Current Petitions

I welcome the Deputy Minister for Enterprise, Transport and Lifelong Learning to the committee and thank him for coming along. We move directly to consideration of PE500. We will come back to PE496 after we have had a chance to talk to the minister.A large number of members are in attendance—much in excess of the committee's membership—to hear what the minister has to say. If the minister would like to say a few introductory words, he can go ahead.

I am glad to have the opportunity to address any further issues that arise from my letter of 12 June, which was written in response to the convener's letter of 8 May, and to clarify the key issues, which on occasion have been misunderstood or have caused some confusion. I hope to address that today.The petitioners called for the Executive to increase the amount that is on offer and to expedite payment so that pensioners receive the maximum benefit from the pension fund surplus at the earliest date. The first point that must be clarified is that neither the former pension scheme members nor the Scottish Executive had a claim on the Scottish Transport Group pension scheme surplus on the wind-up of the schemes. The petitioners are aware that, without the intervention of Scottish ministers, the surplus would have gone to the UK Exchequer, in line with the requirements of section 14 of the Transport (Scotland) Act 1989. As I explained in my letter, when we consider the basis and the mode of distribution north and south of the border, it is crucial to acknowledge the difference in the rules of the National Bus Company and the STG schemes on the final destination of surplus funds in the schemes. The rules for the NBC scheme stipulate that any remaining surplus should go to employees, whereas the rules for the STG pension schemes stipulate that any remaining surplus should go to employers, which means the UK Exchequer. Following a breach of the NBC scheme rules, the actions of the NBC trustees were referred to the pensions ombudsman, who found that the company had acted improperly. The ombudsman ordered the wind-up of the NBC to be reversed and the NBC pension schemes to be restored to the position in which they would have been if they had continued to operate in the intervening years. The petitioners are aware that an out-of-court settlement was agreed with the Deputy Prime Minister, John Prescott. It became clear at that time that members of the NBC schemes would receive an average payment of about £7,000 each.Although we could identify no legal basis for treating the Scottish schemes in the same way, Scottish ministers were keen to address the perceived detriment to Scottish pensioners and to ensure that they received an outcome that was comparable with the one for their English counterparts, despite the difference in the rules. For that reason, Scottish ministers intervened directly with the UK Government to secure for Scottish pensioners an outcome that was in line with what had been achieved on a different basis south of the border. In December 2000, Henry McLeish, the then First Minister, announced that we had secured £100 million from the pension scheme surplus for disbursement through ex gratia payments, which would provide an average payment of £7,000 for each Scottish pensioner. I stress the word "average", because the numbers vary greatly in Scotland and England. As members will recall, in November last year I announced that, in addition to the £100 million that had been secured, we had agreed with the Treasury to an increase of a further £18 million, to take account of investment return that had occurred after the initial agreement was made and of a decrease from 40 per cent to 35 per cent in the rate of tax that was payable on the surplus.We await the final audit, but we expect the final accounts for the STG to reveal that the surplus, net of tax, will be approximately £176 million. Apart from the £118 million that has been set aside for distribution and the £50 million that will go to the Treasury, according to the agreement of December 2000, an additional balance of £8 million remains, which, under statutory requirements, should be remitted to HM Treasury. However, as I said in my letter, we will make further representations to the Treasury on that, with a view to retaining that additional surplus for disbursement to the former STG pension scheme members.The most important matter—and the one in which most pensioners are interested—is when payments will be made. I confirm that the Scottish Public Pensions Agency will write to individuals around the end of July to indicate their payment, based on their pension scheme record. Individuals will be asked to confirm the data that have been used to calculate those payments. For those who are able to reply to the SPPA with confirmation that the data are correct, payment will be authorised quickly. Cases where there are disputes about the data will clearly take longer. I expect payments to the great majority of pensioners, when the pensioners agree with the figures that are used in calculating their entitlement, to begin by mid-August 2002.The SPPA will run a media advertising campaign, which will be timed to coincide with letters being sent to individuals. The purpose of the campaign is to cast the net widely for those who think that they may be eligible but have not received a letter from the agency by a specified date. The advertisements will include a contact address and telephone number, in order to assist us in tracking down any potential beneficiaries for whom we do not have complete or accurate records. I hope that that brief summary clarifies the principles involved in the making of the ex gratia payments and that the committee will agree that what the Executive has done goes some way towards meeting the demands of the petitioners. It goes as far as we have been able to go in maximising the sums available for distribution to them. I will be happy to answer any questions.

