of tens of thousands of jobs and many billions of pounds of revenue, and all with no benefits to the environment.
Currently, flights and emissions are being displaced rather than obviated. Indeed, as people take connecting flights to Europe to avoid air passenger duty, the impact on the environment can be considerably greater. The Government need to take the lead on this issue, which is why the announcement last week that they will consult on the options for the creation of a new hub airport is welcome. A rapid and firm decision is needed that will ensure that the UK has a world-class hub airport fit for the 21st century.
We must support the UK’s aviation sector, in which we are world class and which employs so many people, contributing so much not just in GDP and tax but in what it enables other key sectors of the economy to do. Finally, I ask the Government again not to bring in further swingeing increases in air passenger duty and make the highest aviation taxes in the world even higher. Failure to address these issues—taxes that are too high and airport capacity that is too low—will send a sad signal to the world that we are not truly open for business.
Postal Services Bill
Lord De Mauley Excerpts(13 years, 6 months ago)
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Lord De Mauley
My Lords, I again say that I am grateful to noble Lords on the opposition Front Bench who agree with us on the establishment of an employee share scheme. I think that we all agree that this is a key feature of the Bill and will help improve employee engagement and the culture of the company.
However, we should not lose sight of the fact that the overriding purpose of the Bill is to safeguard the universal service and secure the future of Royal Mail. A key means of doing that is enabling the introduction of private capital. In a previous debate, the noble Lord, Lord Tunnicliffe, stated that the Government should strike the right balance between employee shares and attracting private capital. He also said that we should learn lessons from previous privatisations. Yet, through their Amendments 16 and 17, noble Lords seem to suggest that we have not gone far enough.
So let me put in context the commitment we are already making through Clause 3. The minimum 10 per cent share requirement in this Bill is the largest statutory employee share scheme of any major privatisation. There is no doubt that it is a meaningful share, but one which, in our judgment, will not harm our ability to attract private capital. As I have said previously, most major privatisations did not even refer to employee shares in their respective Bills. Furthermore, the eventual share schemes in those past privatisations offered generally smaller stakes—5 per cent in the case of BT and British Gas and less than that for the other utilities of electricity and water. Only Rolls-Royce and BA came close, at 10 per cent and 9.5 per cent respectively, but I reiterate that we are committed to at least 10 per cent. The noble Lord, Lord Brooke, referred to the bus companies. We of course looked at them, but they were generally very much smaller companies. We consider that a stake of at least 10 per cent already strikes the right balance between a meaningful stake and attracting private capital.
Amendment 16 would also require that the shares be allocated to employees on a pro-rated basis in line with the reduction of the Government’s shareholding. The Bill already allows for that and, as the noble Lord, Lord Stevenson, mentioned, the Government have committed to place shares into the scheme simultaneously with the first sale of its shares.
In Amendment 18, noble Lords have sought to specify the design of the scheme such that it is structured as a share trust. As I said during our debate in Committee on a similar amendment in the name of the noble Baroness, Lady Dean—ably spoken to by the noble Lord, Lord Brooke of Alverthorpe, in her absence—an employee share trust certainly has its attractions, particularly its ability to deliver the Government’s objective to ensure a long-standing employee stake in Royal Mail. The Minister for Postal Services, too, has been clear that he sees many attractions to establishing such a trust. However, it is important to keep options open on the design of the scheme at this stage. Individual share ownership also has its merits, giving employees a very real sense of ownership through their share certificates.
The design of the scheme will in part depend on the type of sale we undertake. For example, individual share ownership could be appropriate if Royal Mail were floated on a stock market. There are circumstances where it could also make sense to have some combination of a trust and individually held shares. The noble Lord, Lord Tunnicliffe, suggested in our debates in Committee that perhaps some shares could be used for training or bursaries. Again, there could be merits in such ideas. However, until we have reached a firm decision on the form of a transaction, it would be unwise to set in stone the form of the employee share scheme. However, I remind your Lordships that government Amendment 6, which we debated a little while ago and your Lordships accepted, requiring us to give details of the scheme when we put shares into it for the first time, will provide the House with further assurance about its proposed design at the appropriate time.
Finally, Amendment 18 returns to the issue of having an employee representative on the board. As my noble friend said when responding to Amendment 10, while the idea may well have some merits, it is for Royal Mail and its shareholders to determine whether the board should include an employee representative. Thanks to this Bill, Royal Mail’s shareholders will of course include its employees in the future.
The future ownership of Royal Mail, by both private investors and its employees, inextricably links them. Within the important boundaries set by Clause 3, the exact size and form of the scheme should therefore be informed by the type of transaction and the circumstances at the time of sale. I ask noble Lords to accept that it is imperative that we keep our options open. I therefore ask them not to press their respective amendments.
