Clause 9 - Transfer of employees: application of TUPE regulations

Defence Reform Bill – in a Public Bill Committee at 2:30 pm on 10th October 2013.

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Question proposed, That the clause stand part of the Bill.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss new clause 1—Transfer of employees (relocation)—

‘Employees transferred to a company by virtue of arrangements mentioned in section 1 may not be required to geographically relocate outside of the UK without full and proper consultation.’.

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

The new clause, proposed by the hon. Member for Plymouth, Moor View, gives us an opportunity to discuss some of the employee transfer arrangements proposed in the Bill. I welcome that opportunity, although she will not be surprised to hear that I am not persuaded of the case for the new clause.

I believe strongly in protecting the interests of transferring employees in the event that the new company should decide to relocate some or all of the services outside the UK. However, I will resist the inclusion of the new clause because I do not think it is necessary. Those employees transferring to the GoCo are sufficiently protected by current UK employment legislation in this context; accordingly, there is no requirement to include this provision in the Bill.

Hon. Members will recall the note on the Transfer of Undertakings (Protection of Employment) Regulations 2006, which I provided by way of reference earlier this month, which explain the protections that those regulations afford to transferring employees.

For those who do not have that with them, or have not got that at the top of their mind, in summary the TUPE regulations protect employees if the business in which they are employed changes hands, or the services that they provide are to be provided by another organisation. Their effect is to transfer employees, and any rights, powers, duties and liabilities associated with them, from the old employer to the new employer. That includes any rights specified in their contract of employment, statutory rights and the right to continuity of employment.

In addition, the new employer cannot change the terms and conditions of employment of transferred employees if the sole or principal reason for the change is the transfer. That is also the case where the sole or principal reason is connected to the transfer unless there is an ETO reason for the change, usually requiring a change in number of the work force. That often makes it difficult, if not impossible, for new employers to amend terms and conditions of employment of staff immediately after a TUPE transfer.

The Bill makes clear and explicit that the TUPE regulations will apply to the employees transferred to the company, which will have the effect of protecting the employees’ terms and conditions of employment in place at the point of transfer, as well as representational rights. The terms of employment that will be protected include any obligation with regard to mobility of place of work.

Civil service terms and conditions of employment generally contain a mobility obligation, both within the UK and abroad, for all but the most junior grades. Some of the employees who transfer to the GoCo will have on previous occasions relocated for work-related reasons, both within the UK and abroad, throughout their careers in the civil service.

Any proposed change of work location would be subject to general employment law constraints, which require that any enforcement of a mobility obligation must be fair and reasonable, dependent upon the personal circumstances of the individual concerned. I would add that it is one of the attractions of working in the Ministry of Defence that there is an opportunity to work outside the UK from time to time for those individuals who have the right skills and aptitude. We find that quite helpful as a recruitment tool.

Hon. Members will be aware that the Government recently published their response to the consultation on the TUPE regulations and that the amendments that will come into force in the spring of 2014 will not have a detrimental impact on the employee. Further to the protections afforded to employees by the TUPE regulations, part 4 of the Information and Consultation of Employees (ICE) Regulations 2004 places a general obligation on employers to provide information to and consult employee representatives.

Consultation is the process whereby management and employees or their representatives jointly examine and discuss issues of mutual concern. It involves seeking acceptable solutions to problems through a genuine  exchange of views and information. The consultation does not remove the right of managers to manage—they must still make the final decision—but it does impose an obligation that the views of employees will be sought and considered before decisions are taken.

To comply with their obligations under the ICE regulations, employers must provide relevant information to and consult employee representatives on all matters in relation to three specific points. First, recent and probable development of the undertakings, activities and economic situation; secondly, the situation, structure and probable development of employment within the undertaking and on any anticipatory measures envisaged, in particular, where there is a threat to employment within the undertaking; and, thirdly, decisions likely to lead to substantial changes in work organisation or in contractual relations.

The information must be provided at such time, in such fashion and with sufficient content as are appropriate to enable the representatives to conduct an adequate study and prepare for consultation. Any consultation must be appropriate in timing, method and content, and conducted with a view to reaching agreement on decisions within the scope of the employer’s powers. In other words, the employer must ensure that any consultation that is conducted must be meaningful and commensurate to the change being consulted on.