Thank you. This is a complex matter. I take it that all members, including those who are not members of the Public Petitions Committee, have the papers. I intend to go through the eight questions that the committee asked the Executive and deal with each in turn. I will ask members whether they want to raise any additional questions on those points. At the end, we will deal with any matters that have not been covered.The first question asked whether the Executive intended to reopen negotiations with the Treasury. As members have heard, the minister said that the Executive intends to make further representations to the Treasury about an additional £8 million. Are there any questions on that point?

I will attempt to do that. Dennis Canavan has correctly identified two points of ambiguity, which I want to clear up. First, the net surplus that we were aware of at the time of our exchange in Parliament—the net surplus until the end of the last financial year, which was 31 March 2002—included £118 million that we had already secured, £50 million that we had agreed with the Treasury in 2000 would go to the Treasury and, at that stage, an additional £6 million, which had been accrued over the financial year that had just finished. Since then, we have gone through the necessary stages. The pension schemes were wound up, the Scottish Bus Group was put into liquidation and, on 7 June, Scottish ministers dissolved the Scottish Transport Group. Following that process, there is a period between the end of March and 7 June when there has been a further accumulation of surplus. Although we do not yet have a final audited account to confirm a precise figure, our estimate is that it will be in the region of an additional £2 million. At the end of March there was £174 million, which consisted of £118 secured, £50 million agreed to go to the Treasury and a further £6 million. That last figure is now £8 million, so there is a surplus that is not accounted for under the headings of money that has been secured or money that it has been agreed will go to the Treasury.That is the first point of clarification. If members are happy with that, I will deal with the second point of clarification.

That is the second point that I was about to make, but I wanted to clarify the first point, which is that the sum of £6 million, which Dennis Canavan quoted, is now nearer £8 million. That is because of the accumulation of surplus between the end of March and the beginning of June.As I mentioned in my introductory remarks, the agreement that was reached with the Treasury in 2000 was that the Treasury would get £50 million and that we would secure £100 million for distribution to pensioners. That agreement remains in place. When we open discussions with the Treasury, we will want to talk in particular about the £8 million of additional surplus that has been accrued since the £18 million was secured last November. We are not closing the door to further discussions, but our primary objective at this stage is to address the issue of the £8 million. We will seek to persuade the Treasury that that additional accrual in the surplus should be made available through us for distribution to pensioners.

The £8 million represents the sum that is not subject to any existing agreement between the Treasury and Scottish ministers. That is why the £8 million is the primary focus of our concern in speaking further to the Treasury.

I am sure that Mr Canavan does not expect me to lay out in advance the detail of the negotiations that we will enter into. That would not be appropriate. However, he can assume that we will continue to make the case that we made in securing the sums that have already been secured to achieve the best possible distribution to Scottish pensioners. Our priority in the negotiations will be to focus on the unallocated sum but, yes, he can assume that, in our discussions with Treasury, we will advance similar arguments to those that were used in previous discussions.

After Fergus Ewing's question, we need to move on to deal with the next point.

I accept the first part of what Fergus Ewing said. The £18 million that we secured last year was the result of a reduction in the tax rate from 40 per cent to 35 per cent and from the accumulation of funds in the surplus during that period. Likewise, the £6 million to £8 million figure—it is nearer to £8 million—is a result of an accumulation in the funds. I do not accept as a logical consequence that there is no further contribution from the Treasury. The Treasury's view would be that the £18 million and the £8 million that has been accumulated legally belongs to them. However, the agreement it has reached with us is that the money should be available to us for distribution to pensioners, even though it has a claim on that money. We have secured the £18 million and we also seek to secure the £8 million.

As I said in response to Mr Canavan, we will conduct our negotiations in the most effective way that we can.

Let us move on to the second part of the answer to the first question, which was about the expected time scale of the payments. We have heard from the minister that the Scottish Public Pensions Agency will write to pensioners at the end of July, asking them to confirm the payments to be made to them and informing them that those payments will be made by mid-August.

We will come to that eventually.

I am sorry, Dr Ewing. Was your question that the payment would not happen in the event of a legal challenge?

We hope to make payments as quickly as we can. That position would be put in jeopardy if there were a legal challenge that questioned the basis for any payments that we made. I suspect that officials would advise me that we should cease payments until any such legal ambiguity was resolved. I hope that any legal issues that individuals might wish to raise would not be raised during the payment process and cause delay to the distribution to pensioners.

We are dealing with question 7.

I sincerely hope that that position will not arise. If there is a legal challenge, I will receive advice from officials, but the responsibility for a decision will lie with ministers. Judging by precedent, the advice of civil servants in the circumstances that you describe would be that we should make no payments that might be called into question in a court of law or that might call into question our proper stewardship of public funds.