Lord Stevenson of Balmacara
My Lords, I thank the noble Lord, Lord Razzall, for his support for the amendment, and my noble friend Lord Brooke for sharing again his experience of working in this operation. We can laugh about it even if we cannot always agree on the absolute detail of what the figures mean. My noble friend Lord Brooke said that this was an opportunity for the Government to show themselves to be progressive in these matters, a theme which has run through most of our debate today. I am grateful to have had confirmation that the Government feel that the employee share scheme should be pushed forward and supported. We are pleased to have had confirmation that shares will be available from the first tranche.
The Minister said that the Government were minded to go for a trust but were not quite sure. There will be a point where they have to come down on one side of the fence or the other. We can see the argument for keeping options open—we are not so daft as not to—but what the purchaser is going to get needs to be clear. I would have thought that any purchaser who wanted to put a very large stake into Royal Mail would want to know that it is a well run and productive corporation and will do the job in which they are investing. That must require them to have good employee relationships, and we have argued—I think that the Minister agrees—that there is a case for ensuring that the employees’ involvement is proper, appropriate and at the level which will mean that we will get a well run and productive firm.
We have argued for greater than 10 per cent—I got a sense of some support from the noble Lord, Lord Razzall, on that. I do not think that the Minister is minded to go that way and he produced a long list of previous privatisations. But it is the future. Why not boldly go where others have not gone and take it up to 15 per cent, and then reflect on that? However, I shall withdraw the amendment.
Postal Services Bill
Lord De Mauley Excerpts(13 years, 6 months ago)
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Baroness Drake
My Lords, in moving Amendment 56, I will also speak to Amendment 57.
I thank the noble Lord, Lord De Mauley, for his courteous and helpful letter that addressed several issues relating to the Royal Mail pension plan raised by the noble Viscount, Lord Eccles, my noble friend Lord Young and myself. I welcome the assurances that: the Government are developing a joint communication plan with the trustees so that members are provided with information on the benefits that will transfer to the new public service scheme ahead of that transfer; active members will receive a seamless service from the new public service scheme and the Royal Mail scheme, including the provision of combined benefits statements; benefits which transfer from the Royal Mail scheme to the new public scheme will be replicated exactly; the governance arrangements for the new public service scheme will be the subject of consultation with the trustees and members’ representatives; and the Government must consult the trustees on the use of powers set out in Clause 17. I welcome that and the Minister’s confirmation that I am correct in my understandings.
However, there remains a matter of continuing concern. The Bill gives the Secretary of State considerable powers to make amendments to the Royal Mail pension plan, including the smaller Royal Mail pension plan—I call it “Mark II”—that is post transfer of assets and liabilities to the new public service scheme. These powers include the ability to transfer assets between the Royal Mail scheme and the new public service scheme, to which accrued pension rights will be transferred, and to divide the Royal Mail scheme into different sections, to allocate assets between the different sections and to determine which company or companies is a participating employer in any given section—this in preparation for the sale, retention and restructuring of different parts of the business. I am concerned that the Bill does not allow for some balancing mechanism of protection for scheme members when the Secretary of State exercises those powers. These amendments seek to address that.
I accept that, on the setting up of the new public service scheme, the Bill limits the assets that the Secretary of State can transfer out of the Royal Mail scheme such that the ratio of assets to liabilities in the Royal Mail scheme is no worse immediately after the transfer of those assets than it was immediately before. However, the valuation of those liabilities and assets is to be done in a manner determined by the Secretary of State. There is no explicit role for the Royal Mail scheme trustees, acting on the advice of their scheme actuary, to exercise a judgment on whether the assets remaining in the Royal Mail scheme are adequate in terms of value or appropriate in terms of the types of assets retained or transferred. Similarly, under Clause 17, when the Secretary of State exercises his or her power to divide the Royal Mail pension plan into sections and to allocate assets and liabilities between those sections, there is again no explicit role for the trustees acting on the advice of the scheme actuary.
Amendments tabled by my noble friend Lord Young in Committee sought to address this concern by strengthening the consultation rights of the trustees and involving the Pensions Regulator in any assessment of the transfer of assets and liabilities, particularly between the new sections of the Royal Mail pension scheme. Having reflected on that debate in Committee, I recognise that the Government would probably not want to give the Pensions Regulator the power to impose any methods, assumptions or penalties on the Secretary of State when transferring assets between schemes or sections of the Royal Mail pension plan. Similarly, the Government may well be reluctant to give the Royal Mail scheme trustees a potential power of veto on the transfer of pension assets, which could impact on the sale process itself. None the less, the concern remains that the Secretary of State retains considerable powers when it comes to determining the adequacy and appropriateness of the actual assets transferred.
The issues that we are dealing with here are fundamentally actuarial, ensuring that the assets of the Royal Mail pension plan and its sections are adequate and appropriate in terms of matching assets to liabilities. If these decisions have to be justifiable as a matter of actuarial opinion and the actuary concerned cannot be the Royal Mail scheme actuary acting for the trustees, the best candidate for the job in my view is the Government’s own actuary, GAD.