For example, if an employer were planning to move current premises to a new building, say half a mile down the road, with no effect on working practices or work force numbers, it could be deemed that the impact of the change would be minimal and, accordingly, a minimal period of consultation of a few weeks would be appropriate. However, if the proposal were to relocate to new premises far removed in the UK, or even abroad, that would have a significant impact on the work force and a period of months would probably be deemed more appropriate.

In summary, established UK employment legislation provides the required protection to the employees that the proposed new clause seeks to achieve. I, therefore, ask the hon. Lady to withdraw it and to support the existing clause.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence) 2:45 pm, 10th October 2013

Clause 9 relates to the potentially complex process of transferring a significant number of employees from the civil service within the MOD to a GoCo, should it be the preferred option, via the TUPE regulations, which the Minister has gone through at some length.

I will come to the new clause at the end of my notes and speak briefly about it. I would like to set down some of our concerns about clause 9 itself. We have all had the opportunity to read the written evidence supplied to the Committee by the trade unions. They have concerns that, under the TUPE regulations, the transfer of public sector workers to the GoCo, along with newly employed staff taken on by the GoCo using private sector flexibilities, has the potential to create a two-tier work force, where some employees have differing pay, terms and conditions. No doubt that will hinder progress on improving morale among former DE&S staff, which is currently rumoured to be low following the hollowing out of the Department.

The Public and Commercial Services Union and Prospect have both expressed only lukewarm support for the GoCo proposals, and the PCS feels that the risks inherent  in transferring its members across to a GoCo are too high. However, it should be said that some of its members, currently feeling demoralised within DE&S, might be feeling that a GoCo could breathe fresh air into the work they undertake with great skill to support our armed forces. I am sure that all the unions could give examples to highlight staff shortages in key areas, the cost of neglecting skill sets, and the impact on what is basically a sound organisation’s ability to recruit, develop and reward specialist staff.

Prospect currently has 2,000 members in DE&S, and the PCS has about 12,000 members across the whole MOD. We know that the Secretary of State accepts that there has been a gradual erosion of skills and capability in the organisation. His view, which appeared in the August 2013 issue of Desider, the in-house magazine for DE&S, is that that

“cannot be allowed to continue if we are to ensure the MOD’s ability to deliver equipment to the front line.”

The movement of staff across to the GoCo and the retention of some to work in the teams supporting the services—the requesters and the governor—need to be incredibly well managed to ensure that there is no imbalance and that the appropriate skills capability is preserved in each of the levels in which it is required. That goes back to our long discussion about clause 1.

The risk of a two-tier work force is real because of the ability of the new contractor to bring in new recruits to the operating company with different employment contracts. We have been digging and found that, rather oddly, DE&S is already recruiting people and using, to a limited degree, higher starting pay as a carrot, enabling them to leapfrog existing staff. Yet existing staff who are successful in applying for posts are deemed ineligible to benefit from the enhanced pay. I do not know whether that will be remedied by the transfer of staff to the GoCo—could it be exacerbated? I think that staff will be interested to know how the Minister sees that situation going forward.

We also need to hear whether the Minister foresees a potential situation whereby, if the GoCo was subsequently brought back in-house, any staff who benefited from better terms and conditions under the private sector would be transferred back to DE&S on the same terms and conditions, or transferred back to their current terms and conditions, which might be less favourable. I would be grateful for clarification on how bringing staff back in-house or transferring them on to another contractor might be managed, because the Minister, the Secretary of State and others have repeatedly held up the fact that the whole thing could be brought back in-house if the GoCo did not work. People need to understand how that would work for the staff.

The Bill also fails to clarify the status of military officers in DE&S and their place within a GoCo. Siren voices have rightly or wrongly said that one of drivers for the GoCo option was reducing the number of military officers involved in procurement. There have of course been issues specific to the length of their rotations, which, to be fair to the Government, the CDM has sought to remedy. The question is not strictly within the realms of TUPE rules, but does relate to the use and transfer of military personnel to the GoCo, and it needs clarification because they are part of the bigger picture  of the skills mix that must be transferred across. The impact assessment for military personnel in the operating company suggests that they will not be employees of the contracting entity or the operating company. Could the Minister please clarify that? I know that it is slightly outside the remit of the TUPE transfer, but it would be useful.

