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New Clause 2

Volume 408: debated on Friday 11 July 2003

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Definition Of "Dependant" And "Surviving Spouse"

'(1) Section 630(1) of the Income and Corporation Taxes Act 1988 (definitions) is amended as follows.

(2) After the definition of "authorised insurance company" there is inserted—

""dependant" means—
  • a child of the member who is under the age of 18;
  • a child of the member who is aged 18 or over and who is continuing to receive fulltime education;
  • a person who is financially dependant on the member; and
  • a person who is dependant on the member by reason of disability."

  • At the end there is inserted—

    ""surviving spouse", in relation to a member, means a person to whom the member was married at the time of his death.".'.—[John Healey.]

    Brought up, and read the First time.

    I beg to move, That the clause be read a Second time.

    With this it will be convenient to discuss Government amendments Nos. 2 and 3.

    I congratulate the hon. and learned Member for Harborough (Mr. Garnier) on piloting the Bill thus far through he House. However, as I explained in Committee last week, the Government cannot accept—in principle or in practice—some of the provisions in the Bill, and some issues remain to be dealt with. I therefore propose new clause 2 and associated Government amendments Nos. 2 and 3.

    I am acutely aware of the time constraints that face us this afternoon, though one resulting joy is that the hon. Member for Hendon (Mr. Dismore) will not be able to speak for two and a half hours. The Minister need not explain the new clause and corresponding amendments at great length, because I accept them.

    I am grateful to the hon. and learned Member for Harborough for indicating his acceptance at this stage. I shall not develop my argument to the extent that I could, but a couple of important points need to be made to enhance the House's understanding.

    I understand that the hon. and learned Member for Harborough (Mr. Garnier) accepts the Government new clause and amendments, but ultimately they are a matter for the House and at some stage of the debate I want to raise some of my concerns about the amendments. I therefore hope that the Minister will outline the amendments in a little more detail.

    I shall certainly outline them, but I would not want to prevent my hon. Friend from expanding on his concerns. He demonstrated on Second Reading the detailed study that he has given to the Bill and his detailed concerns about some aspects of it.

    The new clause inserts definitions of "dependant" and "surviving spouse" into the Income and Corporation Taxes Act 1988. I propose the new clause because, although the Bill purports to be about setting a minimum retirement income for members of personal pension schemes so that they do not have to rely on state support, it is also important to think about the spouses and dependants of the scheme member, once he or she has died. The risk is that they would suffer the very real disadvantages that the Bill would impose just as much as the scheme members. In essence, the Bill would wipe away the rule that says that by age 75 all pension funds built up with the benefit of tax relief, other than the tax-free lump sum, must be used to provide a secure income for the whole of a person's remaining retirement. Instead it would require people with personal pensions to buy an index-linked annuity by age 65 of at least a minimum amount to be specified annually by order. The Bill would allow any funds not used to buy such an annuity to remain tax free in a retirement income account—or RIA. It would allow unrestricted access to the funds of the RIA at any time and the ability to pass residual funds on death to the annuitant's estate. That in a nutshell is what the Bill would do.

    While the Government agree that pension annuities deserve wider debate, the proposals in this Bill are not the way forward. They would help only a minority of the better-off, and they would also seriously disadvantage the vast majority of people in personal pension schemes, and their dependants, who are saving for their retirement. That is an extremely important point that is consistently glossed over by the Bill's proponents.

    I shall give way to the hon. Gentleman, who has been a staunch proponent of the Bill and of a wider debate on annuities. I pay tribute to him for that, because he brings great expertise from his previous professional life and his time in the House to the issues.

    I thank the Minister for his kind comments. The pensions Green Paper contains a commitment to end the obligation to buy an annuity by 75. Much discussion has taken place within the pension industry on what would happen then, but can the Minister confirm that that undertaking represents a commitment from the Government to address the issue and end the enforced—and outdated—obligation to buy an annuity?

    I can confirm what is in the Green Paper and—as I indicated earlier—the Government's commitment to a full and wide debate on the future of annuities, but I cannot confirm the detail of what proposals we will make. The hon. Gentleman will be aware of the nature of a Green Paper and the issues deserve wider debate, but the detail of this Bill is not the place for that debate.

    The hon. and learned Member for Harborough said in Committee that
    "just because we cannot help everybody that does not mean that we should not help anybody."—[Official Report, Standing Committee C, 2 July 2003; c. 20.]
    Of course, if the proposals merely helped some people and left others as they were they might be less objectionable, but the fact is that the main effect of the Bill would be to take away people's choices as to what type of annuity to buy and when to buy it. Instead of increasing choice and freedom—the principles on which the Bill's proponents, including the hon. Member for Arundel and South Downs (Mr. Flight), argue their case—it would force the vast majority of people to use the whole of their pension funds, after the tax-free lump sum had been taken, to buy an annuity at age 65 and not by age 75 as the current rules require. Furthermore, it would force them to buy only an index-linked annuity, thus restricting the flexibility and choices that people currently have when deciding when and what kind of annuity to buy. Spouses and dependants of the annuitant would of course suffer indirectly as a result of those impositions.

    It is on the issue of dependants that I seek clarification from the sponsor of the Bill or from my hon. Friend the Minister. I probably cost the Treasury rather more than I had anticipated when I went to the Vote Office and asked for a copy of the Income and Corporation Taxes Act 1988. Given its size, I now appreciate how much work hon. Members did in previous years. We thought that we were hard done by on the Financial Services and Markets Act 2000 and the number of clauses—

    Order. I remind the hon. Gentleman that he is making an intervention, not a speech.

