House of Commons

Monday 29th October 2012 Commons Chamber

Monday 29 October 2012

The House met at half-past Two o’clock

Prayers

Monday 29th October 2012 Commons Chamber

[Mr Speaker in the Chair]

Oral Answers to Questions

Monday 29th October 2012 Commons Chamber

The Secretary of State was asked—

[Mr Stephen Hepburn (Jarrow) (Lab)]

1. What steps he is taking to increase the quality and availability of apprenticeships for 16 to 18 year-olds.

[The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)]

There is growing consensus that, alongside the overall increase in apprenticeships under this Government, we must enhance their quality and make them more employer-focused. I pay tribute to my predecessor, my hon. Friend the Member for South Holland and The Deepings (Mr Hayes), who ensured that an apprenticeship normally lasts longer than a year, and is a real job. To enhance availability, we are simplifying apprenticeships, and the National Apprenticeship Service will in future focus more of its resources on engaging with employers.

[Mr Hepburn]

Is it not a fact that a lot of those apprenticeships are nothing but a scam? They allow employers to change the name on a job, call them apprenticeships and dodge paying the minimum wage. What is the value of an apprenticeship making sandwiches or packing shelves in a card shop?

[Matthew Hancock]

I am a great supporter of apprenticeships across the economy. As the economy has changed over the past few decades, apprenticeships are in the service sector and insurance as well as in engineering and high-value areas. I am sure the hon. Gentleman, like me, is looking forward to the review by Doug Richard into the future of apprenticeships, because we must ensure that quality is at the heart of the apprenticeship offer.

[Robert Halfon (Harlow) (Con)]

Is my hon. Friend aware that the number of apprenticeships has gone up by 76% in the past year in Harlow? Far from making sandwiches, many of the apprentices have gone on to full-time jobs.

[Matthew Hancock]

I am in favour of sandwiches and in favour of people who learn skills in apprenticeships in all sorts of different sectors. I pay tribute to my hon. Friend, who held a jobs fair last week. I will be copying what he did in my constituency. I hope he, like me, will go to the meeting on Wednesday to discuss what Members on both sides of the House can do to promote apprenticeships in their area.

[Ms Karen Buck (Westminster North) (Lab)]

I welcome the Minister to his post. He has large shoes to fill because his predecessor was a passionate advocate for the brief, but I am sure he will do splendidly. Unfortunately, however, recent figures show a 2% drop in the number of apprenticeships for 16 to 18-year-olds for 2011-12. Given the concerns that we share about long-term youth unemployment and the number of young people not in employment, education or training, does that figure show that the Government are failing in their own terms?

[Matthew Hancock]

On the contrary, not only is youth unemployment on the latest figures falling—thankfully—but in the last year, we have moved to make apprenticeships higher quality. For instance, 11,000 apprenticeships had no job attached. Is it not far better to have high-quality apprenticeships and sell them to employers to ensure that as many as possible engage, so that we can get the numbers and the quality going up at the same time?

[Dan Rogerson (North Cornwall) (LD)]

I, too, welcome the Minister to his position and wish him well in taking over the work his predecessor carried out so admirably. In tightening up the rules on quality, the Government have borne down on some questionable practices. However, they have also tightened up on sub-contracting and sub-sub-contracting to providers. In some areas, particularly rural and peripheral ones, some of those providers are the only providers of such courses. Will he ensure that, where that quality can be guaranteed, those arrangements can continue?

[Matthew Hancock]

Yes.

[Laura Sandys (South Thanet) (Con)]

2. What assessment he has made of the effects of the pupil premium on pupils from disadvantaged backgrounds.

[The Minister for Schools (Mr David Laws)]

The pupil premium represents a significant investment of £1.875 billion since its introduction in April 2011. We are keen to ensure that schools’ use of the premium leads to real improvements for disadvantaged pupils. We have two evaluations under way—a study we have commissioned from Ofsted and our own external evaluation of the premium’s first year. The findings of both reviews will be available next spring, and will further support our drive to promote best practice.

[Laura Sandys]

I welcome the Minister to his position and thank him for his answer. Fifty-six per cent. of the children at Newington primary school are on free school meals. In the headmaster’s view, the pupil premium has doubled key stage 2 attainment and improved maths and English scores by 41%. Will the Minister give a commitment that the money will be in the hands of the head teacher and not ring-fenced in future?

[Mr Laws]

I am grateful to the hon. Lady for her kind words and am delighted to hear of the success of the pupil premium in her local school. I can confirm that we are not going back to the days under the previous Government, who sought to micro-manage each piece of education expenditure.

[Mr Frank Field (Birkenhead) (Lab)]

Given that the skills that young people have before they go to school will determine how effective they are at school, might the Minister consider extending the pupil premium to cover from birth to five?

[Mr Laws]

The right hon. Gentleman has a long tradition of passion for and commitment to the early years in education. We are constantly keeping schools and early years funding under review, and of course we will do what we can over time to ensure that youngsters, at whatever stage of their education, have an opportunity to fulfil their maximum potential.

[Richard Fuller (Bedford) (Con)]

The pupil premium is an excellent coalition policy to assist children from disadvantaged backgrounds, as is the free school policy. Can the Minister advise us on what efforts he will make to push forward with the free school policy to target areas with a high proportion of students on the pupil premium?

[Mr Laws]

My hon. Friend makes a very good point. It is right that free schools are being concentrated in many parts of the country where there is disadvantage and where traditionally the performance of the school system has been weak. That will ensure that many disadvantaged youngsters can attend schools producing an outstanding or at least good performance.

[Ann Coffey (Stockport) (Lab)]

The SK5 8 postcode in my constituency is the 162nd most deprived neighbourhood out of almost 32,500 in the UK. Children attend three different secondary schools where they significantly under-achieve, and not all are entitled to the pupil premium. The Brinnington educational achievement partnership set up in 2009 has helped to increase the number of children attaining GCSE A* to C from 33% to 75%—quite an achievement. Funding has now ended, but would the Minister look favourably on its bid to the education endowment fund?

[Mr Laws]

I am delighted to hear about the progress in the hon. Lady’s constituency, and she has ingeniously managed to keep her question in order. If she would care to write to me on that subject, I will certainly look at the issue further. In the light of what she has said about disadvantage in her constituency, I hope that she will welcome the pupil premium, which must be helping schools enormously in her area.

[Mark Pawsey (Rugby) (Con)]

3. How many 16 to 18 year-olds started an apprenticeship in the last year for which figures are available.

[Sir Tony Baldry (Banbury) (Con)]

4. How many 16 to 18 year-olds started an apprenticeship in the last year for which figures are available.

[The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)]

Early provisional data show that 126,000 apprenticeships were started by those under the age of 19 in the last academic year.

[Mark Pawsey]

Eight hundred and seventy people took up an apprenticeship in Rugby last year, which is an increase of more than 50% since the general election. These are young people who are starting on a process that is vital to them and to the country. Does the Minister agree that, in the same way as for those completing a degree, graduation-style ceremonies should be encouraged as an important way of recognising their achievements?

[Matthew Hancock]

I agree very strongly with my hon. Friend. The first graduation ceremony was held at Buckingham palace a fortnight ago, and the next will be at York minster on 12 November. I hope that around the country we will have ceremonies of graduation from apprenticeships to show the value that has been added to young people’s lives by this fantastic programme.

[Sir Tony Baldry]

It is fantastic that there are so many apprenticeships available, but we are not going to get youth unemployment down if youngsters do not avail themselves of the apprenticeships that are available. Does my hon. Friend find it disturbing—indeed, disquieting —that Barchester Healthcare, which is probably one of the best health care providers, has not been able to fill 500 of the 600 apprenticeships that it has offered? Indeed, it took six months to fill one single paid administrative apprenticeship in its Chelsea office.

[Matthew Hancock]

The average value of an apprenticeship to the apprentice over their lifetime is more than £100,000, and is often more than a university degree. There has been a sharp rise in apprenticeships in health and social care, but I would be happy to meet my hon. Friend to discuss the specifics of the case that he raises.

[Mr David Crausby (Bolton North East) (Lab)]

I started an apprenticeship in a factory, along with 50 others, in the days when it took six or seven years to complete—an experience that the Minister could not possibly be expected to understand. Over the years, the decline in genuine apprenticeships has been catastrophic to Britain’s ability to produce for itself, so what will he do to rebuild the real, quality skills that used to be—not any more—the envy of the world?

[Matthew Hancock]

I would have thought that as a former apprentice the hon. Gentleman would welcome the 500,000 apprenticeship starts over the last year. I entirely agree, however, that we must do more to support quality in apprenticeships, for instance by ensuring that they last for a minimum of one year, and I hope that he will work with me to deliver that.

[Kate Green (Stretford and Urmston) (Lab)]

The Minister will be aware that the recent national apprenticeship scheme pilots achieved a small increase in the take-up of apprenticeships by black and ethnic minority young people, but those pilots have now come to an end. Will he consider using the employer apprenticeship grant to continue to promote diversity and further increase participation by BME young people?

Matthew Hancock: Apprenticeships are a route for all. I welcome the idea of a bid into the second round of the employer ownership pilot from the sorts of groups the hon. Lady talks about. I look forward to such a bid and will consider it along with all the others.

[Annette Brooke (Mid Dorset and North Poole) (LD)]

5. What steps he is taking to ensure sufficient funding for early intervention for children aged five or under.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

7. What plans he has for early intervention spending; and if he will make a statement.

[The Secretary of State for Education (Michael Gove)]

We are increasing the overall funding for early intervention from £2.2 billion in 2011-12 to £2.5 billion in 2014-15. This funding should enable local authorities to support early intervention for children under five, including through the new entitlement to early education for two-year-olds.

[Annette Brooke]

What particular action will the Department take to ensure that Sure Start children’s centres retain early intervention support for families, as well as providing targeted services?

[Michael Gove]

Local authorities are under an obligation to ensure a sufficient supply of Sure Start children’s centres. The overwhelming majority of local authorities, including Liberal Democrat-led ones, have done just that. It is important to recognise that children’s centres work best when they offer a variety of services, from stay and play to some of the targeted early intervention programmes that have done so much to help those children most in need.

[Seema Malhotra]

The Royal College of Speech and Language Therapists estimates that at just age four there is a 30 million word gap between a child from a deprived household and one from an affluent household. This is the number of words that a child will hear in different environments. Will not language and child development now suffer from the scrapping of the ring-fenced early intervention grant and result in more children starting school at four on an unequal playing field?

[Michael Gove]

I have a lot of sympathy with the hon. Lady’s case. The gap in attainment between disadvantaged children and children from more fortunate circumstances only grows over time and is often a consequence of growing up in households where they are not read to and where they do not have a rich literary heritage on which to draw. However, she is mistaken in thinking that the early intervention grant was ring-fenced. It was not; it was money that was available to local authorities to spend as they saw fit in order to help those whom they considered, on a local basis, to be most deserving.

[Mr Graham Stuart (Beverley and Holderness) (Con)]

Will the Secretary of State tell the House whether the Government intend to abolish the early intervention grant, and what steps they are taking to ensure the quality of provision provided in the early years? It is not simply about providing services but about ensuring that they are of the necessary quality to make a difference, so that disadvantaged children arrive ready for school.

[Michael Gove]

That is a typically good point from the Chairman of the Education Select Committee. The early intervention grant money has never been ring-fenced and will remain available to local authorities, which have statutory obligations to provide not just children’s centres but particular services, and we will be announcing more steps in due course to ensure that money is spent even more effectively in the future.

[Mr Graham Allen (Nottingham North) (Lab)]

17. I declare my interest in the Register of Members’ Financial Interests, Mr Speaker. The early intervention grant has been, and will be, reduced and will be put into the rate support grant. Without a doubt, one thing that is happening is that £150 million is being taken from the localities to the centre. What does the Secretary of State intend to do with that money on early intervention, and will he please meet me, in the not-too-distant future, to discuss that and other early intervention grant matters?

[Michael Gove]

Meetings with the hon. Gentleman are always a pleasure—I find myself better informed after every single one. On this occasion, however, I fear that, in the same way as even Homer nods, even the hon. Gentleman errs. The early intervention grant money will increase over the lifetime of this Parliament. The £150 million to which he refers is money that will go to local authorities in order to support the sorts of evidence-based interventions I know he has done so much to champion.

[Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)]

Even a Conservative councillor described the Government’s approach on this as “typical smoke and mirrors”, and we have heard typical smoke and mirrors again from the Secretary of State today. If we compare like with like—not the money for two-year-olds, which the Government have claimed is new money—what are the figures this year and next year?

[Michael Gove]

The figure for this year, 2011-12, is £2,222,555,697, which then goes up to £2,365,200,000, so that is an increase from 2011-12 to 2012-13.

[Stephen Twigg]

A significant part of that extra money is actually the money for two-year-olds which the Government said was additional money. The figures in the Government’s own consultation showed that the cut would be from the £2.3 billion figure, which the Secretary of State has just given us, to £1.72 billion next year, which is a cut of 27%. Should not the Secretary of State be honest and listen to Merrick Cockell, the leader of Conservative local government, who made a clear point last week:

“this move…will force local authorities to cut early intervention services even further”?

Is that not what is really going on?

[Mr Speaker]

Order. Just before the Secretary of State responds, I am sure that the shadow Secretary of State would accept that the Secretary of State would always be honest with the House. There is no need to ask for a commitment to honesty; that is implicit.

[Michael Gove]

Thank you very much, Mr Speaker.

[Mr Speaker]

The Secretary of State need not sound so surprised.

[Michael Gove]

I am never surprised when I hear a kind word from the Chair. It is no more than I have come to expect.

Implicit in the hon. Gentleman’s question was the idea that we should reduce funding to extend early education to two-year-olds. I do not believe that is right. I believe it is right that we increase the amount we spend on early intervention from £2.2 billion to £2.3 billion, to £2.4 billion and then to £2.5 billion. That is an increase in anyone’s money.

[Nigel Mills (Amber Valley) (Con)]

6. How many places he expects to be available in studio schools by 2015.

[The Parliamentary Under-Secretary of State for Education (Mr Edward Timpson)]

There are currently 16 studio schools open. By September 2013, we expect there will be 30 studio schools open, representing nearly 10,000 new school places. More studio schools will be announced following the current application round, providing an employer-backed academic and vocational offer for 14 to 19-year-olds of all abilities.

[Nigel Mills]

I thank my hon. Friend for that answer and welcome him to his position. Does he agree that studio schools offer young people not only a great academic education, but real-world life experience, and will he therefore join me in welcoming Derby college’s bid to open a school in Heanor?

[Mr Timpson]

I completely agree with my hon. Friend about the importance of what studio schools bring to the offer for young people. I understand that this is the first time that Derby college has applied to open a new studio school. We are very much looking forward to receiving its proposal, which will no doubt be supported vigorously by my hon. Friend. Each application will be considered on its own merits and in comparison with others submitted.

[Mr Andy Slaughter (Hammersmith) (Lab)]

9. What steps he is taking to raise the status and quality of vocational education.

[The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)]

As Minister for Skills, it is my mission to raise the status and quality of vocational education. Following the Wolf review, we have reformed school performance tables to encourage the take-up of high-value vocational qualifications before the age of 16. From this September, all those in apprenticeships were required to study English and maths, but there is more to do.

[Mr Slaughter]

That is utter waffle. Is not the truth that the Secretary of State has downgraded the engineering diploma, excluded practical subjects from the English baccalaureate and has no plans to follow my hon. Friend the Member for Liverpool, West Derby (Stephen Twigg) in offering a technical baccalaureate? What do the Government have against vocational education? Is it spreading the privilege a little bit too far?

[Matthew Hancock]

I do not think that requiring all those in apprenticeships to study English and maths if they do not have level 2 is “waffle”; I think it is extremely important for improving the rigour and quality of vocational education. Vocational education is vital to this country’s future, and that is why I will put all my effort into championing it.

[Margot James (Stourbridge) (Con)]

Although more girls start apprenticeships than boys, they are very under-represented in some areas. Only 5% of engineering apprenticeships and 13% of IT apprenticeships were taken up by girls. Will my hon. Friend take action to encourage more girls to consider apprenticeships in IT and engineering?

[Matthew Hancock]

Yes. I am delighted to say that I have already taken some action, but there is more to do. The first round of the employer ownership pilots included funding for a bid by engineering companies across the country specifically to support engineering apprenticeships and engineering training. I entirely accept the size of the challenge in engineering and ICT. If we say that engineering is not for half of our population, we are never going to have enough high-quality engineers. [Interruption.]

[Mr Speaker]

The hon. Member for Huddersfield (Mr Sheerman) has been chuntering from a sedentary position, to no obvious benefit or purpose—[Interruption.] Order. He was making his point sitting down. Would he like to make it standing up?

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

20. Indeed. Would the Minister accept that the withdrawal of funding for the Women into Science and Engineering campaign is not a good idea if we are to be serious about getting more women into engineering and science?

[Matthew Hancock]

No, I do not recognise that point at all. The employer ownership pilots are doing precisely the opposite in the first round. We are looking for more innovative, thoughtful and new ways of ensuring that funding gets to the right places, including to women, where their representation in a particular sector is low.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

A number of organisations have expressed concern that the increased focus on the EBacc will lead to fewer students studying the practical or vocational subjects that are so important for encouraging the next generation of engineers. What can my hon. Friend say to those organisations to allay their fears?

[Matthew Hancock]

In the first instance, ensuring that high quality science is taught before the age of 16 is vital to the future of engineering at a later age. More importantly, ensuring that English and maths are there is crucial for vocational and occupational skills for everybody. There is much more to do in that area, but the EBacc is a step forward. It is part of the future provision right across the academic and vocational areas.

[Derek Twigg (Halton) (Lab)]

10. What steps he is taking to raise levels of attainment in literacy and numeracy for children from deprived backgrounds; and if he will make a statement.

[The Minister for Schools (Mr David Laws)]

The pupil premium provides additional funding—rising to £900 per pupil next year—that helps schools to raise the attainment of disadvantaged children, including in literacy and numeracy. Ofsted will have an increased focus on the performance of pupils who attract the premium. We are also putting in place a new catch-up premium of £500 per eligible child for every year 7 pupil who has not achieved basic literacy and numeracy standards on leaving primary school.

[Derek Twigg]

Halton has seen significant improvements recently in the attainment of those pupils receiving school meals, compared with those who do not. We have also seen a doubling of the number of students getting five or more A to C grades at GCSE over the past 10 years. Resources are of course crucial to all that. The Minister has just mentioned the pupil premium. Can he guarantee that, over the remainder of this Parliament, there will be no cuts in resources going into education in Halton?

[Mr Laws]

What I can guarantee is that the pupil premium will go on rising every year in this Parliament. The hon. Gentleman might like to know that, in this current year, more than £2 million of pupil premium funding is going into his constituency, and he will be delighted to know that that will rise to more than £3.3 million in the year to come.

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

A car travels, on average, 41.8 miles per gallon. How many miles will it travel on 8.37 gallons? The answer, of course, is 349.866 miles. The problem is that, while 54% of 14-year-olds answered that question correctly in 1976, only 33% did so in 2009, according to a study carried out by King’s College, London. Does my right hon. Friend agree that the new draft maths primary curriculum and the new teacher training courses for specialist maths teachers in primary schools will have a significant effect on ensuring that children grasp and understand the fundamentals of maths and arithmetic by the time they leave primary school?

[Mr Laws]

For a moment, I thought that my predecessor as Schools Minister was going to skewer me at the Dispatch Box, and I began to freeze over. However, I am most grateful to him for his question—and for providing the answer—and for highlighting the important work that the Government are doing to restore the credibility and seriousness of these subjects. I pay tribute to him for the superb work that he has done in these areas over the past two years.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

May I also welcome the Minister back to the Front Bench? I know that he is passionate about this subject, and I look forward to working with him for the benefit of the House and of the country. Last month’s reading recovery annual report confirmed that 9,000 fewer children received reading recovery intervention last year. That means that 9,000 struggling children, many of whom are from disadvantaged backgrounds, are not getting the intensive support that they need to support their literacy levels. The Department’s own evaluation shows that reading recovery achieves real results for children, and that it could achieve long-term financial benefits for the Government. Does the Minister agree with that evaluation? If not, why is he happy to sit back while children fall behind?

[Mr Laws]

I am grateful to the hon. Lady for her kind comments, and I am keen to work across the House where we can on some of the issues to which the previous Labour Government showed considerable commitment. This Government, however, are trying to put in place a simpler funding system, not only for the baseline funding, but by giving schools through the pupil premium a large amount of additional finance— £2.5 billion by the end of this Parliament—so that schools can prioritise in each setting the mechanism and the intervention that best serves their pupils. Schools will, through the pupil premium, have the moneys for precisely the types of reading recovery that the hon. Lady mentioned.

[Andrew Bridgen (North West Leicestershire) (Con)]

My constituency is not getting the full benefit of the pupil premium because many parents are far too proud to access free school meals for their children on account of the stigma attached. What can my right. hon. Friend do to address this problem?

[Mr Laws]

That is an important point. Research from the Department will be published shortly, which will highlight the massive differences in the take-up of free school meals right across England. In some parts of England there is essentially 100% take-up, while in other parts almost a third of pupils do not take up free school meals. The Government will look at this and work with local authorities and schools to get those figures up.

[Henry Smith (Crawley) (Con)]

11. What assessment he has made of the effectiveness of university technical colleges in delivering high-quality technical education.

[The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)]

It is early days, but 98% of pupils at the JCB academy, which was our first university technical college, got an A* to C in engineering in their first exams this summer. [Interruption.] I am sure that Labour Members will be delighted by this great success. Many of the sixth formers have gone on to university and higher level apprenticeships. Five UTCs are open, and we are committed to having at least 24 across the country by 2015.

[Henry Smith]

I thank my hon. Friend for that answer. In the last year of the Labour Government, only 17% of young people in my constituency went on to higher education. This December, I am pleased to be officially opening a new university presence in Crawley, which links local employers with local young people through technical education. Will the Minister join me in congratulating Central Sussex college on setting that up?

[Matthew Hancock]

I certainly join my hon. Friend in warmly welcoming what has happened at Central Sussex further education college, which is now offering higher education. It is crucial to have more engagement between our employers, our colleges and our young learners in order to ensure that when people leave college, they are ready for work, can participate in the work force and make sure that Britain has the prosperity it needs in the years ahead.

[Bill Esterson (Sefton Central) (Lab)]

The EBacc means students are less likely to study technical subjects purely on the basis that schools are less likely to provide them because they will be measured on the narrow academic approach of this new qualification. Surely the way forward should be for all schools to offer vocational qualifications, knowing full well that people do better in their academic subjects when they do vocational routes, which should not be provided only in specialised technical colleges.