The position is that anyone who considers making a legal challenge would wish to seek legal advice and to consider it carefully. They should also consider carefully whether there is a realistic basis for pursuing such a challenge. If the rules are as clear as we believe them to be, any surplus belongs to the employer and not to the employee. I would expect any responsible legal adviser to point that out to anyone who is considering taking legal action. The quality of legal advice is always critical.

I remind members that we are considering questions 1 and 7 together.

I welcome the fact that payments will start being made in August. I am concerned that many of the people who are eligible to receive payments are elderly. What steps will the Executive take to ensure that eligible people can claim their payments? Elderly people are notorious for not claiming what is due to them, as they might be frail, unwell and unable to make those claims for themselves. Will local authorities help people to make claims? I am thinking particularly of people in nursing homes who would not be able to make their claims without help.

Our intention is to advertise as widely as we can to seek to reach those people who might not be aware of their entitlement. That will be an important aspect of what we do. Likewise, we will seek to ensure that widows, children and widowers of pensioners are aware of their rights and are encouraged to make appropriate claims. Jamie Ross will respond briefly to the question about how local government might assist with that.

The trade unions—particularly the Transport and General Workers Union, which is the largest relevant union—have been closely involved in the process and will, we hope, continue to assist in identifying members.

We have not reached that subject yet.

We are still dealing with question 1.

What is happening with T&G Scotland? I am here as the T&G representative. What is happening with the formula? Has that been decided? What is the time scale for doing that? The formula must be decided before the letters can be sent.

The criteria for distribution have been decided and discussed with the T&G among others. Members will be aware of the broad criteria. The precise formula for distribution is being worked on, but it will not hold up the process or the timetable that I described. One or two details of the formula will need to be clarified, but its essential shape is clear. The T&G has talked to us about that from an early stage and I think that it is broadly content with our proposal.

Question 2 deals with double taxation and the distinction that has been drawn between NBC members, who it is claimed were paid a lump sum from the pension scheme, and STG beneficiaries, who will receive ex gratia payments from surplus funds, which, on wind-up of the pension schemes, should go to the UK Exchequer.

I will start on the issue because I raised it when the Public Petitions Committee last discussed the petition. Much hinges on whether the settlement up here is comparable with what is happening down south with the National Bus Company. Much information was given at the meeting when the committee last discussed the petition. That showed fairly convincingly that the positions of the two settlements were not comparable. I would like your views on that information.The question that follows from that concerns unlocking the £50 million for the Treasury, which is essentially tax on the ex gratia payments. As the minister said in his introduction, the NBC scheme rules said that any surplus would go to employees rather than employers, which is why settlements could be made without tax, whereas the Scottish scheme requires tax to be paid. I understand that the Inland Revenue has been consulted and has said that it can see no special case for changing its decision. Was the information that was provided to the committee put before the Inland Revenue? It strikes me that a special case could be made for making the ex gratia payments tax free.

Two points are involved and are worth distinguishing. First, as I said at the outset, the schemes have different rules on the treatment of a remaining surplus or deficit. The second point concerns what the trustees of the different schemes have chosen to do. The trustees of the STG pension scheme did not choose to make pensions payments in the way that happened south of the border. Whereas the NBC pensioners in effect received enhanced pension payments or a lump sum paid out within the terms of that pension scheme, the Scottish pensioners received ex gratia payments outwith the terms of their pension scheme. I suspect that that is the key distinction, as individuals are liable to personal taxation upon receipt of ex gratia payments.The decision to proceed in that way lay with the trustees of the respective schemes. Scottish ministers had no say or role in that decision. However, I understand that the STG trustees made the decision on the basis that payments had already been made to their pensioners. A distinction must be drawn between the legal ownership of the remaining surplus, which I have already touched on, and the way in which the trustees chose to make payments. That was the second point.On the arguments that were put to the Inland Revenue, I may need to call on one of my officials, who was involved in the technical side of the discussions, to respond to that question. In essence, we made a case from a number of different angles and sought to identify a basis for special consideration. However, at the end of the day, the judgment is for the Inland Revenue, which decided that the Scottish pensioners have no basis for claiming tax-free payments because the money is being paid outwith the terms of the pension scheme. That is the fundamental issue.Perhaps Jamie Ross can speak more about the particulars of that discussion.

I have one follow-up question.

You must ask it quickly. We are not making progress and I have three groups of petitioners waiting to speak to subsequent petitions.

What special circumstances will the Inland Revenue take into account so that people need not pay tax? Can Jamie Ross provide some examples?

