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Postal Services Bill [HL]

Amendment 70A relates to the treatment of assets that are transferred to the Government. I shall start by setting out the Government’s intended approach to the treatment of assets and how we expect the pay-as-you-go scheme to be governed. Clause 20 covers the transfer of assets from the RMPP to the Government. The Government’s intention to transfer members’ qualified accrued rights to the new public service scheme represents an estimated £29.5 billion liability. To partially offset that cost to taxpayers, Clause 20 provides that the Secretary of State can, by order, transfer assets from the Royal Mail pension plan to the Government. Based on the 2007-08 scheme accounts, the Government estimate that they will use their power under this clause to transfer something like £23.5 billion of assets, which amounts to 80 per cent of the cost of the liabilities transferred. At the point of transfer, the Government intend to leave the remaining RMPP with sufficient assets to meet its liabilities, currently estimated by the Government to be £3 billion. That will require state aid approval. A transfer of assets will not affect the qualifying accrued rights transferred to the new public service scheme. To be clear to my noble friend, these will be protected in law and paid on a pay-as-you-go basis, as with many other public service pension schemes. The Government are conscious that these changes could entail a significant transfer of assets out of the scheme. Those assets have been accumulated over many years through the contributions of scheme members, as my noble friend said, and of Royal Mail as the sponsoring employer, as well as returns on the scheme’s investments. I stress that any such transfer of assets can take place only if the Government have also taken responsibility for the relevant liabilities—the qualifying accrued rights. In other words, at the point that the assets are transferred, the Government will also have taken on responsibility for the payment of past-service benefits to which those assets relate, as well as the responsibility for the shortfall in funding that will almost certainly be the case. It should also be remembered that, under Clause 19, members’ accrued rights that are transferred to the new scheme will be protected in law. A number of questions have been raised with regard to the governance of the new pay-as-you-go scheme; the noble Lord, Lord De Mauley pressed some of these matters as well. Because many public service schemes are not established under trust and do not have assets to manage, they do not have trustees. Instead, the responsibility for the management of such schemes is delegated to a professional scheme manager, who is able to draw on the full range of professional advice available to a trust-based scheme. The interests of members are reflected through statutory protection for benefits, and through other stakeholder consultation arrangements as part of the broader governance of the scheme. It is envisaged that similar arrangements to those applicable in other public service schemes will be developed in respect of the new scheme created under Clause 16. However, as the new scheme has no active members and there is no employer, many of the decisions that need to be made by other public service schemes, such as those relating to future benefit accruals, will not arise. As a public service scheme, it is envisaged that the new scheme will prepare an annual set of resource accounts. These will be informed by regular actuarial assessments and updates of the key assumptions used to calculate the scheme’s liabilities, including longevity. Given the nature of the liabilities that will be transferred to the new scheme, and the protection for members provided through the Bill and in the related secondary legislation, the Government regard the established model for governance of public service schemes as the most appropriate model to be applied in this case. I turn to the detail of Clause 20. Subsection (1) contains provisions for where the assets will be transferred. We intend for any gilts and cash transferred to go to the Treasury’s Debt Management Office and the Consolidated Fund respectively. The intention is that the other transferred assets will go to a fund established by the Secretary of State and will be sold over a number of years, with proceeds going to the Consolidated Fund. Clause 20(1)(a) allows for a transfer of the assets directly to the Secretary of State. That would allow for the transfer of any cash to the Secretary of State, who could then pay it into the Consolidated Fund. It is also a contingency measure, should the fund envisaged under Clause 20(1)(c) not have been established when the transfer of assets is required to take place. Clause 20(1)(b), which gives the power for the assets to be transferred to a nominee of the Treasury, is designed to allow gilts to be transferred directly to the Debt Management Office. I hope this has provided noble Lords with clarity on our proposed treatment of assets and how that relates to the transfer of qualifying accrued rights. Amendment 70A, which I accept is probing, proposes to remove paragraphs (a) and (b) from subsection (1). The effect would be that assets could only be transferred from the RMPP to a fund established by the Secretary of State rather than directly to the Secretary of State or a nominee of the Treasury. That would have no beneficial effect for members, whose qualifying accrued rights would already be protected in law, and would be funded from general taxation and not from the fund established by the Secretary of State. However, it would restrict the flexibility which the Government may need in the interim to implement the transfer successfully and could add to the costs of asset disposal. The noble Lord, Lord De Mauley, asked a number of questions about how the assets would be dealt with and, in particular, what we mean by their being sold over a number of years. Let me be clear that the Government are not interested in a fire sale of any assets; they are committed to selling the assets over a number of years. It would not be appropriate to include a timeframe in the Bill because it is not possible at this stage to predict when sales will be appropriate and deliver value for money. Similarly, it is not appropriate at this stage to predict when sales will be possible. Therefore, the decisions will be for Ministers and the BERR accounting officer to make. The BERR accounting officer will be responsible for ensuring that asset sales deliver value for money for the public sector as a whole. This follows the standard procedure used for all public sector bodies, as set out in HM Treasury’s publication Managing Public Money. The Government recognise the importance of transparency on the pension proposals. We are currently considering the various options for how best to achieve this, including that of setting out a disinvestment strategy, but that is just under consideration. I hope that that explanation has dealt with each of the points that noble Lords have raised. I ask that the amendment be withdrawn.