BMI Pension Fund Compensation

Debate between Eilidh Whiteford and Mark Lazarowicz

Wednesday 17th December 2014 Westminster Hall

[Mark Lazarowicz]

Well, that was certainly the outcome in many cases; that was what happened to the pension scheme members. Certainly, it was clear that part of the agreement that Lufthansa reached with the companies taking over the former BMI operation was that effectively the pension scheme responsibility would not go with the airline, which is very concerning and, as I have said, has much wider implications beyond the BMI pension scheme, although I am obviously concentrating on that today.

The arrangement by Lufthansa to top up members’ benefits outside the PPF seems, on the face of it, relatively generous. However, hundreds of staff in the BMI pension scheme will lose substantial sums in pension money, and I understand from the British Air Line Pilots Association that there are now some people in the Monarch Airlines pension fund who are in similar circumstances. Hundreds will lose out. At least 30 of the BMI pensioners and 13 Monarch members will lose more than 50% of their expected scheme pension, and that is taking account of the top-up payments from Lufthansa. Her Majesty’s Revenue and Customs has decided that although those top-up payments do not in any sense compensate for the full loss of pension entitlement, they must be taxed. That decision is wrong, and addressing it is the purpose of raising this issue today.

The tax treatment is, of course, intimately bound up with issues about the PPF, which is a wider problem that the Government also need to address. I will try to tackle both the immediate and the broader issue, in so far as I can in the time available this morning.

The Government response to the concerns that have been raised by a number of members of the BMI pension fund scheme has so far been, in general terms, one of sympathy. They are basically saying, “'Well, the tax rules are the tax rules and they must be applied, and that’s really all there is to it.” However, that is not in any sense a satisfactory response—not in the slightest. Ultimately, the tax rules are what Parliament—we as MPs, and our colleagues in the Lords—decide them to be, and the Government have frequently taken action to deal with other situations where the application of the tax law has seemed unfair or inequitable in its outcome.

For example, a couple of years ago the Government decided to impose VAT on building alterations to listed buildings. However, because that change would have hit churches and other places of worship particularly hard, the Government set up a special scheme to allow grants to be paid to those bodies to pay for the costs of extra VAT. When the Government want to find a way round the rules, they can do so.

On another pensions issue, a very relevant comparison can be made with the case of Equitable Life. In that case, although it appeared that the Government had no legal obligation to pay those people whose pensions had been hit by the Equitable Life fiasco, as a result of political pressure they of course set up a fund to pay out compensation—I think it is £1.5 billion in total—to Equitable Life policyholders, which Members across the House had called for. Of course, the payments to the Equitable Life pension holders will be tax-free, because the Government passed a law to say that that would be the case. Yet the Government are trying to distinguish between the logic behind the Equitable Life scheme decision, and that behind the BMI pension fund scheme decision.

In that context, I will quote a previous Minister, who told the House, or perhaps wrote in a letter—I am not entirely certain—that:

“Following an Independent Commission report, The Equitable Life Act”—

That is, the Equitable Life Pensions Act 2010—

“came into effect in December 2010 authorising the Government to make payments to the Equitable Life Payments Scheme. The Act provides that payments under the ELPS are tax free.”

He said, or implied, that there was a contrast with the BMI case, by going on to say:

“The £84 million payment made by Lufthansa is a voluntary payment intended to compensate BMI Pension Scheme members for the reduction in pension benefits they may face due to the BMI Pension Scheme entering the Pension Protection Fund. Where the payment is made into a registered pension scheme, it is subject to the registered pensions scheme tax legislation. As such, the payments will benefit from receiving tax relief when it is made, but that relief is subject to the normal limits within the annual and lifetime allowances. The ELPS payment and the payment made by Lufthansa are therefore fundamentally different and cannot be compared in this way.”

As I have pointed out, the two cases are “fundamentally different” because the Government passed legislation to make them fundamentally different, and not because they are, in essence, fundamentally different. These are both cases in which people lost out because of circumstances beyond their control, and we have a moral duty as Parliament and as Government to respect that in the case of the BMI pension fund holders as well as in the case of the Equitable Life pension fund holders, and indeed in other cases.

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

I congratulate the hon. Gentleman on securing this important debate and I also apologise to him, because I will not be able to stay for the duration. He is making a really important point about the Lufthansa deal. I share his concern about the individuals affected, but does he agree that there are implications beyond this individual deal for staff of other companies that might seek to do copycat deals?

[Mark Lazarowicz]

Absolutely. I have made that point already and I will touch on it briefly again. Certainly, this raises much wider issues.

Just as the payments quite rightly made to the Equitable Life pension scheme members were compensation—they were not a direct benefit arising from the scheme—similarly, the BMI pension fund members have lost out through no fault of their own, and I believe they require better treatment. The Equitable Life experience shows that where the Government decide that they want, for political reasons, to compensate those who have suffered adversely through circumstances beyond their control, they can find a way to do so. I believe that they should do so for the BMI pension scheme members.

