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Postal Services Bill [HL]

The amendments of the noble Lord, Lord Clarke, propose some interesting alternative drafting for the adverse-effect safeguard in Clause 19. I am not quite sure why many of those safeguards appear in Clause 16; but be that as it may, I have tabled further amendments to Clause 19 on which I intend to raise some questions about the extent of the safeguard and the apparent loopholes that have been drafted into the Bill. For now, I shall concentrate on the amendments of the noble Lord, Lord Clarke. The most substantive change that his amendments suggest is the extension of the safeguard to the RMPP. I would welcome some assurances from the noble Lord, Lord McKenzie, that any transfer or future amendment to the RMPP by the Secretary of State will not be to the detriment of members remaining in that scheme. The noble Lord, Lord Clarke, is absolutely right to table amendments to ensure that no detrimental effect will result from the change from the existing DB scheme to the new scheme proposed in the Bill. Amendment 62A would close one of the loopholes that appear to have been drafted into this legislation. In Clause 19 the protection, such as it is, that is extended to members of the RMPP applies only to certain order-making powers under Clause 16. Again, the noble Lord, Lord Clarke, is quite right to question this. Certainly it applies to the chief of the Clause 16 powers, the power to set up a new public scheme and transfer rights to it, but the deliberate exclusion of the other powers in subsections (3) to (7) suggests that they might be applied in a way that would indeed cause detriment to members. Can the Minister explain why the other powers also do not have to meet the test of not causing material detriment to the members? It seems that the two things do not balance out at all. Is it because they absolutely cannot be applied in a way that would be detrimental to pensioners, or is it because the Secretary of State would prefer not to have to meet the test when considering future alterations—my brief uses the extraordinary word "tweaks"—to the new public pensions scheme? Amendment 64B attempts to put the safeguard on a more objective footing. The question of whether the safeguard has been met is, I suggest, highly subjective. It depends on many different factors. The valuations used to assess how good the rights are before the exercise of the power will, of course, affect the final judgement, as will the assessment of any risk that has been added to or removed from those rights. The current drafting appears to give the Secretary of State a great deal of leeway to change the figures—even to fudge them—and sign off on any exercise of the relevant powers. I quote from page 10 of the blue-covered pamphlet, published so helpfully by the department, which says "as good as" without any independent scrutiny. How can one judge whether they are "as good as" or "not as good as"? I recommend my amendment not only for the additional security that it would offer pension members but also because of the possibility of reducing any future judicial reviews on this matter. It would be extremely damaging for members’ confidence in their pensions if there were any uncertainty about whether the safeguard had been met. I hope the Minister will seriously consider bringing some proper scrutiny into this clause. There is, of course, a distinct danger of proceeding on overly optimistic figures that do not tell the whole story. We need only to look at the figures for local government pension schemes to see just how much deficit can be hidden away in the footnotes. The official deficit on these schemes is about £23 billion based on a March 2007 valuation. The Minister is by background an accountant and will know that, when the required standards of private sector schemes are applied, FRS 17 creates a totally new deficit, which is shown to be around £43 billion—nearly twice as much. This, of course, is based on figures taken from before the recent economic crisis. The Government appear to be hiding their heads in the sand about the local government scheme deficit, refusing to even contemplate my party’s suggestion of a proper review of the situation. Amendment 66 seeks to probe how previous enactments or Community obligations might prevent the Secretary of State from fulfilling the requirements in subsection (2). I find it absolutely inconceivable that any responsible Government—and I include all Governments of this country—should knowingly put themselves at risk of an EU court judgment. Of course, we have had a discussion even today on the necessary permissions around state aid, which clearly have not been received—indeed, they have not yet been definitively applied for. Can the Minister therefore confirm that the Government are prepared to press on with this part of the Bill, even if that permission is denied? For example, do they have enough money in the kitty, given the vast amount of money that is being spread around the economy at the moment? Do they consider taking over the liabilities, even if it causes material damage to the members, a possible second option? If not, then why is this loophole in here? When would they consider using it? My Amendment 64A seeks to ensure that the assessment of adverse effect applies not only to the individual members of the RMPP but also to any dependants who have accrued rights—a subject very dear to the heart of the noble Baroness, Lady Turner. It has become very clear to me over the past few years when debating legislation establishing private sector pension protection under the PPF and the FAS that the Government consider these secondary benefits to be of much less value than the direct pension rights that the member accrues. This is very unfair to the families, whether we are talking about the surviving partner or the children of the member, who have as much right to their derived benefits as the member. I hope that the Minister will reassure me that the Bill does not intend to exclude these ancillary benefits as unimportant. If he cannot do that, I hope that he will accept my amendment in one form or another. Clause 19(6) seems to establish yet another loophole in the safeguard. As the Explanatory Notes make clear, subsection (6) governs any future changes to the new public scheme and ensures that any detrimental change will be subject to the consent of the members or—this is the more worrying bit—in some prescribed manner, whatever that may mean. What does it mean? As drafted, subsection (6)(b) would allow the Secretary of State to prescribe a simpler procedure by which he could bypass not only the consent of the members but all the safeguards established in the earlier subsections of the clause. Why? When will the Secretary of State use that power? If the Secretary of State is minded to reduce the pension rights of members, and they have not given their consent, surely the reduction should not be made. The only application of a similar power is in the Armed Forces (Pensions and Compensation) Act 2004, which has been used either to allow the consent of Parliament to be waived when a member cannot be tracked down or to make adjustments in the application of inflation to benefits. The first example is already covered in existing provisions about what signifies consent, and the second is made redundant by the uprating of benefits remaining completely at the Secretary of State’s discretion in Clause 16(3)(a), as we will debate on Amendment 42. I realise that this is an enormous group, and I sympathise with the Minister for having to take it on, but the noble Lord, Lord Clarke, and I have asked reasonable questions on this part of the Bill and we would like to hear the Minister’s definitive reply.