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Local Government Act 2003

Sections 101 and 102: Contracting-out: staff transfer matters, including pensions

288.The sections confer new powers on the Secretary of State, the National Assembly for Wales and Scottish Ministers to require best value authorities in England, Wales or Scotland, when engaged in contracting-out exercises, to deal with staff matters in accordance with directions. Section 101 also requires authorities to have regard to guidance on staff matters issued by the Secretary of State, the National Assembly for Wales or Scottish Ministers. The background to this is the commitment made, as part of a package of workforce measures, following the review of Best Value, to legislate to make statutory within local government the provisions in the Cabinet Office Statement of Practice on Staff Transfers in the Public Sector and the Annex to it, A Fair Deal for Staff Pensions (this is available on the Cabinet Office website at: It is intended to use the direction making powers to ensure that contracting exercises are conducted either on the basis that TUPE will apply or, in circumstances where TUPE does not apply, that staff involved should be treated no less favourably than had the Regulations applied, unless there are exceptional circumstances, and that transferees will be offered either retention of the Local Government Pension Scheme (LGPS) or a broadly comparable scheme.

Section 101: Staff transfer matters: general

289.This allows for the Secretary of State, or (in relation to authorities in Wales other than police and fire authorities) the National Assembly for Wales, or (in relation to relevant authorities in Scotland) the Scottish Ministers, to issue directions to require best value authorities, in contracting with other persons for the provision of services or in circumstances where a contracted-out service is brought back into the public sector on the termination of a contract, to deal with staff transfer matters (employment or pensions) in accordance with any directions made. The section also requires authorities to have regard to guidance on staff matters issued by the Secretary of State, the National Assembly for Wales or Scottish Ministers.

290.The duty of best value as set out in the Local Government Act 1999 or the Local Government in Scotland Act 2003 is subordinate to this requirement. Directions or guidance made under the power may relate to all best value authorities or to particular descriptions of best value authority.

Section 102: Staff transfer matters: pensions

291.This provides that the Secretary of State, National Assembly for Wales and Scottish Ministers shall exercise their powers under section 101 to give directions so as to ensure that English, Welsh and Scottish local authorities, in contracting for the provision of services, secure specified pension benefits. These are, first, that the contractor is required to secure pension protection for employees of an authority who are transferring from the authority under TUPE or who, in a re-contracting case, transferred from the authority under TUPE when the services were first contracted out, have transferred under TUPE on each subsequent change in contractor and are again transferring under TUPE in connection with the contract with the contractor. Secondly, that the contractual terms for the securing of pension protection for a transferring employee are enforceable by the employee. Pension protection is secured where the employee’s rights to acquire pension benefits are the same as, or broadly comparable to, those enjoyed by the employee before the transfer.

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