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Postal Services Bill [HL]

My Lords, I shall just check the groupings list as there has been a change. I believe that Amendments 44 to 46 and 48 are also in this group. They all deal with the possibility of using the RMPP as a vehicle for guaranteeing the qualifying accrued rights, which the Secretary of State has said will be guaranteed by the state. They revolve around Clause 17, which will allow the Secretary of State to sectionalise the RMPP, to create a section that will provide for qualifying accrued rights, to amend the RMPP to fit the arrangements that he wants to make after consulting the RMPP trustees but without getting their consent, and to veto any amendment or exercise of discretion in the RMPP. The Secretary of State has made it plain that the Clause 17 mechanism, if it can be called that, is very much a back-up to be used only if a new public scheme is not set up using the alternative Clause 16 mechanism. However, nowhere is there an explanation of why a back-up power is needed at all. The regulatory impact assessment makes a compelling case for operating the scheme, whatever form it is to take, on an unfunded basis. First and foremost, the reason given is the volatility inherent in a funded model, and the point is made in paragraph 20 of the regulatory impact assessment that a 1 per cent fall in investment returns could double the scale of the deficit. Models suggested as alternatives in the regulatory impact assessment are as follows. Model A is: ""One off payment from Government to the scheme to make good any deficit; but no further changes to the distribution of assets and liabilities in the scheme"." In model B: ""Relevant liabilities and assets are transferred to a separate scheme (or a separate section of the existing scheme), with Government issuing a guarantee in respect of those liabilities, and assuming the role of the sponsoring employer—including making payments to the scheme to make good any deficit." In model C: ""Relevant liabilities are transferred to Government and met through the establishment of a new, pay-as-you-go public sector scheme. Assets transferred to government are in due course sold over a number of years"" That comes from the pensions appendix to paragraph 20 of the RIS. We are dealing with models B and C; model A has been discounted. Model C supposes an unfunded pay-as-you-go scheme outside the RMPP—that is the Clause 16 mechanism. Model B supposes a funded new scheme or section of the RMPP. There is no model D—an unfunded section of the RMPP. However, that is just what Clause 17 is. The regulatory impact assessment continues with an interesting explanation of "moral hazard", which it defines as the risk that occurs where perverse incentives exist so that one party is incentivised to act in a way which other parties would consider to be inappropriate. It explores the moral hazard that would exist if a trustee of the RMPP were to invest in assets supplied by the Secretary of State. Here we have a different sort of moral hazard—the risk that the trustee would be forced to act in a certain manner because the Secretary of State was sponsoring an unfunded section. The point is that the RMPP and the RMPP trustee should be allowed to go forward without any interference from the Secretary of State. Clearly, some amendments to the RMPP will be needed if liabilities are transferred to a new public scheme. Members’ entitlements to their saved benefits should be removed from the RMPP if they are being assumed by the new public scheme; otherwise, members of the scheme would have a double entitlement. However, that should be the extent of any amendment that the Secretary of State has any interest in. If the Royal Mail is broken up into a number of different companies—which we sincerely hope will not happen—a sectionalised scheme would possibly be necessary. However, the power to amend the RMPP is already in the rules of the RMPP. It can be exercised by the trustee and the Royal Mail. There is no need for the Secretary of State to be able to force his way through after "consulting" the trustee under Clause 24, but failing to obtain their consent. Amendment 43 says simply that the Clause 17 mechanism should not exist. It is not referred to in the regulatory impact assessment, and the need for a back-up mechanism has not been explained at any stage. Unless and until it is, Clause 17 should simply be removed from the Bill. Amendment 44 deals with the power to amend the RMPP. As I have said, we accept that an amendment power is necessary to remove entitlements from the RMPP that are being transferred to the new public scheme; otherwise there would be double entitlements. However, if Clause 18 is going to enable the cancelling of entitlements under the RMPP, the trustee has a moral—if not legal—obligation to ensure that what is being removed goes no further than what is required. Trustees will also have views about how the scheme should go forward. They will have to manage it in a way that is administratively workable after the qualifying accrued rights have been removed. The amendment would insert a requirement for trustee consent. Amendment 46 is consequential: it deletes the reference to Clause 17. Amendment 51 is also consequential. Reference to a new public sector scheme is unnecessary. If the representatives of members have to be consulted and agree to any adverse changes, then if any amendment is made to the RMPP that adversely affects rights under the RMPP, the trustees of the scheme will have to obey the law and obtain individual consents. The RMPP is subject to Section 67 of the Pensions Act 1995, even if the new public scheme, like every other public service scheme, is not. Subsection (6) is still required, however, in case, by a side wind, an amendment to the RMPP has a detrimental effect on qualifying accrued rights that are to be provided under the new public scheme and the RMPP. I beg to move.