Public Service Pensions Bill

Lord Dubs Excerpts

Tuesday 12th February 2013 Lords Chamber

Moved by

[Lord Dubs]

50: Before Clause 35, insert the following new Clause—
“Amendment to the Railways Act 1993
(1) The Railways Act 1993 is amended as follows.
(2) In Schedule 11 (pensions), after paragraph 11 there shall be inserted—
“11A (1) This paragraph applies if an insolvency event occurs in relation to the employer or former employer of a protected person.
(2) Where this paragraph applies, the Secretary of State shall become liable to discharge any liabilities in respect of relevant pension rights, to the extent that they are not discharged by the trustees of a new scheme in which the employer was a participating employer.
(3) For the purposes of this paragraph—
(a) “insolvency event” has the meaning set out in section 121 of the Pensions Act 2004;(b) “relevant pension rights” means the relevant pension rights referred to in paragraph 6(3) above.11B The duty referred to in paragraph 11A also applies if an insolvency event has occurred in relation to the employer or former employer of a protected person on or after 1 October 1994.””

[Lord Dubs]

My Lords, the amendment stems from the situation that arose on 31 March 2010 when Jarvis, a rail maintenance company, went into administration. The amendment is not intended to make any new demands but simply to close what I think was an unforeseen loophole in the Railways Act 1993. Schedule 11 to that Act was intended to provide railway workers employed by British Rail at the time of rail privatisation with the right to a protected pension. This amendment is intended to restore that right.

In other instances where rail companies collapsed or gave up contracts, the workforce had always been transferred to other companies, but this did not happen with Jarvis, due to complex reasons related to the application of the transfer of undertakings regulations. Nevertheless, many of the Jarvis workers who had been employed by British Rail at the time of privatisation rightly expected that at least their pensions would be protected by the 1993 Act. It was then discovered that the Act does not cover cases of companies going into administration, which meant that these workers simply lost out. It is estimated that some 650 former Jarvis workers have been affected, and that the cost of meeting the pensions shortfall that would arise from accepting this amendment would be in the region of £400,000. The amendment would also honour the spirit of the Railways Act 1993 and ensure that in the unlikely event that another successor company to British Rail went into administration and the work was not transferred to another company, any affected workers who were also employed by British Rail in 1993 would have their pensions fully protected.

I am seeking to put right something that was not foreseen and which clearly represents an unfairness and an injustice. Jarvis’s former BR employees are not receiving the protection that was promised at the time of privatisation. The major flaw in the protection order is that it is an obligation on the employer, but where the employer disappears it seems that there is no entity to take up that obligation. That is obviously a serious gap in the original privatisation process, and the former BR members employed by Jarvis were misled by the UK Government as a result. They expected to get the pensions to which they were entitled, instead of the much lower one they ultimately received.

I do not think that this amendment was debated in the House of Commons because it was not reached. If it was passed, it would mean that the British Government had honoured an obligation and a promise made at the time of privatisation that employees’ pension rights would be protected so that they were at least as favourable as the rights they enjoyed under the BR pension scheme. The new clause would provide the protection sought.

However, I understand that there is another option which the Minister may prefer. Under the terms of the Railways Act 1993, the Government could introduce an order to rectify the situation. The Minister therefore has two options. He can either accept the amendment or he can achieve the same end in another way. This is a matter of honour and integrity, and I think it is only right that several hundred workers should not be penalised due to something that was really only an administrative oversight. I beg to move.

[Lord Newby]

My Lords, as the noble Lord has explained, his concern relates to a situation that has arisen for people covered by the railways pension scheme, which is a very different kind of scheme from those covered by this Bill. That scheme was created as a railway industry-wide pension scheme for the multi-employer railway industry following privatisation. It is a unitised fund made up of a number of different sections, only one of which is underwritten by the taxpayer. Moreover, the scheme focuses predominantly on those working for private sector employers in the rail industry. Conversely, while some of the public service pension schemes in scope of the Bill may admit certain private or third sector organisations, they are predominantly focused on workers in the public sector. I will attempt to respond briefly to the points raised in the noble Lord’s amendment, but I am afraid that the primary focus of his attention should be my right honourable friend the Secretary of State for Transport.

The amendment would create a liability for the taxpayer to underwrite any shortfall in a railways pension scheme section. This underwriting would be required if the section develops a shortfall as a result of the insolvency of a participating employer or former employer who is the employer or former employer of a “protected person”. Protected persons are beneficiaries of the section who still retain certain rights deriving from British Rail days and enshrined in regulations made under the Railways Act 1993 in relation to their pension: for example, if their employer is obliged to provide pension scheme rights “no less favourable” than the relevant pension rights in their former designated pension scheme from British Rail days.

Let me set out the current position. As I have said, the railways pension scheme is a unitised fund that is divided up into sections. There tends to be one section for each employer. Most participating employers in relation to sections of the pension scheme are private sector railway operating companies. Only two sections of the scheme benefit from a solvency guarantee from government. The first of these is the “1994 Pensioners Section”, a closed section that deals primarily with the residual, deferred and pensioner members of the former British Rail pension schemes at the time of privatisation. The second is the “BR Section”, a section comprising a small category of contributing members and beneficiaries deriving from the former British Rail pension scheme. Even if the amendment were within the scope of the Bill, the Government do not believe that it is appropriate to amend the existing legislation in relation to railway pensions, as set out in the Railways Act 1993 and regulations made under it, and create a further liability for the taxpayer, as the amendment seems to propose.

The noble Lord has tabled the amendment specifically because of the Jarvis case. One employer, Jarvis, made use of the railways pension scheme, but has become insolvent. In a situation where the sponsoring employer of a section of the railways pension scheme no longer supports the pension’s scheme, there are complex legal requirements affecting how the scheme should operate in the future. The trustee of the RPS has been working with the Pension Protection Fund to understand whether the three sections of the RPS affected in this case are eligible for support from the Pension Protection Fund. The three sections are currently still in an assessment period. In the mean time, the trustee retains responsibility for paying benefits, although the Pension Protection Fund provides guidance on how the trustee should do this.

I hope that my explanation has provided some clarity for the noble Lord, although I appreciate that he might not have got the help he seeks. However, I hope that he will understand me when I say that the railways pension scheme is not a public service pension scheme in the same way as those being legislated for here, and that this is not the appropriate place to deal with the very important matters he has raised.

[Lord Dubs]

The Minister has given me a fairly complicated explanation and I think I would not be out of order if I said that I want to study it in Hansard rather than comment on it directly, particularly since I am not an expert on the intricacies of this issue. However, the outcome is disappointing. No one is challenging the principle that these Jarvis workers should have been better looked after than they were, given the commitments that were made at the time of railways nationalisation, so what has happened is rather unfortunate. This does not seem to be a fair outcome, whatever the technical process by which the Minister has reached his conclusion.

I should like to make two comments. The Minister has suggested that I should address my comments to the Secretary of State for Transport. I hope that he will be helpful to me if I redirect my arguments to the Secretary of State. I have no Bill under which to do that, although there may be other ways. I look forward to receiving the Minister’s help. Also, under the terms of the Railways Act 1993 maybe the Government could introduce an order to rectify the situation. The Minister did not comment on that suggestion, but I wonder whether he could take it away as an alternative to the other option he put forward. However, in the circumstances, I beg leave to withdraw the amendment.

Amendment 50 withdrawn.