Clause 15 - ''Pay'' and other matters subject to collective bargaining
Employment Relations Bill
4:15 pm

Mr Henry Bellingham (North West Norfolk, Conservative)

I beg to move amendment No. 6, in

clause 15, page 14, leave out line 19.

Mr Eric Forth (Bromley and Chislehurst, Conservative)

With this it will be convenient to discuss the following:

Amendment No. 36, in

clause 15, page 14, line 19, leave out from beginning to end of line 4 on page 15.

Amendment No. 7, in

clause 15, page 14, leave out lines 20 to 25.

Mr Henry Bellingham (North West Norfolk, Conservative)

The clause is important. New paragraph 171A(1) makes it clear that

''In this Schedule 'pay' does not include terms relating to a person's membership of or rights under, or his employer's contributions to—

(a) an occupational pension scheme . . . or

(b) a personal pension scheme''.

The clause excludes from the list of subjects that are part of the collective bargaining process pension schemes, personal or occupational. We touched on this on Second Reading. If there was not agreement across the Chamber, there was at least recognition that to bring pensions into collective bargaining would complicate matters and make collective bargaining

much more elaborate. In spite of all the pension crises, this would not be the right way to try to solve the problem. That was the essence of the discussion on Second Reading, although some Government Back Benchers were understandably pushing Ministers on the matter.

Pensions are a red hot issue. A company in my constituency, a former subsidiary of Albert Fisher Group plc, Fisher Frozen Foods, went into liquidation and was bought from the receiver by a Belgian company. We had the perverse situation in which people who retired when the company went into receivership were entitled to their full pension, even though they were only in their early 50s, while the pensions of those who stayed on with the company are being cut by about 40 to 50 per cent. It is perfectly obvious that there are real problems.

The T and G and I have discussed that matter at some length. Even the T and G takes on board the point that, if pensions were brought into the whole collective bargaining process, it would be complicated. It is difficult to see how it could be achieved in a way that was completely fair.

Mr John Lyons (Strathkelvin and Bearsden, Labour)

Does the hon. Gentleman accept that there is widespread support among employees for including pensions in bargaining because it is seen as nothing more than deferred pay? There is genuine concern that employers have been raiding pension schemes all over the country. That is building pressure locally, too.

Mr Henry Bellingham (North West Norfolk, Conservative)

The hon. Gentleman will have to persuade the Minister of that. I can understand where he is coming from. I do not in any way want to play down the severity of the situation. We all have constituents who are adversely and seriously affected by that. It is undoubtedly destroying family lives. The question is whether it should be brought into the collective bargaining process. We would say no. On the other hand—the hon. Member for Strathkelvin and Bearsden (Mr. Lyons) will be quite pleased about this—the clause holds the door perhaps slightly ajar.

New paragraph 171A(2) states:

''The Secretary of State may by order amend sub-paragraph (1).''

Amendment No. 36 would delete new sub-paragraphs (2) to (7). If the Government are to change the laws of collective bargaining, they should do so not by Order in Council but by primary legislation. This is an important issue. As we know, the opportunities that hon. Members have to scrutinise delegated legislation in this House are often limited. It is difficult for them to attend. Under the affirmative resolution procedure, it is hard to alert them in good time.

Some hon. Members, like you, Mr. Forth, are assiduous in their duties. They are hawk-eyed in looking out for examples of a Government using the procedure to change legislation. We feel that this is not the right way of going about it. It is such an important area. By removing this part of the clause, we will reduce any likelihood of the Government

being tempted to do so. It will force them to come to the House to make their case through proper legislation.

Mr Malcolm Bruce (Shadow Secretary of State for Trade & Industry, Trade & Industry; Gordon, Liberal Democrat)

This is an important section of the Bill and I suspect that one or two Labour Members may be tempted to contribute. The Government have come to a compromise and said, in a sense, ''We are aware of the problem, so we will take the power to do something about it, but we won't do it yet. In fact, we are not quite sure what we are going to do or when we are going to do it.'' I do not support the amendment but I, like some Labour Members, want a stronger section. There are recent historic reasons for examining the issue, and the hon. Member for North-West Norfolk has acknowledged the problem.

First, we must recognise that, over the past 10 to 15 years, many previously well-funded pension schemes—often final salary schemes—have hit difficulties. That is not only because of the fall in the stock market, but because of the pension holidays that were voted for when the going was good. If pensions had been a part of the bargaining process, would that have been as easy to do? Those running the schemes would have had to get the consent of the trustees, including representatives of the employees, but they would not have had to negotiate specifically with employees. Those pension funds might have been saved and employers might have avoided subsequent embarrassment. It may have been embarrassing for the directors not to be able to maintain the pension fund, but for many pensioners it caused a substantial decrease in their quality of life and expectations in retirement.