Amendment 56 to Clause 17 would address transfer of assets between the newly created sections of the Royal Mail scheme and Amendment 57 to Clause 21 would address assets transferred from the Royal Mail pension scheme to the public service scheme. The amendments would require the Secretary of State to obtain a certificate from the government actuary stating that in his opinion, in the first instance, the allocation of assets between the different sections is appropriate, having regard to the liabilities and obligations of each section and, in the second instance, the selection of assets transferred and the assets remaining in the Royal Mail scheme is appropriate, having regard to the liabilities and the obligations of the Royal Mail scheme and the new public service scheme established under Clause 16. In my view, requiring such a certificate from the government actuary would provide a form of protection to the scheme, its trustees and its members when the Secretary of State exercises his powers under Clauses 17 and 21.
The Secretary of State has very wide powers to allocate assets and liabilities and materially alter the strength of an employer covenant backing any of the new sections of the Royal Mail pension plan. These must be seen in the context that, under Clause 8, the Secretary of State has powers to transfer property rights and liabilities between the holding company and other companies that are wholly owned by the Crown, which may occur prior to, and be in preparation for, sale or mutualisation. These powers in Clause 8 could be exercised so as to have the effect of materially weakening the employer covenant supporting any section of the remaining smaller Royal Mail pension plan. To give an example, the Secretary of State could create a separate section of the Royal Mail scheme for Post Office Ltd under Clause 17 and determine which assets and liabilities are allocated to it. The Secretary of State also has the power to decide which assets and property rights are held by Post Office Ltd as a company under Clause 8. When these are taken together, they are considerable powers and reinforce the need for a protection mechanism for scheme members. I believe that certification from the Government’s actuary will provide, before assets and liabilities between schemes and sections are transferred, that degree of protection. I beg to move.
Lord De Mauley
My Lords, I thank the noble Baroness, Lady Drake, for giving us another opportunity to discuss the vital provisions in the Bill on the RMPP. Amendment 56 relates to the selection of assets left with individual sections of the RMPP created under Clause 17. That clause allows the Secretary of State by order to divide the RMPP into sections. The Government intend that this power will be used to create a separate section in the RMPP for Post Office Ltd. This is necessary as Post Office Ltd will be separated from Royal Mail, because it is not part of the sale under Part 1 of the Bill. Amendment 57 relates to Clause 21 and the selection of assets left with the RMPP as a whole once the deficit is transferred to the Government.
Part 2 of the Bill will allow the Government to take over the historic deficit in the Royal Mail pension plan. We intend to do this by transferring approximately £35.9 billion of liabilities and £27.5 billion of assets from the RMPP to the Government. This means that Royal Mail will be left with an appropriately sized pension plan to manage.
We intend that only liabilities relating to the salary link—that is, real growth in salaries for active members—and ongoing pension accruals will be left with the RMPP. We estimate that the salary link portion will amount to approximately £1.5 billion of liabilities remaining with the RMPP at the point at which the Government implement the measures in Part 2. Subject to state aid clearance, we intend to fund fully the liabilities remaining with the RMPP at the point of transfer, which would mean the RMPP also retaining £1.5 billion of assets.
In dealing with both amendments, I want to provide some reassurance on the process that will be followed to transfer assets from the RMPP to the Government. Before any assets are transferred, a valuation of the RMPP will indeed be undertaken by the Government Actuary. That valuation will follow standard actuarial principles and reflect the assumptions agreed between the trustees and Royal Mail for the March 2009 triennial valuation. The output of that valuation will be an up-to-date view of the value of the assets and liabilities in the plan. As a result, there will be no benefit in value for the RMPP, or a section of it, in selecting one type of asset rather than another. As noble Lords have highlighted in their proposed amendments, however, it is important that careful consideration be given to the type of assets that are left with the RMPP and to how those assets might be allocated between the Royal Mail section and the Post Office Ltd section of the plan.
We fully recognise that the assets to be left with the RMPP, and the individual sections, should reflect the future investment strategy of the trustees, and that it should be the trustees, in consultation with the respective employers, who set that strategy, rather than the Government. Jane Newell, the chair of the RMPP trustees, stated during her evidence to the Public Bill Committee in the other place that she would look to engage with us on the selection of assets to be left with the RMPP. I assure noble Lords that officials, with advice from the Government Actuary’s Department, have indeed been engaging with the trustees of the RMPP and are making good progress. Indeed, the Government are obliged under Clause 24 to consult the trustees before any orders are made under Part 2 of the Bill.
It is also important to bear in mind that the trustees would be free to sell any assets left by the Government and to change their investment strategy as they see fit. Of course, given the costs that this would involve, it is in everyone’s interest that we continue to work with the trustees to reach a satisfactory agreement on this issue.
I understand that concerns have been raised—the noble Lord, Lord Young, and I have corresponded on this—that the Government may seek to make changes to the RMPP by way of the powers in Part 2, even after the pensions changes that I have described have been implemented. I am happy to make clear that the Government intend to use these powers on a one-off basis only, and have no intention of making any substantive changes to the RMPP under Clauses 17 or 18 after the implementation of the pensions solution.