Special circumstances can exist, but if Sylvia Jackson wants to pursue the question, perhaps she would be best to address it to the Inland Revenue.

I do not agree. It is certainly our intention that the assertion that you made will not be the case. The deal that Scottish pensioners receive should be comparable with that south of the border. We secured £100 million in the first negotiation. That would have provided, on average, a sum before tax of £7,000, comparable with the average sum received by an English pensioner of £7,000. The additional £18 million that we have secured means that the average receipt for a Scottish pensioner will be more like £8,000. That goes a significant way towards dealing with the taxation issue.The position of individuals will depend on their other income and on whether their existing pension income renders them liable to tax. Sadly, as we know, in many cases transport company operatives have in the past not received generous pension payments, so I suspect that a significant number will not be liable for tax in any case. By securing additional funds, we have sought as far as possible to meet the difference in the tax position. It has not been a matter for political negotiation. As Fergus Ewing said, it is a matter of pension law and tax law. We have sought to maximise the arguments where that will lead to benefit for Scottish pensioners.

Those points refer to question 8, which we intended to come to later, but the minister could answer the point now and get it out of the way.

I met a group of four representatives of the pensioners action committee, one of whom was Jim Donnelly. The meeting took place in Perth on 23 February. It allowed us to address a number of the issues that were of concern to the pensioners action committee. As I indicated in my reply to the convener, we have responded to a significant number of the points that have been raised since then either by correspondence or in Parliament. We will consider on its merits any request for a further meeting that follows the meeting today.

I want to be clear about this point. It relates to the question that Sylvia Jackson asked. Has the evidence that Mr Derek Scott gave to the committee formed any part of the Executive's considerations or the negotiations with the Inland Revenue?

That evidence is certainly something of which we have been aware. Do either of my officials wish to comment on that point?

Have the points that Mr Scott made to the committee been raised with the Inland Revenue?

So they have not been raised with the Inland Revenue. That is clear. We will move on.

As you say, we received an e-mail from Mr Scott just over a week ago. We will consider carefully the points in it and respond to it. If there is additional information or interpretation in the e-mail that we feel might be useful, we will certainly consider how best to act upon it. On that basis, we will consider carefully whether there would be advantage in a meeting. I do not close the door to that possibility, but we must consider it. I will take advice on that in the next few days.

The next set of questions deals with the fact that the STG pensioners made four years of additional contributions because of the late privatisation of their organisation. They also had an agreement in 1983 that promised enhanced pension payments in return for a wage settlement. As no one wishes to ask questions about the minister's answers on those points, we will move on to the decision of the 27 pension trustees to award themselves payments that totalled almost £700,000 to compensate for the loss of privileges such as private medical cover.

I do not disagree. It surprised me to discover that a publicly owned industry had put such a generous contract in place for private health care. The legal advice that the Government received was that, on the wind-up of the Scottish Transport Group, a liability existed that had to be met by the STG or by the Government. It is important that the liability was met by the STG and not from the pension schemes.

Would the relevant minister at the time have agreed to the contract?

I assume so. That was significantly before my time, not to mention the fact that I am a member of entirely the wrong party to be asked about that. I assume that ministers were aware of the contract.

We will move on to seek to clarify whether the sums for pensioners who have passed away will be paid to pensioners' widows and widowers, added to the surplus for the benefit of the remaining pensioners or retained by the Treasury.

Yes. The intention is that such people will qualify.

It will be 50 per cent.

Although the payments are ex gratia, they are within the scheme's rules. What we can pay will accord with the scheme's rules. For widowers whose wives were pensioners, we have gone beyond the rules of the scheme. We have found a way to include widowers in the scheme.

I can certainly investigate the issue. I cannot today offer an assurance as to the outcome of that investigation, but I am prepared to examine whether there is anything that we can do.

I would be grateful if the Public Petitions Committee could be kept informed of developments.

I am sure that that will happen.

Question 6 concerns a statement made in a parliamentary debate in November 2001 about the failure of individual pensioners to convince the pensions ombudsman that there is any legal basis for them to make a claim on the surplus. We thought that the minister had made the statement, but in fact it was made by Nora Radcliffe MSP.

I note that point. The position is as I described, although I am grateful to Mr Canavan for the further information that he provides on the circumstances in which the rules were changed. The situation may be a matter for regret, but the rules are as they stand. The pension schemes have been wound up and the trustees are trustees no longer. The trustees took a number of decisions that might have been taken differently. Unfortunately, those decisions cannot be remedied, because they were taken by trustees who were acting within the rules of the schemes.