[Matthew Hancock]

If the hon. Gentleman has any evidence to back up his assertion, I will happily look at it, but having a core of English, maths and the sciences within the EBacc before pupils reach 16 is vital to ensuring that people can go on to a vocational or an academic pathway in the future. It is absolutely central to this Government’s future vision of where our prosperity comes from that our occupational and vocational skills are at the heart of it.

[Mel Stride (Central Devon) (Con)]

13. What recent progress he has made on ensuring young people leave school or college with a good understanding of English and mathematics.

[The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)]

We are developing a new rigorous English and maths curriculum, which will help young people become fluent in the basics. The new phonics test will identify pupils in year 1 who need extra help, and the new year 6 grammar, spelling and punctuation test will ensure the basics are secure.

[Mel Stride]

My hon. Friend will know that the recent CBI survey showed that 42% of employers were having to provide remedial training in numeracy and literacy to college and school leavers. Will my hon. Friend set out the steps the Government are taking to make sure that these colossal costs to businesses are reduced?

[Elizabeth Truss]

My hon. Friend has made a good point. The Secretary of State has already said that his ambition is for virtually all students to study maths until the age of 18, and we will introduce a funding condition for students who have not achieved a GCSE in maths so that they can reach that level of aptitude. We will also look at mid-level qualifications for students who have maths GCSEs but do not want to take a full A-level in maths, so that there is an alternative path for them to take.

[Kelvin Hopkins (Luton North) (Lab)]

14. What assessment he has made of the 2012 GCSE English results; and if he will make a statement.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

16. What assessment he has made of the 2012 GCSE English results; and if he will make a statement.

[The Secretary of State for Education (Michael Gove)]

On 18 October, provisional national and local authority level GCSE results for 2012 were published. The percentage of pupils achieving grades A* to C in English had fallen by three percentage points to 66.2%. The independent regulator, Ofqual, continues its investigation into the awarding of English GCSEs this year, and is now looking into why some schools achieved the results that they had expected while others did not. The final report will be published shortly.

[Kelvin Hopkins]

My hon. Friend the Member for Luton South (Gavin Shuker) and I recently met teachers and head teachers in Luton to discuss the problems involved in the GCSE results. It is clear that some pupils were not permitted to take the sixth-form courses that they had chosen, as a consequence of their results, and that some schools that made strenuous efforts to improve their English results have actually been knocked back. Is that not a disgrace, and should not apologies be made?

[Michael Gove]

I share the concern felt by the hon. Gentlemen. We must wait to see the Ofqual report before we can be more certain about what went wrong this year, but it is clear that there were a variety of factors consequent on the design of the examination, and that we need to take steps to remedy them.

[Meg Hillier]

In Hackney, 103 pupils received D grades in English in June. In some cases, classmates at the same schools achieved lower scores in January, and received C grades. In each of the five schools affected in Hackney, at least 85% of ethnic minority pupils received Ds rather than Cs. The Secretary of State talked about looking into why some schools had achieved less than others. Will he look into this very serious matter as well?

[Michael Gove]

I certainly shall. Hackney has an exemplary record of educational improvement, and when there are inconsistencies such as this, we must look at the evidence to work out what has happened.

[Andrew Percy (Brigg and Goole) (Con)]

Along with my hon. Friend the Member for Cleethorpes (Martin Vickers), I recently met head teachers from North Lincolnshire. Despite an improvement in results in the area this year, they were still concerned about this year’s marking, particularly in the case of pupils who would have found it easier to get an A in January than they did in the summer examinations. Will my right hon. Friend consider the concerns about the situation that will be expressed in a letter from my hon. Friend and me?

[Michael Gove]

I certainly shall. As we all know, the hon. Gentleman is a teacher with extensive experience of working in some of the toughest schools. I am glad that there has been an improvement in academic results in North Lincolnshire, but yes, there are continuing question marks over the quality of marking at GCSE.

[Alun Cairns (Vale of Glamorgan) (Con)]

Questions raised about GCSEs earlier this year place even greater emphasis on the need for rigour in the exam system. Will my right hon. Friend encourage other parts of the United Kingdom to follow suit, and does he agree that clarity is needed for pupils and students, universities and employers, so that they compare equally?

[Michael Gove]

My hon. Friend has made a very good point, and I look forward to working with the Welsh Assembly to ensure that standards there can be raised to the level enjoyed by students in England.

[Paul Blomfield (Sheffield Central) (Lab)]

18. If the legal action against Ofqual is successful, and it is decided that pupils were treated unfairly—which the Secretary of State himself believes, although he refuses to do anything about it—what action will the right hon. Gentleman take?

[Michael Gove]

I would not wish to pre-empt any judgment in the courts.

[Kevin Brennan (Cardiff West) (Lab)]

We know that the Secretary of State is in a good mood, because yesterday was his favourite day of the year, when he gets an opportunity to turn the clock back without anyone being able to complain. Why does his new Schools Minister have no responsibility whatsoever for GCSE English, or even for the curriculum? Is he too ashamed to defend the Government’s position on the GCSE English scandal, is he too busy at the Cabinet Office polishing the Deputy Prime Minister’s shoes, or does the Secretary of State not trust him?

[Michael Gove]

That was a three-part question, and I shall use both sides of the paper. Yesterday was, in fact, a sad day for me: I was in mourning because, sadly, Queens Park Rangers lost to Arsenal, who, with 10 minutes to go, scored a goal that I can only conclude was offside. It was a day of mourning for the Gove household. The Schools Minister, however, is fully involved in all discussions in the Department for Education in every policy area. The two of us are singing from the same hymn sheet, which is, of course, what we should be doing every Sunday, whether or not the clocks go back.

[Mr Speaker]

The Arsenal result was extremely satisfactory and I was there to observe it.

[Justin Tomlinson (North Swindon) (Con)]

15. What steps he is taking to improve the quality of mathematics teaching in schools.

[The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)]

I agree that mathematics teaching is a major issue. It is the subject with the highest teacher shortage, and we know that maths skills are vital for students. We are working to attract top graduates, with bursaries of up to £20,000. By increasing maths take-up between the ages of 16 to 18 we will increase the pipeline of people going into the maths teaching profession.

[Justin Tomlinson]

Does the Minister agree that teaching factual financial education, such as calculating APRs and tariffs, should be an integral part of the maths curriculum, and will she meet me to discuss the work of the all-party group on financial education for young people?

[Elizabeth Truss]

I completely agree that it is very important for students to be financially literate. In order to be financially literate they need to be mathematically fluent. That is why we are going to have higher expectations in topics such as using and understanding money, working with percentages, and positive and negative numbers. We are also looking at limiting the use of calculators in the early years of primary school so that students achieve proper fluency in calculations. I believe I am due to meet my hon. Friend in only a couple of minutes’ time, but I am happy to have a further meeting with him on this issue.

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

Great maths teaching was instrumental in enabling me to go on to a career in STEM, and it is absolutely critical in helping us to rebalance our economy. The Secretary of State is turning our locally accountable schools into academies, so can the Minister tell me what minimum qualifications or standards she will put in place for maths teaching in academies?

[Elizabeth Truss]

What is important in academies—and, indeed, in all schools—is that we give the head teachers the maximum autonomy and flexibility to recruit the best possible people. As the hon. Lady knows, the issue we face is that although maths is the highest earning subject at degree level and A-level, it is very hard to recruit teachers. We are looking at every possible avenue to increase the level of people coming into studying and teaching maths. That will increase the pipeline, which in turn will make sure academy head teachers have the best possible pool of teachers to draw on.

[Guy Opperman (Hexham) (Con)]

19. If he will take steps to prohibit local authorities from preventing schools from converting to academy status by requiring a 20% pensions fund surcharge for non-teaching staff.

[The Minister for Schools (Mr David Laws)]

Pension contribution rates for non-teaching staff are determined by local administering authority fund managers. In a joint letter in December 2011 my right hon. Friends the Secretaries of State for Education and for Communities and Local Government made it clear that no academy should pay unjustifiably higher employer pension contributions than maintained schools in their area. The letter also made it clear that other options would be considered if high rates persisted.

[Guy Opperman]

Northumberland county council is blocking schools that wish to go to academy status. Will the Minister review the December 2011 evaluation of this problem and then meet with me and interested representatives from my constituency who wish to turn to academy status or are considering doing so?

[Mr Laws]

I am concerned by what my hon. Friend says about his local authority blocking those schools that wish to go to academy status, and I can tell him that Department for Education officials are continuing to work on this issue with Department for Communities and Local Government officials. I would be delighted to meet him and others to discuss this matter. It would not be acceptable for local authorities to use this move to impede schools that wish to go to academy status.

[Karen Lumley (Redditch) (Con)]

21. If he will make it his policy to reform the funding formula for schools in Worcestershire.

[The Minister for Schools (Mr David Laws)]

In March the Secretary of State announced our intention to introduce a national funding formula during the next spending review period. In the meantime, we are simplifying the local funding system, and I hope I was able to reassure my hon. Friend during a Westminster Hall debate last week that we are committed to introducing a national funding formula and to doing so at a pace which is manageable for all schools.

[Karen Lumley]

I thank the Minister for that answer. I just want some reassurances, on behalf of the parents and young people of Redditch, that finally, after 13 years of Labour failing to deal with the issue, we are going to address the national funding formula. I also wish to invite him to come to Redditch to see some of our fantastic schools, which do a very good job in difficult circumstances.

[Mr Laws]

I would be delighted to visit the hon. Lady’s constituency, and I can guarantee her that, after many years of the previous Government failing to address this very unfair national funding formula, this Government will, in the next spending review period, ensure that there is a fair formula for the whole country.

[Mr Robin Walker (Worcester) (Con)]

I am grateful for those assurances from the Minister, and I welcome him to his place. He mentioned the next spending review period. Does the welcome extension of the minimum funding guarantee not give the Government the opportunity to move even faster and to take steps towards a fairer funding formula now?

[Mr Laws]

My hon. Friend is right to say that we already need to take those first steps towards a more rational and fairer formula. We are doing exactly that by reducing the huge number of existing variables in the formulae across the country to a much smaller number. That is the first step in moving to a fairer formula for the whole country.

[Chris Williamson (Derby North) (Lab)]

22. What steps he is taking to raise levels of attainment in literacy and numeracy for children from deprived backgrounds; and if he will make a statement.

[The Minister for Schools (Mr David Laws)]

I refer the hon. Gentleman to the answer I gave a few moments ago to the hon. Member for Halton (Derek Twigg).

[Chris Williamson]

I am just a simple bricklayer, so can the Minister explain to me why he thinks unqualified teachers in free schools and academies will raise standards, but at the same time he feels it necessary to impose tougher tests on teachers in other state schools in order to achieve the same thing?

[Mr Laws]

We announced last week measures to raise the quality of teachers across the board, and I think those received a warm welcome across the country. In the past, the standards for going into teaching have been too low. It is sensible to raise those in all schools across the country.

[Chris Skidmore (Kingswood) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Secretary of State for Education (Michael Gove)]

Last week, I had the opportunity to write to hon. Members from Leicester and Derby inviting them to join me in raising standards in those cities, specifically by making sure that underperforming primary schools can be converted into academies. I look forward to working with those Members in the coming weeks.

[Chris Skidmore]

This year, only 11 out of the 2,000 pupils who took A-levels in Knowsley took A-level physics, which compares with 971 who did so in Hampshire. Even when the population size is taken into account, I simply do not believe that pupils in Hampshire are 22 times more scientifically gifted than those in Knowsley. Will the Education Secretary commit to a one nation policy in which every pupil, regardless of their background, will be encouraged to study rigorous qualifications, as opposed to the previous Government’s two nation policy, which exposed this educational divide?

[Michael Gove]

May I congratulate my hon. Friend on his election to the Education Committee? He is a distinguished historian and a long-time campaigner for improved access to rigorous academic subjects for all students. He is absolutely right to say that we inherited a frankly inequitable situation, and I hope that we can work across the House to resolve it.

[Lisa Nandy (Wigan) (Lab)]

The whole nation has been shocked by the allegations of child abuse surrounding Jimmy Savile, but Labour Members are also deeply concerned by the similarities with recent cases such as the one in Rochdale, where power relationships were exploited and cries for help were ignored. It has become clear that the BBC is just one of many organisations with questions to answer, so will the Secretary of State back our calls for a public inquiry, in order to gain justice for the victims and to ensure that in future young people are both empowered to speak out and listened to when they do so?

[Michael Gove]

I do not think that any of us should seek, for any moment and in any way, to relativise the seriousness of the charges that the hon. Lady raises. The BBC certainly has some issues to investigate, and two inquiries are being undertaken there. Separately, the Deputy Children’s Commissioner has been conducting her own inquiry into the exploitation of young people by groups and gangs. I want to make sure that we can consider each of those reports, but I rule nothing out.

[Simon Kirby (Brighton, Kemptown) (Con)]

T2. Does my right hon. Friend agree that parental engagement in children’s education is vital in raising standards? Will he continue to develop the close ties that exist between schools, parents and pupils?

[Michael Gove]

My hon. Friend is absolutely right. Ensuring parental involvement in children’s education is critical, and one way that that can be improved is through regular reporting of pupils’ progress. That is why I deprecate the action that has been taken by the National Union of Teachers and the National Association of Schoolmasters Union of Women Teachers, which works against parental involvement by inflicting a work to rule on members.

[Kerry McCarthy (Bristol East) (Lab)]

T3. This summer, 97% of students at Bristol Metropolitan academy achieved five good GCSEs, which is a phenomenal improvement over the past few years. Sadly, only 37% achieved five good GCSEs in English and maths, but 46% would have done so if they had sat the exams in January. That means that the school is now below the floor standard, whereas it would have been above it. Is that not grossly unfair, particularly for those pupils who worked so hard to try to get that grade C?

[Michael Gove]

I am grateful to the hon. Lady for her question and delighted that pupils in that academy are improving their education. As I have said before, the structure of the GCSE examination that those students sat, which was designed before this Government came to power, was unfair.

[Simon Hughes (Bermondsey and Old Southwark) (LD)]

T5. I think I detect a bid for the regrading of football scores from the Secretary of State. Will Ministers confirm that the Government will do everything they can to ensure that the Southwark and Lewisham college campus site in Bermondsey gets not only a continuing further education college but a university technical college and, if space permits, a secondary school, too?

[The Parliamentary Under-Secretary of State for Skills (Matthew Hancock)]

Yes, I can. I know that my right hon. Friend has met colleagues in the other place, and my colleagues in this place and I are happy to meet him too to ensure that we can sort this problem out.

[Richard Burden (Birmingham, Northfield) (Lab)]

T4. Does the Secretary of State share my concern at a recent Ofsted report that showed serious and ongoing issues in Birmingham social services? There is good news, however, in that under new leadership Birmingham is now showing greater vigour and strategy in addressing those issues. How can Birmingham be assured that it will have the resources it needs to address those issues, particularly given the doubt over matters such as the early intervention grant, which was discussed earlier?

[Michael Gove]

First, let me reassure the hon. Gentleman that, because the early intervention grant is rising, the money will be there to ensure that safeguarding responsibilities can be discharged. Birmingham local authority has, under different political colours, had problems in both school improvement and child protection. I want to work constructively with local councillors and local MPs to ensure that we can make some improvements. Investment is required, but so is a far more rigorous attitude towards dealing with the circumstances in which many children at risk of abuse or neglect find themselves.

[John Glen (Salisbury) (Con)]

T9. A number of schools in my constituency struggle to get some of their pupils to grade C standard at GCSE, and some of the head teachers to whom I have spoken are concerned that the rigorous standards of the English baccalaureate certificate will prove unattainable for some of those pupils and might be discouraging, particularly for those who at age 11 are five years behind on reading? Will he assure teachers in my constituency that he is committed to raising standards for all, that those pupils should not be discouraged and that the EBacc is not out of reach?

[Michael Gove]

My hon. Friend makes a fair point, and that is why we are introducing additional support for all children who are behind their expected level of achievement at the age of 11. That additional support will go to those secondary schools that need it. I must be honest, however, and if there are primary schools in Wiltshire in which children are five years behind their expected reading age, that is just not good enough. The responsibility rests with the head teachers of those underperforming primary schools. If secondary teachers are saying that they cannot transform those children’s education in some of the wealthiest parts of Wiltshire, he should have a word with those head teachers, because as far as I am concerned they are falling down on the job.

[Mr Jim Cunningham (Coventry South) (Lab)]

T6. May I go back to the Minister’s answer to the question from my hon. Friend the Member for Derby North (Chris Williamson) about tough new tests for new teachers? Will he clarify whether that will apply outside the state system—for example, to free schools? Will he answer that question directly?

[Michael Gove]

Those schools that are already outside the state system—independent schools—have the opportunity to hire people who do not have qualified teacher status. That has led to Brighton college, for example, hiring a nuclear physicist. I am sure that the students in Brighton college and the parents who pay for that education are only too appreciative of it, and if we can have the same degree of spirit, invention and flexibility in the state sector, great.

[Mr Robert Buckland (South Swindon) (Con)]

I welcome the provisions on special educational needs in the draft Children and Families Bill, but will my hon. Friend carefully consider the case for a national framework within which those commissioning the new local offers can operate, similar to NICE guidelines in the field of health, for example?

[The Parliamentary Under-Secretary of State for Education (Mr Edward Timpson)]

I know my hon. Friend is a deeply committed and understanding champion of children with special educational needs and disabilities. He will therefore be aware that we have 20 pathfinders across 31 local authorities that are testing the formulisation and delivery of the local offer. We will examine their findings carefully to help sharpen up the development of the local offer as we go forward.

[Nic Dakin (Scunthorpe) (Lab)]

T7. Considering the need to preserve our Olympic legacy, what does the Secretary of State have to say to those 150,000 people who signed a petition against his plans which will come into force this Wednesday to scrap minimum size regulations for school playing fields?

[Michael Gove]

I admire their passion, but they are wrong.

[Stephen Gilbert (St Austell and Newquay) (LD)]

Many children from my constituency with severe learning difficulties attend Doubletrees school in St Blazey. It has been reported to me that the move from EMA to bursaries for 16 to 19-year-olds represent a fall in funding for that school. Will he meet me to discuss their concerns?

[Michael Gove]

I would be delighted to meet the hon. Gentleman.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

T8. Bearing in mind that the Secretary of State has already said that the results of the GCSE fiasco this year were unfair, who would he advise the 137 pupils in my city who have had manifest injustice done to them as a result of the marking fiasco to put their faith in—him, to put the matter right, or the legal action against Ofqual?

[Michael Gove]

It is anyone’s right to pursue action through the courts if they believe that is the only way to secure a remedy, but the point that I would make, and have consistently made, and a point which was reinforced by the Chairman of the Select Committee, is that the design of those qualifications was flawed from the start, and it was not this Government who designed them.

[Sir Bob Russell (Colchester) (LD)]

I am sure that forward thinking and value for money are part of the Department for Education’s thinking. With that in mind, does the Secretary of State agree that it would be silly to remove permanently surplus places in secondary education, when it is known, as is set out in question 24, that youngsters coming through the system will need those places in three or four years’ time?

[The Minister for Schools (Mr David Laws)]

I think my hon. Friend has specific concerns about issues in his constituency in relation to some of the smaller secondary schools. I would be happy to meet him to discuss whether there is some way that we can support his understandable desire to make sure that there is capacity for future children in those schools.

[Liz Kendall (Leicester West) (Lab)]

The Government’s decision to transfer funding for two-year-olds’ nursery education to the dedicated schools grant will mean an additional cut of 27% for the early intervention grant. Leicester will lose £4 million in 2013. It will have no option but to reduce support for children’s services and the troubled families programme. Can the Minister explain how this will get kids ready for school, promote social mobility or save taxpayers’ money in the long run?

[Michael Gove]

I should have thought that the hon. Lady would welcome the additional investment in making sure that the very poorest two-year-olds receive 15 hours of free pre-school education—something that was never achieved under the previous Government. [Interruption.] I notice all sorts of sedentary chuntering from the Opposition Benches but there is a direct challenge to the hon. Lady and to the shadow Secretary of State. Last week I asked whether they would work with me in order to convert underperforming primary schools in her constituency into academies. She has said nothing yet. People are waiting. Is she on the side of reform or of a failing status quo?

[Mr Graham Stuart (Beverley and Holderness) (Con)]

I welcome proposals to continue the teaching of maths to age 18, both for those who get a grade C GCSE and for those who do not. Are any practical changes required in the timetable of those who go into employment at the age of 16 if they are to be able to continue to do maths and possibly literacy up to the age of 18?

[The Parliamentary Under-Secretary of State for Education (Elizabeth Truss)]

The Government have already committed to a funding condition for students who do not achieve a C at GCSE to continue to study maths until 18 either in or not in employment. I am also concerned about the cohort who achieve a GCSE grade C in maths but who do not want to go on and study A level. We need to make it clear that there are qualifications for them, too.

[Toby Perkins (Chesterfield) (Lab)]

I am interested in the logic of the Secretary of State’s position. If he believes it is right that academies and free schools should be able to take on whoever they like on the strength of the opinion of the head teacher, why is that not right for local authority schools? And if he believes it is right that we make the teachers’ training qualification more difficult, why is it right that academies can opt out of that?

[Mr Speaker]

Order. The hon. Gentleman is supposed to be an egalitarian. One question will do—an equal distribution of the available fruits.

[Michael Gove]

I, too, am an egalitarian, which is why I believe that academy status should be extended to every school that believes in improving outcomes for its children.

[Duncan Hames (Chippenham) (LD)]

As Wiltshire’s education settlement has historically been underfunded, we look forward to the new school funding formula, but Wiltshire council is concerned that it might have unintended consequences, especially in relation to support for small schools, so will the Minister please meet me to explore any scope for discretion in how the council can go about making those changes?

[Mr Laws]

I would be delighted to meet my hon. Friend to discuss these matters. He will know that in the past couple of weeks the Government have made two announcements to try to ease concerns in this area: first, we have committed to reviewing the funding formula for 2014-15; and secondly, we have promised to continue the minimum funding guarantee beyond 2015.

[Andrew Gwynne (Denton and Reddish) (Lab)]

The special educational needs proposals currently under pre-legislative scrutiny will water down the scope of the SEN tribunal, weakening the rights of parents to get the help they need. Will the Minister give a commitment today to ensuring that parents of children with SEN do not lose out?

[Mr Timpson]

The hon. Gentleman should look carefully at the draft clauses and the subsequent regulations and code of practice that will follow, because it will be clear from all that that the tribunal processes will be strengthened, particularly for those over 16, who currently have little course for redress.

[Rehman Chishti (Gillingham and Rainham) (Con)]

In the 2012 GCSE results more students in Medway achieved five or more A to C grades. Will the Minister join me in congratulating the parents, students and staff on that achievement?