As well as pension fund holidays, I have a further concern about many institutions in the City that operated pension funds for companies that bought out their own funds instead of managing them. Those institutions secured permission from the Government to release and pay out orphan funds. Those funds have never been quantified, although figures in excess of £50 billion have been mooted; indeed, Prudential Assurance alone acknowledged £15 billion of such funds. It is sad that that money, which could have plugged the gap that has opened up because of the market downturn over the past few years, has been dissipated in a way that has not secured the future.

The impact of changes has sometimes been obtuse and unfair. Currently, there is a controversy at Clydesdale bank, which hon. Members may know is owned by an Australian bank but is one of the four major high street banks north of the border. It used to be known as the Clydesdale and North of Scotland bank, and in my part of Scotland it was the most prolific bank in terms of branches and customers. In that case the policy for staff was changed arbitrarily. Until recently, men and women were allowed to retire early on a full pension, but men have now been excluded from that option. I am surprised that that does not fall foul of anti-discrimination legislation, but legal advice suggests that it does not.

I use that case as an example in which employees regard their pension as an integral part of their working conditions, pay and terms. In the context of the Clydesdale bank, those employees are long-serving members of staff and specifically branch managers. Clydesdale bank is sufficiently old-fashioned still to have branch managers; other banks are beginning to think that they should bring them back. It is increasingly difficult to argue against the idea that, whether through the consultation or negotiation process, pensions should be regarded as part of people's negotiated package of pay and conditions. A pension is more than just deferred pay. It is usually contributory, so some pay is taken now, and then invested in trust for an agreed long-term benefit.

The first thing to ensure is that the benefit offered is protected; that people at least get what they were promised. It is particularly unacceptable if the pension is adjusted in a way that people do not get what they were promised. Secondly, we must avoid a situation where certain members—namely the older, established members of staff—have one pension and newer employees a different one. Some companies are resolving problems in that way; a sure recipe for friction in a company.

I am not only reluctant to support the amendment. I considered tabling my own amendment to do what the Government say they will one day do. I concluded that while I might have felt good about having the debate, I was unlikely to get the amendment passed. I want to say to the Government—I encourage some Labour Members to back me up—that if they recognise that they need to do something about this matter, they must tell us in more detail when and what they might do. There are an awful lot of people out there who have a direct interest in this. It is not just trade unionists or shop-floor workers; it goes from top to bottom, involving anyone who is other than self-employed.

The experience of the last 10 or 15 years suggests that that would be in the interests of the taxpayer in the long run, because it would ensure that people retired on good pensions and were not forced back on top-up benefits. It will ultimately be in the interest of well-managed pension funds to recognise that such a thing as raiding orphan funds or awarding pension holidays is a short-term bonus with negative long-term consequences, which is bad for industrial relations, bad for the morale of individual employees and, ultimately, not a very good deal for the taxpayer.

Mr John Lyons (Strathkelvin and Bearsden, Labour)

I agree with much of what the hon. Member for Gordon has said in this debate. There is increasing pressure; in my surgery, I meet people all the time who have spent 20 and 30 years working for a company but have been suddenly robbed of benefits that they were promised on the day they started in that organisation. They have faithfully paid the contribution and expected a return; then, quite suddenly, the trustees make changes. A person's life can be ruined by that change at retiral age.

There is a crisis in the pensions industry and not just in occupational pensions. It is bad enough that it should happen there, but someone in an occupational scheme can face changes in parallel. There might also

be major changes to a saving with Equitable Life, or with someone else. Again, plans that have been made for a whole lifetime suddenly have to be put on hold because neither the occupational pension nor some of the supplementary pensions are delivering what was promised. Regularly, people will come to my surgery to explain the situation.

There is an issue in terms of bargaining, but we are finishing up with a two-tier work force when it comes to pensions. We have people who have been established in a company for 10, 20 or 30 years and might well be in a final salary scheme. Then there are employees in exactly the same job who have only recently started; they are told that they are valued employees, but they cannot get the pension rights of the person who has been here five, 10, 15 or 20 years. Pressure is building up in the work force and in organisations all over the country. People will quite rightly say that all of us are valued employees and part of a partnership, but that we should not be undervalued when it comes to pensions. They will want to be treated just as fairly and just as properly as someone with a bit of previous service in the organisation.