Postal Services Bill
Lord De Mauley Excerpts(13 years, 7 months ago)
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Lord Young of Norwood Green
I will speak to Amendments 24EC, 24ED, 24FA and 24GA, which stand in my name, and also to Amendment 24EB.
As my noble friend Lady Drake pointed out, there is, at the point of transfer to the new scheme, no clarity in the Government’s proposals regarding a number of issues that are of great importance to members of the Royal Mail pension plan. To begin with, there is the simple issue of who will be the immediate point of contact for scheme members who have a query or concern. The Secretary of State could, at least initially after the transfer, insist on continuity by having the new scheme administered from the current Royal Mail pension centre in Chesterfield. This would guarantee that the concerns of Royal Mail pension plan members are dealt with by staff who are familiar with those members and their problems. Chesterfield would also be seen as a familiar location, with familiar access points via telephone, email and postal address. Such a simple move would go some way to minimising concern during a difficult period of change for postal workers and retired members.
Equally, there is the question of the future governance of the scheme at the point of transfer. The current trustees of the scheme will end their trusteeship. That means that union members and pensioners will lose their current nominated and elected trustees. Whatever the Government’s intentions on these matters for the future, the fact is that at the point of transfer there will be a loss of representation of Royal Mail pension plan members in the functioning of the scheme. Immediately prior to the transfer, existing trustees will not be in a position to provide the assurances and information that are necessary, and which are outlined in this amendment.
In the other place, the Minister sought to give some reassurances on these questions. The honourable Ed Davey said:
“Because we want to continue the high standard of service and support to which members of the pension plan are accustomed, we want to work with the trustees on ensuring that administration is in place. No final decision has been made on how the new governance scheme will be administered, but it is likely that the Government will look—at least initially—to contract the administration of the new scheme to the existing Royal Mail pension plan administrators in Chesterfield. We are speaking with the trustees about that”.
We welcome that statement, and would welcome some reinforcement of it. That was said on 25 November, but what is the position now? Have the Government considered further the issue of contracting the administration of the new scheme to Chesterfield?
On the issue of the new scheme’s governance, the Minister said:
“We understand the importance of pension scheme members having input into running their scheme; that is absolutely common ground between us. We will therefore consider establishing a governance group with member representation for the new public sector pension scheme for current beneficiaries. When considering this, we will take account of the views of stakeholders and practices in other large public sector pension schemes. For example, the NHS pension scheme and the principal civil service pension scheme”.
He went on to talk about the governance group and it being,
“critical that the public sector pension scheme works with the Royal Mail pension plan, in terms of administration, governance and communication”.
He ended his contribution saying:
“We are absolutely committed to that”.—[Official Report, Commons, Postal Services Bill Committee, 25/11/10; cols. 431-32.]
Again, what progress has been made on this question?
If nearly four months later there is no greater clarity then, far from reassuring Royal Mail pension plan members, the Government will be responsible for having caused them greater concern. The intention of the amendment, as my noble friend Lady Drake said, is not to undermine but to seek clarity by obliging the Secretary of State to address Royal Mail pension plan members directly at the point of their greatest concern—that is, before the changes take place. In the absence of any further clarity from the Government, this amendment is surely profoundly important.
In relation to Amendment 24ED, as we noted in a previous amendment, under Clause 17 the Secretary of State has to make an order for the division of assets because of the separation of the pension schemes. There is no intent to prevent this process through this amendment, but there is concern that the trustees are losing control of hard-earned assets. There has to be a will to co-operate closely with the scheme representatives to ensure that there is a smooth transition in separating the schemes. The Bill gives great discretionary power to the Secretary of State; such power would not normally exist with the private employer in a pension scheme, so in order to demonstrate that there will be some checks on this power, we need a clearer picture of the future governance of the scheme. At this point in time, the Government have not had to make plain any detail about the future governance of the new scheme. Are the Government in a position to elaborate on their current thinking on this issue?
On Amendment 24GA, in Clause 24 there is no obligation on the Secretary of State to consult directly with representatives of the unions in Royal Mail. Although elected from and by union members, the members’ trustees are bound by law to act outside the formal democracy and accountability of trade unions. It has to be said that the practice of the Government is better than the formulation in the Bill. Meetings are taking place between the ministerial team and BIS and the elected officials of the union to discuss the future of the pensions plan. That is necessary and sensible. But nothing in this relationship is guaranteed on the face of the Bill. It is not beyond the bounds of possibility that matters between the Government and the unions may take a turn for the worse before the implementation of the new scheme. One hopes that this will not occur, but banking on hope is not a good guide for legislators or those affected by legislation.
I believe that the Government should accept this amendment, because it recognises that the real interests of postal employees have different representative forms. The best practice of this Government is to act on this fact. Now let the Government guarantee this in legislation.