[Michael Gove]

I absolutely will. It proves that, even in tough circumstances, with strong leadership children can do better.

[Lilian Greenwood (Nottingham South) (Lab)]

What evidence informed the Secretary of State’s decision to propose the removal of coursework and controlled assessments from the examination system?

[Michael Gove]

A huge weight of evidence showing that the very best schools recognise that the most effective way of ensuring that children can be motivated is by having linear qualifications.

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

I, like many others in South Essex, believe that one way to improve educational outcomes in Basildon would be through the provision of a UTC specialising in both engineering and logistics. Will my hon. Friend confirm that he would welcome and support an application for such a college in Basildon?

[Matthew Hancock]

Yes, I absolutely will. There is a commitment to have 24 UTCs by the end of this Parliament. The deadline for applications is next month and we hope to be able to announce which UTCs will go ahead by Easter.

[Paul Goggins (Wythenshawe and Sale East) (Lab)]

I am sure that the Secretary of State agrees that children learn properly when they eat properly, so does he share my concern that already more than 1 million children who live in poverty are not eligible to claim free school meals—a figure that is likely to increase next year with the introduction of universal credit? Has he made it clear to the Secretary of State for Work and Pensions that he should be seeking to extend eligibility rather than restricting it?

[Michael Gove]

I have enormous respect for the right hon. Gentleman. We are working across Government to ensure that as many children as possible who are eligible for free school meals receive that very important benefit and that it continues to go to those who deserve it.

[Jenny Chapman (Darlington) (Lab)]

Does the Secretary of State accept that the effects of the GCSE fiasco are now being felt by students not directly involved, because schools in my constituency are having to fund a legal action against Ofqual, because the Government, unlike the Welsh Government, have failed to act?

[Michael Gove]

I have already made clear to the House my view of the mistakes the Welsh Education Minister has made. All I will say once again is that the flaw in the qualification was in its design, and it was not this Government who designed it.

Ash Dieback Disease

Monday 29th October 2012 Commons Chamber

14:30

[Mary Creagh (Wakefield) (Lab)]

(Urgent Question): To ask the Secretary of State for Environment, Food and Rural Affairs if he will make a statement on the Government’s policy on tackling ash dieback disease.

[The Minister of State, Department for Environment, Food and Rural Affairs (Mr David Heath)]

My right hon. Friend the Secretary of State is today in Cannock Chase visiting woodland, so I will reply in his stead. We are taking the threat posed by Chalara fraxinea—ash dieback disease—extremely seriously. We have today imposed a temporary ban on imports of ash and restrictions on its movement, supported by the results of a shortened consultation with industry on our pests risk assessment. The ban will therefore be effective well before the start of the main UK planting season. Before the ban, the Horticultural Trades Association urged its members to follow a voluntary moratorium on imports throughout the period, which is being well observed.

On discovering Chalara in the UK, plant health authorities took immediate action rapidly to assess ash trees for signs of infection at more than 1,000 sites where ash plants from Europe had been grown or planted in the past five years, and this has resulted in the destruction of 100,000 trees.

[Mary Creagh]

I thank the Minister for his reply.

Over the weekend, the risk facing the UK from ash dieback disease has become apparent. Experts fear that it is the biggest threat to British trees since 25 million trees were killed by Dutch elm disease 30 years ago. It is disappointing that the Secretary of State chose to announce the ban in Staffordshire instead of in person to this House.

We welcome the ban, but the question on everyone’s lips is, “Why did it take so long?” Ash dieback was found last February in a Buckinghamshire nursery. Why did Ministers sit back, cross their fingers and wait until the disease was found in the wild in June? Why did the Horticultural Trades Association act before the Government? Why did the Government’s consultation on an import ban on ash start only on 31 August? Can the Minister give a cast-iron guarantee that no infected trees were planted in the spring, especially after the severe winter? Can he guarantee that no infected trees were imported into the UK over the summer while Ministers dithered? How does he know that people did not import saplings into the country in the boot of their car? Why were landowners and local authorities told of the disease just three weeks ago?

How will the ban be implemented and policed, and how much will it cost? On Saturday, the Secretary of State told the “Today” programme that 58,000 trees had been burned since the disease was identified. The Minister said that within that short 48-hour period the number had been revised up to 100,000. Can he tell us what the number will be by the end of the week? Is it possible to treat and store felled wood so that it can be used productively in future? What assessment has he received of the impact of the disease on jobs in the wood services industry?

In autumn 2011, the Forestry Commission’s pathology bulletin carried the headline “One to watch for—Chalara fraxinea”, and stated that it was

“not yet present in Britain”.

On what date was Chalara fraxinea identified as the pathogen that causes ash dieback and when were Ministers informed? They cannot say that they were not warned as an internal Forestry Commission document warned that cuts meant that there would be

“no capacity to deal with the costs of disease or other calamity.”

The Forestry Commission trade unions’ evidence to the Science and Technology Committee stated:

“Forest research in Great Britain is already funded at a minimal level, and will be drastically under-funded as the cuts proceed.”

This Government cut the Forestry Commission’s cash by 25%, closed seven regional offices, and cut 250 staff. They have cut funding for forest research from £12 million a year to £7 million a year. The Forestry Commission’s website details the difficulty that scientists had in identifying the deadly form of the fungal infection, and those cuts reduced the commission’s ability to identify and tackle tree disease.

We welcome the creation of a tree disease taskforce under Professor Ian Boyd to deal with this crisis. We also welcome the app that is being launched to crowd-source the disease—I am surprised that the Minister did not mention it—although with leaf fall already under way this is, again, too little too late. After the forest sell-off fiasco, this incompetent Government have been asleep on the job with ash dieback. Like Nero, Ministers fiddled, and now it is our forests that will burn.

[Mr Heath]

It is sadly predictable that when we have a serious condition that could have enormous consequences with which we are trying to deal as a country, the first thing the hon. Lady thinks is, “How can we blame the Government rather than deal with the disease?” She asked why the Secretary of State was not here today. It is because he is talking to people who are dealing with the disease; he is talking to foresters and making sure that we are taking all necessary precautions.

The hon. Lady asked why nothing was done in February. Of course something was done in February—we acted straight away under the previous Secretary of State. Once the first United Kingdom finding of Chalara was confirmed in March, plant health authorities prepared a pest risk analysis. No previous national or international pest risk analysis existed, partly because until 2010—[Interruption.] The hon. Lady would do well to listen to the background to this. Until 2010, there was widespread scientific uncertainty over the identity of the causal organism. That is actually an international issue, rather than an issue in this country.

Since the disease was intercepted, plant health authorities have been carrying out intensive surveillance and monitoring, chasing forward movements of ash plants from infected nurseries and inspecting trees in the vicinities of infected sites to ascertain where the disease may be present in the wider environment. That enormous ongoing task involves well over 1,000 sites, and it is as a consequence of that that the 100,000 trees have been destroyed.

The hon. Lady asked for a guarantee that no infected material came in during the voluntary moratorium, but of course I cannot guarantee that. I can say that no commercial imports took place, because of the action that we took, but I cannot guarantee that no one brought back a little ash sapling in the boot of their car. I hope that they did not, but I cannot guarantee it.

The hon. Lady may not understand that this is an airborne disease and that the incidence of the disease in mature trees in East Anglia had not previously been suspected—it is likely to have been carried on the wind over the channel. Now that we have discovered it, we have immediately taken the action required.

Finally, the hon. Lady was quite wrong about resources, because there has been no reduction in those for plant health and tree health in this country, as she would ascertain were she to speak to the Forestry Commission.

[Several hon. Members]

rose—

[Mr Speaker]

Order. Many Members are seeking to catch my eye and I am keen to accommodate them, but to do so will require brevity from those on Back and Front Benches alike. I am sure that we will be led in this process by the Chair of the Select Committee.

[Miss Anne McIntosh (Thirsk and Malton) (Con)]

I welcome these proceedings and congratulate my hon. Friend the Minister. Will he pass on our thanks to the Food and Environment Research Agency in my constituency for its work and to the Forestry Commission? Will he explain to the House that this disease was already treated as a quarantine pest under national emergency measures? That would help to show that it was already high on the political agenda. Will he ensure that resources are put into urgently investigating the age profile of the disease? Saplings are deemed more likely to die from the disease, but are mature trees equally at risk? Will he also assure the House that none of the other plants that are being inspected by FERA and the Forestry Commission are causing the same concern?

[Mr Heath]

I can certainly confirm that we are taking all measures possible to deploy colleagues in the Forestry Commission, those working in forest services and people from FERA to identify the incidence of disease wherever it can be found. We will look closely at a suspected further case in a mature tree. It is important to realise that there is a national forest inventory through which symptoms of disease are looked at across the board all the time. There were 8,000 inspections of ash trees under the inventory last year and it was found that the trees were, in fact, in very good health. Only 61 cases of any signs of ill health in ash trees were discovered, and none of them was due to Chalara.

[Joan Walley (Stoke-on-Trent North) (Lab)]

There is concern because while it is now late autumn, this was discovered much earlier in the year. Leaving aside that delay, will the Minister give the House an assurance that he will work with the Woodland Trust, which has great expertise in this issue and has a series of asks for the Government?

[Mr Heath]

It is important that we work with everybody; this is not something that we can leave entirely to the scientists and the experts. Anyone who spots an incidence of disease in trees would do well to advise the authorities. We can then use the great body of voluntary organisations that are interested in the health of our forests to do all we can to deal with the disease as quickly as possible. I repeat that there was not a delay over the summer. Planting does not take place during the summer period and, as far as we are aware, the voluntary moratorium has worked very well.

[Dan Rogerson (North Cornwall) (LD)]

Given the importance of a joined-up approach to tackling the threat to trees and plants, will my hon. Friend tell us the likely make-up and remit of the expert taskforce?

[Mr Heath]

We are keen to bring together experts in plant disease, industry experts and wider forest interests so that we can see what more, if anything, can be done to deal with what could be a disastrous outbreak of the disease. We also need to look at how we will deal most effectively with plant and tree health in future. The Secretary of State and I have discussed that, because we feel that for many years this country has not been as well equipped to deal with plant health as it has with animal health. I would like us to be prepared for all eventualities at all times.

[Caroline Lucas (Brighton, Pavilion) (Green)]

This episode is a terrible indictment of the Government, and also the Opposition, because the Horticultural Trades Association first warned about the disease back in 2009—[Interruption.] Neither of your houses has worked hard or fast enough on this. Will the Minister reverse the 25% cuts that he is making to the Forestry Commission so that it has the resources to tackle this episode urgently and properly?

[Mr Heath]

I am afraid that the hon. Lady simply is not correct. I have explained the sequence of events and the fact that we have in no way reduced the resources available for plant and tree health.

[Dr Thérèse Coffey (Suffolk Coastal) (Con)]

Pound farm in Suffolk is a mile from my constituency boundary, in the constituency of my hon. Friend the Member for Central Suffolk and North Ipswich (Dr Poulter). Will the Minister update the House on what proactive policies are being put in place for local home owners and residents? Will there be a proactive felling and burning policy, and how will it be communicated?

[Mr Heath]

We certainly need to communicate with local people who have forestry interests and trees on their property about what they should be looking for. I will not pre-empt the discussions with the experts on the ground about precisely what is the right action to take, but I assure my hon. Friend that we will apply all available resources to the problem, because we do not want it to spread further if we can possibly avoid it.

[Dame Joan Ruddock (Lewisham, Deptford) (Lab)]

The Minister said that he had difficulty identifying the pathogen, but did he or his officials contact Danish scientists who have a decade of experience in the field? Will he publish the scientific research indicating that airborne spores could reach this country from continental Europe?

[Mr Heath]

It was not I who had a problem identifying the pathogen; it was the international authorities, including the Danish authorities that the right hon. Lady mentions, who had reason to suspect that the pathogen was not the one that was initially identified, and that it was less virulent. That was why Europe and the world, frankly, took their eye off the ball to a certain extent and did not recognise the threat that Chalara represented to the Danish forests, for instance. Of course we work closely with our colleagues in other European countries and learn from their information, but I am afraid we cannot second-guess the international consensus.

[Mr Edward Leigh (Gainsborough) (Con)]

The ash tree is known as the Lincolnshire tree. Indeed, my home in Lincolnshire is surrounded by them, and if only a couple fell over, my home would be completely demolished. We therefore take the problem very seriously in Lincolnshire. Will the Minister accept that there have been reports of nursery imports carrying the disease coming into Lincolnshire, and that the reason why such diseases have taken off in the past is that Governments have not had sufficient grip and have not been severe—ruthless even—by stopping them at their inception?

[Mr Heath]

As I have indicated, we need to take tree and plant diseases very seriously. There is of course evidence that saplings have brought the disease into the country, which was precisely why we applied the voluntary moratorium and have now moved to a ban, which comes into effect today. That means that no trees have been imported on a commercial basis since early spring.

[Andrew Miller (Ellesmere Port and Neston) (Lab)]

May I declare an interest as the proud owner of a number of ash trees that I planted 10 years ago?

Will the Minister explain what budget Professor Boyd and his team are working to and where that fits in the cuts that were identified in evidence to the Science and Technology Committee last June?

[Mr Heath]

The team that Professor Boyd has brought together will have all the resources it needs. I do not have a figure to give the hon. Gentleman because that will depend on where the team’s discussions take it but, if he wishes, we will provide his Committee with the information in due course.

[Guy Opperman (Hexham) (Con)]

I have six forests in my constituency, and I pay tribute to the work of the Forestry Commission thus far. Will the Minister outline what ongoing funding the Government have allocated for research into tree health?

[Mr Heath]

Research into tree health—other than that which takes place within the university sector and independently of the Government—is carried out through the Forestry Commission and Forest Services. The actual amount will be available in the Forestry Commission’s budget, and I will send the hon. Gentleman an accurate figure if he wishes.

[Mrs Mary Glindon (North Tyneside) (Lab)]

What advice would the Minister give to people who might have trees with the disease in their garden? How will he encourage them to come forward if they are concerned that they might be blamed for bringing the disease into the country?

[Mr Heath]

Let me be clear: we are not going to blame anyone for bringing in a tree. The only person engaged in a blame game is sitting on the Opposition Front Bench; the rest of us are trying to find practical solutions. I have no intention of scapegoating somebody who has innocently brought a diseased tree into the country. We will ensure that advice is available through the Forestry Commission, and use every resource, including the press, so that people know the signs they should be looking for in mature ash trees. Meanwhile, it will be for experts to identify the existence of the pathogen in ash trees and to take appropriate steps. Nobody should feel worried that because they have planted an ash sapling, they will be held personally responsible for the outbreak of Chalara.

[Michael Ellis (Northampton North) (Con)]

While the Labour party has been making cheap political points, a consultation has been in progress. What can the Minister tell the House about how effectively that consultation supported a prohibition?

[Mr Heath]

The consultation was about a statutory ban and the responses we received were overwhelmingly supportive of that. In fact, they also provided some further helpful advice about the implementation of the ban, which enabled us to achieve that at the very first opportunity.

[John McDonnell (Hayes and Harlington) (Lab)]

I do not doubt the Minister’s commitment to tackling this issue, but when the Public and Commercial Services union made representations to the Government, it stated that cuts in the Forestry Commission would have such consequences. Even if the Minister does not accept that point, we will need additional resources. Will he undertake a swift, independent review of the need for those resources? I assure him that if he requires support in getting those additional resources and lobbying the Treasury, the Labour party will assist him.

[Mr Heath]

May I make it absolutely clear that we will not fail in our fight against this disease through lack of resources? We will make available from the Department those resources that are identified as necessary by the scientific team and taskforce that we have brought together to consider what should be done next.

[Mr William Cash (Stone) (Con)]

Has my hon. Friend experienced any resistance from the European Commission or the European Union regarding the import ban, as was suggested on the “Today” programme a couple of days ago? If so, will he make certain that under no circumstances we will allow the EU to stand in the way of the plans that he has announced?

[Mr Heath]

In this instance I can put my hon. Friend’s fears to rest because the EU has not impeded what we have sought to do in any way. Indeed, we have been working extremely closely with colleagues in other countries who, to date, have faced a much larger incidence of this disease than we have. We have been able to learn from their experiences and put those lessons into action in this country.

[Dr Alan Whitehead (Southampton, Test) (Lab)]

The Minister will understand that the felling of a large amount of timber may have an effect on the wood services industry and the price of timber. Will he issue advice—perhaps he has advice now—on the safe storage, curing and drying out of wood that has been felled, to ensure that the pathogen does not persist?

[Mr Heath]

We will certainly issue such guidance. The ban also deals with the movement of timber and timber waste products in this country. There is no evidence that the pathogen persists in felled trees and wood products but, nevertheless, we believe that an appropriately precautionary response would be to restrict movements in this country, and that is what we have done.

[Zac Goldsmith (Richmond Park) (Con)]

Ash is not the only tree in this country that is under assault from invasive species. In parts of Richmond park, up to 50% of our great oaks show signs of acute oak decline, and about 70% of horse chestnuts in the country show signs of bleeding canker. Surely we can make better use of our island status and apply stronger and better controls at points of entry.

[Mr Heath]

We can do a number of things. Obviously, we cannot prevent the spread of wind-borne disease, but we can look carefully at where import controls are required. We have instructed the agricultural attachés network in our embassies to monitor local intelligence, so that when there are outbreaks of tree disease, we can deal with them in a timely and effective way. The hon. Gentleman is absolutely right that ash dieback is not the only disease to consider, because we also have phytophthora, Asian longhorn beetle and sweet chestnut blight. We are having to cope with a number of serious tree diseases, and we are applying the necessary resources to do so.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I understand that an incidence of the disease has already been identified in Scotland. Will the Minister therefore tell the House the date on which the devolved Administrations were first notified?

[Mr Heath]

We have worked very closely with colleagues in the devolved Administrations to ensure that they are aware of what we are doing and that they can take appropriate decisions on what ought to be done. The Forestry Commission works across the border with its counterparts in Scotland to ensure that all scientific information is shared. I am absolutely clear that they will have all the knowledge we have in dealing with this case. I do not think there is any shortage of information.

[Mrs Eleanor Laing (Epping Forest) (Con)]

The House has heard what the Minister said about his Government not second-guessing the international consensus and not being impeded by the EU, but does he not understand the annoyance of my constituents, who care about our precious, ancient Epping forest, at the EU’s lack of action on biocontrol? While EU officials are wasting their time and our money trying to interfere with the work of UK hairdressers, who do not need protection, they are doing nothing for our ancient forests, which need protection from airborne diseases and diseases imported from Europe. Why has the EU not taken action, and will he do all he can to ensure that it does so?

[Mr Heath]

We have brought together scientific experts from all over Europe to deal with this problem. I am not sure that the people dealing with hairdresser regulation are best deployed dealing with tree health. We need to use all available methods to restrict the spread of tree diseases, because there is a very high incidence of several of them, particularly in northern Europe. We should do everything we can do to avoid their coming into this country.

[Mr David Anderson (Blaydon) (Lab)]

In evidence to the independent panel on forestry, the Friends of Chopwell Wood, which is based in my constituency, said:

“There is a concern that having ‘saved’ our wood from sell-off we may lose it by neglect and disease”

and that that would be caused by “insufficient staff and funding”. Will the Minister give an assurance that that will not happen?

[Mr Heath]

As the hon. Gentleman knows, the Government have not yet formally responded to the independent panel on forestry, but we have indicated that we accept the thrust of its recommendations. I look forward to giving a full response early in the new year on that subject. The future for forestry is very bright, despite setbacks of the sort that I have described today. I repeat that we have not cut back on the allocation of resources. I hope we will be able to mobilise not just scientists, foresters and the voluntary groups for which he has spoken up, but everybody who has an interest in trees in this country, to ensure we have a thriving forest—not only today, but in future.

[Andrew George (St Ives) (LD)]

Given that there will be a desire for public vigilance, what will the Government do to ensure that public concern and support for taking action on this issue are properly and effectively harnessed?

[Mr Heath]

I am keen that all of us with an interest in tree health take responsibility for this. We cannot all be experts on fungal diseases of the ash—I do not expect that—but people should report clear symptoms of ill health in trees to the authorities. The Government play their part by ensuring that research programmes into aspects of tree health are augmented, and we will thus ensure that we have healthy forests in the future.

[George Freeman (Mid Norfolk) (Con)]

As a representative of one of the areas affected by the disease, may I—in contrast to the hon. Member for Wakefield (Mary Creagh), whose principal preoccupation seemed to be to play the blame game—thank the Department and its officials for their rapid action to get on top of this potentially devastating disease, particularly by inspecting more than 1,000 sites over the summer, destroying more than 100,000 trees and introducing an immediate ban? Given that the science of the disease is little understood, will he reassure the House by updating us on what steps are being taken to work with the forestry industry and researchers to understand its epidemiology?

[Mr Heath]

That is absolutely right. We have actually allocated £8 million from existing resources for new research into tree health over the next four years, which I hope will go some way to supplementing what is already in place. There are question marks in the international scientific community over such things as the pathology of the organism and its means of transmission, which we need to explore more fully. The fact that those countries with a high level of infestation—Denmark, Germany, Poland and others in northern Europe—still do not have the answers to some of those questions indicates the complexity of the issue. It is not the case that Britain has not been playing its part; scientific research sometimes takes time.

[Mr Mark Spencer (Sherwood) (Con)]

Will the Minister assure the House that his officials are working with importers and nurseries to ensure that no affected stock remains that may be planted in the future, so that forests such as Sherwood stay not only clean and green, but great places to visit?

[Mr Heath]

We will continue the programme of inspection that has identified those saplings that may be a risk and destroyed them. The ban has been in place on a voluntary basis—it is now on a statutory basis—to ensure that nothing came into the country over this summer and therefore was not available for the next planting season. We can be reasonably assured that infected trees will not be planted this winter—at least those from commercial sources—but we need to maintain vigilance, which we certainly will do. We will also work closely with the industry, which understands how dangerous the disease is and wants to co-operate. I am grateful for the help it has given to the Department in identifying and dealing with the threat at an early stage.

[Dr Sarah Wollaston (Totnes) (Con)]

We have already seen one dangerous tree disease spreading into other species—phytophthora. Is there any evidence of Chalara spreading into other species, either on the continent or here?

[Mr Heath]

I do not believe that there is evidence of Chalara crossing species at the moment, but I will check that and give the hon. Lady an accurate response. She is right about phytophthora, which is well evidenced. In the case of Chalara fraxinea, we are dealing with a specific issue for the ash tree but, as she will be aware, fungal diseases are sometimes more easily spread between species than some other pathogens. I will examine all the evidence and write to her if there is any suggestion of cross-species spread.