    I am sorry, Mr. Deputy Speaker. I am grateful for your guidance. I shall stick to the point.

    The new clause reads:
    "After the definition of 'authorised insurance company' there is inserted—"
    Will my hon. Friend clarify whether the part of section 630(1) of the Income and Corporation Taxes Act 1988 comes after the words "authorised insurance company", or whether it comes after the following two paragraphs, (a) and (b), because that would seem to conflict with the numbering within the amendment? It is an extremely technical point, but I think that it requires clarification.

    As my hon. Friend says, it is a highly technical point. I undertake to reflect on the issue. If my hon. Friend will accept that, I shall be happy to deal with the matter in detail once I have had a chance to reflect on the point.

    I shall not develop my arguments as I might have done in other circumstances because I want to give the hon. and learned Member for Harborough time to respond.

    The new clause does what currently tax legislation does not do, which is to define the terms "dependant" and "surviving spouse". Nowhere in legislation are these definitions laid down. At present, the Revenue uses discretionary powers in guidance notes for both personal and occupational pension schemes. In principle, the Revenue's proposals for simplifying the tax regime mean that it is moving towards a single and simpler set of rules covering all sorts of pension arrangements. The rules imposed by the Revenue under these discretionary powers are to be minimised, and in principle that must be right.

    The Bill gives us the opportunity to take a step in that direction by defining "dependant" and "surviving spouse" for pension purposes. It also gives us the opportunity, but I do not propose to take it up now, to consider the consequences in terms of the provisions in the Bill. Suffice it to say that new clause 2 is simply designed to import current definitions into the taxes Act. It is intended to maintain the status quo until any wider changes are announced. I have in mind particularly the consultation document that was issued last month by hon. Friend the Minister for Industry and the Regions on the new legal status for civil registered partners—same sex partners. To be clear, that is not to say that unmarried partnerships will not be able to benefit under the current pension rules. As things stand, an unmarried partner of either sex can qualify for a survivor's pension if they were financially dependent on the scheme member at the time of his or her death.

    To go further at this stage, as some propose, to try to provide an automatic pension for the surviving partner in the way that a widow's or widower's pension is provided for now, poses serious challenges that I do not propose to deal with now, and which need to be discussed and developed elsewhere. The new clause is designed to clarify things as they stand. Until a clear-cut alternative to a formal marriage is introduced such as the proposed civil registration, I see no alternative to defining "spouse" as the person to whom the scheme member is married, and "surviving spouse" as the person to whom the scheme member was married at the time of their death.

    I turn briefly to amendments Nos. 2 and 3. The Bill makes it compulsory for the annuity benefit that a personal pension scheme must provide to be not less than the minimum retirement income that is set under clause 2. Of course, while the Bill attempts to keep the personal pension scheme member off state benefits, it would do nothing for the member's spouse or dependants. There is no provision to prevent spouses or dependants falling back on the state because there is no requirement that they should be provided for out of the minimum retirement income annuity. At present, most annuitants would want to, and do, provide for their spouses and dependants through, for example, joint life annuities.

    I hate to raise the issue of Jeffrey John in the Chamber because it has been much discussed in another place, but the issue prompts me to ask what is the definition of a dependant person, and would it include same-sex partners. It appears from the definitions that have been set out in the Bill that it would not be covered under the Bill as it is drafted.

    Generally, such definitions, as my hon. Friend will be aware, are a matter for the scheme's trustees and administrators. Generally, the Revenue does not seek to impose such terms on schemes. If Reverend John was interested in those issues, the definition would depend on the provider with whom he or his partner had annuities.

    Finally, the correct level for the minimum retirement income annuity is subject to the amendments tabled by my hon. Friend the Member for Hendon (Mr. Dismore), which we may or may not reach shortly, so I do not propose to rehearse the arguments on that. Assuming that the Bill could be made to work, Government amendments Nos. 2 and 3 extend the Bill's underlying principle by requiring the minimum retirement income annuity to continue after the scheme member's death to his or her surviving spouse or dependant. The amendments would result in the annuity to the surviving spouse being set at 100 per cent. of the scheme member's annuity. That is logical, and would ensure that the surviving spouse stays off state support.

    2.15 pm

    Where there are sufficient funds, it is right that they should be used for both the scheme member's pension and the pension of any surviving spouse. Although we have made plain our reasons for opposing the thrust of the Bill on Second Reading, in Committee, and I hope, this afternoon, its form remains largely the same as when it was first introduced. That being so, it should at least work properly and logically in accordance with its purported underlying principle. It would certainly not be right for a scheme member to secure his own minimum income retirement annuity, then remove the residual fund at will, leaving his spouse or dependants unprovided for after his or her death. On that basis, I commend Government new clause 2 and Government amendments Nos. 2 and 3 to the House.

    In view of the time that is left, I am under no illusions about what will happen to the Bill. There is absolutely no need for the hon. Member for Brent, North (Mr. Gardiner) or the hon. Member for Hendon (Mr. Dismore), the two Friday boys who turn out to do the Government's business on these occasions, to get overexcited. In the past, we have had plenty of opportunities in their absence to have fruitful and intelligent discussions about the policy behind the Bill and its details. I congratulate the Minister on what he said in Committee and this afternoon—unlike his hon. Friends, he has approached our deliberations constructively.

