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Postal Services Bill [HL]

Some interesting issues have been raised. Perhaps I can say first to my noble friend Lord Clarke that Amendment 55 is grouped with this amendment and extends the proposition in respect of the guarantee not just to look at the new public scheme, but that: ""If the RMPP or any section of the RMPP is wound up, its liabilities shall be guaranteed"." I will address those issues, even if my noble friend did not actually touch on them. I shall deal specifically with his query about whether, if a section of the RMPP did go bust, it would affect other sections. The intention is that sections of the RMPP that the Government create are fully segregated so that there is no cross-subsidy or cross-fertilisation, as it were. I can also say up front to the noble Lord, Lord Skelmersdale, in regard to the Pension Protection Fund, that if the RMPP in its funded guise were to suffer circumstances where the employer had an insolvency event and therefore began to wind up an insolvent position, the PPF would kick in. But there is a big "if" about the insolvency of the employer because in those circumstances we would have to look separately at the Post Office and Royal Mail. The Government have said that they intend to take responsibility for members’ historic rights accrued up to 16 December 2008, including the pension deficit currently estimated to be in the order of £6 billion. At the point of transfer of any liabilities and assets to the Government, the sections of the RMPP would be left with sufficient assets to cover their liabilities. Let me make it clear that the Government are not proposing to make any changes to individual pension entitlements for either past or future service, and decisions on future pensions provision will continue to remain with Royal Mail Group Ltd and Post Office Ltd. As such, it is right that responsibility for funding future service entitlement should remain with those two companies. The Government’s proposals would facilitate a strategic partnership with Royal Mail, and both companies—Royal Mail Group Ltd and Post Office Ltd—would be in a much better position to support members who want to continue to build up pension benefits in the company-backed scheme. In the unlikely event of the insolvency of either sponsoring employer, as I have just said, members would be eligible for protection from the Pension Protection Fund. However, as the noble Lord, Lord Skelmersdale, noted, for pensioners in those circumstances the benefit would be 100 per cent on a PPF basis, which does not necessarily equate to a strict comparability with the benefits from the scheme for someone who has not yet reached normal retirement age at the date of the assessment. When payment is made it would be at 90 per cent, but with the detriment of the cap. As I have said, however, it would require the unlikely event of the insolvency of the sponsoring employer for that to happen. Amendment 50 would require the Treasury to meet any outstanding liabilities to the public service scheme were it to be wound up. Such provision would, however, be applicable only to a scheme operated on a funded basis, and that is not what the Government are proposing. As public service schemes operate on a pay-as-you-go basis, the liabilities that would be transferred to the new scheme are in effect already guaranteed by the Treasury because the Government are responsible for paying the benefits when they fall due. So what my noble friend is seeking is certainly met in practice in respect of the new scheme. Amendment 55 would go further and essentially provide a government guarantee to the whole of the RMPP, including any future service rights accrued after 16 December 2008. Under the amendment, if the company and trustees decided to wind up the scheme, the Government would have to meet any shortfall in funding. I should clarify that if the Government established a new section in the RMPP for qualifying accrued rights—the fallback option if a new scheme is not established—the liabilities in this section would already fall directly on the Government, who would meet the costs of paying the benefits as they fell due. So, in essence, that would equate to the situation if a separate scheme was set up. The guarantee arrangements of the proposed sections for employees of Royal Mail Group and Post Office Ltd could have a number of adverse effects. First, they would, in effect, make winding up much more likely to happen because of the undertaking that there would be no additional costs to the sponsoring employer. Secondly, and related to the first point, because the winding up is not contingent on Royal Mail’s own insolvent liquidation, it would represent a significant and potentially unfair subsidy to Royal Mail and Post Office Ltd and the European Commission would be likely to view this as incompatible aid. Thirdly, it would result in the prospect of a further potentially significant burden on taxpayers for an indefinite period into the future. Ultimately, taxpayers would be underwriting the decisions taken by the trustees and the company with no influence over their actions. For these reasons the amendment is not appropriate. The Committee will be aware that the Government have to balance protecting the universal postal service, members of the pension scheme and the interests of taxpayers. For members, the RMPP will be left in a much better position than it is at present and we are not proposing any changes to individual pension entitlements. I hope that my noble friend will find a degree of comfort within that and feel able to withdraw his amendment.