Mental Health Act 1983

Monday 29th October 2012 Commons Chamber

16:05

[The Secretary of State for Health (Mr Jeremy Hunt)]

With permission, Mr Speaker, I wish to make a statement about an issue relating to the Mental Health Act 1983.

It has become apparent that there are some irregularities around the way in which doctors have been approved for the purpose of assessing patients for detention under the Act. For assessments and decisions under certain sections of the Act, including detention decisions under sections 2 and 3, three professionals are required to be involved—two doctors and an approved mental health professional. The latter will usually be a social worker.

In 2002, when strategic health authorities came into being, the then Secretary of State properly and lawfully delegated his function of approving doctors under the Act to them. However, it came to light last week that in four of the 10 SHAs—North East, Yorkshire and Humber, West Midlands and East Midlands—between 2002 and the present day the authorisation of doctors’ approval appears to have been further delegated to NHS mental health trusts.

I was made aware of the issue and kept up to date with the actions being taken last week. Our latest best estimate is that approximately 2,000 doctors were not properly approved, and that they have participated in the detention of between 4,000 and 5,000 current patients within institutions in both the NHS and independent sectors. Rampton high-secure hospital is in one of the affected areas, and some patients at Ashworth high-secure hospital are also included.

There is no suggestion that the hospitalisation or detention of any patient has been clinically inappropriate; that the doctors so approved are anything other than properly qualified to make such recommendations; or that these doctors might have made incorrect diagnoses or decisions about the treatment that patients needed. All the proper clinical processes were gone through when these patients were detained. We believe that no one is in hospital who should not be and that no patients have suffered because of this. The doctors would have had no reason to think that they had not been properly approved. They acted in good faith and in the interest of their patients throughout this period.

In the light of our legal advice, we do not believe that any decisions made about patients’ care and detention require review because of this irregularity. Doctors should continue treating patients currently detained under the MHA in the usual way. We have received advice from the First Treasury Counsel that there are good arguments that the detentions involving these particular approval processes were and are lawful, but the counsel also argues the need for absolute legal clarity. The legal advice is that this should be resolved through emergency retrospective legislation.

As soon as the irregularity was identified, my Department worked swiftly to identify the best course of action and to put the necessary preparatory work in place. It first became aware of the problem last week. Officials immediately sought initial legal and clinical advice. We then swiftly analysed possible options, including the option of reassessing all potentially affected patients, working with the health leads in the regions affected and clinical experts from the Royal College of Psychiatrists.

When I was briefed on the situation, I asked for detailed information on the time it would take and the clinical risks involved in reassessing all potentially affected patients. On Friday, I asked for an emergency Bill to be drafted over the weekend, as a matter of contingency. I also briefed the Prime Minister personally the next day. Following further discussions and analysis over the weekend, the decision to introduce emergency legislation was taken yesterday, and we have since worked to prepare the necessary materials.

At all times, my priority has been to resolve the situation in a way that follows clinical advice about the most sensitive way to deal with a highly vulnerable group of individuals. We have also worked to remedy the problem as it relates to current and future detentions. As of today, all the doctors involved have been properly approved. The accountable officers for the four SHAs in question have written to Sir David Nicholson, chief executive of the NHS, to confirm they have made the necessary changes to their governance arrangements. Furthermore, the accountable officers in the remaining six SHAs have written to Sir David to confirm that they have, in the light of this issue, reviewed their own arrangements and that they are in full compliance with the Act.

Although we believe there are good arguments that past detentions under the Mental Health Act were and are lawful, it is important that doctors, other mental health professionals and, most importantly, patients and their families have absolute confidence in the decisions made. That is why, in relation to past detentions, we have decided that the irregularity should be corrected by retrospective legislation. Although we are aware of the problem in only the four areas going back to 2002, the proposed legislation will apply in principle to the approval of all doctors under the Mental Health Act since its introduction in 1983. The proposed legislation will retrospectively validate the approval of clinicians by those organisations to which responsibility was delegated, up to the point when all the relevant doctors were fully re-approved and their status put beyond doubt. The legislation will not deprive people of their normal rights to seek redress if they have been detained for any reason other than the narrow issue of the delegation of authority by the strategic health authorities, nor will it affect any future detentions or legitimise any similar failures in future. We are proposing to introduce the draft legislation to this House and, through best endeavours, looking for it to complete its passage through all the appropriate stages in this House and the other place as soon as is practicable.

While addressing the technical issue, it is also important that we get to the bottom of how this happened and that we learn any lessons to help inform the operation of the new system architecture from April 2013. As such, I have asked Dr Geoffrey Harris, chair of NHS South and former chair of Buckinghamshire mental health trust, to undertake an independent review to look at how the responsibility was delegated by the four SHAs and, more broadly, the governance and assurance processes that all SHAs use for delegating any responsibilities. I will also ask him to look at this issue in the context of the new NHS structures that come into force from next April and to see whether any lessons need to be learned. It is imperative that the review is swift, and I have asked Dr Harris to report to me by the end of the year with recommendations to ensure that every part of the system employs the highest standards of assurance and oversight in the delegation of any functions.

I stress to the House that I have reviewed with lawyers, clinicians and NHS managers possible alternatives to introducing this retrospective legislation. I have been advised that all alternatives would be highly disruptive to many of the most vulnerable patients and would deprive many other patients of the care they need while any action is undertaken. However, all the advice I have received has been unequivocal in stressing the need for absolute clarity of the legal status of any hospitalisation or detention of patients, in the interests of those patients, their families, those caring for them and the wider public. That is why, in such exceptional circumstances, this retrospective legislation is being proposed. Both a Bill and the accompanying explanatory notes will be published this afternoon. I commend this statement to the House.

16:12

[Andy Burnham (Leigh) (Lab)]

I thank the Secretary of State for his statement and for notice of it. Detaining people under the Mental Health Act raises the most serious issues of fundamental rights and of patient and public safety. Any reported failure will therefore always be a matter of the highest concern. I know this House will want to get to the bottom of the unacceptable breaches of procedure that we have just heard about. However, I am sure I speak for both sides in saying that the House will have been reassured by the Secretary of State today on three crucial points: first, that no patient has been wrongly detained, received care that was not clinically appropriate or will see their legal rights restricted by the legislation; secondly, that no doctor was unqualified to make decisions; and, thirdly, that urgent action is being taken to correct the situation and bring the clarity that is so essential.

Let me now turn to the serious questions that need to be answered. Will the Secretary of State say more about the events that brought this issue to light last week? Was it discovered in one SHA first, and by what process did the Department establish that it extended to three more? When exactly was the Department made aware, when was the Secretary of State informed and what action has been taken to establish the full extent of the problem? Have extensive checks been undertaken in all 10 SHA areas, and is he absolutely confident that no more patients and families are affected than the 4,000 to 5,000 he has mentioned?

I want to press the Secretary of State for more information on the people affected. Will he say whether he has any plans for direct communication with the patients and families affected? Are the patients living not only in the four regions mentioned but in all parts of the country? How many are in high-secure hospitals, and how many could pose a risk to the public?

We understand and support the Secretary of State’s wish to remove any doubt about the legal status of the patients concerned, but that must be set against the undesirability of asking the House to legislate tomorrow on an issue that it has found out about only today. Over the next 24 hours, will he ensure that Members have access to the fullest possible information, including a summary of the legal advice he has received?

There will be concerns about precedent. This is the first time that the House has been presented with emergency legislation in this area that will affect people’s rights. The public will want to know that it is being used in exceptional circumstances as a last resort, and not as a convenient means of correcting administrative failures. Will the Secretary of State therefore explain precisely what alternatives to legislation were considered, and why it was decided that they were not acceptable in these circumstances?

Let me turn to the investigation. We support the review under Dr Harris that will try to get to the facts and ensure that lessons are properly learned. We do not want to prejudge it, but is the Secretary of State in a position to confirm today whether the review is already proceeding on the basis that this is a failure of policy implementation rather than a defect in the original legislation? That is important, as practitioners working in this field will not want any unnecessary question marks hanging over the Mental Health Act 1983.

We also need clarity about the future. This area is currently the responsibility of SHAs, which are due to be abolished next April. So, as well as establishing the historical facts, will the Secretary of State ask his review to consider whether the new arrangements for sections, following the Government’s reorganisation of the NHS, are sufficiently well understood? Will he also ask the review to advise on how any danger of further confusion arising from the process of transition can be prevented?

I commend the Secretary of State for the pragmatic approach he is taking to this difficult issue. His request of the House is exceptional, but failure to act could cause unnecessary distress and uncertainty to many thousands of vulnerable patients and their families, and present risks to public safety. We will press him for answers in the areas that I have outlined, but we believe that his action is justified. He will have our support in removing any uncertainty.

[Mr Hunt]

First, I thank the right hon. Gentleman for the co-operation that he has shown to me and my Department over the weekend. There are occasionally moments when issues of public safety and patient well-being transcend the normal political divides, and I greatly appreciate his co-operation on this matter.

Let me deal with the important questions that the right hon. Gentleman has asked. The issue arose when a challenge was made to the authorisation of one doctor in Yorkshire and Humberside and, in dealing with that challenge, the irregularity in the way in which all authorisations had happened became apparent. Following further investigation, we discovered that this had happened in four other SHAs. We found out about this early last week, and I was informed towards the end of last week. Immediate action was taken to ensure proper validation last week of all the doctors who are currently taking section 12 decisions under the Mental Health Act, and that was completed as of today.

We have done exhaustive checks on the other SHAs, which is part of the reason why we asked all the SHA bosses to write to Sir David Nicholson—which they have all done today—to confirm that their processes in this area are in order. We do not believe that this issue affects any patients other than the ones we have talked about, to date. However, because people move and are moved to different hospitals and places of detention, it might be happening in other parts of the country beyond the four SHAs in which the irregularities in authorisation happened.

The right hon. Gentleman will understand that it is not the practice for Governments to publish legal advice because we want to continue to be able to receive frank legal advice in the future. However, I am happy to answer any questions about the legal advice and, as he knows, I am happy for him to talk to my Department’s legal advisers to satisfy himself on the precise legal situation.

Let me move on to the really important point about the alternatives that we considered, as it is highly exceptional to bring in emergency legislation. The right hon. Gentleman will know that authorities are allowed to detain someone under the Mental Health Act for 72 hours while the correct processes are followed to section them. Although, as I mentioned, we believe we have good arguments to show why these detentions were lawful, we did not know what a court might have decided if the detentions were challenged. We could have faced literally having to redo the entire process for 4,000 to 5,000 patients within 72 hours. Given the high level of vulnerability of many of them, we could not find a means of doing that in an orderly way that protected their well-being. I received clear medical advice from the NHS medical director, Professor Sir Bruce Keogh that that would not be an appropriate course of action. We looked at the position carefully and because we were trying to explore other alternatives we did not come to the decision to introduce emergency legislation until this weekend.

I can confirm that we do not believe that this has highlighted a defect in the legislation. We are not seeking in the emergency draft Bill to change the Mental Health Act. This is purely retrospective legislation dealing with some specific procedures under that Act; it will have no impact as this goes forward.

The right hon. Gentleman is absolutely right that we must be sure to minimise the confusion as we move towards the new structures. Under them, the problem would have been resolved, with the power reverting from strategic health authorities to the Department of Health. I do not want to be complacent: if this problem happened in one area, we want to be sure that it cannot happen in others.

[Mr Stephen Dorrell (Charnwood) (Con)]

I welcome the prompt action taken by my right hon. Friend and the support he has secured from Opposition Front Benchers for putting this sensitive matter on a secure legal footing. Is not the key point the fact that no patient has been sectioned and no doctor has been authorised who would not have been sectioned or authorised under the legislation? Is not the purpose of the emergency Bill, as always with retrospective legislation, simply to put the position as Parliament intended it to be in the first place?

[Mr Hunt]

My understanding is exactly the same as that of my right hon. Friend. The key point is that this was a technical irregularity, but we do not believe that any patient has been sectioned, detained or hospitalised who would not have been if the correct procedures had not been followed. It is none the less very serious that this technical breach happened; that is why, as well as correcting the technical breach and providing absolute clarity, we are conducting this review to make sure that we do everything we can to avoid anything similar happening again—even under completely different structures than the SHAs.

[Derek Twigg (Halton) (Lab)]

I do not necessarily disagree with anything the Secretary of State said, but I noted that he used the term “we believe”, which means that it is not simply factual at this point that no one has been detained who should not have been. It would be worth the Secretary of State addressing the reverse position: does he believe that no one who should have been detained has been released and then gone on to commit a serious offence?

[Mr Hunt]

As a result of the technical irregularities that we have identified and put right, I do not believe that what the hon. Gentleman describes has happened. Let me explain that when I say “we believe”, it reflects the advice we have had that there are good arguments on why the detentions were and are lawful, but that is not to say that those arguments cannot be challenged or that a court would necessarily agree with us. That is why it is necessary to take this unusual step of introducing emergency legislation.

[Mr Charles Walker (Broxbourne) (Con)]

Removing the liberty of ill people is serious business, and deserves to be taken seriously. That has not been the case for the past decade, or perhaps even longer. I hope that, as we go forward, we can ensure that people who are ill get the representation and advocacy they deserve and that they—and, most importantly, their rights—are taken seriously.

[Mr Hunt]

My hon. Friend is absolutely right. As a result of the new structures in the NHS, responsibility for ensuring that all patients who are threatened with detention receive the advocacy to which they are entitled under the Mental Health Act will be transferred from primary care trusts to local authorities. We will use this opportunity to review the arrangements, talk to local authorities, and do all that we can to ensure that those functions are discharged in the way my hon. Friend seeks.

[Andrew Percy (Brigg and Goole) (Con)]

Two mental health trusts that do a fantastic job in my constituency, Humber NHS Foundation Trust and Rotherham, Doncaster and South Humber NHS Foundation Trust, have been involved in this. Can the Secretary of State tell us how many patients have been affected by what has happened in trusts, so that if families approach us we can offer them the information that they require?

[Mr Hunt]

I shall try to give my hon. Friend that information later.

[John Howell (Henley) (Con)]

Does the Secretary of State agree that speed is of the essence in the provision of clarity, and will he accept our congratulations on having moved with such commendable speed?

[Mr Hunt]

I am grateful to my hon. Friend for saying that, but I think that we should extend our gratitude to the Opposition on this occasion. It is possible to move with speed only when there is cross-party co-operation, and I think that everyone has recognised the seriousness of the situation.

[John Pugh (Southport) (LD)]

Given the huge, overwhelming concentration on the subject of detention during the passage of the National Health Service Act 2006, which revised the Mental Health Act 1983, why was this departure from the law not brought to Members’ attention, or, indeed, to light? Someone in the Department of Health must be answerable, surely.

[Mr Hunt]

The truth is that no one in the Department of Health knew that this irregularity was happening. I do not think that anyone in the system knew that it was happening, until the issue arose in Yorkshire and Humberside when a particular decision was challenged. However, the hon. Gentleman is right: there is an important question mark over why it was possible for the irregularity to continue for so long without being noticed. I think that we need to listen to what Dr Harris says about why he believes that it was possible for it to continue for so long, and to act on his advice.

[Guy Opperman (Hexham) (Con)]

I declare an interest, as someone who represented a number of individuals under section 12 of the Mental Health Act—and also as someone who is owed money by the state for the work that he did on behalf of such individuals three and a half years ago, but I leave that to one side.

I welcome the drafting of retrospective legislation to resolve this problem, but has advice been obtained on whether the section 12 patients will retain any right to challenge their original detention procedures by way of judicial review?

[Mr Hunt]

My hon. Friend makes a very important point. All the patients’ rights to challenge their detention are preserved, with the exception of their rights relating to the technical irregularity over the authorisation of doctors under section 12. If they are challenging any other clinical or legal due-process decision, they are free to continue to do so: that will be completely unaffected by the retrospective legislation.

[Iain Stewart (Milton Keynes South) (Con)]

Can my right hon. Friend explain the position of trusts such as Milton Keynes PCT, which was part of South Central strategic health authority but is now part of East Midlands SHA? I understand that that is one of the SHAs that were affected. Will my right hon. Friend look into whether any issues have arisen from that transfer?

[Mr Hunt]

I can reassure my hon. Friend that if any issues have arisen from the technical irregularity involving the authorisation of doctors under section 12, they will be dealt by the retrospective legislation.

[Mr Robert Buckland (South Swindon) (Con)]

I welcome my right hon. Friend’s approach, which is responsible and right. May I urge him to ensure that the review being undertaken by Dr Harris will include the effect of the changes in NHS structures on all relevant provisions of the Mental Health Act—for example, the provision of information about bed availability to courts under section 39?

[Mr Hunt]

I shall certainly pass my hon. Friend’s question on to Dr Harris. It is not clear that the irregularity is a result of reorganisations, but I want to give Dr Harris a completely free hand. We shall then listen to what he says very carefully.

[Rehman Chishti (Gillingham and Rainham) (Con)]

rose—

[Mr Speaker]

Ah! A late arrival at the station.

[Rehman Chishti]

I am so sorry, Mr. Speaker.

I am very grateful to the Secretary of State for his statement. Despite the irregularity, sections 2 and 3 of the Mental Health Act give patients an automatic right to a tribunal hearing, and the tribunal will have been able to consider their applications for release.

[Mr Hunt]

That is correct. Nothing in the legislation will affect any rights that patients have, except with respect to the technical irregularity involving the authorisation of doctors under section 12.

West Coast Main Line

Monday 29th October 2012 Commons Chamber

16:30

[The Secretary of State for Transport (Mr Patrick McLoughlin)]

With permission, Mr Speaker, I would like to make a statement on the progress we are making to put right arrangements for the west coast main line and rail franchising. First, I will update the House on the Laidlaw inquiry. Secondly, I will explain how we will ensure not only continuity of service on the west coast line after 9 December, but an enhanced service.

On 3 October I announced the cancellation of the competition to run the inter-city west coast franchise because of the discovery of unacceptable flaws in the procurement process run by the Department for Transport. I made it clear at the time, and do so again today, that this was a very regrettable decision prompted by mistakes that should never have happened. I also launched two independent inquiries, one of which has reported its interim findings to me, and which I am today delivering to the House.

I asked the first inquiry, led by Centrica chief executive Sam Laidlaw, to look into what happened and why, with the aim of establishing the lessons to be learned. I also asked the second review, led by Eurostar chairman Richard Brown, to focus on any lessons to be learned for the future rail franchising programme. I promised that both would conduct their investigations thoroughly, independently and urgently.

Given the public interest in this matter, the Laidlaw inquiry was asked to deliver an interim report to me by 26 October and a final report by the end of November. I am grateful to the inquiry for meeting the first deadline and for working tirelessly to meet the second. I stress that today’s findings are precisely that: an interim report. There is more work to do. These findings are clearly a first stage. As Mr Laidlaw explains, they set out what went wrong, and from that basis he will now carry out further investigations into why this happened.

From the start, my aim in dealing with this situation has been to be open and to come forward with information for the House at the earliest opportunity. It is in that spirit that I make this statement today. In the interests of complete transparency, I am publishing this interim report with its provisional findings, and placing copies of it in the Libraries of both Houses.

To be blunt, these initial findings make uncomfortable reading, but they provide a necessary and welcome further step in sorting this situation out. The Government will need to see the full and finished report before we can comment in detail on any conclusions. That is crucial because of the independent nature of the Laidlaw inquiry and the need for the Government not to prejudge its eventual findings, but it is clear that the inquiry has identified a number of issues that confirm that my decision to cancel the franchise competition was necessary. These include a lack of transparency in the bidding process, the fact that published guidance was not complied with when bids were being processed, inconsistencies in the treatment of bidders, and confirmation of technical flaws in the model used to calculate the amount of risk capital bidders were asked to provide to guard against the risk of default. The Laidlaw inquiry also mentions factors that

“appear to have caused or contributed to the issues raised”.

We will look at them with interest and care, although, once again, we will need to see the final report before we can comment further.

Secondly, I would like to update the House on the progress we are making to ensure continuity of service on the west coast main line once the current franchise expires on 9 December. As I have said previously, we will ensure that passengers continue to be served by the same trains with the same front-line staff, the same services and using the same tickets, and, I am pleased to say, with enhanced future timetables.

The Department is making good progress in its discussions with Virgin on how it will operate the line for a short period of up to 14 months while a competition is run for an interim agreement. We are discussing its proposals for improved services over this period and an enhanced compensation scheme for delayed passengers.

In dealing with this matter, my Department has been frank and open about its mistakes and is absolutely determined to find out exactly what happened. In the meantime, we will keep delivering for passengers, and continue with the unprecedented levels of investment in trains, stations and railway lines.

Combined with our decision to limit train fare rises to an average of inflation plus 1%, instead of RPI plus 3%, for the next three years, this demonstrates this Government’s total commitment to Britain’s railways. I commend the statement to the House.

16:34

[Maria Eagle (Garston and Halewood) (Lab)]

I thank the right hon. Gentleman for early sight of his statement—it was a good job I had my mobile phone with me so that I could read it. I welcome his willingness to come to the House and his stated intention to be transparent, which I hope will translate into actual transparency.

However the Secretary of State spins it, the truth is that this is a franchise fiasco with not one but four Cabinet Ministers’ fingerprints all over it. Who designed the new franchising policy, building significantly greater risk into the process? It was the Secretary of State for Northern Ireland. Who reduced the Department’s capability to manage major contracts by cutting a third of the staff, including the directors of procurement, rail strategy and rail contracts? It was the Secretary of State for Defence. Who decided not to bother with an external audit, turning a saving of thousands into a cost of tens of millions, then delegated the entire process to her junior Minister and then failed to act on warning after warning about flaws in the process? It was the Secretary of State for International Development. And who declared himself satisfied with the whole process before the Transport Committee, despite the growing evidence that something had gone badly wrong, and then added to the chaos in the franchising system by replacing the costs of one competition with the costs of three? It was the current Secretary of State. This is a shambles involving not one but four members of the Prime Minister’s Cabinet, and it is about time they took responsibility for it instead of blaming officials.

After his last statement to the House, the Secretary of State failed to answer a single question I put to him, so perhaps today, in the interests of transparency, he can manage to give answers to five questions. The first relates to what Ministers knew and when. We know that his Department received a detailed report by Europa Partners five days before awarding the contract. Its author has said that a proper risk analysis was not at the centre of the appraisal. Can the Secretary of State now confirm that at least one bidder warned the Department of errors as far back as May 2011, with one executive telling the Financial Times:

“The spreadsheet contained certain assumptions that looked odd to our economic modellers, so we went back to the department and pointed it out”?

Again, why did Ministers not act on that warning? Can the Secretary of State tell the House who the senior responsible owner for this project was in his Department?