I understand Dr Ewing's long-standing antipathy to the Act of Union, but in 300 years no challenge to the legal standing of the act has been sustained. I fear that the same may be true in this case. However, we will take the point into account when considering whether there are additional grounds for discussion.

We dealt with question 7 when dealing with question 1. Question 8 has also been dealt with.

The question was about the implications of any legal challenge mounted by the pensioners.

I would not wish to assert a legal view, but we have acted on the best advice on the legal entitlement to ownership of the pension surpluses. On that basis, we have proceeded in the way that I have described. We have secured as much as possible of the surplus by agreement with the Treasury. We believe that that was the right course to follow.As is the way of these things, the legal advice from our advisers was full and frank, and so was received in confidence. We listened to that advice before coming to a view. We feel that we have received the best possible deal for pensioners. Clearly, others have the right to take a different view. As I have stressed, having finally secured the funds at the beginning of this month, following the wind-up of the pension schemes, our priority now is to distribute them as quickly as we can. If people feel that there is a prima facie case, as described by Mr Ewing, we would encourage them to consider carefully not only the substance of that case but the timing.

We have covered most of the issues and I thank the minister for his open and honest answers. He has been very co-operative and I thank him on behalf of the committee.We must now consider our response to what we have heard. The matter is complex and detailed. The committee's only power is to refer the petition to another subject committee. We are not really sure which committee would be appropriate. The Finance Committee has looked into the matter but complaints arose over the way in which it dealt with it. The Enterprise and Lifelong Learning Committee may also have a view on the petition as it concerns a commercial enterprise.It is suggested that we take time to consider the matter and put the issue on the agenda of our next meeting, which will be the committee's final meeting before the recess. In the meantime, the clerks will liaise with other committees to decide which committee would be the appropriate one to deal with the petition. We should not rush things.

I do not have a problem with that. Is that agreed?Members indicated agreement.

We will have to consider how to deal with the taxation question, which was not answered this morning.

I would like to read the Official Report of the meeting so that, at the next meeting, we are better placed to discuss what can and cannot be done.

A week today. It will be the last meeting before the recess, so we will decide then.

We could invite Mr Scott to the next meeting to discuss the petition.

I want to pick up on what Helen Eadie said. There is the unresolved issue of special cases in which the Inland Revenue changes its mind and there is also the issue of what the minister will do. Now that he has the information that was available at the previous meeting of the Public Petitions Committee, which he and his staff admitted they did not have when they went to the Inland Revenue, will he put the case to the Inland Revenue again?

It has been suggested that, as well as asking Derek Scott to be present, we could ask for an urgent response from the Inland Revenue in respect of special cases so that that will be available for the next committee meeting.

As far as the Public Petitions Committee is concerned, the intention is to resolve the issue at the next meeting. We realise the urgency of the matter and want the Inland Revenue to respond by next week. We will ask it to do so in order that the committee can reach a decision. That is why we want Derek Scott to be present, too. If he cannot be present, we cannot do anything about that, but we can consider the points that he made at the previous meeting.

We can invite the Inland Revenue, but it is under no compulsion to attend any meeting of a committee of the Parliament. At this stage, we simply want to obtain the information that Sylvia Jackson wants. We are trying to pressurise the Scottish ministers in their negotiations with the Inland Revenue. I do not think that we can take the place of the Scottish ministers in negotiations at this stage. We should apply the maximum pressure to get ministers to reopen the issues.

There is no guarantee that an Inland Revenue representative will come and I am concerned that ministers would see that approach as gross interference in negotiations that they are conducting on behalf of the Scottish Executive. At this stage, it would be better simply to obtain the information and try to process it.

It would be very short notice for Inland Revenue civil servants to come up from London.

We can invite the Inland Revenue. Does any member oppose that?

I am a wee bit concerned about Winnie Ewing's tone. She wants to invite the Inland Revenue simply so that it can turn us down. It is not fair to invite representatives at such short notice so that we can use their turning us down against them. Sending an invitation is no problem, but in doing so, we should take cognisance of the short notice and the fact that representatives might not be able to come.

We intend to seek information from the Inland Revenue about special cases that it allows to be tax exempt. We could ask the Inland Revenue either to write to us or send a representative to explain what the exemptions are so that we can reach a conclusion about the petition. However, we should not invite the Inland Revenue up here to conduct negotiations that should be carried out by ministers. The committee's role does not include getting involved in negotiations—its role is to obtain as much information as we can to help us to resolve the petition.Are members agreed on the suggested course of action?Members indicated agreement.

I thank members. The issue will be on the agenda for the next meeting.