Lord De Mauley
My Lords, before I start I should repeat my declaration of an interest in that my wife jointly owns and runs a business which is essentially a web-based mail order company and as such uses Royal Mail for delivery of its product.
Before I turn to the detail of the amendments, it may help if I provide a brief overview of the provisions in Part 2 of the Bill and the intentions behind them. These provisions will allow the Government to take over the historic deficit in the Royal Mail pension plan. As noble Lords are very well aware, the deficit in the Royal Mail pension plan is huge and volatile. As at 31 March 2010, it amounted to £8.4 billion, and the total liabilities in the plan amounted to £34.4 billion. So this pension burden is completely out of proportion to the size of the business. The provisions set out in Part 2 will allow this pension burden to be addressed as part of a package of measures to secure the future of the universal postal service. We propose that responsibility for the deficit will be removed from the business by the transfer of the historic liabilities to a new public pension scheme. Responsibility for ongoing pension accruals and salary-related liabilities will be left with the Royal Mail. Indeed, I think I can say that there is very little difference between this approach and that of the last Government.
Lord Morris of Handsworth
The Minister made reference to the liabilities. Could he say a word about the inherited assets?
Lord De Mauley
Yes, my Lords. As a general point, could I say that we are in Committee? So the noble Lord is free to come in after I have spoken, if he wishes. I do not think that my mental calculator is fast enough, but the assets are the difference between the £34.4 billion liabilities and the £8.4 billion deficit. My maths is failing me, but it is something in the region of £26 billion. But I am sure that divine intervention will bring the exact figure to me shortly.
Royal Mail will also continue to have full responsibility for past and ongoing accruals in the senior executive pension plan. These proposals will safeguard the pension benefits accrued by members and I am sure that all sides of the Committee share that objective. Member protection is paramount and features prominently in the Bill. In particular, Clause 19 provides that benefits—let me be clear, that is the full range of member benefits including increases and payments to dependants—cannot be adversely affected by transfer into the new public scheme. Our proposals are subject to state aid clearance, which is why some of the detail can be provided only in secondary legislation.
Viscount Eccles
My Lords, I thank my noble friend very much for an extremely clear exposition. We started the group with an extremely clear and well expressed amendment from the noble Baroness, Lady Drake. I want to ask a question that perhaps cannot be answered this morning: namely, what information has been conveyed from Royal Mail either to Postcomm, as it is at present, or to the Government about the expected experience under the new pension scheme? Pension schemes are very difficult to keep in surplus or in balance if the number of employees is declining or their average age is rising. Royal Mail recently declared that it was going to reduce its staff and workforce and I think has further plans that might lead to that happening again in the future. In my submission it is likely that the new scheme, which is entirely properly set up under the arrangements as described, nevertheless could be threatened with going into deficit at an early date. In looking at that subject, I hope that the Government are also taking account of the comparative costs of pensions to Royal Mail and to other postal operators. As I say, I am not looking to receive a detailed assurance today as this is a new and rather complex point. Nevertheless, at a later stage I might consider it right to revert to this subject.
Lord De Mauley
My Lords, my noble friend makes an extremely important point. The terminology is confusing but I think that he is talking about the RMPP scheme, the old liabilities and assets having been transferred out into what is rather confusingly called the new scheme. Therefore, he is concerned about the ongoing liabilities in the RMPP scheme. I will write to him, but I can tell him that £1.5 billion of funding will be left in the new scheme specifically to cover what is known as the salary link. However, I had better expand on that in writing, if I may.
Baroness Drake
My Lords, I hope that I may respond to some of the points made in the debate, particularly to the comments made by the Minister. Before I deal specifically with my own Amendment 24EB, I wish to comment on Amendment 24EC, which was spoken to by my noble friend Lord Young, as this addresses the Secretary of State exercising powers under Clause 17. As far as I can see, there is no explicit requirement on the Secretary of State to consult the trustees when exercising powers under Clause 17. Clause 17 gives the Secretary of State considerable powers. He can divide up the Royal Mail pension plan—not the new scheme but the Royal Mail pension plan—into different sections and allocate assets and liabilities between them, and he can allow different companies to participate in that scheme. The Secretary of State also has the power to determine what assets go on to the balance sheets of companies in preparing for privatisation or in a post-privatisation world.
These matters are of great importance to the trustees of the Royal Mail pension plan, which is left with accruing liabilities, or existing liabilities, that are not transferred to the new scheme. They will be very interested in the strength of the employer covenant backing any section so created, and what it does to the security of the members left in a particular section so created. In the occupational pension world, if you weaken the employer covenant to a particular section, that is a notifiable event—it is not something that you can breeze over. It is what the regulator exists for, which I suspect is why my noble friend raised the issue of the Pensions Regulator.
Hypothetically, if I were an employee of Post Office Ltd and I had accruing rights in the remaining Royal Mail pension scheme, I would want my trustees to be very alert to what assets were left on the balance sheet of Post Office Ltd, because they are the assets—the covenant—that are backing the future benefits or the benefits that are remaining in the Royal Mail pension plan. These are real issues for the trustees. This will remain an occupational pension scheme because, as I thought, the Minister has not said that Crown guarantee carries on in the Royal Mail pension plan.