We need to face up to this issue, and deal with it. It is not going to go away. People—I support them—will want to drag that matter on to the bargaining agenda. They will demand that trade unions make an issue of it. They will not be prepared to work without knowing what security they will have at the end of 10, 15 or 20 years. They want to be secure and know that they can promise their family and friends that they will be doing something for their retirement. They will want to know what money they are getting and what is missing. That is why it is important for us to drive this matter on to the bargaining agenda as soon as possible.

Mr Jon Cruddas (Dagenham, Labour)

I support what the hon. Member for Gordon and my hon. Friend the Member for Strathkelvin and Bearsden said.

I oppose the amendment, because it would make the situation regarding whether pensions are covered even worse than it was after the Government's ambiguous action in setting up the measure. It would also close the door on the possibility of returning to this matter at a later date, as my hon. Friend the Member for Strathkelvin and Bearsden said.

The ambiguities about whether pensions were covered emerged in the 1999 Act. They were clarified in the CAC report on UNIFY and the Nigerian Bank of Commerce, which said that pensions should or would be covered, although the report did not have the status of law that was inferred. The Government are closing the door and opening up the possibility of revisiting the subject in future. I want the Minister to say what circumstances he has anticipated in reconsidering that.

Mr Jonathan Djanogly (Huntingdon, Conservative)

I support the amendment and believe that the traditional bargaining topics—pay, hours and holidays—should not be extended beyond the current remit. At the very least, anything touching this area of the law should be done only with full parliamentary

scrutiny, rather than through the back door of statutory instruments at the order of the Secretary of State. That would be an enormous concern. However, it was fairly interesting to hear the argument.

Given these proposals, it seems that the Government could be considering including pensions, which would be a grave error. I ask them to think carefully about that. My hon. Friend the Member for North-West Norfolk said that that would complicate matters, and it certainly would. It would be a worse disaster than the £5 billion a year that the Government are currently stealth-taxing out from pensions. We are talking about big sums. This is the perfect measure to encourage companies to move their plants to the far east faster than they are currently.

The hon. Member for Strathkelvin and Bearsden spoke about the need to provide workers with security. Pension rights in themselves do not provide security. Time and again in recent years, as pension schemes go bust as companies fold, we have seen that there is no security without a secure company future. The sort of change we are talking about will damage companies' futures.

The hon. Member for Gordon made the interesting point that if unions had been more involved in investment in pension funds in previous years, perhaps—he did not speak in absolute terms—a lot of the final salary schemes with a trust behind them would not have been so bad. The Trade and Industry Select Committee addressed that in a recent review on corporate governance. It found that there were hundreds of trade union representatives on most of the pension funds, and they had been there for some time. The TUC acknowledged that that was a big problem; it had not been providing proper training for people going onto the pension schemes, and it was concerned about their knowledge and their liability.

I hear what the hon. Member for Gordon says, but it is not something the unions have had nothing to do with. They have been intimately involved with it and regard it as a problem. I am not casting any aspersions on the unions working within the pension schemes, or saying whether they contributed to the problems; just that it is not so straightforward as he said.

Mr Gerry Sutcliffe (Parliamentary Under-Secretary (Employment Relations, Competition and Consumers), Department of Trade and Industry; Bradford South, Labour)

This has been an important debate, in which hon. Members have shown their expertise on the emotive issue of pensions. They will be aware that the Government intend to publish a pension Bill shortly that will try to address many of the complex issues that have been raised. I will not get drawn into the issue of the timing of the Bill. However, when speaking to colleagues in the Department for Work and Pensions, it is important to ensure that the Bill addresses all of the key issues that have been raised not only in this debate but in discussions on wider pension issues. It is clearly an emotive issue for the reasons stated by hon. Members, particularly the hon. Member for Gordon, who spoke about the history of some of the schemes and the problems faced by many occupational schemes.

Mr. Forth, I know that you will want to draw me back to the Bill and the amendments. I found myself somewhere in the middle in terms of how I would approach this point, but I do not want to take anything away from the strength of feeling that has been shown by hon. Members on the issue.

I will discuss amendments Nos. 6, 7 and 36 together. Quite rightly, pensions are not currently one of the issues on which employers and unions must bargain under an award of statutory recognition. Those issues currently are pay, hours and holidays. Clause 15 clarifies that pensions are not part of pay for the purposes of the statutory recognition procedure. However, the clause provides a power for the Secretary of State to add pensions to the core topics in future. The Government intend to exercise that power when there is evidence that pensions are being widely bargained on in voluntary agreements. The TUC figures show that 36 per cent. of recognition agreements mention pensions.