    I will acquit the hon. Members for Brent, North and for Hendon to a certain extent, because I largely agree with the amendments that they have tabled today. Indeed, I largely agree with the Government new clauses amendments that we are discussing. Of course, it is open to Government Back Benchers to engineer a sterile final few moments in the Bill's life, and no doubt their pensioned constituents will thank them for the line that they have taken on the Bill over the past few months. I am pleased that the right hon. Member for Birkenhead (Mr. Field) is in the Chamber—his private Member's Bill has already received the treatment that the Government usually give to private Members' Bills that are designed to ameliorate pensioners' position.

    A delegation from ASW—Allied Steel and Wire—is in the Palace of Westminster today. The plight of those people and many others whose companies have failed to deliver on their pension promises is something that all of us in the House should be concerned about, irrespective of our party allegiances. I welcome the Government's constructive amendments and the way in which the issue behind the Bill has at last received attention from the Treasury. It is undoubted that the pensions crisis exists and that it is growing. Other than the issues that the Government face over weapons of mass destruction, the pensions crisis is probably the biggest political issue with which the Government, as the governors of this country, and we, as politicians, must cope.

    Given that my hon. and learned Friend has sympathy for the new clause and the amendments, would it not be proper for the Government to respond by adopting his Bill and my Bill, and to say that they will work them into a new form? That would at least send out a clear message that they believe that there is a pensions crisis and that they are trying to grapple with it—they have failed to grapple with it up to now.

    I could not agree more. My Bill is the third Bill on this subject, and I make no claims for originality. Until my Bill came out of Committee last week, it was identical to that of my right hon. Friend the Member for Skipton and Ripon (Mr. Curry). As far I can tell, it is little different from that promoted a little while ago by my hon. Friend the Member for Bournemouth, West (Mr. Butterfill).

    The Government cannot have been taken by surprise by either the policies behind my Bill or the thrust of the Bill of the right hon. Member for Birkenhead. They cannot have been taken by surprise by the growing fears for their future prosperity of those who are already of or who are about to enter pensionable age. Those matters have been on the table for months and months, and they are getting worse.

    The hon. Member for Brent, North almost begged for congratulation on having gone to the Vote Office to get the Income and Corporation Taxes Act 1988, which is a large volume. He would have been derelict in his duty as a parliamentarian if he had not gone and got the 1988 Act, which my Bill would amend. It is not a matter for congratulation but a matter of common sense that he went to get it. I trust that Government Members—this was their job on 7 March on Second Reading—have taken the time to study the 1988 Act and to interweave it with my Bill to allow them fully to understand the issues that we are discussing.

    I shall end my remarks because I want to hear what the Minister has to say about the succeeding Government amendments. Because I suspect that I shall not have another opportunity to address you on this subject, Mr. Deputy Speaker, I say in advance that I have no quarrel with new clause 3.

    Order. Even at this late stage, the hon. and learned Gentleman should not stretch the rules of order to the extent of discussing amendments that are not in this group.

    I merely seek to engage in the same constructive behaviour as the Minister, who has taken that approach since he took charge of the Bill a little while ago.

    I am acutely aware that we are in the last six minutes of the Bill's life. I want to take the opportunity offered by the discussion on the new clauses and amendments to thank all those, including the Minister, who have supported me in getting the Bill this far. I thank my hon. Friend the Member for Arundel and South Downs (Mr. Flight) for his hard work and, indeed, the Conservative, Labour and Liberal Democrat members of the Committee. I also want to thank the Retirement Income Reform Campaign, which has given me sterling support on both the technicalities of the Bill and the wider policy issues. Without its support, the Bill would not have got this far.

    In conclusion on this group of amendments, the ideas behind the Bill are ones that the Government must come to terms with, and they must do so very quickly. They have no time to waste. I suspect that between now and November, when I assume that the next Session will begin, the Treasury will need to do a great deal of work to produce the detail of a pensions law that incorporates not only the ideas in this Bill and that of the right hon. Member for Birkenhead, but some of the other matters discussed in the discussion papers that the Government have produced over the past few months, and to announce in the Queen's Speech a Bill that deals with the same matters. It is no good the Government saying, "We are looking at this and consulting on it." They have had plenty of time to do that and the time has now come for action.

    If the Government introduce early in the next Session a Bill that takes up the points that I have made, as well as those made by the right hon. Gentleman, I shall be prepared to wish them a degree of good will in dealing with this aspect of public policy. On the other hand, if they allow the issue to dry up and wither on the vine, hundreds and thousands of pensioners in this country, as well as the hundreds and thousands of others who will inevitably become pensioners, will reward the Government in the usual way at the next election. I am not suggesting that my Bill alone will be the undoing of this Government, but it is symbolic of a need for them to open their mind, relax and be prepared to take on ideas that come from outside the Treasury.

    Retirement income reform is a vast subject and I accept that it is perhaps not always adequately dealt with by Opposition Back-Bench Bills. None the less, the thrust of my Bill and that of the right hon. Gentleman lies in ideas that are worthy of support. They are worthy of constructive support, as well as constructive thought—something that I fear has not always been given to the Bill. It was certainly not given on Second Reading by some of the Minister's hon. Friends.

    On that basis, I shall sit down and prepare to wind up the funeral band.

