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Lord Donoughue: My Lords, with the permission of the House I should like to speak from this Bench. I was a fund manager of the BBC pension fund for many years in the 1980s, when clearly it did quite well. Specifically, I should like to support what my noble friend said. It is simply not acceptable that employees who have worked with, and for, that surplus should, on moving, lose a part of it. If that is where they end up, they certainly should be advised to stay in the BBC scheme, keep their share and then start a new scheme elsewhere.

To make a more general point to the Minister, will he confirm that in the Bill there is no guarantee that a purchaser of the transmission system will operate an appropriate scheme for employees and pensioners? That seems to me to be the heart of the problem. That is what we are looking for. We are looking for the guarantee which my noble friend said was there for the IBA. That is what should be provided.

At present, BBC employees are members of an appropriate scheme. The Government say that one of the delights and risks of privatisation is that it may mean a deterioration in the pension position for which they have worked all their life on the assumption that it would not deteriorate. That is not acceptable. I ask the Minister, if he does not wish to change the Bill, whether he will agree that the Secretary of State, who has the power of final approval on transfer, should not give approval to any transfer of transmission unless an appropriate scheme is already in place. We would rather have that provision belt and braces in the Bill. If it is not in the Bill, I should like a guarantee from the Secretary of State that a transfer will not be made other than to a party that has an appropriate scheme in place.

Lord Inglewood: My Lords, I am most grateful to the noble Baroness for explaining the thinking behind her amendment and for the way in which it has been brought forward. She explained how she wants a proportion of the accrued surpluses in the BBC pension scheme to be transferred to the scheme operated by a new employer following the privatisation of the BBC's

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transmission network. I do not think this would be appropriate in these circumstances and, therefore, I cannot support this amendment.

I shall say a little about the background to begin with. There is currently a surplus in the BBC pension scheme. As is normal practice, when there is a transfer of a small proportion of staff from a scheme, this will remain in the main scheme. Let me explain: the BBC pension scheme is a "balance of cost" final salary scheme. The members pay contributions at an agreed rate, which in this case is 4.5 per cent. In return there is an agreed range of benefits. These include, most importantly, a pension related to the final salary they are receiving when they retire from the BBC. That pension is not determined by the level of any individual's contributions.

The BBC has an absolute obligation to pay whatever contributions are needed so that the benefits promised in the rules can be delivered. Whether the scheme is in surplus or deficit at any point is therefore dependent on the employer's contributions. It has no bearing on the pension which any member may be entitled to receive.

The options generally available to BBC employees when they leave the BBC are threefold and reference has already been made to them. They can either leave their accrued benefits in the BBC scheme where they will be guaranteed to increase each year in line with the retail price index up to 10 per cent. The second possibility is to take a transfer value payment to their new employer's scheme. The third is to take a transfer value payment to a personal pension arrangement.

However, when staff transfer with their function, as in this case, the BBC has agreed with the trustees of the BBC pension fund that it will pay into an appropriate scheme operated by the new employer a higher amount, known as the "past service reserve". The importance of that is that it goes beyond the legal obligation. This is the amount agreed between both sets of actuaries, which the new scheme would need in order to provide benefits equivalent in value to those accrued in the BBC scheme.

While there is no guarantee that the purchaser of transmission will operate an appropriate scheme based on final salary, the BBC has assured us that it will use its best endeavours to have a buyer who does. Indeed, some of the main potential bidders already operate such schemes.

In response to the second point made by the noble Lord, Lord Donoughue, the Secretary of State will ensure that fair arrangements are made for pensions in the transfer scheme, but cannot guarantee that a purchaser will offer a particular scheme.

We believe that it is right that the BBC, in selling its transmission assets itself, should have the responsibility for negotiating the arrangements with the purchaser and with staff, as with other services they have contracted out. In the case of transmission, there is a further safeguard introduced, as confirmed by the government amendment, that pension rights and liabilities can explicitly be included in the transfer scheme, which requires the Secretary of State's approval, as already mentioned.

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It is important both for the BBC and for the potential purchasers that they maintain the loyalty and commitment of transmission staff who are providing a first-class service. But I do not believe that they should be put in a straitjacket. Staff benefits will be one criterion of selection, but not the determining criterion.

To return to the subject of this amendment, where a scheme provides specified benefits, as does the BBC pension scheme, those are guaranteed whether it is in surplus or deficit. There is no logic in requiring any surplus or deficit, which happens to have arisen at a particular time, being passed to the new employer. To transfer a deficit would be a drain on the new employer. To transfer a surplus would simply subsidise the new employer's future contributions and penalise the BBC for having contributed up front. It makes no difference to the member's final pension. Having heard this explanation, I hope that the noble Baroness is able to withdraw her amendment.