Finally, pension schemes and the responsibility for their associated costs will be particularly relevant to the MOD if it needs to transfer people back in-house and finds that the cost of the pension scheme has risen in the interim due to the much-vaunted enhancement of terms and conditions that is apparently likely to occur in the GoCo. Liability to the MOD could change and the Minister’s view on that could be useful. What is planned at the moment? Will employees take the new deal being designed for the principal civil service pension scheme with them into the GoCo? Does the Minister intend to renew the code of practice for staff transfers, which was signed by the MOD, the Defence Manufacturers Association and the CBI, and apply it to the GoCo?

Will the Minister set out clearly what type of restrictions might be applied to the freedoms and flexibilities that the operating company is likely to receive? The impact assessment makes a big play of the importance of those flexibilities, but will any restrictions be imposed in the contract? Will the contract insist on a training requirement, because it is not set out in the clause? If there is an additional need for training when staff are moved around by the GoCo, will that happen?

Quickly returning to new clause 1, the Minister is right that it was probing and intended to tease out how much flexibility the GoCo would have and whether staff would receive any protection, given the global nature of the GoCo consortium members, the bases and other functions of the DE&S, if they felt that mobility was unreasonable. I fully accept that many people join that element of the civil service in the MOD simply because there is the exciting possibility of mobility, but we need to ensure that that is covered.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

May I begin by saying what a pleasure it is to serve under your chairmanship, Mr Amess? I wish you all the best in the forthcoming election. Having served under your chairmanship before, I know that people will certainly not need hearing aids in the Chamber when you are in the Chair.

Clause 9 covers the transfer of employees and the protections given to them. It is welcome to see a Conservative Minister supporting the TUPE regulations, which stem from a good piece of European legislation. I was a full-time trade union official when they were introduced and brought some of the early cases. I remember the Conservative party of the time vigorously opposing the proposals as though it would be the end of the world for British business. I hope that the Minister can assure us that TUPE regulations will not be in the Prime Minister’s much-vaunted renegotiation of European legislation and will not be removed. We will have to wait and see.

TUPE regulations have clearly been important when Government contracts have been moved to the private sector, but I must say that they have limitations. The first limitation is the duration of the protection for employees. It has been quite common in many outsourcing situations for a company to take over a group of employees  and protect them for the necessary 12 months. Then, lo and behold, we see either redundancies or new contracts being issued to employees. I understand Prospect’s and PCS’s concern that the protection for many of their workers will be only temporary. I can also understand why, as my hon. Friend the Member for Plymouth, Moor View said, morale is low at DE&S, given people’s concern about knowing where they are going to be.

There is another issue that, again, might be a boring human resources point—a personnel point in the old days, when I used to deal with it. I am thinking of the two-tier work force. It is quite clear what will happen if people transfer over on present civil service conditions. New employees will enter the organisation not on the same terms and conditions. I suspect that the organisation will be looking for ways to save money, which were referred to the other day. The key way of doing that is not taking the Community Secretary’s view of saving paper clips, turning lights off or getting rid of pot plants, but getting rid of people, because people are the key driver of costs.

We could therefore end up, quite quickly, with a two-tier work force—or even a three-tier work force, if we have Crown civil servants and military personnel in there as well. They will be on different terms and conditions from the individuals we are discussing, plus the new employees of the GoCo.

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence 3:00 pm, 10th October 2013

Will the hon. Gentleman clarify his comments? I am confused as to whether he is advocating that the best way to introduce efficiencies into a GoCo is to sack people.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

No, I am not, but if we are realistic and honest, one of the key cost drivers is people. If the GoCo is to save money, it can do that by only two ways—either getting rid of people, or driving down terms and conditions of employment. Those two mechanisms will, I think, be used by the GoCo to ensure that the efficiencies are achieved.

The Government ought to be honest in acknowledging that point, not only in the public debate, but to existing employees. I have met some of them; I am sure the Minister has as well. Some have served long careers in the procurement system and have done sterling work. Treating them in this way is not correct. Regarding loyalty to the organisation, some people, if they are of a certain age, will leave the organisation. That will lead to the problems that have occurred in some of the other reforms that have taken place in the MOD.