    Obviously, I am not going to talk for two and half hours in this debate. I think the hon. and learned Member for Harborough (Mr. Garnier) has probably shot my fox in his last remarks in terms of trying to develop my arguments effectively. I say to him that the only reason why I had to speak at such length in our previous debate was that he did not introduce the Bill properly. I did so not because I was doing the Government's bidding, as he suggested in the personal attack on me that he made at the start of his speech. I have taken a great interest in the issues with which the Bill deals as a member of the Select Committee on Work and Pensions and of its predecessor. Indeed, I have been a member of that Committee for five years or more. I was very concerned that the Bill was inadequate. If he had addressed some of the arguments that I advanced in that two-and-a-half hour speech, we might have been able to make rather more progress. As I recall, Mr. Deputy Speaker, you called me to order once for quoting some lengthy figures, but I think that the rest of my remarks were in order.

    May I tell the hon. Gentleman that, no matter what he intended on that previous occasion, the impression that he inevitably gave was entirely contrary to the expressions that he has just given to the House?

    I can only respond by saying that, if the hon. and learned Gentleman had introduced his Bill properly, developed the arguments at length and dealt with some of the issues when they had arisen in debates on similar Bills, we might not have had to spend so much time on the detail. None the less, as I said last time, I am wholly in favour of annuity reform. My concern is that the Bill is simply not the appropriate vehicle. If I may express some agreement with the hon. Gentleman, I hope that the Government will make their own proposals very soon, preferably in the Queen's Speech, to introduce proper annuity reform.

    On new clause 2, I have some concerns about the definition of "dependant".

    My hon. Friend said that he hoped that the Government would introduce their own reforms in the next Session. If they fail to do so, may we ask him to adopt the pose of a Trappist monk and remain silent when others of us are trying to push through pension reform?

    The answer is that I shall take any Bill as it comes. If the Bill is adequate, I will not have to say anything. If it is woefully defective, as the Bill before us has been during the previous attempts of the Conservative party, I will make the contribution that I should make and point out those defects.

    On the meat of new clause 2, I am very concerned about the definition of "dependant". I can illustrate that point in a number of different ways. My first concern is the reference to "a child of the member". A little while ago, in my previous life, I had to represent a family who had been bereaved by the Zeebrugge ferry disaster. The father and the mother had both been killed. The mother had children by a previous marriage who had not been formally adopted by the father. The net result was that although the father had assumed financial responsibility for those children, they were not technically his children in law or by blood. That created an enormous series of anomalies that had to be corrected in the courts—

    It being half-past Two o'clock, the debate stood adjourned.

    High Hedges (No 2) Bill

    Order for further consideration, as amended, read.

    Further considered.

    Order for Third Reading read.

    Animals (Electric Shock Collars) Bill

    Order for Second reading read.

    Food Labelling Bill

    Order read for resumed debate on Question [7 March], That the Bill be now read a Second time.

    Medical Practitioners And Dentists (Professional Negligence Insurance) Bill

    Order for Second Reading read.

    Draft Constitutional Treaty On The Future Of Europe (Referendum) Bill

    Order for Second Reading read.

    Greenbelt Protection Bill

    Order read for resumed debate on Question [13 June], That the Bill be now read a Second time.

    Harbours Bill Lords

    Read a Second time, and committed.

    Corporate Responsibility Bill

    Order for Second Reading read.

    Pensions (Winding-Up) Bill

    Order for Second Reading read.

    As the Government have again blocked the Bill on pension reform, I ask for 21 November, Mr. Deputy Speaker.

    To he read a Second time on Friday 21 November.

    Housing (Overcrowing) Bill

    Order for Second Reading read.

    Health And Safety At Work (Offences) Bill

    Order for Second Reading read.

    Food Colouring And Additives Bill

    Order for Second Reading read.

    Road Safety Bill

    Order for Second Reading read.

    Aviation Health Bill

    Order for Second Reading read.

    Telecommunications Masts (Railways) Bill

    Order for Second Reading read.

    Local Communities Sustainability Bill

    Order for Second Reading read.

    Crown Employment (Nationality) Bill

    Order for Second Reading read.

    Government Powers (Limitations) Bill

    Order for Second Reading read.

    House Of Lords (Exclusion Of Hereditary Peers) Bill

    On a point of order, Mr. Deputy Speaker. I have been informed that, although the hon. Member for Spelthorne (Mr. Wilshire) destroyed the last chance of the High Hedges (No. 2) Bill becoming law, he will not be identified in Hansard. Is that correct? If so, is it in keeping with transparency and openness in the House?

    I am guided entirely by the rules of order of the House. I cannot alter those instantly. Hansard will show what it has traditionally shown.

    Further to that point of order, Mr. Deputy Speaker. Will you confirm that a Minister blocked Bills 7, 8, 10, 11, 16, 20, 21, 22, 24, 25, 26, 29, 31, 32 and 33?

    Further to that point of order, Mr. Deputy Speaker. Is it possible for Hansard to record that the hon. Member for West Derbyshire (Mr. McLoughlin), who shuttled between his Front-Bench and Back-Bench responsibilities, objected to the Health and Safety at Work (Offences) Bill, which is important in setting proper penalties for health and safety offences? Will it also show that he objected to the Crown Employment (Nationality) Bill, which I promoted, and would have made important reforms to admission procedures to the civil service, especially for those from ethnic minorities?

    The hon. Gentleman must not stray into discussing Bills that we have covered. Any hon. Member has the right to object.

    Greater Anglia Rail Franchise

    Motion made, and Question proposed, That this House do now adjourn.— [Margaret Moran.]

    2.38 pm

    My previous dealings with the Minister suggest that we agree about very little, but I have confidence that we shall be in complete agreement on my opening remarks.