I do not think that we have clarity about how the Secretary of State can exercise his power under Clause 16 to split up the Royal Mail pension plan and how at the same time the trustees can exercise their power to protect the employees so that their position as creditors or the strength of the employer covenant is not weakened and the members left in a less favourable position.
On Amendment 24EB, I fully recognise that the proposals in the Bill allow for the deficit to be taken over by the Government; that will clearly give a lot of people in the scheme peace of mind. I welcome the Minister’s comment that members’ protection is of great importance. I think I welcome his statement that there will be a comprehensive communication exercise before, during and after the transfer, which is clearly very positive and on the record. However, we still need clarity about what will happen before the transfer. What communication will there be then? If the Government could clarify that, in writing or in some other way, that might deal with the issue.
The Minister referred to the Royal Mail pension plan trustees having statutory obligations to provide information to pension scheme members, and that is absolutely true. However, we have a complex situation in that there is almost a Secretary of State override to impose certain powers or requirements on the Royal Mail pension scheme. The trustees cannot account for that—they cannot explain that. The Government might choose them as the conduit to do that, but they cannot make those decisions or answer the questions that arise because of powers exercised by the Secretary of State.
I anticipated that the inefficiency of double communication might be raised, but I am not persuaded that that is an argument for not allowing people the maximum information prior to transfer. That is the reason for civil servants and Royal Mail pension plan trustees coming up with an efficient communication plan; it is not really a reason for not giving full and proper information prior to transfer.
It would be helpful to obtain greater clarity about the information that would be provided. However, I recognise that the noble Lord was seeking to improve the assurances given on the importance of protecting members’ information.
Lord De Mauley
Before the noble Baroness withdraws her amendment, I am happy to provide some clarification on the points she raised. She asked about the Secretary of State being obliged to consult, and I mentioned Clause 17. I apologise if I was not clear enough. The Government’s position is that under the general provisions in Clause 24 the Secretary of State must consult the trustees on the powers set out in Clause 17. I hope that that is helpful.
The noble Baroness also asked about the Crown guarantee. Perhaps I should clarify the Government’s position, which is that an unfunded public sector scheme is a better option, because providing a Crown guarantee would expose the Government, and therefore taxpayers, to significant risks—for example, investment risk—that are not under government control. With a guarantee, it would not be clear as to what liabilities the Government would be taking on, because although they would assume responsibility for the deficit, the Royal Mail trustees would continue to exercise control over investment policy and discretionary powers in relation to benefits to members. Our proposal to establish a new unfunded scheme is consistent with the majority of existing public service pension schemes. The pay-as-you-go model provides members of the Royal Mail pension plan with certainty that their benefits will be paid, while minimising the taxpayers’ exposure to investment risk and future volatility in the scheme’s funding position.
I should say in answer to the noble Baroness’s second broad point that officials have already started to work very closely with the trustees to implement Part 2, including over asset allocation. These discussions are critical in helping the Government to implement the pension solution.
Baroness Drake
I thank the Minister for those further clarifications. They are helpful, although they trigger one or two queries. Any further clarity that can be provided in writing would certainly be helpful. I interpreted what the Minister said as the Government putting on record that if they seek to exercise their powers under Clause 17, they will consult the trustees. That is helpful.
My point about the Crown guarantee was that after the transfer of liabilities or accrued rights to the new pension scheme, there remains a Royal Mail pension scheme with either liabilities or accruing liabilities, and it will remain an occupational pension scheme. I sought to clarify whether the Secretary of State would not exercise any powers over that remaining pension scheme in a way that undermined the protections afforded to the Royal Mail pension scheme under the normal range of occupational regulations. That was a key point.
The Minister’s clarifications have been helpful. Ambiguities remain and I am sure that they will be the subject of further discussion. Any clarity that can be given to my noble friend Lord Young on what happens before the transfer would be helpful. I beg leave to withdraw the amendment.
Lord De Mauley
“( ) For the purposes of this section as it applies in relation to the transfer of assets after the relevant time by virtue of a transfer order—
(a) treat the assets as if they had been transferred at the relevant time, but(b) disregard so much of the assets as were transferred to reflect the fact that the assets were not actually transferred at the relevant time.”
Lord De Mauley
“( ) Information that—
(a) relates to pensions or other benefits under the RMPP or a new public scheme, or(b) relates to the administration of the RMPP or a new public scheme in respect of those pensions or other benefits,may be shared among relevant persons for the purpose of facilitating the administration of the RMPP or new public scheme.( ) “Relevant persons” means—
(a) the Secretary of State,(b) any person who administers, or exercises functions under, a new public scheme,(c) the trustee of the RMPP,(d) any person who exercises functions on behalf of the trustee of the RMPP, or(e) any person who is or has been an employer of a qualifying member of the RMPP.”