I know personally that the Department is losing good people with good historical knowledge of the Department. That is leading to—how can I put this politely?—difficult implementations of certain policies in the MOD. To use a more vulgar term, it is leading to cock-ups in implementing the Government’s programme in the MOD.

Photo of Russell Brown Russell Brown Shadow Minister (Scotland)

Just to back up my hon. Friend’s point, those of us on the Committee today who have a genuine interest in defence have witnessed that over the past couple of years. The way to reduce costs is, deeply regrettably, people. We have seen that not just with civil servants, but with front-line serving military personnel. That is a big price. Perhaps two or three years down the line, people will question whether it was a price worth paying.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I understand what my hon. Friend is saying. Another point is that there is a common misconception in defence of “military personnel, good; civil servants, bad”. That is a simplistic argument that I think we, in all parties, have fallen into for far too long.

The argument does not recognise the fact that when we talk about the civil service, or when the press talks about the pen pushers, we mean people with highly technical skills, without whom we would not be able to deliver the capability that our armed forces need in their operations. It is important to acknowledge not only their career path, but the knowledge that a lot of them have built up over many years, which is invaluable.

It is argued that driving down the number of civil servants is a good thing. Obviously, it is a bad thing, but the Government are doing it anyway, and driving down the number of armed forces personnel. I know from my time at the Ministry of Defence that the cost of employing military personnel is far more than that of employing civil servants. If we lose the knowledge that is in the DE&S, we could have a situation in which it will have to be back-filled by military personnel, which will be more expensive, and that will obviously lead to costs as well.

My hon. Friend the Member for Plymouth, Moor View touched on the issue of pensions and exactly what the situation will be. There are two issues. One relates to civil servants in the Government scheme. Will the pension liabilities transfer—I guess not—and who will pick up the tab for the continuing liability of the people who have accrued pensions over a long period?

I am sure that any new pension scheme that could be offered by the GoCo employer would be on less generous terms than that currently enjoyed by civil servants. Have the Government given any thought to how that will be managed to ensure that there will not be a huge leakage of people? They might think it is time to leave if they are in a situation whereby their new pensions are going to be on a very inferior basis.

The idea that TUPE regulations make it impossible for a new employer to change terms and conditions or get rid of people is a misconception. That is not the case. The Minister challenged me and asked whether I was suggesting that that is how the GoCo will save money. No, I am not, but it will. The only way it will save money is by introducing inferior terms and conditions or reducing the headcount of people in the organisation.

I come back to my favourite subject of Bernard Gray. In his evidence to us, he claimed that the main driver for why we need a GoCo is that we can actually pay people more. I am sure he does not mean that everybody in the new GoCo will be paid more; I think he is possibly talking about attracting a certain number of individuals who will be on a higher scale of remuneration, and on a package such as he enjoys, which is in the public domain. I am not sure whether the Government have legally signed it off yet, but his salary is far higher than the Prime Minister’s.

That salary runs counter to what we have heard from the coalition Government over the past few years, which is that we should be driving down the pay of civil servants and those working for public bodies on the basis that they should not earn more than the Prime Minister. Yet the Government are setting up a mechanism to pay a salary higher than the Prime Minister’s, which shows how naive and stupid the original policy was in terms of trying to attract individuals.

It is not clear what Mr Bernard Gray is trying to get at. He gave evidence to the Defence Committee on 4 September this year. The Chair said to him:

“What you are essentially trying to do is to persuade the Treasury to loosen some of the restrictions on the civil service terms of employment for DE&S-plus. Is it possible for them to do that for DE&S without also doing it for all the other Government Departments?”

We can achieve that without going down the GoCo route, as with existing examples such as the Debt Management Office. When the Chair asked him what the answer was, he said, “We don’t know yet.” He did not know on 4 September this year, but we are now considering a piece of enabling legislation, which will give freedom to the Government to enact the GoCo—to go through the competition that they say they are going through at the moment. Everything comes back to a flaw that goes through the entire piece of legislation, which is the detail.