    The privatisation of the railways by the Conservative Government was a disaster. It was a shambles. Public assets were sold off with gay abandon, no regard to their worth and total disregard for the well-being of the railway industry and its passengers.

    A once proud industry, which generations of dedicated railway men and women built up over many decades, was split asunder and fragmented. Where once was unity of purpose, there are now 101 or so companies. There is no longer joined-up thinking in service provision. The same applies to maintenance; there is a belief that safety standards are not what they used to be.

    Each company apparently has an interest in only its compartment of the industry, with a prime objective of securing dividends for shareholders, ahead of the public service ethos that existed hitherto.

    We were told that privatisation would bring sweeping benefits to the industry and to the travelling public. I have seen no sign of them. If I compare the publicly-owned British Rail of the early 1970s—when I was a daily commuter from Colchester to London—with the rail service of today, I can see that it has not got any better in those 30-plus years. I use the train to travel between my Colchester constituency and London. I am a politician who practises what he preaches. I believe in public transport and I use it—unlike most Ministers, it has to be said. But are the railways a truly public service? The train operating companies are owned by shareholders, not by the public through state or local authority ownership. They are private companies that the public use, in the same way that Tesco and Sainsbury are private companies whose shops are used by the public. So can we please drop the misnomer "public transport"? The accurate description is "transport for public use".

    Many of us, including the real Labour MPs, would like to see the railways—and our once-proud municipal bus transport undertakings, for that matter—brought back into public ownership, at which point they could again be truthfully described as public transport. Alas, six years down the line, there is no indication that new Labour has that as an objective. The Government's only solution to what they acknowledge is a problem is to reduce the number of train operating companies. How that will galvanise the industry and provide a better service is not clear, but the Government want to give the impression that they are doing something.

    So we are faced with the continuation of a privatised railway. At this point I will admit—perhaps uniquely, given what I hear is happening elsewhere in the country—that for the people living in the areas centred on Colchester and Ipswich there has been one advantage from privatisation: namely, that it has resulted in more services from two companies, First Great Eastern and Anglia, both of which serve that part of East Anglia. But will this be the case when, instead of two competing privately owned companies, there is a one-company private monopoly? A public monopoly is one thing, but I suggest that a private monopoly is not in the public interest.

    How long will it be before rationalisation—a euphemism for cuts—results in a reduction in the number of services between Colchester and London? Can the Minister give a cast-iron guarantee today that the number of trains running from my town into the capital will not be reduced? If not, what possible advantage is there for rail customers in my constituency if the only benefit that might have accrued from privatisation is lost? Accepting, albeit reluctantly, that public ownership of the railways is not on the Government's agenda, we are simply left with a dog's breakfast being served up differently.

    Like it or not, the good people of East Anglia are to be served by one privatised monopoly railway company. However, the public in general, and rail passengers in particular, are not being allowed any say in who that company should be—quite the reverse, in fact. Although the public have indicated overwhelmingly their desire for one of the existing companies to be considered to operate the new Greater Anglia franchise, their views have been arrogantly ignored by the Strategic Rail Authority, a quango operating without any remit to provide the public, whose interests it purports to serve, with an objective assessment of what it does and its reasons for doing it.

    Can the Minister say how much influence, if any, the Department for Transport has on the Strategic Rail Authority? To whom is the SRA answerable? Is there a democratic process that requires it to operate within the democratic framework of the United Kingdom when it comes to the parcelling out of railway franchises? Or are those who run the SRA a law unto themselves, as appears to be the case? Is the Minister entirely satisfied that the SRA has complied with the spirit and letter of the directions and guidance given by the Secretary of State—in particular, section 6.10, which covers value for money, and section 10.5, which deals with the criteria for replacement franchises?

    I hold no brief for First Great Eastern. I am not saying that, as the largest of the three operating companies currently running trains in the region, it should automatically be given the new single Greater Anglia franchise. But what I and thousands of other rail users are saying is that it is completely unfair that the SRA has banished First Great Eastern from the shortlist. Everyone is asking why that should be the case. Perhaps the Minister can enlighten us; the Strategic Rail Authority has refused to do so.

    First Great Eastern is the best-performing train operator in London and the south-east. It is also the only franchise in the region not receiving public support, having turned a £40 million a year subsidy into a £10 million a year premium to the Government. The latest report from the London Transport Users Committee shows that First Great Eastern achieved the best punctuality and reliability score of all operators running services to London.

    The SRA has refused to give verifiable reasons for excluding First Great Eastern. That has prompted some to ponder whether the SRA decision has more to do with the settling of old scores by senior members of the SRA against First Great Eastern than with what is best for a public railway service in the east of England. I am told that the SRA decision is without precedent. Can the Minister confirm that? We are not talking here of another Connex.

    A MORI survey revealed that only 3 per cent. of passengers support the SRA's decision to exclude First Great Eastern from the Greater Anglia shortlist. The same survey shows that support for First Great Eastern services is twice the national level for rail franchises. The rail passengers committee for eastern England, which, as the Minister knows, is part of
    "the statutory watchdog protecting and promoting the interests of rail passengers throughout Great Britain"
    is appalled at the dumping of First Great Eastern.

