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Postal Services Bill [HL]

My Lords, I shall start with one or two immediate responses to my noble friend. He said that the term "technical provisions" is not a magical benchmark, and I agree with that. I should make it clear in relation to the funding of the salary link that the liability estimate of £3 billion staying with the RMPP includes the estimated value of the salary link, so it is covered in the assets staying with the RMPP. Amendments 55, 56 and 57 relate to Clause 21, as my noble friend has just outlined. The clause is an important feature of the member protection in Part 2 of the Bill. It restricts the Secretary of State’s ability to make an order to transfer assets from the RMPP under Clause 20. The restriction is that the ratio of assets to liabilities in the RMPP is no worse immediately after the transfer of assets and liabilities than it was immediately before the transfer. A specific calculation is being undertaken. The restriction applies to all sections of the RMPP, including new sections for Post Office employees and Royal Mail Group employees. I do not believe that it was intended from what my noble friend said, but Amendment 55 requires that for the purposes of Clause 21 the liabilities are measured on a buyout basis—that is, the most cautious basis for funding pension liabilities, often used to assess the cost of winding up a pension scheme. In addition the amendment requires that the RMPP scheme actuary is responsible for determining the liabilities, and as a result the assets remaining with the ongoing scheme. Amendment 56 has the same purpose but in the scenario where the Government create a section of the RMPP to hold qualifying accrued rights. Measuring the liabilities on a buyout basis rather than using other assumptions, such as the assumptions used by the trustees at the most recent full actuarial valuation in March 2006, would have two effects on Clause 21. First, the measured value of the liabilities of the RMPP immediately before the transfer would be higher, and so the ratio of assets to liabilities would be lower. This would mean that under Clause 21 the Secretary of State could leave the RMPP with a lower ratio of assets to liabilities. Secondly, however, the measured value of the liabilities of the RMPP immediately after the transfer would also be higher on a buyout basis. As a result the assets remaining with the RMPP would need to cover a greater value of liability but, as noted, the Secretary of State could leave the RMPP with a lower ratio of assets to liabilities. Broadly these two effects would cancel each other out, and so in practice the amendment would have little effect on the operation of Clause 21. The Government have stated their intention that when transferring assets and liabilities from the RMPP, sufficient assets will be left to cover its liabilities. The Government will appoint a suitably qualified person to calculate the liabilities in the scheme. However, they intend to engage with the trustees and their actuarial advisers to find an appropriate valuation basis that delivers value for money without putting members’ accrued benefits at risk. I think that that is the core of what my noble friend is seeking and that is what we intend to do. The details of the valuation will be set out in secondary legislation. State aid approval will be required to leave the RMPP with sufficient assets to cover its liabilities. It is not appropriate, therefore, to include a requirement to that effect in the Bill. The thrust of my noble friend’s amendment was to seek to establish that the RMPP should be fully funded at the end of the exercise on the buyout basis. The RMPP and its sponsoring employers will be in a significantly improved position by virtue of the measures in the Bill and it would be perverse to argue in this context that the trustees need full funding on a buyout basis to protect members going forward. Nor is it desirable to specify a particular funding basis for the purposes of Clause 21. In addition to the state aid issues I have just described, leaving the scheme fully funded on a buyout basis could involve a large cost to the Government and the taxpayer but provide members with little extra protection. Indeed, it could also provide an incentive for the company to wind up the scheme. The Government have no intention of doing that. Although the Government are confident that it will be possible for state aid approval to be obtained, they cannot prejudge the Commission’s detailed decision or rule out the possibility of modification to the proposals. That is why the Bill is not written in those terms. But there is protection written on the face of the Bill in the way that I have just outlined. As a result, I ask my noble friend Lord Clarke not to press the amendments. Amendment 57 would remove subsection (3). This subsection deals with the scenario where the Government have created a section of the RMPP to hold qualifying accrued rights under Clause 17. Subsection (3) states that, for the purposes of calculating the ratio of assets to liabilities described earlier, any liabilities in a government section holding qualifying accrued rights should not be taken into account. This is because those liabilities would now be supported directly by Government and not by the remaining assets in the RMPP. Although the option of a government-sponsored section containing qualifying accrued rights is only a contingency measure, it is a necessary precaution, should it not be possible to transfer qualifying accrued rights into a new public service scheme, as we discussed earlier. Accordingly, again, I ask my noble friend to consider not pressing his amendment.