My Lords, I thank the noble Baroness, Lady Drake, for the time and effort that she has put into examining this matter and meeting with me and my officials to explore the details. The noble Baroness is an expert in pension matters and we have all benefited from her advice, and I am very grateful. Government Amendment 33ZYE is explicitly designed to ensure the continuation of the Crown guarantee for those transferees from BT plc to a future Openreach or other successor company. Amendment 33ZYEA is a technical point and concerns the adequacy of the word “undertakings”. I believe that our existing wording on undertakings is sufficient and would cover any transfer of staff, including one that was consequential on the application of the TUPE regulations about the movement of activities from one company to another. The “activities”, suggested by the noble Baroness, if moved to another company, are part of the undertaking of BT.
We agree with the noble Baroness on the policy intent. We intend to cover all ways by which BT staff might be transferred to the new Openreach company, but technical detail is important here, and I will table a technical clarification for Third Reading.
Amendment 33ZYEB seeks to delete a subsection of the Government’s amendment that provides a power to vary the Crown guarantee. I understand the reasoning behind this amendment but want to remind noble Lords that the Government have been clear that we are providing a power to ensure that, following Openreach’s separation, the extent of protection afforded by the Crown guarantee is no less and no more than at present. I reassure noble Lords that nothing in the Bill or in the delegated powers it gives to the Secretary of State will change or alter the Crown guarantee to BT plc pension liabilities.
We have seen the documents published by BT and Ofcom that outline plans for a legally separate Openreach Ltd. On the basis of those, the Government fully intend to ensure that the Crown guarantee protection continues to be maintained for all current members of the BT pension scheme, including those who will become part of the wholly owned subsidiary Openreach Ltd. So, our clear intention is that the protection of the guarantee provided to BT pension scheme members should be maintained. That is why the power includes an ability to define that protection in secondary legislation so that it may be neither wider nor narrower than
existing protections. However, until we see the detail of the agreement on Openreach separation, and how the liability for payments to the BT pension scheme will be divided between BT plc and the new Openreach, we cannot say that the power defined in new subsection (5) will not be required. In applying the Crown guarantee to the pension liabilities of the new company, we are creating new risks. There is the potential for unintended consequences, which concerns us particularly. This power helps guard against them, while enabling the Government to maintain Crown guarantee protections for pension scheme members in line with our clearly stated intention to do so.
New subsection (5) gives the power for the Secretary of State to consider whether to maintain the Crown guarantee for any staff who then move on to spin-off companies: for example, if part or all of Openreach were sold. I believe that the need for this power is clear. I reiterate that it is the Government’s intention to ensure that current members of the scheme who transfer to Openreach are certain that their pension rights will continue to be safeguarded by a Crown guarantee.
I turn now to Amendment 33M, which seeks to place obligations on the Secretary of State to direct Ofcom to begin the process of “legal and functional separation” of Openreach from BT plc. Functional separation of Openreach and BT has been in place since 2006 by means of undertakings that BT gave to Ofcom pursuant to the Enterprise Act 2002. On 10 March 2017, Ofcom and BT announced that they had agreed on a legal separation. By the end of this year “legal and functional separation”, as required by the noble Lord’s amendment, should have been achieved, according to Ofcom. On that basis, if the timetable set out in Amendment 33M were to be followed, separation would take much longer. Ofcom is currently consulting on the details of the transition to a legally separate Openreach. This consultation closes on 14 April and the timetable for completion Enterprise Act 2002Moreover, if Ofcom had to impose its decision on BT rather than having a voluntary agreement as now, the decision would have to be referred to the European Commission under the electronic communications framework directive. The remedy of separation has never been used before, so the timetable for a response from the Commission is unknown. It could be nine months or more. It is also possible that BT would appeal against forced separation, further delaying the process. A long delay would be likely to inhibit investment in the sector at a time when we all want to see great strides being made in the UK’s broadband coverage and quality.
The purpose of having our independent communications regulator, Ofcom, is to make exactly these assessments. It is Ofcom’s duty and role to take decisions and regulatory interventions on the strength of its expert analysis of competition in the market. As such, it is our view that it would not be appropriate for the Government to legislate in this way in view of the independence of Ofcom from government. It is therefore not necessary or right for government to legislate on this matter both because Ofcom can take such decisions and because it has already done so, specifically in respect of the separation of Openreach. With that explanation, I hope that the noble Baroness will withdraw the amendment.
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