Living Wage

Debate between Eilidh Whiteford and Mark Lazarowicz

Thursday 6th November 2014 Commons Chamber

[Dr Eilidh Whiteford (Banff and Buchan) (SNP)]

It is a pleasure to follow the thoughtful contribution from the hon. Member for Newark (Robert Jenrick).

I congratulate the hon. Member for Warwick and Leamington (Chris White) on securing the debate. Like other Members, I am pleased that we are able to engage in it during national living wage week. I also welcome research findings that were published earlier this week by KPMG, documenting the extent and scale of poverty pay across the United Kingdom. In-work poverty is one of the biggest challenges that we face, and the knock-on impacts of low pay are a major factor in rising levels of child poverty and growing inequality. A large number of people in my constituency work in low-paid jobs, so I read KPMG’s report with great interest. It states that about 414,000 workers in Scotland are currently paid less than the living wage—about 19% of the work force.

Just under two thirds of those people are women—an issue that needs to be much further to the fore in this debate. We cannot tackle the problem of low pay without understanding the reasons why women are significantly more likely than men to be earning less than the living wage. The report contains a paragraph that notes the gender differentials in relation to low pay, but it does not offer any detailed analysis. We know that there is still a substantial pay gap between women and men throughout the labour market, not just in low-paid occupations. Arguably, however, the consequences are more acute at the low-paid end of the income spectrum, and have more detrimental knock-on social impacts.

In my view, the disproportionate number of women who earn less than a living wage is only partly attributable to the greater number of women who work part time. It is also due to persistent tendencies towards occupational segregation in certain job sectors. Lower-paid jobs in, for instance, catering, cleaning and cashiering are disproportionately taken by women. Some of those jobs are also in sectors in which there has been a huge drift towards zero-hours contracts in recent years. It tends to be women who take on responsibility as primary carers for dependants, which can also limit their availability, mobility and flexibility at work. All that is before we even think about the under-employment of women in the work place. Obviously, the issue of gender inequality is much wider than the scope of today's debate, but it is clearly both a driver and a consequence of low pay, and we need to take it much more seriously.

Many low-paid workers are in the service sector, and the vast majority are in private sector jobs. Left to its own devices, the market tends not to ensure that those workers receive adequate wages. If the Government are really serious about ending poverty pay, they need to consider how they can move the minimum wage towards a living wage. Legislating for a minimum wage that actually reflects the cost of living, and actually makes work pay, is the single most important thing they could do to tackle the problems associated with low pay.

The truth is that the minimum wage has not risen in real terms in nearly a decade, and every year since 2008 it has failed to keep pace with the cost of living. Had it done so, those in minimum wage jobs would have been more than £600 a year better off. If the living wage rises in line with projected rises in the consumer prices index, it will reach £8.57 an hour by 2019. We need to be realistic about that and more ambitious in ensuring that the minimum wage genuinely makes work pay for people. Let us make no mistake: we have heard proposals in recent weeks from the Labour party about raising the minimum wage to £8 an hour by 2020, but that is a pretty feeble increase, which will leave millions of people in poverty pay, below the living wage.

I would like to see responsibility for employment policy, including the minimum wage, devolved to the Scottish Parliament as part of the Smith commission process. I therefore ask the Minister to outline the Government’s view on that in his response to the debate. The Scottish Government are the only Government in the UK who have made a living wage an integral part of their public sector pay policy. They have ensured a living wage of £7.65 an hour for all direct employees across all Departments, and during the recent years of pay restraint they have ensured a minimum pay rise of £300 for those earning less than £21,000 per annum. I welcome the news that this will rise to £7.85 an hour in next year’s pay awards, in line with this week’s announcement.

There was some discussion earlier about challenges in respect of contracts that Governments issue to other suppliers, and there are constraints from existing legislation in other areas, including EU law.

[Mark Lazarowicz]

I respect what the hon. Lady’s party has done on this issue. In my local council, the Labour-Scottish National party administration together have adopted a living wage in Edinburgh. There are obviously legal arguments about what can be done, but the Scottish Government should do more on the issue of workers employed on contracts for which they are responsible. We have done something, but so far only 50 have actually improved. We must try to get agreement across the parties. A lot more needs to be done for these people, many of whom are among the lowest paid in the country.

[Dr Whiteford]

I thank the hon. Gentleman for his intervention. Steps have been taken, and the launch of a fair work convention in Scotland in the last few weeks shows one way forward. On contracts, the Scottish Government have also at an early stage been encouraging procurement to take account not just of pay, but of other conditions. Councils that have faced the same legal constraints have been working to try to ensure this is built into contracts, and I believe some UK Government Departments, including the Department of Energy and Climate Change, have taken a similar approach in the absence of a mandatory process, trying to encourage suppliers to meet living wages for those workers.

