My Lords, Subsections (2) to (5) of Clause 24 and Schedule 14 give employers powers to amend employee contributions and benefits in their occupational schemes to an extent supposed to be limited to the cost of the extra national insurance the employer will have to pay as a result of the end of contracting out. I am totally opposed to this clause and also to Schedule 14. The proposal potentially impacts on 1.6 million active members of private sector DB schemes. It would enable any existing protection for members’ benefits in legislation or scheme rules to be overridden. This includes specific statutory protection given to members in former nationalised industries when they were privatised and also measures of protection that employers in times past have agreed to write into their schemes.
The ending of contracting out and the associated increase in employer national insurance is, in principle, no different from any other risk employers with DB schemes might face and there is no sound justification for the Government to disturb the existing balance of power in relation to these schemes. The extra cost on employers is no greater than as might arise in the event of a small change in market interest rates. There was no suggestion of intervention to protect scheme members who lost out when the Government, not so long ago, amended the statutory basis of the pension increase from RPI to CPI. A number of us objected at the time. Governments should allow the problems arising for employers on this count to be dealt with through the established process whereby changes can be effected by negotiation and agreement. An overriding power based on being able to recover a set amount of cost could result in great unfairness as there may be no correspondence between the variable amounts members may gain from a single state pension and those they may lose if employers are allowed to determine unilaterally the form of contribution and benefit changes in occupational schemes.
I also recall, during my career as a trade union official a number of years ago, how keen we were to negotiate what we then called final salary schemes—
DB schemes. As a result of the schemes that we negotiated then, there have been beneficial changes for many pensioners. As we know, though, after a certain number of years there was a bit of a campaign against DB schemes, as a result of which a number of employers decided that they would scale down their DB schemes. I have sensed that there remains not a hostility but a lack of concern and support on the part of the Government for DB schemes. These schemes excellently provided for generations of pensioners, who are very grateful for the fact that they are in existence.
What is proposed here is not in any way acceptable. I very much hope that the Government will take it away and rethink it. I am not the only person to feel this; the Minister will notice that there are a number of other amendments in this group, including my own Amendment 40, which are designed to protect employees who were covered by existing protections when they belonged to former nationalised industries that were denationalised. As a result of that, there was legislation that provided for protection. In fact, the protected persons were first introduced by an Act of Parliament in 1948 and reaffirmed by the Thatcher Government on the denationalisation of the electricity supply industry in 1990.
The Government now propose, in my view, to override the statutory provisions providing these pensions, in order to allow employers to claw back the additional NI contributions. This really is the thin end of the wedge and I do not think we should accept it. The Government should take it away and rethink it, because I regard it as quite unacceptable and so do many people, including individuals who are themselves beneficiaries of DB schemes and the unions that support them. I beg to move.