Secondly, on the cost to taxpayers, the Secretary of State doggedly sticks to his figure of £40 million, yet we know that that is just the cost of compensating the four west coast bidders. It does not include the cost of re-running the competition twice, of compensating bidders for the other stalled franchises or of preparing Directly Operated Railways to step in. So what assessment has he been given of the final cost of this Cabinet ministerial failure? How accurate are reports of a final figure of well over £100 million?

Thirdly, on his Department’s external advice, the Secretary of State has admitted in parliamentary answers that his Department paid £491,000 to Eversheds and £439,000 to WS Atkins for advice during the west coast tender process. Can he confirm whether those are the total amounts paid? What steps is he taking to secure a refund for taxpayers for any mistakes that may have contributed to this fiasco?

Fourthly, on the legal advice that the Secretary of State has received, what is his Department’s liability if the participants in any of these cancelled or stalled franchises take action against the Government? What advice did he receive on procurement and EU competition law before deciding to extend Virgin’s contract? What will be the cost of Virgin’s interim operation of the west coast main line until he can get to the first of the next two competitions?

Finally, on the review itself, does the Secretary of State not think it is extraordinary for his Minister of State to insist, in a parliamentary answer, that the Department for Transport board has no responsibility for this fiasco because it was delegated to one of its sub-committees? Surely the board is responsible for its own sub-committee. It is precisely this wriggling that makes people suspicious about the nature of this review. Will the Secretary of State, even at this late stage, think again and allow a genuinely independent review that can look at the role of the Department for Transport board and of Ministers?

The Secretary of State’s attempt to bury his franchise policy at midnight failed to cover up this nightmare on Marsham street that has rapidly become a nightmare for Downing street. Does the Secretary of State agree that

“Ministers must take responsibility for serious or systematic performance failures...flawed policy and poor design...Ministers must not be allowed to shuffle off responsibility”?

Those are not my words, but those of the Prime Minister. This is not just a faulty process; it is a faulty Government. It is time that the Prime Minister listened to his own words, followed his own advice and insisted on his Cabinet finally taking some responsibility for this franchise fiasco.

[Mr McLoughlin]

For the hon. Lady’s information, the Department is based in Horseferry road, not Marsham street.

Let me draw the hon. Lady’s attention to the final line of Mr Laidlaw’s letter to me today, which states:

“Firm judgments should not be made based upon what are provisional findings or wider conclusions drawn at this stage.”

I have been very open with the House about the problems we have encountered. She accuses the Government of wasting money, but she should perhaps look back at the previous Government’s record, particularly the decision by the then Deputy Prime Minister that wasted some £469 million on the flawed procurement of regional fire stations. I see that the shadow Minister, the hon. Member for Poplar and Limehouse (Jim Fitzpatrick), is rather amused by that, because he was directly involved.

I have come to the House and I have been open with the House. As far as the money is concerned, I talked about the £40 million that related to the bidding process and there will be some other costs. When I have those costs, I will inform the House. I will not judge them or estimate them; I will give the House the information when I have it.

The last time I gave a statement, the hon. Lady attacked us for not getting external advice. As the answers given by my right hon. Friend the Minister of State show, we did get external financial advice where necessary. Yes, some changes were made to the Department but they were well under way and being planned for before May 2010.

On the question of Virgin’s position, I made it perfectly clear the last time I made a statement that I intend to enter into an interim contract with Virgin until we can do a longer franchise. That first franchise will last up to 13 months. I did check it out, and have obviously had discussions with, the commission.

[Mrs Cheryl Gillan (Chesham and Amersham) (Con)]

May I congratulate my right hon. Friend on coming to the House and being so transparent and open about what is obviously a very painful part of the Department’s dealings? Will he now translate that openness and transparency across all the modelling that is being used either by the Department for Transport or its subsidiary, HS2 Ltd, for HS2? Will he now put his words into action and publish the Major Projects Authority’s report on HS2, showing that he really is a transparent Secretary of State?

[Mr McLoughlin]

As I think I said to my right hon. Friend the last time we discussed this matter, a lot of work is being done on the planning of HS2 and there will be a number of opportunities for wide-ranging debates when we discuss that Bill, but today I am dealing with the west coast main line and franchising.

[Mr Alistair Darling (Edinburgh South West) (Lab)]

Will the Secretary of State tell us whether Mr Laidlaw considered the implications of the decision to make this a 15-year franchise? He will know that when I had his job I reduced the franchises to seven years, because after that time trying to speculate on the state of the economy, and therefore on what fair revenue is, becomes increasingly difficult, if not impossible. The problem is that the further out we go, the greater the probability is that the risk will fall back on the Government. Does not that policy decision, taken, I think, by some of his predecessors, need to be reconsidered if we are not to repeat some of the procedural problems that he has outlined today?

[Mr McLoughlin]

I am grateful to the right hon. Gentleman for that question. He has a distinguished record of being one of the longest-serving Secretaries of State for Transport, so I listen to him with the care and attention he rightly deserves. He raises a couple of points. He might not be aware that at the tail end of the previous Government they also talked about extending the franchises up to 20 years, which was seen to be a way of getting a better return overall for the huge investment from the taxpayer that goes into the railways. He makes an interesting point. As I said in my initial statement, I have asked for two reviews and I think that that is something that Richard Brown, the chairman of Eurostar, will be considering in his report, which I expect to see before the end of the year.

[Mr John Redwood (Wokingham) (Con)]

In the appraisals of the new competition being held for the west coast franchise, what will the role of Ministers be in setting the terms of the competition, supervising the arithmetic and making sure that a fair assessment is made?

[Mr McLoughlin]

I hope Ministers set out the policy. I am not sure that we are there to check every line of every spreadsheet. That is something that we should rightly expect officials to do for us at the request of Ministers, to ensure that we get the best value for the taxpayer out of what has been a huge amount of investment on this railway line, which has been made on behalf of the British public. It is one of the most important lines that serves the United Kingdom so I will certainly bear in mind what my right hon. Friend says, but part of the point of going for longer franchises was to try to deliver better services to the passenger.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

The Secretary of State will be aware that the Transport Committee may have a few questions to ask him on Wednesday. Perhaps he could tell the House today why, if it is important that the outcome of the review should not be prejudged, he suspended three civil servants.

[Mr McLoughlin]

I am sure the Transport Committee will have a number of questions for me on Wednesday. I think I am looking forward to coming. The decision on suspensions of staff is not made by a Secretary of State; it is made by the permanent secretary. I have had no involvement with that process and it would not be right for me to do so.

[Mr John Leech (Manchester, Withington) (LD)]

Does the Secretary of State agree that one of the lessons that should be learned in relation to future franchising is the need to ensure that good performance as well as poor performance by an operator can be taken into consideration as part of the franchising process, notwithstanding the need for fair competition?

[Mr McLoughlin]

I entirely agree. That should certainly be taken into account, but so should the return to the taxpayer. The taxpayer has invested a huge amount of money in the line, which must be borne in mind as well.

[Mr Jack Straw (Blackburn) (Lab)]

Successive reports this year from the Transport Committee and a National Audit Office report last week have indicated that the Department is running a huge underspend on its capital programme. The NAO report last week talks about addressing

“£1.7 billion unexpected funds for infrastructure”.

I realise that the Secretary of State has been in office for only a few weeks, but can he say to what extent the slimming down of the Department and its preoccupation with the issue of rail franchising has meant that it lacked the capacity to ensure that funds properly allocated to it—for example, for road repairs and desperately needed regional rail infrastructure improvements—are spent, and what he is doing to address that?

[Mr McLoughlin]

The right hon. Gentleman’s question goes slightly wider than my statement this afternoon, but I point out that I made an announcement just a few weeks ago about a pinch-point plan to relieve certain areas of road congestion, which will cost £170 million. Wherever money is spent, I am determined to ensure that good value is obtained and that we do not waste public money. That is more important to a Minister than making sure he spends the money, come what may.

[John Stevenson (Carlisle) (Con)]

I congratulate the Secretary of State on the speed of the work that he is doing and his approach to this very difficult issue. My concern, however, is the potential loss of investment and innovation in the rail service in the short term. Will the Secretary of State assure me that everything will be done by his Department to ensure that no investment opportunity is lost and that any improvement to the service will go ahead if at all possible?

[Mr McLoughlin]

My hon. Friend make a good point, because the line is very important for his constituency. I know that he has already had a meeting with my right hon. Friend the Minister of State about rail investment in his constituency. I am keen to make sure that the benefits that people will get from the franchise are realised as soon as possible. There has been a necessary delay and I very much regret that.

[Mr George Howarth (Knowsley) (Lab)]

In his statement the Secretary of State referred to discussions that he is holding with Virgin about extending its involvement for a short period of 14 months. Can he give some reassurance to travellers and also to the staff who work on the west coast main line that if it becomes necessary to extend that 14-month period, there is no in-principle reason why that should not happen?

[Mr McLoughlin]

Over the next eight months, which we are talking about as the extension to the franchise, and the following five-month changeover period, if that is necessary, we will obviously be talking with Virgin and other companies interested in running the interim two-year contract, but I think that the jobs of the people who operate the trains will remain the same under any operator.

[Christopher Pincher (Tamworth) (Con)]

Commuters in Tamworth will be relieved to hear that at least my right hon. Friend knows where his Department is. Will he make clear the steps he can take to ensure that the next round of franchises are not unduly delayed? In particular, can original requests for proposals made by bidders who choose to tender again be requested again so that that the review process is expedited?

[Mr McLoughlin]

I can assure my hon. Friend that I am very keen to get on with franchising, but he would expect me to wait for the recommendations of the Brown report and the Government to respond to it in a measured and appropriate way. I can give him the assurance he seeks: I am very keen to get on with franchising.

[Sir Gerald Kaufman (Manchester, Gorton) (Lab)]

I join those Members who have complimented the right hon. Gentleman on his openness in coming to the House and his readiness to come here frequently. Is he aware that, as is shown in the book “How to be a Minister”, the incompetence, errors and blunders he listed in his statement should end up in the lap of his predecessor and that the Government should admit that? Will he also accept that those of us who travel twice a week on the west coast main line have seen the cloud that has hung over the train crews during this period lifted? It is up to him to ensure that the cloud does not return.

[Mr McLoughlin]

I am not sure who wrote “How to be a Minister”, but the right hon. Gentleman might like to inform me privately afterwards. I refer him to Sam Laidlaw’s letter, which I mentioned earlier. The fact is that this is an interim report and nowhere does it criticise Ministers.

[Mr Brian Binley (Northampton South) (Con)]

I welcome the Secretary of State’s willingness to update us on the continuity of service on the west coast main line once the current franchise expires on 9 December. Has he noted recent reports suggesting that capacity could be reached well before 2026, undermining continuity of service? Consequently, will he bring forward plans for HS2, even though he said he would not talk about them today?

[Mr McLoughlin]

I am interested in the representation my hon. Friend has made, but perhaps we could leave it at that.

[Mr Frank Field (Birkenhead) (Lab)]

Why does the Secretary of State think that he will ever be best placed to decide competition between these companies? Does he not realise that we, the consumers and travellers, would like to decide competition between the companies ourselves? When will he realise that we are in a better position to decide which trains we would like to travel on, that those who are bidding for the contracts have huge skills in fixing them and that no amount of skill from the Secretary of State can overcome them fixing the market in the way they have succeeded in doing up to now?

[Mr McLoughlin]

I am not sure that I completely agree with the right hon. Gentleman, but I might want to reflect a little on what his question is in the longer term. The Government, on behalf of the taxpayer, have invested a huge amount of money in the west coast main line—some £9 billion—so it is right that the people who are served by the line get a good service, and we are trying to find how best to achieve that.

[Mr Marcus Jones (Nuneaton) (Con)]

Over the past eight years, passenger numbers from Nuneaton station have increased by 77% to just under 1 million. On the basis of that growth and the huge growth in railway usage that we have seen across the country, does my right hon. Friend agree that it would be complete folly at this stage to revert to a nationalised railway, as has been alluded to by some Labour Members over the past week? May I also appeal to him to consider better off-peak fast services to Nuneaton station when he deals with the re-timetabling?

[Mr McLoughlin]

I am grateful to my hon. Friend. Requests for improved services often come my way whenever I appear at the Dispatch Box. That shows, to a degree, the importance of the rail industry to all our constituents and the demand that exists whereby people will use a service if it is available, so I take his representations very seriously. As for nationalisation, the railways could have been nationalised by the previous Government—they were in power for 13 years—and they decided not to do so, for very good reason.

[Ann Coffey (Stockport) (Lab)]

I know that the Secretary of State is aware of the urgent need for improvements to Stockport station, so will he tell me whether capital projects are to be included in the interim agreement?

[Mr McLoughlin]

I cannot yet go into the full details of what will be in the interim two-year agreement. However, the hon. Lady has made the case for Stockport station not just today but on other occasions, and, knowing her, I have the feeling that she will continue to do so every time I appear at the Dispatch Box.

[Jeremy Lefroy (Stafford) (Con)]

Stafford station is to receive a welcome £3 million upgrade, and my constituents are looking forward to several other improvements in fares and services, particularly—here is another bid for my right hon. Friend—later departures from London and Liverpool in the evening. Can he confirm whether these improvements will be possible under the two shorter franchises?

[Mr McLoughlin]

I am very pleased to hear that my hon. Friend’s station is being improved. I should like to point out that Derby station is being improved as well, but that was agreed some time before I arrived at the Department. On his request for further services to Stafford station, which I know well, I will certainly try to ensure that when the enhanced services are negotiated, Stafford also gets the benefit.

[Richard Burden (Birmingham, Northfield) (Lab)]

The Secretary of State mentioned the Brown review on more generalised lessons for franchising. Is he aware that some urgent lessons need to be learned and acted on straight away, particularly regarding routes to and from the west coast main line? I refer, of course, to the literally hundreds of train services that have been delayed or subject to cancellation by London Midland. The Secretary of State says that his officials are in daily contact on this. What are they doing? Will the problem be resolved? How did we get to the situation whereby London Midland appears not to have forward planned its driver requirements? What penalties are available to him and his Department?

[Mr McLoughlin]

I congratulate the hon. Gentleman; I think there were about six questions there. However, I will give him only one answer, which is that the Under-Secretary, my hon. Friend the Member for Lewes (Norman Baker), spoke directly to the managing director of that rail line. We are concerned about the deterioration of services, and I hope that measures will be put in place quickly to put them back to an acceptable level.

[Andrew George (St Ives) (LD)]

Notwithstanding my right hon. Friend’s reply to the hon. Member for Tamworth (Christopher Pincher) about the Brown inquiry, is he prepared to go a little further in outlining the consequences for other franchises and their timetabling, particularly the First Great Western franchise, which many hon. Members are very concerned about?

[Mr McLoughlin]

Yes; the hon. Gentleman’s points are well taken. However, I do not want to prejudge the Brown inquiry, nor the final Laidlaw inquiry. It is better that I wait for those reports to see whether they have any read-across. I assure him that, as I have said throughout the statement, we are very keen to see good, reliable railway services across the country.

[Iain Stewart (Milton Keynes South) (Con)]

I thank my right hon. Friend for his comments about the continuity of services on 9 December. He also said that he is in discussion with Virgin about enhancing services in December and an improved timetable. Can he give any more details about those discussions?

[Mr McLoughlin]

I am afraid that I cannot give those details at the moment, because we are in negotiations. I know that my hon. Friend wants a better service for Milton Keynes, because every time he talks to me he talks about exactly that. As a member of the Transport Committee, he is one of those people who keep an incredibly close eye on this issue and he will no doubt pursue me at every opportunity.

[Guy Opperman (Hexham) (Con)]

I welcome the speed and transparency of the interim Laidlaw report and endorse the calls of other hon. Members for lengthier franchises. Today the all-party group on rail in the north looks forward to meeting the Minister of State.

[The Minister of State, Department for Transport (Mr Simon Burns)]

I have already been there.

[Guy Opperman]

Yes, and I am sure that my right hon. Friend will be coming back.

Will the Secretary of State confirm that this Government’s increased investment in things such as the northern hub and the expanded service for the north will continue in the long term?

[Mr McLoughlin]

I am grateful to my hon. Friend for his question. My right hon. Friend the Minister has just told me that he looks forward to going back to the all-party group. My hon. Friend makes a very important point. Just before the summer recess we announced our plans for the railways from 2014 to 2019, which ought to have some very beneficial effects for all constituents. They include the largest electrification ever seen in this country—we are planning to electrify some 850 miles, which is a lot more than the previous Government achieved in 13 years.

Business of the House

Monday 29th October 2012 Commons Chamber

17:01

[The Leader of the House of Commons (Mr Andrew Lansley)]

With permission, Mr Speaker, and in the light of the statement earlier this afternoon by my right hon. Friend the Secretary of State for Health, I should like to make a short business statement. The business for tomorrow will now be:

Tuesday 30 October—Proceedings on a business of the House motion, followed by all stages of the Mental Health (Approval Functions) Bill.

The business for the rest of this week will be substantially unchanged.

Wednesday 31 October—Consideration of Lords amendments to the Local Government Finance Bill, followed by a motion to approve European documents relating to the multi-annual financial framework. The House may also be asked to consider any Lords amendments that may be received, and the Speaker shall not adjourn the House until he has reported the Royal Assent to any Act agreed on by both Houses.

Thursday 1 November—A debate on a motion relating to beer duty escalator, followed by a debate on a motion relating to air passenger duty. The subjects for these debates have been nominated by the Backbench Business Committee.

Friday 2 November—Private Members’ Bills.

I will announce, as usual, further business during the business statement on Thursday.

[Several hon. Members]

rose—

[Mr Speaker]

Order. The Leader of the House emphasised that it was a short business statement and I emphasise for the benefit of hon. and right hon. Members that it is also a narrow business statement. The normal opportunity for exchanges will occur on Thursday at business questions, but I know that hon. and right hon. Members will wish narrowly to focus their questions on the specific change to business to tomorrow, which the right hon. Gentleman has announced.

[Ms Angela Eagle (Wallasey) (Lab)]

I thank the Leader of the House for his business statement, which was inevitable following the earlier statement by the Secretary of State for Health. Will the Leader of the House do something to reassure us about the practicalities of a sudden switch to consider all stages of a Bill that has just this minute been published? In the words of my right hon. Friend the Member for Leigh (Andy Burnham), the shadow Secretary of State, we will be legislating tomorrow on something that the Government, or certainly we in this Parliament, have only found out about today.

Will the Leader of the House explain why there is such a rush and why all the Bill’s stages have to be taken tomorrow? Will he reassure hon. Members, who would usually be given adequate time to ask parliamentary questions and to discuss or even hold hearings on aspects of the Bill? Is there anything he can do as Leader of the House to ensure that adequate help is given to those who wish to consider the Bill, which has only just been published, at such short notice? Are there any extra things that the Department of Health could do to reassure hon. Members about the reasons for this? Perhaps it could be more open than would usually be the case, given that all stages of the Bill are now due to be taken tomorrow. I would appreciate it if he could go into a little detail for those who are interested in taking part in the debates, and if he could reassure the House and those outside that the matter has been adequately examined.

I particularly wish for some reassurance about stakeholders. The explanatory memorandum to the Bill mentions stakeholder involvement, but only medical involvement, not user involvement.

[Mr Lansley]

I am grateful to the shadow Leader of the House for her response, and to the shadow Secretary of State for Health for how the Opposition responded to my right hon. Friend’s statement.

On the practicalities of the matter, hon. Members will of course be concerned to know that tomorrow’s business of the House motion, which I will table later, ensures that they can raise issues by tabling amendments, including before Second Reading. I hope that the motion will permit that to take place, to allow the full debate that Members will wish to have in Committee.

My colleagues, including the Secretary of State for Health, and I of course looked carefully at the requirement for the proceedings on the Bill to be conducted on such a time scale. As the hon. Lady will recall from my right hon. Friend’s responses to questions following his statement, a 72-hour period is allowed to put in place the assessment necessary to make a section under the Mental Health Acts. By extension, once it is clear that there is any procedural irregularity, there is a risk of legal proceedings being raised by the patients concerned. The legal advice makes it clear that it is desirable to achieve clarity as quickly as possible, otherwise there is a risk of large numbers of assessments having to be entered into. I know that our collective judgment will have been explained to the shadow Secretary of State.

I hope that along with the Department of Health, we will be able to take every step that we can. The Department has published the Bill and explanatory notes, which the hon. Lady will have seen. She will know that the Bill contains one substantive clause plus those on commencement, extent and short title, and I hope that today’s statement and the explanatory notes make it clear that it is focused specifically on the point in question.

As far as stakeholders are concerned, the issue that has arisen is about the approval of medical professionals. We were therefore particularly focused on the Royal College of Psychiatrists. As my right hon. Friend the Secretary of State made clear, patients’ rights and interests have not been prejudiced, and I hope that they will take reassurance from that. I have no doubt that immediately following his informing the House of the situation, my colleagues at the Department of Health will have ensured that all those in a position to represent patients’ interests have been given the necessary details and that they will have the opportunity to contact the Department and Members over the next 24 hours.

[Grahame M. Morris (Easington) (Lab)]

Can the Leader of the House clarify what will happen to the Second Reading of the Growth and Infrastructure Bill, which was planned for tomorrow? Have I misunderstood, or will it be rescheduled?

[Mr Lansley]

No, the hon. Gentleman has not misunderstood. As I said, I will announce further business for next week and provisional business for the week after in the business statement on Thursday.

[Mr Speaker]

I am grateful to the Leader of the House, the shadow Leader of the House and the hon. Member for Easington (Grahame M. Morris).

Ford Assembly Plant (Swaythling)

Monday 29th October 2012 Commons Chamber

Application for emergency debate (Standing Order No. 24)

17:09

[Caroline Nokes (Romsey and Southampton North) (Con)]

I seek leave to call for a debate on a specific and important matter that I believe should receive urgent consideration—namely the planned closure of the Ford assembly plant based in Swaythling in the Southampton part of my constituency.

Ford is the biggest single employer in my constituency. It currently employs approximately 500 people on site, and is home to the iconic Transit van. Ford began production in my constituency in 1953, and commenced building the Transit in 1972—40 years ago. The decision to close the plant will affect not only the 500 employees on site, but the significant supply chain attached to the business, which is equally at risk. Current estimates indicate that approximately 1,500 jobs are reliant on the Ford supply chain.

I call for a debate in the House because the closure affects not only my constituents but those of neighbouring right hon. and hon. colleagues. It is very much a cross-party matter, and the House will understand its importance. I am extremely concerned about the effect the plant’s closure will have on an area of my constituency that has higher unemployment statistics than other parts of Romsey and Southampton North, and I wish to seek assurances that the Government will do all they can to support those hard-working individuals.