Lord De Mauley
“( ) Any order under this Part may provide for it (or any of its provisions) to come into force on a specified day.
( ) A “specified day” means a day specified in an order made by the Secretary of State under this subsection (and different days may be specified for different purposes).
Subsections (1) to (3) do not apply to an order under this subsection.”
Lord Christopher
My Lords, I had not intended to speak, but some of the comments made require a response. The noble Lord, Lord Flight, put his finger on one point: we have had much discussion about competition for the universal service when it does not exist and, in my own judgment, never will. However, you need regulation, because science moves on and who knows what might happen?
I was interested in the intervention of the noble Viscount, Lord Eccles, because I was going to use as a not-too-strong illustration the supermarkets. It is very interesting that they have not come together to provide a universal delivery service; they all do it on their own. Whether they ever will, I do not know, but I think that people would be very worried if we had the system which the noble Viscount, Lord Eccles, has just suggested, because the delivery of one’s letter in 24 hours would disappear and it would become increasingly difficult to discover who was responsible for it.
I shall move on to something more practical; the low cost of postage in this country, as has been mentioned. A couple of days ago, the Telegraph ran one of its happy headlines about the increase in the price of postage, and now utterly unrealistic correspondence is going on. I should like to put the differences on record. Despite the increase that is about to take place, we are still the second cheapest in Europe and the only country which has a mandatory access service. No other country in Europe has picked that up—not one. The new price of posting a first-class letter in the UK is to be 46p as compared with the following countries, none of which has an access requirement. In Denmark it costs 64p; in Germany 48p; in Belgium 51p; in the Netherlands 38p; in Sweden 58p; in France 50p; in Austria 48p; and in Spain, at the bottom, 30p, which will come as no surprise to anyone who has had experience of its postal service. Whichever company ultimately buys Royal Mail, it will seek to make a profit, so how can we conceivably expect a price structure to exist unless we have some regulation over it? We should be realistic, not only with ourselves but with the country, about the fact that there will continue to be increases in the price of mail in this country.
Lord De Mauley
My Lords, the essence of this large group of amendments concerns the balance between protecting the universal service on the one hand and allowing competition on the other. We agree that the new regulatory regime must strike the right balance between those two objectives. I thank all noble Lords who have contributed informed views from both ends of that spectrum. Satisfying all noble Lords will be something of a challenge.
The Government’s policy for the mail market is clear: competition is beneficial but must not undermine the universal service. Securing the universal service is therefore the overarching objective of the Bill. Clause 28, which gives Ofcom its primary duties for postal services, and Clauses 37 and 38, which relate to the access regime, are fundamentally important to ensuring that that objective is met.
Amendment 24GC seeks to remove subsection (3) of Clause 28, which ensures that, in performing its primary duty, Ofcom must have regard to the need for the provision of the universal postal service to be both financially sustainable and efficient. It is vital that the Bill ensures that Ofcom considers the impact of all that it does in regulating the market on the long-term financial sustainability of the universal service. None of us would want Ofcom to support the development of the market in a way that would undermine the long-term viability of the universal service. Furthermore, it is common ground that Royal Mail needs to modernise and to become ever more efficient. It is therefore also important that the financial sustainability requirement is balanced by a duty to have regard to the need for efficiency. Clause 28(3) is therefore a vital part of the new regulatory framework that we are creating.
The noble Lord, Lord Young, suggested that there will be pressure to remove parts of the universal service that are not efficient. The requirements to have regard to both financial sustainability and efficiency apply to the universal service as a whole; it is both inevitable and in the nature of any universal service that some parts of it will be profitable and will need to cross-subsidise those parts that are not. There is nothing in the approach set out in the Bill that could or would lead to every individual component of the universal service needing to be profitable in itself—although, obviously, Royal Mail would hope that they could be. The Bill seeks to ensure that the universal service as a whole is financially sustainable and that it is delivered efficiently to the requirements and standards set.
Lord Jenkin of Roding
I was not referring to the cost of Postcomm. I was referring to the cost that fell on the Royal Mail from complying with the regulatory requirements of Postcomm. That is the point that was made to me. I was astonished at the size of the figure, but I accepted what was being said.
Lord De Mauley
My Lords, I am most grateful to my noble friend for his clarification. I hope that I can reassure him that under the current regime, under the Postal Services Act 2000, any operators providing services within the scope of the universal service that have significant turnover are obliged to contribute to the costs. That will be the case under this Bill as well.
The debate that we have heard today, for which I thank noble Lords on all sides for their helpful and knowledgeable contributions, demonstrates that a case can be made to move the access regime in either direction. However, I strongly believe that the provisions in the Bill set the right framework for access—one that supports competition but not at the expense of the universal service. I am of the firm view that Clauses 37 and 48 strike the right balance and, when combined with other powers in the Bill, give Ofcom the tools to ensure a better and more effective access regime. I hope, therefore, that after this rather lengthy explanation, the noble Lord will feel able to withdraw his amendment.