We are being asked to scrutinise the Bill, as the other place will be, but with much of the detail to be put in place afterwards. We may return to discuss that situation under one of the later clauses, but it is vital that the matter comes back to Parliament before the GoCo takes place. The employees are faced with uncertainty, because of the potential difficulties it could create, even with the TUPE regulations put in here; in future, the present Conservative Government could abolish TUPE negotiations altogether, and then where would that leave the employees?

Finally, to reiterate what my hon. Friend asked about where the TUPE regulations will apply, they will clearly apply if the civil servants and other people move from DE&S to the GoCo, but if, for example, as was described at length the other day, the Government use their golden share to bring the GoCo organisation back in house, will those people be transferred on their new terms and conditions, or will they return to civil servant terms and conditions?

Going back to Mr Bernard Gray’s evidence to the Select Committee, those people would then be out of synch with any civil service scheme. We need to understand where TUPE applies, therefore, and the Government need to be clear about what the terms and conditions of people would be if we brought them in house. Will they revert to the old civil service, or remain on their existing contracts?

Photo of Russell Brown Russell Brown Shadow Minister (Scotland)

I want to add one or two things to the points made by my hon. Friend. As a trade unionist, many of us thought that the Transfer of Undertakings (Protection of Employment) Regulations were going to be a saving grace when they arrived on the scene; TUPE was going to be the white knight on a charger coming over the hill to save everyone. My hon. Friend, however, has made it abundantly clear that TUPE is not an absolute saving grace; it is nothing more than a temporary measure. All those people who are involved and caught up in the whole situation as we move forward—the civil servants and all the staff producing products for our military—deserve as much security and certainty as anyone else. The tragedy is that the Bill gives them nothing.

On 5 September, the trade unions were asked—by me—what the feeling on the ground was. The response came back:

“There is massive concern on the ground. People are very unsure; they still do not understand how the transfer will take place. There has been an announcement this morning about potential changes to the TUPE rules.”––[Official Report, Defence Reform Public Bill Committee, 5 September 2013; c. 75, Q157.]

TUPE is only as good as how it is written up and constructed today. If we seek massive changes to the TUPE rules in future, what will that mean for any work force anywhere in the country?

Over the past six or seven years, I have witnessed on a number of occasions businesses changing hands, contracts changing and TUPE regulations coming in to what was deemed to be help for the work force. I am struggling to discover whether there was a single occasion when people were given anything more than a little bit of protection. There was no real benefit for people.

Both my hon. Friends referred to pensions. I remember one large public sector organisation that decided to hand everything over—it took everything out-house, I should say—and went to a contractor. The pensions for a work force of more than 150 went missing for three years. That was a really traumatic time, although thankfully we managed to get the situation resolved at the end of the day. It is not just about hourly rates and terms and conditions that people have to adjust to on a day-to-day and week-to-week basis, but about what lies behind that, and perhaps years of pension contributions.

Only last Friday I met a chap who works for the local council and came to see me about a worrying situation, which relates to this point about people being on all sorts of different terms and conditions when a change is made. There was one section in my local authority that brought in a contractor to do part of the work. This involved completely different terms and conditions and a significantly higher annual salary. Some two years later, the council has decided that the contractor can go, but that the work force belonging to the contractor will now transfer to the council. The people who worked for the contractor will retain their terms and conditions. The ridiculous thing is that some of the council staff initially transferred to the contractor, so there are guys who have probably worked together for around 20 years who had the opportunity to go to the contractor on new terms and conditions, but are now coming back on those protected terms and conditions for a period. That does nothing more than cause animosity within a work force, which was why I had someone knocking at my door.

Photo of Oliver Colvile Oliver Colvile Conservative, Plymouth, Sutton and Devonport 3:15 pm, 10th October 2013

May I say how pleasant it is to serve under your chairmanship, Mr Amess?

The hon. Gentleman makes an interesting case, but I am curious because this situation has been arising not for the past five or 10 years, but for somewhere in the region of 20 years. I remember being slightly involved with some of this stuff when we were talking the reorganisation of local government. Why is the hon. Gentleman making his point only now, rather than trying to deal with the situation when Labour was in power? I am curious to know some of the thinking behind this.