I wish to emphasise the importance of Southampton’s inclusion in the next wave of city deal funding, and highlight the need for an enterprise zone to be created in the area. An enterprise zone in or around Southampton will undoubtedly create an environment in which businesses can grow, leading to a stronger local economy. I also strongly encourage BIS local, the city council and other neighbouring local authorities to join forces so that those being made redundant are given the most comprehensive help possible to find alternative opportunities.

It is imperative for this House to know whether there was anything the Government could have done to prevent the decision to close the plant. There are also questions over whether Ford has reneged on earlier promises to keep the factory open in exchange for previous Government funding, and what, if anything, the Government knew about the decision. Those issues should rightfully be debated on the Floor of the House, and not in the media.

[Mr Speaker]

The hon. Lady asks leave to propose a debate on a specific and important matter that should have urgent consideration, namely the closure of the Ford assembly plant in Swaythling. I have listened carefully to her application, and it is an important matter for her constituents and others who depend upon that plant. I must tell the hon. Lady, however, that I have concluded that the matter does not meet the stringent criteria for an urgent debate under Standing Order No. 24, and for that reason I do not propose to put the application to the House. I hope that the hon. Lady will succeed in finding other ways to debate this important issue soon. I hope that is of some assistance.

Public Service Pensions Bill

Monday 29th October 2012 Commons Chamber

Second Reading

17:12

[The Chief Secretary to the Treasury (Danny Alexander)]

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

The Public Service Pensions Bill represents the final building block of the Government’s commitment to reforming public service pensions. It is an important measure that will affect the pensions of millions of public service workers for decades to come. It is the culmination of a process that started more than two years ago when the coalition Government invited the former Labour Secretary of State for Work and Pensions, Lord Hutton of Furness, to undertake a fundamental review of public service pensions. Lord Hutton’s independent public service pensions commission undertook its responsibilities with thoroughness. It consulted and met a wide range of interests and considered a wealth of expertise and viewpoints, and more than 3,000 pages of evidence were submitted in response to it by more than 250 bodies.

[Mr Jim Cunningham (Coventry South) (Lab)]

Will the right hon. Gentleman give way?

[Danny Alexander]

I will give way, although it is rather early in my speech. Perhaps the hon. Gentleman wants to make an urgent point about Lord Hutton.

[Mr Cunningham]

I appreciate that the Government commissioned the Hutton report, but surely that report would not have been needed had they honoured the previous Government’s commitment to civil servants and public service workers.

[Danny Alexander]

I shall deal with the good reasons why further reform is needed later in my speech.

Lord Hutton’s conclusions of March 2011 set out a clear and compelling case for further reform. He found that the status quo was not tenable, that there had been an unfair sharing of costs between the employer, the employee and the taxpayer, and that previous reforms had not fully addressed the underlying issues of sustainability and fairness. His recommendations were equally compelling, and those for the future design of schemes fall into three broad categories, the first of which is safeguards to ensure that the long-term costs of pensions are sustainable. That is achieved through a link between the state pension age and normal pension ages in the majority of schemes, and a cost-cap mechanism to protect the taxpayer in the event of other unforeseen costs.

[Mr David Anderson (Blaydon) (Lab)]

rose—

[Mr Brian H. Donohoe (Central Ayrshire) (Lab)]

rose—

[John Healey (Wentworth and Dearne) (Lab)]

rose—

[Danny Alexander]

I give way to the former Secretary of State.

[John Healey]

The Chief Secretary lays great stress on the Hutton report, so why did not the Chancellor wait until Hutton reported before hitting public service workers with a 3% surcharge on their pension payments?

[Danny Alexander]

I did not mention Lord Hutton’s interim report, but I am happy to do so now for the benefit of the House. The right hon. Gentleman will know that Lord Hutton produced an interim report in October 2010 that said that there was a case for rebalancing member contributions. We followed that advice and came forward with our proposals as part of the general programme to repair the public finances and clear up the mess that the Labour party left.

[Mr Donohoe]

The Chief Secretary is a Scottish Member, so I presume that he is aware of negotiations north of the border. If the Scottish Executive make different decisions, how will they fund them? Will the Treasury fund them?

[Danny Alexander]

The hon. Gentleman makes a good point. I will deal with this subject in detail later in my speech, but I shall turn to it briefly. In respect of the pension schemes that are devolved to the Scottish Government, the Northern Ireland Government—their Finance Minister, the hon. Member for East Antrim (Sammy Wilson), is in the Chamber—and the Welsh Government, those Administrations are free to negotiate within the parameters in the Bill and the cost ceiling that has been set out. I understand that such negotiations are ongoing. Should Scottish, Welsh or Northern Irish Ministers wish to offer more financially generous terms, they are entirely within their rights to do so, but the additional costs will have to be met from their budgets. They have complete freedom to do that and I know that they will want to consider it.

[Mr Anderson]

The Chief Secretary said that there was a fairness imbalance between employers, employees and the taxpayer. What was fair about a public body such as Royal Mail taking a 13-year pension contribution holiday when the members of the scheme had to carry on paying?

[Danny Alexander]

The hon. Gentleman will know that Royal Mail is a public corporation, and therefore not within the scope—

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

rose—

[Danny Alexander]

Let me respond to one intervention before I take another. I know that the hon. Gentleman is keen for me to clarify one of my points—I am sure that I will be able to do so—but let me respond to the important matter raised by the hon. Member for Blaydon (Mr Anderson). As part of our measures to support Royal Mail, we recently took its pension scheme on to the Government’s balance sheet. Many schemes took holidays during the previous Government’s time in office—

[Mr Anderson]

And the one before them.

[Danny Alexander]

Indeed. Perhaps schemes took holidays even under the Government before that one. In many cases, members regretted such action in retrospect. The Bill is about public service pension schemes—by and large unfunded, with the exception of the local government scheme—that desperately need reform.

[Mr Russell Brown]

In response to my hon. Friend the Member for Central Ayrshire (Mr Donohoe), the Minister made it clear that the devolved Administrations would need to fund anything different that they wished to do. However, will he clarify the situation fully? We know that the devolved Administrations must fund those differences, but will there be an additional financial penalty through the block grant allocation?

[Danny Alexander]

No, there will not. Let me describe how this works. The negotiations that my ministerial colleagues and I conducted in UK Government Departments allow considerable flexibility within the parameters of the Bill—for example, the link between the state pension age and normal pension age, and the move away from final salary—and within the so-called cost envelope set up around the schemes. For example, the hon. Gentleman will note that the teachers pension scheme has agreed a different balance between accrual rates and revaluation factors for its new scheme from that for the health workers pension scheme. There is great flexibility in the provisions, provided things stay within the cost envelope. Under the Bill, the devolved Administrations are free to make more generous provision, as happened with the offer for prison officers. The Ministry of Justice agreed to fund an additional element of the proposed scheme to enable prison officers to have enhanced early retirement factors beyond those that were affordable within the cost envelope. The Ministry had offered to put additional resources on the table from its own departmental expenditure limits, and that was part of the offer that prison officers sadly rejected. Should the devolved Administrations wish to do something similar, they will be within their rights to do so, at their own expense.

[Sammy Wilson (East Antrim) (DUP)]

One of the options open to the devolved Administrations was for their pension schemes to be included in the Bill. In Northern Ireland, the Executive decided not to take that option, which could mean that, simply because of the timing of the legislation, the new scheme will be in place here, but not in Northern Ireland, even if Northern Ireland decides to follow suit. Will there be a penalty if there is a time gap between the implementation of the legislation in the rest of the United Kingdom and any delayed implementation in Northern Ireland?

[Danny Alexander]

I am not aware of any technical reason why a time gap should occur, but I know that officials in the Northern Ireland Department of Finance and Personnel discuss this regularly with my officials in the Treasury. If there is any evidence of such an occurrence, I will be happy to consider it in the normal way. There have been regular discussions on these matters, not least in our Finance Ministers quadrilateral. We will meet again in a couple of weeks in Edinburgh, when this subject will be on the agenda, so we can discuss it then.

[Katy Clark (North Ayrshire and Arran) (Lab)]

The Chief Secretary will be aware that several of the Bill’s provisions will affect Scottish pension schemes for the first time. There is a debate in Scotland about whether a legislative consent order is required, so will he address that point in detail in his speech?

[Danny Alexander]

I certainly will, when I come to it.

Lord Hutton’s first set of recommendations consisted of safeguards to ensure that the long-term cost of pensions was sustainable through a link between state pension age and normal pension age, and included a cost-cap mechanism to protect the taxpayer in the event that other unforeseen costs arose. He recommended that the new schemes should be fairer by smoothing the current disparities between high and low-income earners and ensuring that benefits are distributed more equally, which was why he recommended a move from final salary provision to career average revalued earnings—CARE—schemes. Finally, he recommended stronger governance provisions for the new schemes so that scheme members and the public could understand how the schemes were run and what they cost.

We accepted all 27 of Lord Hutton’s recommendations as the basis for discussion with trade unions and scheme member representatives across the public service, and designed our blueprint reference scheme in a way that reflected the recommendations of the Hutton report without any cherry-picking. Our aim was to strike a deal that would last, unchanged, for 25 years. Talks with the unions took place on all elements of that deal. I should stress that the Government did not do all the talking in those meetings—we listened carefully, too. Agreeing the design of these pensions has taken a considerable cross-Government effort over the past 18 months. The Minister for the Cabinet Office, the Home Secretary, the Lord Chancellor, the Education Secretary, the Defence Secretary, the Communities and Local Government Secretary and the former Health Secretary worked hard to understand the concerns of the trade unions and member representatives in their sectors.

[Richard Fuller (Bedford) (Con)]

The Chief Secretary talks about a deal on pensions that will last over the long term. Lord Hutton specifically ruled out moving from defined benefit to defined contribution schemes. We currently do not account for the cost of public sector pensions within our public debt numbers. Would it not have been wiser to have looked for a system that included the long-term costs for public sector pension schemes if the Government wanted to achieve such long-term sustainability?

[Danny Alexander]

The hon. Gentleman will know that Lord Hutton addressed that issue. The costs of such a transition would have been enormous and very disruptive, and I think that the recommendation on the career average revalued earnings scheme is preferable from that point of view. He will also know that the new whole of Government accounts presentation of the public finances takes detailed account of the unfunded liabilities in public service pension schemes. That means that the public and the House have precisely the information that he wants transparently available, so I hope that he regards that as progress.

[Andrew Selous (South West Bedfordshire) (Con)]

On the issue of fairness, does the Chief Secretary agree that private sector workers can only look at guaranteed retirement benefits with envy, especially because most of them would have to pay more than one third of their income to achieve equivalent benefits?

[Danny Alexander]

Yes, I agree. We need better pension provision across the work force. That is why I think the national employment savings trust scheme is an important step forward. That basic pension scheme, which is available to the 12 million or so members of the country’s work force who do not have any pension provision, was recently launched by the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), and had its origins under the previous Government. It is a good thing all round that we have agreed a reform to public service pensions that makes significant cost savings and ensures that public servants continue to have access to among the best pension schemes available.

We all wanted to find a solution that was sustainable, affordable and fair, as did the vast majority of trade unions and negotiators for the non-unionised work force. Thanks to both sides’ commitment to constructive talks, I am pleased to say that the final proposed designs have been issued for all major public service schemes. I thank Brendan Barber and his TUC negotiating team for the mature and constructive way in which they approached these talks. It has taken many hours of discussion to get where we are today, and I am grateful that the majority of trade unions brought sensible, workable solutions to the negotiating table, rather than grandstanding. The final scheme designs reflect that hard work.

The trade unions took those scheme designs to their memberships as the best that could be achieved through discussion, and the majority of the unions have accepted the proposed agreements. The turnout in the ballots held by the unions that rejected reform was low—less than 30% in most cases—which is hardly a compelling mandate for an ongoing dispute. The Public and Commercial Services Union decided to reject the offer before it was finalised, without first seeking the views of its membership, which was not a reasonable way to approach a set of reforms affecting more than six million public servants.

There is no point in further dispute or threats of strikes regarding public service pensions. We have set out a good and fair deal that protects those rights already earned and puts fairness at the heart of future pension provisions.

[Mr Jim Cunningham]

The comparison between private sector and public sector pension schemes is variable, as not all public sector schemes are good. However, what discussions has the right hon. Gentleman had about the various provisions in the Bill affecting employees? More importantly, if the Bill is passed, what method of consultation will he allow on changes to the various schemes?

[Danny Alexander]

We have taken great care to work with the TUC. We have taken it through the text of the Bill, listened to its concerns and made adjustments where necessary. This has not just been done through the scheme negotiations; we have also been open by sharing the Bill with trade union colleagues. Given the long-term nature of the reform and the fact that it affects so many people, it was important to engage properly. My departmental colleagues have engaged closely with representatives of the relevant work forces to ensure that that has happened.

The Bill sets out a framework for the schemes, with some restrictions, and in due course we will have to produce regulations to set out the design of each scheme. There are well-established processes within Departments for working with employers and employees on such details. My experience is that those processes work pretty well, and there is a pretty good co-operative spirit among the pensions experts around the table. I therefore do not foresee any problems but, of course, if the hon. Member for Coventry South (Mr Cunningham) does, I would be delighted for him to bring them to my attention so that I can try to resolve them.

[Katy Clark]

Will the right hon. Gentleman give way?

[Danny Alexander]

I will make some progress and give way to the hon. Lady later.

I return to Lord Hutton’s four key tests for the future design of public service pensions: affordability, fairness to public service workers, fairness to the taxpayer and transparency. Those objectives have prevailed throughout the process and remain the cornerstones of the Bill. First, on affordability, it is clear from Lord Hutton’s report that the new scheme should be affordable and sustainable. The Bill represents a significant proportion of the total of more than £430 billion of savings that our reforms of public service pensions are estimated to save over the next 50 years.

[James Duddridge (Rochford and Southend East) (Con)]

Those of us on the Government Benches are quite often accused of reminding those on the Opposition Benches that they left us with a massive deficit and unsustainable debt, but in fairness is it not true that these reforms would have had to happen even without the awful economic legacy we were left?

[Danny Alexander]

I agree with that, and I would add that, frankly, these reforms could have been made in the 1980s or 1990s, as well as the 2000s. In fact, we have to go back quite a few decades to find the root of the problems we are having to tackle in this Bill, which I think we are doing very effectively.

The remainder of the £430 billion of savings are generated by the Government’s decisions to change their policy on the indexation of pensions and payments from the retail prices index to the consumer prices index, and, as has been mentioned, to increase the contributions that public servants pay towards their pensions, rebalancing the costs more fairly between them and other taxpayers. The combined effect of those changes will help to restore the health of the British economy, reduce the size of our deficit and correct the unsustainable 40% increase in costs there has been over the last 50 years.

[Andrew Gwynne (Denton and Reddish) (Lab)]

I am grateful to the Chief Secretary for giving way. Does he recognise that the Government have to be careful and approach this issue in a much more balanced manner? There is a danger that if more people opt out of occupational pensions because they find them unaffordable, that could end up costing the Treasury more in the long run through means-tested benefits.

[Danny Alexander]

I would say that we have handled this process in a balanced and sensitive way throughout, in recognition of the fact that the changes affect millions of public service workers. In response to the hon. Gentleman’s concern, which was raised a number of times in the talks, I would say that none of us wants to see increased opt-outs from pensions, for the reasons that have been mentioned on both sides of the House. We have put in place a process for reviewing the next stage of the contribution increase in the light of opt-out data from the first year. I am sure he will be pleased to hear that there is no evidence of increased opting out in response to this year’s increase in contributions. However, we will review the matter again next year before proceeding with the third phase of the increases, so he makes a serious and important point.

The reforms treat not only the symptoms of delayed reform but the underlying problem. Therefore, they are forecast to reduce the cost of providing public service pensions by around 40% over the next 50 years, returning costs to their historic long-term average. Clause 9 deals with the principal risk that needs to be managed if pensions are to be affordable and sustainable: longevity. Longevity has improved significantly over recent decades, which is a very good thing. As a result, the state pension age has increased. The Government are therefore asking public service workers in due course also to retire later. In a society where we are all living longer and where fellow citizens in the private sector are expected to retire later, it is both fair and right that the public sector retirement age should rise with the state pension age. As Lord Hutton says, improvements have continuously been underestimated in the past, which has led to the cost of providing pensions rising significantly over recent decades. As such, clause 9 provides that in future the normal retirement age in the public schemes will be set at the state pension age. As Lord Hutton identified, this change will move the proportion of adult life in retirement for public service pension scheme members back to where it was in the 1980s. More important, by linking the scheme retirement age to the state retirement age, we will ensure that further improvements in longevity are tracked. That is the main way in which the Bill will ensure that the cost of public service pensions cannot again spiral out of control, but will remain affordable and sustainable long into the future.

[Mr Anderson]

The Chief Secretary talks about longevity, but what does he think the proposals will mean for the longevity of a mental health nurse who is 67 and a half years old, goes to work every day and ends up literally fighting with patients?

[Danny Alexander]

We will conduct a regular review, as Lord Hutton suggested, which will enable issues such as those the hon. Gentleman has raised to be taken into account. They were raised and discussed in the scheme talks. In the end, employee and employer representatives both agreed that the modelling we are using—which is similar to that used in the deal struck under his Government—is the right, fair and balanced way to take such matters forward across the whole work force.

[John Healey]

The Chief Secretary will be aware that there is a working longer review in the NHS that is looking into the question of working longer in particular disciplines in the health service. Will the provisions in the Bill allow flexibility in the link between the normal pension age and the state pension age, depending on the conclusions of that review?

[Danny Alexander]

If I may, I will come to that issue in a moment. The arrangements for the NHS pension scheme have been agreed, and the reforms have been taken forward on that basis. That includes the link between the normal pension age and the state pension age.

[Mark Durkan (Foyle) (SDLP)]

Will the Chief Secretary give way?

[Danny Alexander]

I will go on with my speech, if I may. I hope that I will be able to answer the hon. Gentleman’s question as I do so. I will not take interventions at the moment, as this is an important subject. I will perhaps take some at the end of this section.

We have all heard the cries “68 is too late”, along with similar slogans, but it is crucial that people understand the facts behind the proposals in the Bill. The pension age is a calculation point, not a fixed date up to which people must work in order to receive their pension. Public service workers will still be free to choose when to retire, either earlier or later than the state retirement age. When a person retires at a different age, their pension benefits will be adjusted, to take account fairly of the fact that they are taking them earlier or later than the date against which they have been costed. People will still have the freedom to choose when to retire, however. The Bill does not deprive public servants of that choice.

Lord Hutton said that the Government should ensure that the link between the public service schemes and the state pension age should be reviewed to ensure that it continued appropriately to track longevity. We will do that. The Bill does not provide for such a review, however, and nor should it. We have already committed to come forward with details of how the review of the state pension age will be conducted. We will review the normal pension age of the schemes, to consider whether the state pension age appropriately tracks longevity in the public service schemes. The process will be determined once the detail of the state pension age review system is settled. That is the right way to proceed, and it would be inappropriate for the Bill to attempt to second-guess that.

[Mark Durkan]

The Chief Secretary is emphasising the importance of clause 9 in facilitating future adjustments in relation to pension ages. Why, then, does he also seek to justify the Henry VIII provision in clause 3, which will allow the Government radically and retrospectively to alter pension terms at any time, or times, in the future?

[Danny Alexander]

The hon. Gentleman will know that the provisions in the clause to which he refers mirror directly those in the Superannuation Act 1972, which this Bill in many cases replaces. It was passed in the year I was born, and it has been used by a number of Governments to make adjustments to public service pensions. We have set out in the Bill certain elements of the scheme, particularly the pension age link, and the fact that the schemes need to be CARE schemes and certainly cannot be final salary schemes in future. The provisions to which the hon. Gentleman refers are in fact more limited than those in the 1972 Act. It is appropriate that we continue in broadly the same way, because that has stood the test of time. I hope that, by setting out the Government’s intentions here and in Committee and by undertaking detailed negotiations with work forces, we will have ensured that people know precisely how we intend to use these powers. I think it is clause 23—I might have got that number wrong—that refers directly to the 25-year guarantee that I mentioned earlier. I hope that that will give people some assurance that our scheme designs will stand the test of time.

[John Healey]

With respect, intentions are one thing but the terms of the legislation are another. Is my reading of it wrong? As I understand it, the provisions will not allow flexibility for some groups of NHS workers in the link between the normal pension age and the state pension age. Clause 9(3) states:

“The deferred pension age of a person under a scheme under section 1”—

including NHS workers—

“must be…the same as the person’s state pension age”.

That suggests that there will be no flexibility. Am I right or wrong?

[Danny Alexander]

The right hon. Gentleman is absolutely right to say that the link between the state pension age and the normal pension age is fixed in the legislation. That is a matter that was discussed in the negotiations, including the detailed negotiations with health service unions. The point I was seeking to make was that, as Lord Hutton recommended, we have agreed to review how that link operates at each stage at which the state pension age is increased, to enable those issues to be debated.

[Katy Clark]

rose—

[Danny Alexander]

I will give way one more time, then I must make some progress. There is a lot of detail to get through.

[Katy Clark]

Clause 9(2) means that firefighters would not be able to retire with a pension until they were 60. Many in the industry believe this is unworkable. What would the right hon. Gentleman suggest to firefighters who cannot work until they are 60?

[Danny Alexander]

In that case, we followed the recommendations of Lord Hutton—and, indeed, previous practice. The point I made just a moment ago—I am sure the hon. Lady was listening carefully—is that the provision does not stipulate the date to which people must work. Clearly, if people wish to retire earlier, they can do so and take an actuarially reduced pension or, indeed, retire later and take an actuarially enhanced pension.

[Mark Durkan]

rose—

[Danny Alexander]

I am going to make some progress, if I may.

The second and third tests of Lord Hutton were fairness to public servants and fairness to taxpayers. The Government have worked hard to ensure that the reformed pensions are fair and continue to provide a generous level of retirement income for public servants as a fair reward for a career spent serving the public. The Government made a commitment that these schemes would be at least as generous at retirement for those on low and middle-income earnings. We have delivered that commitment in a number of ways.

First, clause 16 allows transitional protection to be provided for those who have already had a long career in public service and are approaching retirement. I said in November last year that the offer provided that those within 10 years of their normal pension age on 1 April this year would not see any changes to their pension, nor the date at which they can draw it. The Bill ensures that the current final salary schemes will remain open to people who are covered by the transitional protection criteria in those schemes. Most of the proposed final scheme designs include the transitional offer as we set it out; however, the local government scheme in England and Wales has chosen alternative arrangements as sought by their trade unions and employers.

Secondly, we have honoured our commitment to retain the final salary link for people who have already built up some service in final salary schemes, as the provisions in schedule 7 make clear. Although these people will move on to CARE schemes by 6 April 2015 at the latest, their accrued years of final salary benefits will be calculated and paid at their final retirement salary—not their 2015 salary.