Baroness Dean of Thornton-le-Fylde: My Lords, I have listened very carefully to what the Minister has had to say. I shall respond to some of the points which do not answer the concerns that I have. The Minister frequently referred to "a normal transfer". These are not people who are leaving, but who are being sold on. Their work is being sold on and privatised. On that basis, as a group of employees and not individuals, I argue most strongly that the points that the Minister made about the surplus are not appropriate in this instance.

The Minister said that the BBC has agreed with the trustees. We have to remember that the trustees within a scheme have it within their discretion to decide about the scheme itself. Their first responsibility is to the scheme whereas the BBC management will not be able to instruct the trustees on what they will and will not do. That is another reason why we want this provision in the Bill, with the Secretary of State having responsibility.

The Minister used the term "best endeavours". In this situation best endeavours are not sufficient. On paper it might look right, but in reality and in everyday experience, it just does not work out. It may be that the bidders for transmission services have their own pension schemes. I do not know, and neither do the employees, whether those schemes match the BBC scheme, which is a good scheme. It is a final salary and defined benefits scheme. I do not know whether the potential bidders have money purchase schemes, which are nowhere near as good as the majority of defined benefits schemes. So the employees may not have a real choice.

If the company that buys the BBC transmission services is already an established company with its own pension scheme, it is no easy matter to transfer people into it. Time and time again one has seen situations where two schemes are run in tandem because the differences are so enormous.

Those are all arguments for the provision, but the core of the matter comes down to the surplus. I heard what the Minister said, that the BBC has to pay if the scheme is in deficit. I have here the BBC report which deals with managing the surplus. It says that the present

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surplus will see the BBC through to the year 2004. Therefore, it is not as though the scheme is going to go into deficit next year or the year after.

I am not convinced by the Minister's arguments. Although the present provision is an improvement on that in the original Bill, with my amendment it will give employees the security that they deserve and the surplus element that they are entitled to. I wish to test the opinion of the House.

7.27 p.m.

On Question, Whether the said amendment, (Amendment No. 260A) to Commons Amendment No. 260, shall be agreed to?

Their Lordships divided: Contents, 36; Not-Contents, 65.

Division No. 2

CONTENTS

Addington, L.
Berkeley, L. [Teller.]
Carmichael of Kelvingrove, L.
Chapple, L.
Clinton-Davis, L.
Dahrendorf, L.
Dean of Thornton-le-Fylde, B.
Desai, L.
Donoughue, L.
Falkland, V.
Farrington of Ribbleton, B.
Graham of Edmonton, L. [Teller.]
Harris of Greenwich, L.
Hayman, B.
Jeger, B.
Judd, L.
Kilbracken, L.
Longford, E.
McGregor of Durris, L.
McIntosh of Haringey, L.
McNair, L.
Mayhew, L.
Monkswell, L.
Prys-Davies, L.
Richard, L.
Russell, E.
Serota, B.
Stoddart of Swindon, L.
Taylor of Blackburn, L.
Thomson of Monifieth, L.
Turner of Camden, B.
Whaddon, L.
White, B.
Williams of Crosby, B.
Winchilsea and Nottingham, E.
Winston, L.

NOT-CONTENTS

Abinger, L.
Addison, V.
Annaly, L.
Belstead, L.
Berners, B.
Blaker, L.
Blatch, B.
Brougham and Vaux, L.
Burnham, L.
Carnegy of Lour, B.
Carnock, L.
Chelmsford, V.
Chesham, L. [Teller.]
Clark of Kempston, L.
Coleraine, L.
Coleridge, L.
Colwyn, L.
Courtown, E.
Cox, B.
Cranborne, V. [Lord Privy Seal.] Cumberlege, B.
Denton of Wakefield, B.
Dixon-Smith, L.
Eccles, V.
Elton, L.
Ferrers, E.
Finsberg, L.
Fraser of Carmyllie, L.
Glenarthur, L.
Goschen, V.
Harlech, L.
Henley, L.
Hogg, B.
HolmPatrick, L.
Howe, E.
Inglewood, L.
Lawson of Blaby, L.
Liverpool, E.
Long, V.
Lucas, L.
Lucas of Chilworth, L.
Lyell, L.
McColl of Dulwich, L.
Mackay of Ardbrecknish, L.
Mackay of Drumadoon, L.
Macleod of Borve, B.
Mancroft, L.
Marlesford, L.
Massereene and Ferrard, V.
Mersey, V.
Miller of Hendon, B.
Napier and Ettrick, L.
Northesk, E.
Orr-Ewing, L.
Park of Monmouth, B.
Pilkington of Oxenford, L.
Rankeillour, L.
Seccombe, B.
Shaw of Northstead, L.
Strathclyde, L. [Teller.]
Swinfen, L.
Teviot, L.
Trumpington, B.
Ullswater, V.
Wilcox, B.

Resolved in the negative, and amendment disagreed to accordingly.

18 Jul 1996 : Column 1114

7.35 p.m.

On Question, Commons Amendment No. 260 agreed to.


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