Photo of Russell Brown Russell Brown Shadow Minister (Scotland)

I thank the hon. Gentleman for his intervention, but the TUPE regulations came in only in 2006. I do not doubt for one minute that there was lots  of activity going on out there for the last 20 or 30 years, but this is seen as some kind of protection, and I have to tell the hon. Gentleman and his colleagues that at least it is something—something is better than nothing. The reality is that there is a strong history of the process being abused at a later stage.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

We also need to remember that the Conservative party, including their MEPs, fought elections opposing the TUPE regulations.

Photo of Russell Brown Russell Brown Shadow Minister (Scotland)

My hon. Friend is absolutely right. He has a long pedigree—

Photo of Russell Brown Russell Brown Shadow Minister (Scotland)

Undoubtedly a long memory as well.

Mark Pawsey (Rugby) (Con) rose—

Photo of Sir David Amess Sir David Amess Conservative, Southend West

I apologise; that was the hon. Gentleman’s father.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

Is the hon. Gentleman seriously suggesting that we should not make any changes to defence procurement because of his concerns about TUPE and that instead we should have a whole new set of TUPE regulations that are appropriate to the Bill?

Photo of Russell Brown Russell Brown Shadow Minister (Scotland)

I am sure that you will not make that mistake again, Mr Amess, if you are sitting in the big Chair downstairs at some point in the future.

I say to the hon. Gentleman that I am living in the real world, because I do not expect a new regime to be put in place to protect the work force that will be dealing with vital work for the security of our nation. In our evidence session back on 5 September, it was abundantly clear that the two trade union representatives had serious concerns for the people they represent. We need a quality work force delivering for us, and they need a degree of certainty.

I fear for the loss of experience and talent. In my constituency, I have seen talented people walk away from businesses that have been taken over by other companies when TUPE protection was supposed to be in place. TUPE is not the answer to all the woes that we will witness.

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

I made my contribution to our debate on the clause at the outset, so I shall address some of the points that have been raised by the hon. Member for Plymouth, Moor View and her colleagues.

The hon. Lady asked about the skill base within DE&S. She is quite right to raise that because it is fundamental to the success of DE&S that we are able to recruit and retain suitably qualified people with the right skills. The fact is that there are vacancies in DE&S and we have an ongoing recruitment campaign. That  campaign was kicked off this summer, and I am pleased to say it is having success in recruiting more skilled people to the organisation.

When I was giving oral evidence to the Committee, I said that the proposals were not about cutting jobs, as was suggested a few moments ago by the hon. Member for North Durham, but about ensuring that we are in a position to recruit and retain the right people. Does that mean that there will be different rates of pay for those new joiners coming in under a GoCo and those who have been TUPE-ed across from the existing organisation? At the beginning, that might be the case for some people, but it is not the intent. There is no intention to create a two-tier system of employees based on whether they have just been hired or have been in place for some time.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I am reassured by what the Minister says and I am sure that the work force will be, too. Will he give a commitment today that if DE&S goes over to a GoCo, the number of jobs in the GoCo will be protected?

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

No. As the hon. Gentleman well knows, I am not in a position to protect job numbers in an organisation when we are seeking to outsource the management of that organisation to somebody else. That would not make any sense at all. What we are seeking to ensure is that all employees in the new GoCo environment have the opportunity to benefit from whatever improvements to their existing terms and conditions are put in place by a new manager.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

In light of what the Minister has just said, will he give an assurance to the employees of DE&S that whoever takes over the new GoCo will not get efficiency up by reducing the work force, or can he not say that?

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

As I pointed out to the Committee two days ago when we were discussing where savings and efficiencies will come from, the big target is to make efficiencies in the procurement programme itself, which accounts for 82% of the spend managed by DE&S. There may be savings and efficiencies to come out of the operation and organisation of DE&S itself—I am sure that there will be—but we would anticipate that the bulk of the savings will come out of better procurement.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

I appreciate that the Minister is trying to answer the questions we posed. Something has occurred to me about how staff will be selected to be transferred across to the GoCo. At what stage in the process will the MOD have discussions with the GoCo on which individuals sitting within DE&S have the skill sets that the MOD wants to keep, but that the GoCo might equally want? How will those discussions be resolved?