    The RPC's eastern England secretary, Mr. Guy Dangerfield, told me in a letter:
    "The Committee publicly expressed its surprise that FirstGroup did not make the short-list for the Greater Anglia franchise. Our Chairman, Derek Langslow, wrote to the Chairman of the Strategic Rail Authority on 1 May asking about the basis on which the decision to take forward only three bidders was reached.
    So far the SRA has declined to say more than that the process is commercially confidential and will remain so.
    Our view is that, while we don't expect to see the answers, provided to the SRA by prospective bidders, in an open and accountable world we cannot see why the questionnaire itself, together with details about the weighting applied to the questions, is a commercially confidential document."
    Mr Dangerfield added:
    "We remain perplexed that FirstGroup, a company of financial strength owning a demonstrably competent subsidiary like First Great Eastern, is not on the short-list."
    Does the Minister agree that because the
    "statutory watchdog protecting and promoting the interests of rail passengers"
    has made such a strong statement, perhaps there is something seriously fishy about the whole situation?

    The Federation of North Essex Rail User Groups—representing rail users from Colchester, Clacton, Manningtree, Frinton, Walton and Harwich—is particularly scathing about the SRA. A press release issued on 13 June said that the different groups
    "are so angry that they have combined to make this joint statement to the media."
    This is what they had to say:

    "We deplore the arrogant way that the Strategic Rail Authority has acted in relation to rail services between London Liverpool Street, Colchester, Manningtree and Ipswich, and between Colchester and Clacton, Frinton and Walton by:—
    Sacking a highly competent rail operator (First Group) without giving any reasons or explanations for such a bizarre decision.
    Short-listing three operators that in at least two cases, either lack experience in some areas or are plainly known to be weak in train punctuality or operations.
    Refusing to answer any correspondence on the issue with anything other than a meaningless response that says they will not change their decision. The answer has been issued to all who have written to them regardless of status and position.
    Taking over timetable planning and changing the timetable without consultation with any of the current or future train operators or the established rail user groups."

    A signatory to the federation's press release is Mr Graham Male, chairman of the Colchester rail users. He goes on to make further complaints, including that the SRA's strategy
    "would mean that average journey times would be longer than those achieved by steam trains in the 1950s."
    What a damning indictment of the SRA.

    I was told by one First Great Eastern employee:
    "There is widespread concern at First being excluded—from people who smelled an injustice. Many local authorities made strong protests. There was obviously cross-party political support."
    I welcome the hon. Member for Braintree (Mr. Hurst) to the Chamber. The employee continued:
    "We received well over 500 letters and e-mails and I suspect the SRA got more."
    Surely the Minister must accept that the travelling public, and all who work for First Great Eastern, are fully justified in demanding that the quango SRA respond to the best interests of railway users by including First Great Eastern on the shortlist. Surely that would be natural justice.

    Between my seeking the debate and securing it, there has been a legal challenge, the first round of which was a victory in the name of First Great Eastern. Astonishingly, its parent company threw in the towel. That must be the first recorded case in which someone on the brink of a legal victory has capitulated. Why did that happen? It does not need a Sherlock Holmes to find the answer. It is blindingly obvious from what the managing director of First Great Eastern, Mr. Dave Kaye, told me in a letter dated 27 June:
    "Having exhausted the various options open to us, we wish to withdraw with grace and, as First has received assurances from the SRA that it is still a valued participant in the railway industry, move on to new challenges."
    New challenges? Assurances? Nudge nudge, wink wink!

    Quite simply, the SRA has told the parent company of First Great Eastern, FirstGroup plc, that if it drops its case for the Greater Anglia franchise it—the SRA—will ensure that the company is treated favourably in regard to franchises elsewhere. What other explanation can there be for First's otherwise inexplicable decision to withdraw from a legal challenge that it was winning?

    FirstGroup has services in the north-west, and from London to Wales and the west country. Moreover, the group is one of the two final bidders for the TransPennine Express franchise. On the day that First was given the bad news about the Greater Anglia franchise, it was announced that it had pre-qualified for the Northern franchise. A coincidence, or what? It is not necessary to be a cynic to see that FirstGroup realised that it was not in its best interests to upset the SRA, so First Great Eastern was sacrificed.

    The words of FirstGroup's spokesman Mr. Martin Helm, as reported in the Colchester Evening Gazette on Wednesday last week, were most revealing. He said:
    "The SRA has decided they're not reinstating us and we've got a broader business to consider."
    He added:
    "It's very difficult for an operator. There's no appeals process and we're in the hands of the SRA—its decision is final."
    Back in April, seeking to justify the rejection of First Great Eastern from the shortlist, the SRA's communication director, Mr. Ceri Evans, told the Evening Gazette:
    "This is a commercial deal",
    but he said that the commercial reasons were too sensitive to divulge publicly. Then the excuse got even lamer. Mr. Evans said that First Great Eastern was not being judged on its past performance—which, as a regular rail user, I would have thought would be a good indicator of whether it was up to the job—but had
    "left gaps in what they said they would do to run the new franchise".
    He said that the gaps involved "quality", but refused to say where quality had been compromised in First's application for the new franchise. Obviously, the words "openness" and "transparency" are not part of the SRA's vocabulary; certainly they are not part of the vocabulary of the inappropriately styled communications director.

    First Great Eastern issued a legal challenge, requesting that the SRA disclose the documentation on which its claim that First had failed was based. It came as no surprise that the judge found in favour of the company—but then came the capitulation by the parent company. What we do not know is how the stitch-up between the SRA and FirstGroup plc was engineered. Was there a simple phone call, a private meeting at a discreet venue—perhaps over lunch—a nod and a wink? Perhaps the Department for Transport would like the appointment diaries of the two parties, and logs of their phone calls, to be examined. Or does either outfit contain a public-spirited whistleblower who will spill the beans?