The purpose of amendments Nos. 6, 7 and 36 is apparently to constrain—as hon. Members have said—the Secretary of State's ability to add pensions to the core bargaining topics in future. Amendment No. 7 would do that by deleting the power that allows pensions to be added as a new core topic alongside pay, hours and holidays. Amendment No. 6 would do it by deleting the Secretary of State's ability to amend the matters that are excluded from the definition of pay. Those matters include what are presently the two principal forms of pension schemes; occupational and personal schemes. Amendment No. 36 essentially repeats the changes sought by amendment Nos. 6 and 7, but also deletes the remaining sub-paragraphs of new paragraph 171A, which would otherwise be redundant. I shall confine my remarks to amendments Nos. 6 and 7, but it should be understood that they apply equally to amendment No. 36.

On amendment No.6, it is perhaps understandable that the hon. Member for North-West Norfolk is concerned that the power contained in sub-paragraph (2) of new paragraph 171A might be used at a later date to include pensions in the definition of pay once more. That is not the Government's intention at present. We have been clear that pensions are not part of pay for those purposes. Pensions and pay are closely linked, but they are not the same.

The reason for the inclusion of the power in sub-paragraph (2) of new paragraph 171A is not to allow us to include pensions in the definition of pay at a later date. It is included so that the law can be easily amended to take account of new forms of pension scheme that may develop and result in changes to the classification of pensions.

We have sought to exclude those matters relating to pensions that are most likely to be the subject of collective bargaining. Those are, broadly, members'

rights under a scheme and the employer's contributions to that scheme. While we have considered the issue carefully, it is possible that other pensions matters may emerge and come to our attention that we would also wish to exclude. Therefore, sub-paragraph (2) of new paragraph 171A is a sensible measure, which simply seeks to allow the law to take account of changing circumstances.

However, let it not be thought that the Government wish to discourage collective bargaining on pensions. We are proposing a power to add pensions as a bargaining topic in its own right in future. Amendment no. 7 seeks to delete that power. The Government are keen to encourage the renewal of employer-union partnership on pensions and there is a strong interrelationship between pensions and pay. Unions should have as much interest in the future incomes of their members following retirement as they do about the current pay that they receive. That is why it is right to take this power.

However, the Government do not believe that it is right to add pensions at this time, because the evidence is that they are only included as an item for negotiation in a minority of voluntary agreements. Encouraging voluntarism has been fundamental to our approach to the statutory recognition procedure. That procedure is designed as a fall-back; a last resort to be used where the employer and the union are unable to reach a voluntary settlement of a claim.

We intend to exercise the power when there is evidence of more widespread partner engagements on pensions. To that end, we will conduct periodic surveys of collective bargaining, to monitor what is going on. We recently published research, which is available on the Department of Trade and Industry website, which examines the extent to which pensions have been specified in voluntary agreements signed since 1998. Phase two of that research will examine in more detail the nature of collective bargaining where it is occurring in relation to pensions.

The fifth workplace and employee relations survey, which will shortly go into its fieldwork stage, should also provide an early guide. As Opposition Members said, we will undertake consultation before making an order under this power, and the order will be subject to the affirmative procedure.

I believe that the Government proposals are balanced and rightly give prime importance to encouraging voluntary engagement in this important issue. We strongly resist amendments Nos. 6, 7 and 36, but take on board the points raised by my hon. Friends. I am sure that we will return to this later. Notwithstanding the strength of the hon. Gentleman's opinion, I ask him to withdraw his amendment.

Mr Henry Bellingham (North West Norfolk, Conservative)

The Minister has not said why the Government cannot come back to the House with primary legislation on such an important matter. However, I take on board what he has said. He is in a tricky position, and I can see that he is being pushed by colleagues. For me to push him too hard

from the other direction might be considered unkind, but we will be coming back to this subject later. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 ordered to stand part of the Bill.

Clause 16 ordered to stand part of the Bill.

Further consideration adjourned.—[Charlotte Atkins.]

Adjourned accordingly at eight minutes to Five o'clock till Thursday 5 February at half-past Nine o'clock.

Forth, Mr. Eric (

Chairman

Atkins, Charlotte

Atkinson, Mr. Peter

Bellingham, Mr.

Bruce, Malcolm

Cruddas, Jon

Djanogly, Mr.

Foster, Mr. Michael Jabez

Lyons, Mr.

Owen, Albert

Picking, Anne

Sheridan, Jim

Stewart, Ian

Sutcliffe, Mr.

Tynan, Mr.

Williams, Hywel