Most importantly for low and middle-income earners, we are putting the fairness back into public service pensions. Clause 7 provides that the new default for public schemes will be based on career average earnings, rather than on final salary. Final salary schemes are unfair to the majority of the work force as they disproportionately reward those who progress to senior roles compared with the majority of staff who have more consistent career paths. These outmoded schemes provide lower effective benefit rates to the people that carry out the core front-line work in our public services—the nurses, police officers and our armed forces whose work is so valuable to everyone here.

Career average schemes are fairer to the members and to taxpayers alike. Under final salary schemes, it is the taxpayer that picks up the cost of those high flyers who attain high salaries by the time they leave public service. Such members can receive twice as much in benefits per £1 of contributions that they have paid towards their pension. This is clearly unfair, which is why this Bill will not allow final salary schemes to continue after 2015. For members, pension benefits will be based on the amount that they earn over their career. That means their pension benefits will directly reflect the contributions that they and their employer make over their career.

The Bill ensures that these pensions remain among the very best available—and rightly so, if we are to continue to be able to recruit and retain the right people to undertake these crucially important roles. A key objective of the reforms is to ensure a fair balance of risks between scheme members and the taxpayer. To achieve this, Lord Hutton recommended that the Government establish a mechanism to control the future costs of pensions.

Clauses 10 and 11 establish an employer cost cap in the public service schemes. This will provide backstop protection to the taxpayer to ensure that any unexpected risks associated with pension provision are shared between employers and scheme members. With foreseeable longevity risk controlled through the pension age link, this really is a backstop, which under normal circumstances should not need to be used. Everyone in a public service pension scheme will see their pensions reformed along the same lines. I do not believe in special cases at a time when we are reforming the pension arrangements of those who provide essential services to the public.

[John Healey]

I promise not to intervene on the Chief Secretary again, but I want to ask about the employer cost cap in clause 11. On the front of the Bill, the Chancellor has signed a declaration that the provisions of the Bill

“are compatible with the Convention”.

It is clear from clause 11(7), however, that the Bill allows schemes to provide for reduction of accrued benefits as part of the employer cost cap. This would be a fundamental breach of scheme members’ rights under article 1 of protocol 1 of the convention, so how can the Chancellor’s statement on the front of the Bill be true?

[Danny Alexander]

I do not think that the right hon. Gentleman is right in this instance. In fact, had the “cap and share” arrangements introduced by the last Government been allowed to operate, they could have manifested themselves—[Interruption.] No, the right hon. Gentleman is wrong. They could have manifested themselves in both a reduction in benefits and an increase in costs to members. The right hon. Gentleman is free to explore the matter in Committee, and I am sure that he will.

I should add that I have some further information relating to the right hon. Gentleman’s earlier intervention. The working longer review is acknowledged in the proposed final agreement on the NHS pension scheme, which specifically states that early retirement factors allowing retirement before the state pension may be considered should the review suggest that that is necessary.

As we have established, public body pension schemes and public service schemes operated by the devolved Administrations are required to make equivalent changes to their schemes as swiftly as possible. In the case of public body schemes, it has not been possible in all cases to complete the reform process according to the same timetable. As I said in a written ministerial statement on 16 July, reform is definitely on the cards for these organisations, and the Government aim to complete the work by 2018.

Speaking of special cases, the House should note that the Bill will also close the generous and outdated “great offices of state” pension schemes. They have outlived their usefulness in the modern world. I am glad that the Bill will close them to new office holders and will ensure that people in such roles are given the same pensions as Ministers. As I am sure Members are aware, the Prime Minister waived his entitlement to such a pension when he took office. The current Lord Chancellor is making arrangements to do likewise, as did his predecessor. Mr Speaker announced on the day that we published this Bill that he would retain the pension, but would take it only when he reached the age of 65 rather than drawing it as soon as he left office.

Lord Hutton’s fourth key test related to governance and transparency. The reformed schemes should be widely understood, both by scheme members and by taxpayers. People understand what is in their pay packet each month, and it should be just as easy to understand how their pension works. Under the Bill, the schemes will have robust and transparent management arrangements.

Clause 5 provides for each scheme to have a pension board which will work to ensure that the scheme is administered effectively and efficiently. There will be local pension boards in the case of the locally administered police, fire and local authority schemes. The boards will consist of member representatives, employer representatives and officials. They will operate in a similar way to boards of trustees, holding scheme administrators to account and providing scheme members and the public with more information about the pensions. The board members will be identified publicly, and their duties will be made clear to scheme members. I welcome the greater transparency that the Bill will bring to this area of public pension administration.

Clause 15 and schedule 4 provide for an extension of the role of the pensions regulator, who will improve and police the management and administration of all the new schemes. The regulator is independent of Government, and will be able to utilise its full range of powers to ensure that the public schemes are managed properly and to consistently high standards. Clauses 12 and 13 will ensure that all schemes collate and publish information to improve transparency and enable comparisons to be made between them.

Since the Bill was published, I have received a number of questions about its design. It establishes a common framework of delegated powers which enable schemes to be made in respect of the public service work forces. The common framework constrains the use of those powers on core parts of pension scheme design, such as the link between state pension age and normal pension age, the career average pension structure, and the abolition of the final salary link. Those core elements are fixed in this legislation in order to create fairness and an even degree of cost control across the work forces.

At the same time, the Bill allows flexibility when that is appropriate, enabling the secondary detail of the pension schemes to be adjusted in recognition of the differences between different areas of public service work. Members will know that the final scheme designs agreed vary significantly from work force to work force, properly reflecting differing priorities and concerns within the cost ceilings that I established. The approach builds on that taken in the Superannuation Act 1972, which set out a framework of delegated powers some 40 years ago.

[Mark Durkan]

The Chief Secretary has just mentioned the Superannuation Act 1972 again. Does he accept that section 2(3) of that Act specifically prohibits retrospective effects, whereas clause 3 of the Bill specifically allows them?

[Danny Alexander]

There are some technical areas in which that may be necessary, but in practice the adjustments that we are making in the clause to which the hon. Gentleman has referred—and also in clause 11(7), which was mentioned earlier—allow the design of future benefits to change to ensure that costs are controlled, but do not allow changes to accrued benefits. The Bill, however, takes a more balanced approach than the Superannuation Act. The core elements for all public pensions are set out in the Bill. This serves as an important constraint on the delegated powers, to ensure our main objectives for reform are met.

I have also heard representations from Members of the devolved Administrations, but I think we have addressed that matter through earlier interventions. The Bill contains some minor areas that touch on devolved matters in Scotland and Wales, and I have written to all the devolved Finance Ministers to request that they seek legislative consent motions for the appropriate provisions. The Bill covers Northern Ireland, and the Minister of Finance and Personnel there—the hon. Member for East Antrim—has indicated that the Executive are considering a legislative consent motion to that effect. As to the progress of reform discussions in Scotland and Wales, the Government have made it clear that these Administrations have exactly the same flexibility in discussions with their trade unions as Whitehall Ministers have had, and within those parameters there is a great deal of flexibility.

Members who have followed this issue closely will know that the path to these reforms has been a long one, but it has also been a collaborative journey. The public debate on these pensions has been happening ever since this Government came to power more than two years ago. Some 18 months have passed since the Independent Public Service Pensions Commission published its final report, and discussions with trade unions and negotiators have taken place continuously since then. It is now time to take the final step by codifying the key elements of these reforms in legislation.

The framework set out in the Bill provides Parliament, public service employees and taxpayers with an assurance that the new schemes will be consistent, transparent and effectively managed. More than that, it requires new schemes to have common retirement ages, to provide benefits on a fairer basis and to include cost control mechanisms to protect members and other taxpayers from unforeseen changes in the cost of providing pensions.

The Government have set out a settlement that represents a good deal for public sector employees and a good deal for the taxpayer. It recognises the enormously valuable contribution that public sector workers make to our society and ensures a fair balance of contributions between public sector workers and other taxpayers. Taken together, these reforms will ensure that these pensions are sustainable for a generation. That is why the Bill proposes to create a high barrier for future changes to these elements of pension scheme designs. That means that any Government wishing to adjust them within the next 25 years would be required to jump a very high hurdle to do so.

In the UK’s long-term interests, we are facing up to tough decisions that Labour failed to address during its time in office, and we have done so while engaging with the unions every step of the way. We have made huge savings that were long overdue while protecting the entitlement of public service workers to a very good pension in retirement, giving public servants the confidence that future Governments will not need to make further reforms, and giving taxpayers confidence that never again will these costs be allowed to balloon out of control. These reforms therefore also help to repair the mess that Labour made of our public finances.

Fair, affordable, sustainable, good pensions that last: this is a new pension settlement for a generation, and I commend this Bill to the House.

17:53

[Rachel Reeves (Leeds West) (Lab)]

With advances in medical science meaning people are living longer and a pressing need to ensure that our public finances are on a sustainable path, it is right that we put in place the long-term reforms we need to manage the cost of public service pensions. That is why when in government we took important steps to ensure public service pensions were sustainable, and it is why we regret that this Government have behaved in a way that has made reform harder and that has undermined confidence in occupational pensions for teachers, nurses, police officers and others who work in the public sector.

We remain of the view that the Government’s imposition of steep contribution increases across the board and a permanent switch in the uprating of pensions to a lower measure of inflation were unfair and unnecessarily provocative. However, we support in principle the Bill’s main measures.

[David T. C. Davies (Monmouth) (Con)]

Do the hon. Lady’s comments mean that if she were the Minister, she would reverse that Government reform?

[Rachel Reeves]

We have said that we support the shift from the retail prices index to the consumer prices index for the period of this Parliament to reduce the deficit, but we do not support a permanent shift from RPI to CPI that will continue long after the deficit has been eliminated. I will discuss shortly some evidence from the Pensions Policy Institute and the Royal Statistical Society on the appropriate measure of inflation for uprating pensions.

[Andrew Gwynne]

My hon. Friend realises that the vast majority of public sector workers do not have massive gold-plated pensions. Instead they have very modest pensions, and they are concerned about their employment prospects as well as their contributions. Does my hon. Friend agree that those are the kinds of concerns that people out in the real world we speak to are talking about?

[Rachel Reeves]

My hon. Friend is entirely right. The average public sector pension in payment is under £6,000 a year, and it is considerably less for women who work in the public sector, so we are not talking about huge pensions in the vast majority of cases. Instead, we are talking about modest pensions to which people have contributed throughout their working lives.

We support in principle the main measures in the Bill, however, so we will not oppose it on Second Reading, but we will work in Committee to improve it, in order to ensure that it underpins, rather than undermines, the progress made in negotiations. We will seek to ensure it facilitates a smooth and stable transition to new scheme designs, entrenching good standards of governance, transparency, administration and consultation, thereby allowing those who give their working lives to serving the public to save for their retirement with confidence, while establishing a workable system for managing change and controlling costs to the taxpayer.

The Government and public service employees do need to find ways of adjusting to the welcome fact that people are living longer. In government, Labour had agreed and established a framework for negotiating reform and the “cap and share” mechanism to manage long-term costs, and it was always clear that this would mean increases in contributions and, as the population lives longer, a rise in retirement ages.

We have always said that the Hutton report provided a useful starting point for negotiations. Lord Hutton was right to suggest that career average schemes could be fairer than final salary schemes, and we think his proposal that public service pension ages should rise with the state pension age is right in principle. Lord Hutton also stressed the need to approach these issues in a careful and balanced way, however, with particular care for the affordability of any additional contributions for lower paid public service workers, and for avoiding fuelling a race to the bottom on pension provision. Reform needs to be fair to taxpayers and public service employees, as well as being genuinely sustainable for the long term, and that would be endangered by a search for quick cash savings or the playing of political games.

The vast majority of public service workers retire on very modest pensions. The average public service pension in payment is less than £6,000 a year, and even less for women. Tearing up decent public service pension schemes, or imposing punitive and unaffordable contribution increases, would be entirely counter-productive if that resulted in lower saving and inadequate retirement incomes.

[Margot James (Stourbridge) (Con)]

Does the hon. Lady not accept that the Government have made great strides in protecting low-paid public sector workers in response to Lord Hutton’s report, so that anyone earning £15,000 or less will not have to make any increased contribution at all, and for those earning less than £21,000 the increase will be capped at 1.5%? Surely that is the evidence she requires?

[Rachel Reeves]

That is simply not true. There are 800,000 part-time public service workers earning less than £15,000 a year, 90% of them women, and their pension contributions will rise by, in some cases, 50% or more because their full-time equivalent salary takes them above the minimum salary threshold.

Instead of building on our reforms, the Government have ripped them up. They have made it much harder to make progress by seeking to impose, prior to any negotiations, a steep 3% rise in contributions and a permanent switch in the indexation of future pension income from RPI to CPI. The “cap and share” arrangements agreed and established by the last Labour Government provided the mechanism for delivering the adjustments as needed, but the current Government chose to undermine that agreement and instead announced a 3% increase in contributions in the October spending review without any discussion or negotiation with employers or employees.

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

As the hon. Lady is discussing the previous Labour Government’s reforms, will she say whether she accepts any responsibility on behalf of the Labour party for the decimation of private sector defined-benefit pensions as a consequence of the disastrous decision in the 1997 Budget of the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) to end the repayment of dividend tax credits?

[Rachel Reeves]

If that was such a disastrous thing, why have this Government not reversed it or made any efforts to do something about it? They have no intention of doing so.

The contribution increases in this Bill were based on no assessment of the future funding needs of public sector pensions and were simply a tax on public service workers who were already facing a pay freeze and redundancy risks. The increases came long before Lord Hutton had published his final report. He warned that excessive increases could hit lower-paid workers hard and result in a counter-productive increase in opt-out rates. He has said that although it is for Ministers to decide by how much contributions should rise,

“there must also be a careful examination of the implications of any possible increase in opt out rates in these schemes as well.”

But the Government chose to plough on, not mindful of the increase in opt-out rates and with little regard for the consequences.

The Government promised that lower-paid workers would be protected from excessive and unaffordable increases, but the reality is that as many as 800,000 part- time workers earning less than £15,000 a year are already paying higher contributions. As I said, for many of them the contributions are 50% higher, because their full-time equivalent salary takes them over the minimum threshold. That approach had nothing to do with long-term reform and everything to do with a cash grab by the Treasury, which made it much harder to deliver progress on the real reform we needed, because the Government acted arbitrarily before Lord Hutton reported and lost the trust of public service workers.

In addition to imposing that hike in contributions, the Government used their June 2010 Budget unilaterally to change the indexation of pensions from RPI to CPI. On average and over time, public service workers will be 11% worse off in retirement as a result. According to analysis published last week by the Pensions Policy Institute, this is a bigger hit than the extra contributions, the raised retirement age and all the other changes to pensions put together. Independent experts, such as the Royal Statistical Society, have emphasised that CPI fails to reflect the spending patterns of pensioners and the rising costs they face. As pensioners worry about the hikes in energy bills this winter and expected steep increases in food prices, we should be particularly mindful of the challenges that retired people face in meeting ever-rising costs.

Again, those changes were imposed on public service workers without any negotiation or discussion. Lord Hutton stated:

“If these reforms have any chance of succeeding then people need to know that they are being treated fairly.  We have seen…the anger that has been triggered on the state pension when older women feel the finishing line is being put back at the last minute with very little time to adjust. So there should be full and proper consultation and discussion with the trades unions. That is how we do things in Britain—the public would take a very dim view of any government that fails to honour this basic requirement. We must try and avoid the confrontation and division that marked previous decades and must not turn the clock back.”

I regret to say that the Government did not follow that advice. Sometimes it seems that they are turning the clock back to the conflicts and divisions of the 1980s, and perhaps that was exactly their objective. Their aggressive and provocative approach to these serious and sensitive issues resulted in months of stalemated negotiations and several days of strike action, which resulted in closed schools, cancelled operations, and disrupted lives for families and businesses across the country.

[Richard Fuller]

There are times when the hon. Lady seems to be making a coherent argument and then she goes back to using rhetoric. She said that the change from RPI to CPI is the most significant one. If she seeks to make amendments on that issue and she does not want to make savings on the basis of a change from RPI to CPI, will she set out where she would make the savings in order to make the overall numbers add up as they are at the moment?

[Rachel Reeves]

I am sure that the hon. Gentleman has read the Bill. The RPI to CPI change was imposed before it, so it is not contained in the Bill and we will not be able to make any amendments in terms of RPI and CPI when discussing it. The point is that the Government acted arbitrarily before Lord Hutton reported, thus making it harder to deliver the long-term reform to public service pensions that we need.

Labour Members think that those strikes could and should have been avoided last year, and that it is a matter of deep regret that this Government have lost the trust and damaged the morale of millions of public service workers, whose engagement and commitment is vital at a time when they are being asked to accept prolonged pay restraint while delivering continued improvement in the quality and efficiency of public services with fewer resources.



Let me turn from the Government’s mishandling of the issue to the specific provisions in this Bill. The Bill is designed to put the new schemes on a clear and consistent legal footing, with clear lines of accountability to scheme members, public service employers and taxpayers. That, in itself, is a worthwhile objective. I have already emphasised that our big disagreements with the Government’s approach to public service pensions lie elsewhere, so we will not oppose the Bill on Second Reading.

However, we have a number of concerns about the Bill that we hope to address in Committee. It is an ill-prepared and poorly drafted Bill containing a number of mistakes, including giving the wrong dates for the transitions to new schemes. The Bill fails to deliver on the commitments and assurances given by this Government to underpin the provision of decent pension schemes that allow public service workers to save for their retirement with confidence. In short, as we have come to expect from this Government, it is a shambles of a Bill that has not been properly thought through, risks creating more problems than it solves and fails to deliver on the promises that Ministers have made.

First, we think it is right that pension ages rise in line with longevity, but it is essential that that is done carefully and fairly, with due notice given to people whose retirement plans may need to change and due consideration given to the impact of working longer on people in front-line or particularly strenuous occupations.

[Derek Twigg (Halton) (Lab)]

My hon. Friend makes an important point. Many of my constituents contact me about the impact on pensioners of the wholesale changes that the Government are proposing and have made in respect of this notice period and the fact that people are having to change their plans. That has caused great distress and worry to many of my constituents. I am pleased that she is addressing the point, because the Government seem to be ignoring it.

[Rachel Reeves]

I thank my hon. Friend for his intervention. We argued exactly the same point when the Government arbitrarily increased the state pension age for women in their late 50s with just six years’ notice given. When Lord Turner carried out the review of state pensions for the previous Government, he recommended a 15-year notice period be given, and the Pensions Policy Institute recommends a 10-year notice period. Such notice needs to be given and it is not enshrined in this Bill.

[Andrew Gwynne]

Does my hon. Friend recognise that one of the reasons why that notice period is required is that as the retirement age rises careers may also have to change to ensure that employees are not forced into ill health and are not forced to do work that is unsuitable for their age?

[Rachel Reeves]

I thank my hon. Friend for that intervention. We also believe that this Bill should not pre-empt or cut across ongoing discussions—this builds on the point that he raised, as did my right hon. Friend the Member for Rother Valley (Mr Barron)—between the Department of Health, NHS employers and NHS workers about the implications of working longer for some staff groups, especially those, such as paramedics, in physically demanding roles.

We think that the Bill should reflect Lord Hutton’s recommendations that the link between public service pension ages and the state pension age should be kept under review and that this should be conducted by a properly independent body, with public service employees and employers represented and consulted. The Chief Secretary to the Treasury said in his speech that that will happen, but it is not guaranteed in the Bill—indeed, it is unclear whether it is even compatible with the Bill. These are all issues that we will be raising in Committee to get the commitments that public service workers deserve and thought they had been given during the negotiations behind the Bill. These are also issues that we will have in mind as we look to any future increases in the state pension age itself.

For our finances to be sustainable, and for decent pensions to be affordable, it is right that retirement ages rise with longevity. However, as Malcolm Wicks, the late Member for Croydon North reminded us in some of his most recent work, many people doing manual jobs started work at 16 or 18, with some doing so even earlier, and find it harder to continue work into their late 60s. We should be mindful of people’s capacity to work later and later, especially if support is not in place for them in the workplace.

Secondly, there are real worries that the Bill fails to take due account of the special characteristics of the local government pension scheme. Members will know that it is a fully funded scheme administered by local authorities and we should welcome the hard work of local councils and trade unions, who have made very valuable progress in negotiations on a mutually agreeable agenda for reform. The Bill threatens to unravel the agreements that have been reached and destabilise financially the local government pension funds by forcing a disruptive and potentially disastrous closure of existing schemes instead of facilitating a smooth transition to the new scheme design. That extension of Treasury interference into aspects of scheme valuation and design could prevent local authorities from delivering on the deal they have agreed with their work force. Indeed, the view of the pensions manager at the Chartered Institute of Public Finance and Accountancy is that the relevant provisions in the Bill represent

“a major shift in the governance of local authority pensions and”

raise

“questions about future local democratic accountability for those pension funds.”

Again, we expect those concerns to be addressed in Committee.

Thirdly, on the question of good governance, the Bill must underpin and not undermine high standards of scheme governance. As Lord Hutton stated in his final report,

“there is a powerful case for…much stronger governance of all the public service pension schemes. This should keep government, taxpayers and scheme members better informed about the financial health of these schemes. There should be minimum standards set for scheme administration. There is also a proper and legitimate role for representatives of the workforce to be formally involved in these new governance arrangements.”

The Bill fails to include key recommendations from Lord Hutton’s report, such as the inclusion of member-nominated and independent members on pension boards; the establishment of pension policy groups to consider major changes to scheme rules; the need to ensure that pension boards are responsible for the oversight of financial management and, in the case of funded schemes such as the local government pension scheme, for investment management; and the commissioning of a review into how standards of administration in public service pension schemes can be improved. Those measures would improve the efficiency and cost-effectiveness of scheme administration and would ensure that public service pension schemes matched best practice in the private sector.

Finally, we must ensure that the Bill adequately reflects and reinforces the progress made in negotiations. We should give public service workers a system they can trust and pensions that they can save towards with confidence, ensuring protection against retrospective or arbitrary detrimental changes. We also have concerns in this regard, which some hon. Members have already mentioned, and we will seek to address them in Committee. For one thing, the Bill subjects many aspects of public service pension provision to unilateral Treasury control. Although it is right that mechanisms should be in place to ensure that costs to taxpayers are contained, public service employees also have a right to know that critical changes will be consulted on and that their pension savings will not be vulnerable to arbitrary interference and opportunistic cash raids.

