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Postal Services Bill [HL]

My Lords, in response to the points raised by my noble friend Lord Clarke, the Government cannot accept the amendment proposed by him. I hope that my comments will set out clearly the reasons for this. I understand that, in part, my noble friend is probing the position. I revisit the rationale for the measures set out in Part 2. They provide the Government with powers that, subject to conclusion of a partnership agreement for Royal Mail and to state-aid clearance from the European Commission, we intend to use to take responsibility for the historic pension liabilities within the Royal Mail Pension Plan that relate to benefits accrued by members of the plan prior to 16 December 2008. The Government’s view is that such action, taken as part of a package of measures including partnership and a new regulatory regime, is essential in ensuring that Royal Mail can modernise its operations and respond successfully to the challenges of a rapidly changing market. It must also be balanced against the interests of taxpayers, for whom the implications are significant, and of members of the scheme who may be affected. In relation to the Royal Mail Senior Executive Pension Plan, the Government are clear that there is no convincing value-for-money case for equivalent action to that proposed for the RMPP. As Richard Hooper’s report set out, it is the size of the RMPP’s liabilities relative to the size of Royal Mail’s business that is at the core of the issue in relation to pensions faced by the company and the postal market more generally. Given that the total liabilities of the Senior Executive Pension Plan are around 1 per cent of the liabilities of the RMPP, the same arguments cannot be applied to the Senior Executive Plan. Accordingly, in policy and value-for-money terms, the Government’s view is that there is no equivalent argument for intervention in relation to the Senior Executive Pension Plan. This fact is based not on the relative pay, status, or role of members of the plan. It is based on the relative size of the plan compared to the RMPP, and the risks this presents to the Government’s proposals in relation to the modernisation of Royal Mail through a strategic partnership. In relation to the interests of members, it has been suggested that members of the Royal Mail Senior Executive Pension Plan will somehow be worse off as a result of the proposals set out in the Bill. I do not accept that proposition. There is nothing in the Government’s proposals that will adversely affect members of the plan. For both the RMPP and the Senior Executive Pension Plan, the Government are not proposing any changes, whether enhancements or reductions, to the individual pension entitlements of members of either scheme, for either past or future service. The Senior Executive Pension Plan has, since April 2008, been closed to new members, with future benefits being accrued on the basis of career average-related earnings, rather than final salary. These changes are in line with those made to the RMPP. Importantly, this will reduce the future cost to Royal Mail as the sponsoring employer. Further, Royal Mail will, by virtue of the Government’s proposals on pensions and in relation to the measures set out in the other parts of the Bill, be in a much better position to meet its obligations to both schemes. In the unlikely event of Royal Mail’s insolvency, members of the Senior Executive Pension Plan would be entitled to protection from the Pension Protection Fund, as is the case now. Both of these facts are relevant in reassuring members about the Government’s broader proposals. I hope, on that basis, that my noble friend will feel able to withdraw his amendment. The amendment, should it be accepted, and we are not able to do so, does not say anything about assets transferring, only liabilities. Of course, if the Clause 17 route were adopted, it would not provide for the sectionalisation of the scheme to take account of the Clause 17 provisions. I hope that also for those added reasons, my noble friend will not press his amendment.