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

That is an interesting question. The hon. Lady rightly points to the fact that we intend, as was clear from the letter I recently wrote to the Committee, to retain some skills within the MOD to enable it and the commands to retain the intelligent customer role. There will be some time between the decision point at which we decide whether to go down a GoCo route—and  with which winning consortium—and such time as the contract takes effect. We anticipate that that will be a period from next summer until the turn of the year. Therefore, over several months in the second half of next year, discussions will take place between a successful contractor and the MOD about which individuals go in which direction. I gave an indication of our current assessment of the order of magnitude of those transfers in the letter I wrote and that is as far as I can go at the moment.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

I will continue on this line. We received the Minister’s letter with the specifics on the numbers but, for the benefit of the Committee, will he state at what point in the period between the GoCo being accepted and starting and the staff being transferred will consultation happen with the work force and their representatives?

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

There is continuous consultation with the work force about the whole process that we are going through now. There are regular sessions between management and interested employees, and I addressed a town hall session of employees when we announced the White Paper in May. I assure the hon. Lady that there will be regular discussions. As to the formal consultation process, I cannot stand here now and say when that will start, but I commit to there being one.

We expect that there will be some discussion with the consortia as to their views on the types of roles, rather than individuals, that they would anticipate that they will need, or like to see left at the MOD, so that might form part of the negotiations in the first half of next year. Implementation will then take place in the second half of next year.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

I thank the Minister for his patience. Is there any risk that, given the relationship that exists between some of the bidders in the GoCo consortia and DE&S staff, bids could go in for individuals—because they had been appointed with them, or they understand their skill sets—rather than just the post?

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

Given the scale of what we are talking about, it is most unlikely that there will be discussions about individuals until the structure of the separation is clear. At the most senior levels—the board level—within DE&S, there will be exposure involving individuals within DE&S and the bidders, so views may be formed about a small number of individuals, but I would expect that that would be a handful. This is essentially a transaction involving several thousand people and we will not be providing access to those individuals for the bidders until such time as the contract has been signed.

The hon. Lady asked whether terms and conditions would remain in place on a transfer back to the MOD or to a third party. Clearly, if terms and conditions that were transferred across in the first instance were subsequently changed by a GoCo operating company and there was a subsequent transfer, those enhanced terms and conditions would be inherited either by the MOD or another party. At present we have no intention of bringing that business back into the MOD. The  much more likely eventuality in the event of a transfer is that another consortium would come in and inherit the terms and conditions prevailing at the time.

The hon. Lady and the hon. Member for North Durham both mentioned pension arrangements. Staff who transfer will remain members of the current pension scheme, and they will of course have the opportunity in future, should a new scheme be established by the GoCo operator or should access be made available to an existing scheme, to choose whether they wish to move into that new scheme. For the time being, however, they would remain within their existing arrangements.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence) 3:30 pm, 10th October 2013

That is very interesting. Who will pick up the employer’s liability for those individuals? They will no longer be civil servants. The Minister says they will keep the scheme when they transfer to the GoCo. Will the GoCo reimburse the MOD for those contributions?

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

From his work prior to joining this place, I am not sure how familiar the hon. Gentleman is with transfers of businesses, but there is a perfectly well established route under which both pension liabilities and contributions are transferred when an employee moves between one organisation and another. That typically involves the existing pension scheme continuing to receive contributions for those individuals who have chosen to stay with the scheme, and they continue to have the benefits of that scheme. In the event that the individual chooses to move to a new scheme—and it is the choice of that person, rather than the corporation—the contributions would be paid into the new scheme and a portion of the liabilities in the old scheme, as assessed by actuaries, would also be transferred. That is what happens in real life.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

Yes, I am quite well aware of what happens in real life. Ten out of 10 for the Minister.

I will be kind to the Minister because it is Thursday afternoon. If he does not know the answer, he may write to me if he wants.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

No, that was not an answer. For those who transfer to the GoCo but remain in the civil service scheme, will the employer’s contributions be paid into the scheme by the GoCo? The contributions will certainly be a lot more generous than those offered to new employees in a new scheme.

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

I have just explained it to the hon. Gentleman.