    First Great Eastern staff with whom I have discussed the situation feel that they have been shafted and betrayed. They have been let down and abandoned by a parent company that seems to have its eye on franchises elsewhere, and it is felt that the SRA has done a deal to get the legal challenge dropped.

    While I do not doubt for a moment that most First Great Eastern staff will transfer next year to whichever company wins the Greater Anglia franchise, for many middle and senior managers the future is not so sure. Some, no doubt, will be head-hunted by companies elsewhere; I am told that others are already dusting down their CVs, and making overtures for jobs that have not yet even been advertised. What will happen to the management of First Great Eastern in the meltdown of the remaining period of the franchise? I fear the prospect of months of uncertainty as staff leave, having been dumped by their current employer.

    One employee told me:
    "The SRA still claim they can get the new franchise in by 1 April but most people think it is very unlikely."
    Worryingly, he also said:
    "First will freeze all investment and, frankly, I think we will very quickly see a drain of good managers off to other parts of the FirstGroup or elsewhere in the rail industry. The chances of replacing them are slim.
    He added:
    "We will do our best to get the new trains in service but we have no budget to market them—the biggest rail investment story in Essex for many, many years (£80 million on 21 new trains just a few months before the franchise ends) and we can't tell anyone about it!"

    Another staff member wrote to me saying:
    "We have recently achieved the Investor in People Award for our Engineering Department with the rest of the company being assessed for the Award later this year. If we do not get back in the bidding process a huge amount of work by many of our staff will be perceived as a waste of time—and motivation levels to exceed business goal targets will nosedive."

    It is recognised that the railway network, not just in the Greater Anglia area but nationwide, has been starved of investment and encouragement by successive Governments. Despite that, the industry has generally been well served by managers, who know what the railways are about. The action of the Strategic Rail Authority towards First Great Eastern is a kick in the teeth towards those who have served the region well.

    Before I commence my concluding comments, I invite the Minister to encourage his officials to see how they can help with the following request. The Government are keen to promote regional identities, although in the case of the east of England, it is a somewhat artificial region. That said, if the Government are serious about devolving power, which as a principle I support, and since Cambridge is geographically central to that region, 1 hope that whichever operating company wins the franchise will provide a regular direct service linking Colchester and Cambridge via Ipswich as a practical alternative to the A12-A14 road journey. It would be helpful if the Department for Transport endorsed such a direct rail service.

    In its documentation seeking bids for the Greater Anglia franchise, the Strategic Rail Authority stated among its key objectives of letting in paragraph 3.1:
    "Deliver a safe, more reliable service of consistently high quality for rail passengers;
    Provide a clarity of service specification so that industry partners work together for passengers;
    Deliver value for money for passengers and taxpayers; and
    Secure accountable, viable operators who are passionate about delivering for their customers."
    I submit to the Minister, in the total confidence that it is a view shared by 97 per cent. of those surveyed by MORI, that First Great Eastern should have been included on the final shortlist. Its track record, literally, demands that it should. Even though the parent company has done the dirty on First Great Eastern, its staff and those who use its services, I hope that, even at this late hour, the Government will tell the Strategic Rail Authority that its behaviour is not acceptable, demand answers to the questions that its decision has caused to be asked, and state that First Great Eastern should be reinstated on the shortlist.

    2.57 pm

    I congratulate the hon. Member for Colchester (Bob Russell) on securing the debate and on providing an opportunity for the House to discuss the Greater Anglia rail franchise. I do not think that he did his constituents or others in East Anglia any service by the manner of his speech. I shall forgive him his childish and tiresome rant about the state of our railways. People who consistently do our railways down do no favours to commuters or all those struggling to work hard in the railway system. I forgive him, too, because there is no budgetary provision whatever in any shadow Budget emanating from his party for the full renationalisation of the railways, so he is out on his own, as ever, in that regard, too.

    What I cannot forgive, even under the cloak of parliamentary privilege, is the irresponsible manner in which the hon. Gentleman alluded to some conspiracy theory, where we have everything but the second gunman on the grassy knoll. To speak of half-truths, innuendoes, stitch-up, companies being shafted, nudge-nudge, wink-wink and the Strategic Rail Authority telling FirstGroup what it may or may not get elsewhere, is frivolous beyond belief, irresponsible in the highest regard and does the hon. Gentleman no credit at all. Nor does it help in any way to pursue what his constituents require.

    The hon. Gentleman will know that, last year, the SRA consulted the industry, stakeholders and passengers on its proposed policy of one operator at London termini. The authority's consultation document suggested that having one substantive operator at a terminal would—this may have been the area that he should have dwelt on—facilitate optimum use of available capacity, both in the station and on the approaches to it; provide a simplified, more understandable and impartial day-to-day interface with the passenger; remove many of the contractual interfaces that he complained of at stations and simplify the timetable planning process; and improve reaction to service disruptions.

    In the main, the responses to the consultation were positive, supporting the notion that such a policy would bring significant benefits to operators and passengers alike. The SRA has therefore adopted the policy in its programme of replacing franchises. All services into London Liverpool street are therefore to be combined into one Greater Anglia franchise. The franchise will be comprised of the services currently operated by Anglia Railways, First Great Eastern and the West Anglia services of West Anglia Great Northern, the franchises for which are due to expire by 31 March 2004. All the stations managed by those operators will be included in the new franchise, as well as the stations operated by Central Trains between Peterborough and Norwich.