Lord Young of Norwood Green
As a matter of historical accuracy, I did not play a prominent part in dealing with the previous Bill. That was done by my noble friends Lord Mandelson and Lord Tunnicliffe, although I was part of the Government.
Lord Young of Norwood Green
I felt that the Minister’s comments were helpful. He has agreed to take away some issues, which would be useful. He stressed the importance of ensuring that competition does not undermine the universal service provision or the role of the universal service provider. It is important to hear those remarks and to have them put on the record. I also welcome the response that he made to the amendment spoken to by my noble friend Lord Brooke. Reserving the right to look carefully at the record and at any further correspondence from the Minister, as well as amendments that may come on Report, I beg leave to withdraw the amendment.
Lord Young of Norwood Green
My Lords, I can understand why my noble friend tabled his amendment, given his long association which started at the GPO—an association which I shared, although not on the postal but on the telecoms side, so we both have a long-standing and abiding interest. We want Royal Mail to have the ability to be profitable as the universal service provider meeting its universal service obligation. That has been the Government’s aim in removing the burden of the pension and in making it clear in today’s comments that they are in favour of competition, but not to the point that it undermines the Royal Mail’s ability to function. If that “profitable” was to take into account the full costs of providing the universal service obligation, we could see the benefit of that. There are some concerns about what implications there might be when that test is applied, such as on stamp tariffs et cetera, but I will certainly be interested to hear the Minister’s response to this amendment.
Lord De Mauley
My Lords, Amendment 24GD, moved by the noble Lord, Lord Clarke of Hampstead, seeks to delete “financially sustainable” from Clause 28(3), and replace those words with “profitable”. If I may say so, he makes an important point, as do my noble friend Lady Kramer and the noble Lords, Lord Christopher and Lord Young. There was a long discussion in Committee in the other place over whether financially sustainable meant “profitable”. The Minister for Postal Affairs put it on the parliamentary record, and I would like to do the same today, that this Government absolutely seek for Royal Mail to be a profitable company. Part of the problem and the threat to the universal postal service is that, under the way in which the previous Government managed the postal services sector, Royal Mail has not been making profits and has been a drain on the taxpayer, so at the heart of this concept is the belief that to be sustainable the universal service must make a return for its provider. The only alternative, after all, is perpetual taxpayer subsidy, which is not a realistic, acceptable solution.
Importantly, in addition, “financially sustainable” is a broader concept than simply “profitable”. A company can be profitable in the short term but not necessarily financially sustainable; equally, it can make losses in the short term but have a sustainable future. As I have said, it will be for Ofcom to determine what needs to be taken into consideration when having regard to financial sustainability: the ability to earn a rate of return on investment; profitability; the setting of prices; long-term market volumes, and so on.
As I said in response to the previous group of amendments, the arguments that have already been made on Clause 28 and Ofcom’s duties, both in your Lordships’ House and the other place, have persuaded me to revisit Ofcom’s regulatory duties. The protection of the universal service is of paramount importance and we understand that we must get this absolutely right. That is the very reason why we are taking action and why we brought the Bill forward.
The noble Lord, Lord Clarke, in particular has unrivalled experience of the postal sector and I am always grateful for his contributions to our debates. He made some excellent and important points and I will reflect on them further when considering this issue. Given my commitment to look again at the issue and to bring forward proposals on Report, I hope that the noble Lord will feel able to withdraw Amendment 24GD.
Lord Clarke of Hampstead
My Lords, I thank the noble Baroness, Lady Kramer, the noble Lord, Lord Christopher, and my noble friend Lord Young for their contributions. I did not do this as a perverse way of having a voice today. I simply believe that we have a chance to look at history and not make the same mistake again. That is why I am particularly pleased to hear what the Minister has just said about revisiting the whole question of the regulatory responsibilities of Ofcom. In those circumstances, I beg leave to withdraw the amendment.
Baroness Dean of Thornton-le-Fylde
My Lords, I was encouraged, and I hope rightly so, by the Minister’s response that this matter would be considered between now and Report. Will that consideration include ensuring that we are not faced with Ofcom regulating after the sale, and that we have cover for the sale itself? If I had that assurance, I would be delighted to withdraw the amendment.
Lord De Mauley
I am sorry. May I ask the noble Baroness to repeat that? I was having words in my right ear.
Baroness Dean of Thornton-le-Fylde
I noticed that the noble Lord was somewhat distracted. My concern on this amendment is that if, on looking at the indebtedness of a potential USP, the Government come forward with a wholly acceptable measure, they do not do so after the boat has sailed—in other words, not after the sale. That is because the debt level which may or may not be raised by whatever model the Government decide on for the sale could still burden the company, although there would be provision for the future. Will the Minister please take that into account when he considers the matter before Report?
Baroness Dean of Thornton-le-Fylde
I thank the Minister very much for that. I beg leave to withdraw the amendment.