Given that 93% of low paid workers are working for private sector employers, it is heartening to see increased numbers of employers signing up to the living wage accreditation scheme. In Scotland, the Poverty Alliance has been promoting take-up of the scheme and has succeeded in trebling the number of accredited employers over the last six months. However, there is scope for a lot more action on that front.

As has been said, there is a strong business case for private sector employers paying a living wage. As the authors of the KPMG report point out, the improvement in staff retention and morale associated with decent wages can easily outweigh any increase in the wage bill, and consequently can have a positive impact on productivity and help reduce business costs.

There is a fundamental dignity in having the living wage—a fair day’s pay for a fair day’s work. Conversely, something has gone very wrong in our economy when people who are working long hours in sometimes physically demanding jobs are simply not earning enough to support themselves or their children. The Government must explore how they can bring the minimum wage up to a more realistic level—towards a living wage—and we also need to tackle the underlying inequalities that perpetuate poverty pay.

Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Bill

Debate between Eilidh Whiteford and Mark Lazarowicz

Tuesday 10th September 2013 Commons Chamber

[Dr Whiteford]

The hon. Lady provides a perfect illustration of the point that I was making. Parts of the Bill are so vague as to be nonsensical, and they will be open to all kinds of challenges. They are completely open to interpretation, and the words that she has just mentioned could mean 20 different things. It is exactly that kind of vague, ambiguous language that needs to be clarified. I worry that, at the end of the process, we shall be left with unnecessary complexity, unhelpful ambiguity and unintended consequences. I urge the Government to go back to the drawing board and take the time to consult properly with stakeholders on an appropriate and balanced set of measures to ensure that third parties can continue to contribute to the democratic process without having undue and disproportionate restrictions placed upon them.

I have particular concerns about the detrimental impact that the measures could have on civil society—and, in particular, on the voluntary sector—in Scotland. I shall not repeat the points made so eloquently by the hon. Member for Caerphilly (Wayne David) about the devolved Administrations and the disproportionate effect that the Bill could have on their legislative and electoral processes. This part of the Bill is a quagmire, and its consequences have not been adequately thought through. There has not been adequate consultation with key stakeholders, including elected parliamentarians in the Governments of the devolved Administrations, and it is important that we should take the time to go back and carry out that consultation properly.

One of the points that I made on Second Reading was that those third parties that are also charities are already regulated very effectively, and are explicitly prevented from engaging in party political activity. They are already significantly constrained in the activities they can undertake during an election period. In my extensive experience of the voluntary sector, charities—whether large or small—take those responsibilities seriously and tend to err on the side of caution when determining what they do when engaging with politicians and public policy processes in the run-up to elections.

[Mark Lazarowicz]

The point has been raised about the possible effect of the provisions on the Scottish referendum. Is it not ironic that the Scottish charities regulator has confirmed that charities can participate and put forward their views on the issue of independence, given that that could come into conflict with the terms of the Bill? Incidentally, there is even a possibility that the Scottish Government could be considered a third party for the purposes of this legislation in the run-up to the referendum.

[Dr Whiteford]

The hon. Gentleman makes a pertinent point. There has been a carefully considered process in Scotland, involving a partnership between the Electoral Commission and other stakeholders, to ensure that we have a fair, democratic and open debate around the referendum. I agree entirely with him that it would be counter-productive if this legislation were to cut across that process. That is one more reason for us to go back and look at the process in more depth.

It is not just in the run-up to elections that charities and civil society organisations take these issues seriously—they take them seriously throughout the electoral cycle. Fundamentally, I do not think that charities should have to cope with an extra set of regulations that overlap so extensively with existing charity law and other forms of regulation that seem to be working well. Charity regulation is certainly working well in Scotland, and since the introduction of the Office of the Scottish Charity Regulator in 2005, governance has been strengthened across the voluntary sector, and accountability has improved dramatically right across the sector in the most recent few years.

Charities play an enormously important role in our democratic process. They not only make the voices of their members and service users heard, but they actively influence and shape public policy in ways that are already much more transparent and accountable than is the case with corporate lobbying. I can think of numerous examples of pieces of legislation that have been actively enhanced by the input of charities, with far-reaching consequences for the quality of life of thousands of people. I think in particular of the Community Care and Health (Scotland) Act 2002, which was significantly amended by the efforts of stakeholders, including a range of small specialist health charities and large campaigning organisations working together to influence legislation and make it fit for the 21st century.

When I look back at the kinds of activities undertaken, fully transparently and accountably, by the charities involved in lobbying around that Bill, I can see that some of them would almost certainly have fallen within the terms of third-party campaigning proposed in the Bill. Some of the smaller organisations, particularly those with perhaps only one or two members of staff, advocating on behalf of small numbers of people perhaps with a rare condition, would simply have opted out of that discussion because they would not have had the resources to navigate the regulatory framework. That would have been to the enormous detriment of the legislation that finally emerged. As a society, we are all better off because of the inclusion of such organisations in the democratic process.