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

I specifically said that contributions relating to individuals who are staying in the existing scheme will be paid into that scheme. I did not say that both the employer’s contributions and the employee’s contributions will be paid into the scheme, but that is how it works—contributions in total.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

I am sorry, but the Minister has not answered the question. The contributions for the new provider will be quite big if it has to meet the more generous contributions to the civil service scheme. It is important, therefore, to know whether those contributions will be picked up by the GoCo, which I assume is what the Minister is saying. Or will the taxpayer still pick up those contributions? Clarity is needed.

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

The hon. Gentleman is assuming that a GoCo operator will set up a new scheme with more generous terms. We simply do not know that. Even if the terms are less generous than those applicable to members of the civil service pension scheme, the individuals will most likely choose to remain with the civil service scheme. In that case, the contributions, both employer and employee, will continue to be made into the civil service scheme by the GoCo employer and the individual who becomes an employee of the GoCo.

Photo of Kevan Jones Kevan Jones Shadow Minister (Defence)

That is fine. We have finally got there. The new GoCo employer will pay the employer’s contributions to the civil service scheme. I accept that there will be an option for people to go into the new scheme, and they will clearly set up a new scheme because new employees of the GoCo post-transfer will not have the right to join the civil service scheme. Therefore, there will be two separate schemes running. It is not a matter of whether the GoCo will choose to set up a pension scheme; it will set one up.

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

The hon. Gentleman is right that new employees will need pension arrangements. Whether the GoCo sets up a new scheme or whether the existing scheme of one of the members of the GoCo consortium is made available will be a matter for it to decide.

Mr Jones rose—

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

I am going to move on. We have done this one to death. I am sorry, but I am not willing to take another intervention on the same subject. We have covered it about six times.

The hon. Member for Plymouth, Moor View asked about military secondments. Those on the MOD payroll and the military register who are seconded to the GoCo in the future will remain MOD employees, and their remuneration will be reimbursed by the GoCo if that is what is determined in the contract. They will continue to benefit from the terms and conditions of their military service. The hon. Lady asked whether the code of practice will continue to apply to the GoCo. I would like to come back to her on that matter in writing, but I imagine it will. I think I have addressed all the issues she raised.

The hon. Member for Dumfries and Galloway described these arrangements as temporary measures. I am not sure which aspects of the proposed transfer of DE&S into a GoCo he regards as temporary, but I assure him that there is no intention for it to be a temporary measure.

Photo of Russell Brown Russell Brown Shadow Minister (Scotland)

The point I was making—I apologise to the Committee if I did not put it across correctly—is that no one should see this as a solution to all problems.  It may, as has happened in most cases, turn out to be a temporary solution before something much more drastic befalls the work forces.

Photo of Philip Dunne Philip Dunne The Parliamentary Under-Secretary of State for Defence

I can seek to reassure the hon. Gentleman if he is sceptical about whether this will be a lasting transformation. It is certainly our intention to find a new and improved arrangement for procurement and defence that will endure beyond the life of this Government and the next Government. We think this is the right way to go for defence procurement for succeeding generations.

Photo of Alison Seabeck Alison Seabeck Shadow Minister (Defence)

My hon. Friend the Member for North Durham, who has a wealth of experience as a Minister, persistently flagged up the issue of the transfer of pensions and his concerns about the leakage of personnel that may result from these changes. He also flagged up the potential for a three-tier work force, and the continuing uncertainty about the ability to move work into the GoCo, out of the GoCo and potentially back again. The Minister reassured us and said he does not think that is likely to happen—it is more likely to be a move from contractor to contractor. However, even in those circumstances there is upheaval and the risk of ever-changing terms and conditions.

My hon. Friend the Member for Dumfries and Galloway spoke with a degree of expertise about TUPE transfers and the mismatch that results when outsourcing happens and people work together in the same workplace, doing the same jobs but on different pay and conditions. TUPE was introduced only in 2006, and it has bedded down, but there are clear signs that in some places it is being abused and is not offering full protection for work forces.

Government Members have been enthusiastically hopping up and down and saying the Opposition have got it all wrong, but they are incorrect in their assumption that we intend to oppose the clause. We do not intend to oppose the clause, because TUPE, on the whole, is the best game in town and therefore we are not willing to go back to the drawing board on the clause.

I thank the Minister for his offer to write to me on one or two issues that have been raised, and I look forward to receiving his answers. We will not oppose the clause and I believe that the new clause will be discussed later.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.