    The competition for the franchise was originally launched on 27 March 2002. There was a strong response to the invitation to pre-qualify and in May last year the authority announced that nine parties had done so successfully, including FirstGroup, the incumbent operator of the First Great Eastern franchise. Following the publication of the Strategic Rail Authority's new franchising policy in November 2002, the competition for Greater Anglia was relaunched in January of this year. On 1 April, the authority announced that three parties had qualified as bidders for the franchise. These are GB Railways plc, the incumbent operator of the Anglia Railways franchise; National Express Group plc, the incumbent operator of the West Anglia Great Northern franchise; and Arriva Trains Limited.

    As the hon. Gentleman said, there has been much debate and speculation over the decision not to qualify FirstGroup to receive an invitation to tender for the franchise. While this is a matter for the Strategic Rail Authority as the letting agent, it would be difficult for me not to comment on the matter in the context of this debate. Of course, the authority's primary concern in letting any franchise is to get the best possible deal for passengers and taxpayers. Given that the Greater Anglia contract has a headline value of up to £3.5 billion, there had to be a rigorous process for selection.

    The Transport Act 2000 makes it clear that each franchise competition is a new competition and everyone, whether incumbent or not, must treat it as precisely that. The Strategic Rail Authority is well aware that Great Eastern has performed well under the stewardship of FirstGroup. That was not overlooked in the decision-making process. However, that process is primarily centred on the responses to the "Qualification to Receive An Invitation to Tender" document. That was a clear and concise document, explaining precisely what was required of bidders.

    FirstGroup, along with all the bidders, accepted and participated in this process. The Strategic Rail Authority evaluated the substance of FirstGroup's response on a basis consistent with all others. The notion that it is about settling old scores or nudge-nudge, wink-wink elsewhere is immature to say the least and ill becomes the hon. Gentleman. He besmirches a number of people who are working with integrity throughout the rail industry. He might want to reflect on those comments when he looks at Hansard tomorrow.

    The hon. Gentleman says that he has been well briefed. He might have employed a speechwriter to give greater emphasis to the genuine concerns among commuters from his constituency and that of my hon. Friend the Member for Braintree (Mr. Hurst).

    As I said, the SRA evaluated the substance of FirstGroup's response, consistent with all others. On the basis of those responses, it selected the bidders that scored highest against the criteria that had been clearly set out. The authority made it clear in advance of the qualification exercise that if a sufficient number of applicants met the minimum requirements, it would invite not fewer than three and not more than five bidders.

    FirstGroup was not ranked among the top three bidders and was therefore not invited to continue in the bidding process. The company was Understandably disappointed, but I am glad that the prospective legal challenge has been withdrawn and the SRA can now focus its attention on selecting a preferred bidder and working towards signature of a franchise agreement. Unless I am informed otherwise today or subsequently, the SRA will not change the bidding process halfway through; the process was clearly mapped out for all individuals concerned.

    What are the next steps? In June, the Strategic Rail Authority finished consulting stakeholders on their aspirations for the franchise and, having evaluated the responses received, issued a final franchise specification to the bidders on 1 July. This specification indicates a number of options and proposals that could be included in bids such as schemes designed to enhance capacity, the possibility of a metro-style service within the Greater London Authority boundary, improved interchanges between train and other forms of transport and improved station facilities such as the capacity and quality of car parks, improved facilities for cyclists, better access for disabled passengers, better security and improved signage.

    The SRA also requires bidders to put forward with their bids a detailed rolling stock plan, indicating how they would maximise the use of infrastructure capacity during peak periods. Such plans would be expected to show how the bidder intends to accommodate the implications of operating longer rolling stock, and what trains they intend to refurbish, replace, procure or lease.

    The authority intends that rural routes be managed within a separate business unit. The successful franchisee will be expected to ensure that the business unit has appropriate autonomy to review and develop rural services, and to provide local focus, accountability and partnership with the communities that they serve. As I said, rural routes are important in this regard.

    The bidders will work up their proposals and submit them for the authority's consideration in time for a preferred bidder to be announced later this year. The franchise is envisaged to come into effect in April 2004. Of course, all bids must be backed by a robust business case. The authority will be looking to select the bid that is affordable, deliverable and of most benefit to passengers: in other words, the one that offers best value for money.

    I hope that I have gone some way towards demonstrating that the new franchise will bring significant benefits to passengers—a point that the hon. Gentleman chose not to touch on—both to commuters to London, and to users of local services. The Greater Anglia franchise is the first to be let under the new franchising policy, and the first to be let under the one operator per London terminal principle. It will therefore be under a particularly bright spotlight, and I know that everybody in the industry will do their utmost to ensure its success.

    I understand the hon. Gentleman's point about the comments of aggrieved employees who would rather that their company was involved in the bidding process. However, it is a matter of regret that he chose to couch his contribution in such a childish and immature context, which did nothing for commuters in the area served by Greater Anglia, or for his Colchester commuter constituents. Nor did it add anything in terms of highlighting what is a very important issue.

    In my previous manifestation as Minister with responsibility for housing, I had a rather rough debate with the hon. Gentleman in Westminster Hall. I came here today with the explicit intention of being nice, emollient and terribly ministerial, but I am afraid that I could not be because of the unnecessary and immature drivel that he introduced into the debate. Perhaps next time will be third time lucky.

    Question put and agreed to.

    Adjourned accordingly at seven minutes past Three o'clock.