Furthermore, Lord Hutton has stated that

“there must…be full protection of accrued rights”,

but the Bill does not rule out retrospective changes that reduce benefits already accrued, going against the fundamental principle that pension benefits accrued are pay deferred and must therefore be honoured. The Government have reiterated their commitment to maintaining defined benefits in the public sector, and the Chief Secretary reaffirmed that to the House last year. He said, as he has on a number of other occasions, that his commitment was that

“public sector schemes will remain as defined benefit schemes, with a guaranteed amount provided in retirement”.—[Official Report, 2 November 2011; Vol. 534, c. 927.]

Clause 7, however, provides for the creation of new schemes that are

“defined benefits…defined contributions…or…a scheme of any other description.”

That should not be a means to drive a coach and horses through the commitments the Government have given and allow another round in the race to the bottom on pension provision.

In addition, the Government have made much of their promise of

“no more reform for 25 years”.

In his foreword to the Treasury’s document on new scheme designs, published last December, the Chief Secretary wrote that

“we need a long term solution that will last a generation”.

Clause 20 specifies “protected elements” of scheme design that cannot be altered for the next 25 years without clearing a “high hurdle” of comprehensive consultation and a report to parliament.

We think it is right that public service workers should be given an assurance that their pension savings will not be vulnerable to further arbitrary and unfair changes without adequate scrutiny and debate, but the Bill seems to be riddled with loopholes, excluding a number of important scheme features from the list of “protected elements” and stating that the “high hurdle” can be bypassed in order to meet a cost cap that is in turn set by the Treasury with no such requirement for consultation and report. Furthermore, it was a critical part of the agreements reached with employee representatives that protection should be provided to staff transferred to alternative providers as a result of public service outsourcing —the so-called fair deal policy. The Chief Secretary told the House last year that

“we have agreed to retain the fair deal provision and extend access for transferring staff. The new pensions will be substantially more affordable to alternative providers, and it is right that we offer workers continued access to them.”—[Official Report, 20 December 2011; Vol. 537, c. 1203.]

Yet there is no guarantee in the Bill that public service workers transferred to new employers will be able to keep their public service pensions. We will seek to address all those issues in Committee to improve the Bill and the protections granted to public service workers.

In conclusion, we think public service workers with understandable fears for their financial futures deserve better than being treated as pawns in this Government’s political games, with the consequence that it has been harder to reach agreement on reasonable reforms that control costs to the taxpayer. Indeed, perhaps the best case for the Bill is that it should ensure that never again can an opportunistic Government create unnecessary conflict and disruption by imposing unfair and arbitrary changes without adequate consultation, scrutiny and accountability. Let us ensure that it fulfils that objective.

Finally, let us remember that the real pensions crisis is not in the public sector but in the private sector. It is right that we should ensure public service pensions are sustainable and affordable for the taxpayer, but we should not allow that to distract us from the unacceptable inadequacy of pension provision in the private sector. Too often, it has sounded as though the Government’s answer to disparities in pension provision across the public and private sectors is to level down, not level up. Indeed, we have seen more than a million lower paid workers excluded from automatic enrolment when we should be ensuring that the National Employment Savings Trust can deliver low-cost, high-quality pensions to all who could benefit.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does the hon. Lady accept that in the 10 years since the previous Prime Minister decided to get rid of advance corporation tax relief on pensions, that decision has destroyed £100 billion of private sector pension savings? Does she accept that that was the fault of her Government?

[Rachel Reeves]

I look forward to the hon. Lady’s private Member’s Bill to restore that relief. The real crisis is that some people are not saving at all for their retirement and are not in any type of occupational scheme.

[Andrea Leadsom]

rose—

[Rachel Reeves]

I shall take another intervention so that we can hear about the hon. Lady’s private Member’s Bill.

[Andrea Leadsom]

How on earth does the hon. Lady think that anyone can put right £100 billion wiped off the value of private sector pensions? How does she expect anybody to right that wrong today? It has been done; it is too late.

[Rachel Reeves]

It could be reversed so that dividends were not treated in such a way in the future, but the Government have no intention of doing that. I do not think the hon. Lady understands the real crisis: some people are not saving at all for their pensions and have no occupational pension to save into, and the 20% of people who earn less than a living wage do not feel that they can put money aside every month. That is the real crisis we face and the Government excluded 1 million people from automatic enrolment and have done nothing to tackle the excessive fees and charges automatic enrolment schemes can charge. The Government should be focusing on that challenge to bring up the quality of pension provision for everybody so that nobody risks retiring into poverty and having to rely on means-tested benefits.

Improving governance and reducing costs across private pension schemes while cracking down on the excessive fees and charges that erode pension income should be the Government’s priority, but it is not. Instead, to address disparities they want to level down the pensions enjoyed by those who work in the public sector.

[Kelvin Hopkins (Luton North) (Lab)]

My hon. Friend is right to draw attention to the pathetic performance of private sector schemes. Is not the answer a compulsory state earnings-related pension scheme for everyone in the private sector?

[Rachel Reeves]

Automatic enrolment could bring into saving for retirement 10 million people who are currently not saving. They would not just be contributing their own money, but getting a contribution from their employer that they have never had before. That scheme started in October this year and by October 2017 it will be fully rolled out.

The pensions Minister is now in his place. It is disappointing that people on low pay and in part-time work are excluded from that scheme, and that the waiting period was increased to three months, which means that some people who could have benefited from it, particularly those who change jobs regularly, will be excluded. The Government need to do more to bring people into saving for occupational pension schemes through automatic enrolment, and they need to ensure that excessive fees and charges do not erode that pension income. We urged the Government to amend the Pensions Act 2011 to cap those fees and charges, but the Minister did not take those proposals on board.

Lord Hutton argued that public service pensions should remain a gold standard, so let us make sure that the Bill delivers on that objective and then seek to spread that standard across the wider economy so that everyone can benefit from good quality pension schemes. Instead of this Government’s divisive political games, pitting public sector against private sector, union member against taxpayer, we need to work together—Government, businesses, employees and civil society—reforming our economic institutions to give everyone a stake and a fair share in prosperity, building the one-nation economy that our nation needs to succeed.

18:21

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

I am pleased to follow the hon. Member for Leeds West (Rachel Reeves). She would have been better to avoid the issue of private sector pension schemes because of the enormous damage that was done by the Labour Government in those early years, in the July 1997 Budget. As my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) said, they took £100 billion out of private sector pension funds, which at that time had an asset value of £650 billion. It was the envy of the world, and £100 billion was a very large proportion of that sum.

I welcome the hon. Lady’s acceptance of this very important Bill and the fact that the Labour Opposition will support it in the Lobby. Despite her assertion, my view is that the negotiations were handled extremely well by the Treasury, the Cabinet Office and the individual Departments involved. There was engagement and a willingness to compromise, but there was also a firm approach to ensure fairness between the taxpayer and the public sector employee.

I support the Bill not just because of its importance in tackling this country’s historically high budget deficit, but because of its vital importance to ensuring that we have high-quality, well-rewarded public sector employees, in the teaching profession in particular. We need a well-rewarded profession that continues to enjoy a defined benefit pension scheme on a sustainable basis when such schemes are increasingly rare in other sectors of the economy. As my hon. Friend the Member for Rochford and Southend East (James Duddridge) said, even without the budget deficit, these reforms are necessary to tackle increased costs and life expectancy.

The Government’s education reforms are built on trusting the teaching profession, ensuring that we have the best people coming into teaching, and raising the status of the profession. Indeed, the schools White Paper was called “The Importance of Teaching”. In the opening chapters it made the point:

“The evidence from around the world shows us that the most important factor in determining the effectiveness of a school system is the quality of its teachers. The best education systems draw their teachers from the most academically able”.

Countries around the world that have the best education systems, such as Singapore and Finland, recruit their teachers from the top third of their graduates, and South Korea recruits from the top 5%, but Singapore and South Korea pay their teachers more than any other country in the world relative to average earnings in their own country. Finland pays its teachers at about the OECD average.

In its 2007 report, “How the world’s best-performing school systems come out on top”, McKinsey made the important point that the quality of an education system cannot exceed the quality of its teachers. Its 2010 report, “Closing the talent gap: attracting and retaining top third graduates to a career in teaching”, looked at precisely how Singapore, Finland and South Korea manage to recruit graduates from the top third. It concluded that the key to recruiting the best graduates is attractive starting salaries and attractive top salaries.

A report that examined the US education system concluded that a starting salary of $65,000 and a top salary of $150,000 were needed. In this country starting salaries outside London are about £21,600 and £27,000 in London. Top salaries for teachers are about £105,000 outside London and £112,000 in London. Although the McKinsey report was about the United States and looked at the US employment market, it is nevertheless fair to draw the conclusion that compensation packages are an important element in determining the calibre of graduates recruited into teaching, and pensions are an important part of that remuneration package. Defined benefit schemes are particularly attractive, and in my view they are an important part of that package, which is why the Bill is so important.

In his final report Lord Hutton stated:

“Given the current design of public service pension schemes, the general public cannot be sure that schemes will remain sustainable in the future.”

The issue of sustainability is therefore critical. Is a scheme sustainable in terms of its costs, given increased life expectancy? As Lord Hutton pointed out,

“In 1841, someone who reached the age of 60 might expect to live a further 14 years on average, but most people did not live to this age. By the early 1970s…the life expectancy of a 60 year old had increased to about 18 years and this has now risen to around 28 years. In addition, many more people can now expect to reach 60.”

Public service pension costs have been rising significantly over recent years—by a third in the past decade to £32 billion. Expenditure on teachers’ pensions is projected to double from £5 billion in 2005-06 to almost £10 billion in 2015-16. As Hutton pointed out,

“between 1999-2000 and 2009-10 the amount of benefits paid from the five largest public service pension schemes increased by 32 per cent. This increase in costs was mainly driven by an increase in the number of pensioners, a result of the expansion of the public service workforce over the last four decades, longer life expectancy and the extension of pension rights for early leavers and women.”

Hutton also said that it was important to look at the pension position as a whole, comparing the situation in the public and private sectors. One of the over-arching principles was to achieve fairness between taxpayers and public sector employees. The divergence, he said, between the public and private sectors is of concern. That does not mean, as the hon. Member for Leeds West asserted, that public service pensions should follow the trend in the private sector. Hutton said:

“This downward drift in pension provision in the private sector does not however provide sufficient support or justification in my view for the argument that pensions in the public sector must therefore automatically follow the same course. I regard this as a counsel of despair. In making clear I believe there is a case for further reform I have therefore rejected a race to the bottom as the only answer, and hope that reformed public service pensions can be seen as once again providing a benchmark for the private sector to aim towards.”

It is worth pausing a moment to look at how extensive this downward drift in private sector pension provision was, and its causes. According to the 2010 occupational pension scheme survey by the Office for National Statistics, the peak provision of occupational pensions was in the mid-1960s, when there more than 12 million active members, of whom 8 million were in the private sector and 4 million were in the state sector. By the mid-1990s active membership had fallen to about 11 million, but 90% of that 11 million continued to have defined benefit schemes. This means that more than 5.5 million private sector employees of that time were in some form of final salary or defined benefit scheme. By 2010 membership had fallen to 2.1 million and, as Hutton points out, only about 1 million of those members were in schemes that were still open to new members and an increasing number of schemes were closing to new accruals for existing members.

The fall in membership was due in part to the private sector making a realistic assessment of the costs of increased life expectancy. There had been a modest trend away from defined benefit schemes and towards defined contribution schemes in recent years, but that accelerated after 1997, in my view because of the decision taken by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) in his first Budget to end the repayment of dividend tax credits to pension funds and other tax-free funds, which took about £3.5 billion a year from pension funds. At the time, Britain’s private sector pensions were the envy of the world, with assets of more than £650 billion.

Many people, including in the pensions industry, said that that policy would have a very damaging effect on pension provision. Treasury civil servants shared those misgivings. In 2007 the Treasury was forced to release a number of internal papers from 1997 assessing the likely impact of the policy to end the repayment of dividend tax credits. A Treasury paper, dated 15 May 1997 and headed “Paper Four: Pension Schemes and Insurers”, pointed out that 90% of employees in occupational pension schemes had defined benefits but warned:

“In recent years we have seen a small but steady shift towards defined contribution schemes.”

The Treasury paper alerted Ministers to the risks arising from ending the repayment of dividend tax credits, stating:

“The present shift towards defined contribution schemes might accelerate…One of the claimed merits of defined contributions schemes is that they give employers more control over costs since the investment risk is transferred away from employers and onto employees. This factor would become ever more relevant with the proposed tax credit change.”

Despite that clear warning, the right hon. Gentleman pressed ahead with the policy, and the predictions made by his civil servants have come to fruition. That is why we have the problems we face today and why we are debating the Bill.

[Mr Iain Wright]

The hon. Gentleman mentioned the 1997 Budget. First, what does he think was the impact of the then Chancellor’s decision to cut corporation tax by 2p in the pound with the aim of encouraging more long-term investment in pension funds? Secondly, what impact does he think the long payment holidays for employers have had on defined contribution and defined benefit schemes?

[Mr Gibb]

The whole basis of the decision was the argument that the stock market was rising and so the tax cut would lead to more profits, more dividends and further rises in the stock market. Unfortunately, after 2000 the stock market started to fall and the whole basis of the argument fell apart, and therein lies the problem. Those pension holidays were temporary because of the over-exuberant stock market. Indeed, the Treasury papers from 1997, released under duress in 2007, made the point to Ministers that there was a danger that the stock market was overvalued.

As a consequence, the public sector faced a situation in which the private sector was moving away wholesale from final salary and defined benefit schemes while it was increasingly becoming the exclusive preserve of such schemes. The issue of fairness thus became paramount, particularly as the cost of those schemes was rising so quickly. Although Hutton rejected the notion that public sector pensions were gold-plated, he did conclude that longer-term structural reform was needed because

“current schemes had proved unable to respond flexibly to changes in working lives and longevity.”

Therefore, the only way to ensure that teachers and other public sector employees continued to enjoy high-quality defined benefit pensions was to engage in structural reform.

The final arrangements represent a very good deal. They now link the normal pension age to the state pension age in order to deal with longevity issues. No one within 10 years of retirement age will be affected by the changes and there is a tapering arrangement for those within 13 years of retirement. Although final salary schemes will be replaced by career average schemes from April 2015, all the accrued rights to that date will be maintained and the final salary will be the final salary on retirement, not the final salary in April 2015, as my right hon. Friend the Chief Secretary confirmed again today. Career average is still a defined benefit scheme, and it is fairer. Its generosity, of course, depends on the actual accrual rate. Currently the teachers’ pension final salary accrual rate is one 60th, and that will become more generous under the new scheme, with an accrual rate of one 57th. The salary that determines the career average will be indexed by CPI plus 1.6%, as far as teachers are concerned, although that varies in the different schemes.

These arrangements have been accepted by the Association of School and College Leaders, the Association of Teachers and Lecturers union and the National Association of Head Teachers, which have said that they are planning no further action over pension reform. These arrangements, and the Bill that will implement them, will ensure that public sector employees, including teachers, can continue to benefit from a defined benefit pension scheme that is sustainable in the long term and that will be supported by the public. That, along with other education reforms, will help to ensure the teachers are well rewarded and that we will have a teaching profession that continues to see its status rise and, with it, standards in our state schools. I fully support the Bill and, if there is a Division tonight, look forward to voting for its Second Reading.

18:36

[Katy Clark (North Ayrshire and Arran) (Lab)]

The Bill and, perhaps more significantly, the delegated legislation that will follow it, will undoubtedly have far-reaching consequences for all those who receive public sector pensions in this country, as the debate has clearly highlighted. Analysis from the Pensions Policy Institute suggests that the proposed changes to the NHS, local government, teachers and civil service pension schemes will reduce the average value of the benefit offered across all schemes by more than a third compared with the value of the schemes in place before the coalition Government came forward with these proposals and the other steps they have taken since coming to power. The Minister has already spoken about a 40% cut in costs over time, so I assume that he will accept that figure.

We find it shocking that while there have been pay cuts of 40% in Greece as its austerity programme has been implemented, pensions in the UK are facing equivalent cuts yet most people are unaware that that is happening, perhaps in part because many people find pensions complex and difficult to understand. Of course, pensions are as much a part of our employment package as other benefits, such as pay. Indeed, many argue that pensions are in fact deferred pay, so in effect we are discussing significant cuts in the terms and conditions of all public sector workers in this country, which will, of course, have all sorts of ramifications for the private sector.

According to the Pensions Policy Institute’s analysis, following the coalition’s proposed changes, the scheme value across the four largest public sector pension schemes will reduce on average from 23% of a scheme member’s salary to 15% of their salary, with the net effect that the pension will form a much smaller part of an employment package. I argue that we should not support that. I have listened with interest to the debate on private sector pensions—I hope that we have can have a much fuller debate about it on another occasion—but I think that the message that should be coming from the House is that we want the pension to form a much bigger part of a person’s employment package. We should put in place a framework whereby the individual is required to save, as is the employer, and the Government have a role to play by ensuring that the policy framework is in place to enable that to happen.

My hon. Friend the shadow Minister said that the change in the indexation for public sector pensions from RPI to CPI is wiping 11% off the value of pensions in the public sector. In effect, that means that the pension of each public sector worker will be 11% lower in each year of their retirement. We have already heard about the implications of people opting out if these proposals are implemented, but we must also consider the implications for the public purse if people have lower incomes in retirement and therefore need to look to the state for support through welfare benefits. Half of all women workers who have a pension of less than £4,000 will be worse off, and the TUC estimates that 60% of all public sector part-time workers earning less than £15,000 a year will have to pay higher contributions. We need to look at the wider implications of the proposal.

In previous debates in the Chamber on public sector pensions, many figures have been cited to show the low salaries that most people who receive such pensions receive. As we know, public sector pensions are far from gold-plated. The Hutton report said that the average pension paid to scheme members was about £7,800 per year, with the median payment being £5,600 per year, while half of all women public sector pensioners get less than £4,000 per year. In reality, however, many people in receipt of public sector pensions receive smaller sums. The proposals suggest that those people should be required to pay greater pension contributions, to work longer, and to receive a worse pension at the end of the process.

Tribute has already been paid in this debate to the former right hon. Member for Croydon North, Malcolm Wicks. It is incredibly sad that he is not here to explain, in his most articulate way, why it is not the case that everyone should be expected to work longer, especially those who have worked in heavy manual jobs from an early age. Perhaps such people should have a lower retirement age, with the retirement system and their pension schemes taking that into account. I remember chairing a sitting of the Committee that considered the Bill that became the Pensions Act 2011 during which Malcolm Wicks entertainingly and powerfully highlighted his passion for this issue as he strongly led a rebel Labour effort to make the case that we need to look seriously at how we deal with those who carry out manual tasks.

[Richard Fuller]

Does the hon. Lady share my particular concern about firefighters whose retirement age will be extended? It is argued that fire prevention roles requiring less manual work will be made available to them, but does she agree that that will probably not prove to be the case for the vast majority of firefighters as they reach their later retirement age?

[Katy Clark]

I am grateful to the hon. Gentleman for that intervention. I referred earlier to clause 9(2), which clearly states that firefighters will be required to work until the age of 60 before receiving their pension, whereas at the moment they have to work only until they are 55. My understanding of the fire service is that jobs requiring lesser physical skills would not be available, so I asked the Minister what he expected people to do. Labour Members fear that they would retire early, but would then have to get other employment, such as a part-time job in Tesco, or to sign on. That is not an adequate way to deal with people who do such jobs over a lengthy period.

Of course, it is not only firefighters who will be affected. Many people in the public sector work in very physical jobs, whether they are the paramedics in our ambulances or nurses—particularly grade A nurses. Those who carry out manually demanding tasks would not be able to work until they were 68, but other jobs might not be available to them. We need to think this through very carefully. Having listened to the Minister, I am worried that the Bill has very little flexibility. We need to be able to think far more flexibly about working ages. We must recognise that while it may be appropriate for some people to work for longer—indeed, many people might want to work until they are much older than has traditionally been the case—for others that is simply not appropriate.

The Bill will have significant implications for the various public sector schemes in Scotland, where there has been considerable debate about its impact. Of course, the civil service schemes are a matter for this Parliament, but the local government, national health service and police pension schemes, as well as those of teachers and firefighters, are devolved. When Westminster legislates on matters that are devolved to Scotland, it usually needs to obtain a legislative consent motion from the Scottish Parliament. I appreciate that the Scottish National party spokesperson, the hon. Member for Banff and Buchan (Dr Whiteford), is in the Chamber, so she might address this later, but I am told that Scottish officials have advised Ministers in the Scottish Government that such a motion is not required, although the view of the trade unions in Scotland, on the basis of legal advice that they have obtained, is that a motion would be necessary. I was interested to hear what the Minister said about that, because there are very significant implications for Scotland. The negotiations that have taken place there are not identical to those that have been held with Ministers down here. I hope that the Scottish Government will wish to ensure that they are able to enact measures on the basis of whatever agreements are made with the unions in Scotland.

I believe that this is a devastating Bill, not only for pensioners in the public sector, but for those in the private sector. It sends all the wrong messages about what we should be seeking for pensions. We need to put in place frameworks through which we collectively save far more than we have in the past to ensure that we have provision in retirement. That does mean that individuals who can afford to should be paying more into their pension schemes, but it also means that the employer should be paying more and that the state should be playing a greater role in ensuring that that happens. In 2007 and 2008, the then Labour Government implemented reforms to the four largest public sector schemes that took account of the changing demographics that we faced. My view, which is shared by most people who have looked seriously at this, is that those schemes are viable and that sufficient funds are available to ensure that pensions are paid out.

[Mike Freer (Finchley and Golders Green) (Con)]

Will the hon. Lady give way?

[Katy Clark]

I was about to conclude, but I am happy to take an intervention.

[Mike Freer]

In actual fact, the Audit Commission report on the local government pension scheme, which is by far the largest scheme, says that it can meet only 75% of its future liabilities. Far from being sustainable, it has a shortfall.

[Katy Clark]

My understanding is that there will be a review of the scheme. Having spoken to some of those who are directly involved in the negotiations on the scheme, I am firmly of the view that we need to look carefully at those figures. On the basis of the financial information that we have, which is, of course, dated, because there has not been an up-to-date review, the reality is that the scheme is viable and there is no reason to believe that that will change.

[Andrew Gwynne]

May I advise my hon. Friend of a successful local government pension scheme, namely the Greater Manchester pension scheme, which is administered by my own local authority—Tameside metropolitan borough council—and is fully funded? Is it not the case that best practice therefore exists, and should not other local government pension schemes utilise it?

[Katy Clark]

I am interested in the scheme to which my hon. Friend refers, and I might get more information about it from him later.

[John McDonnell (Hayes and Harlington) (Lab)]

It is worth putting on record that under the deal negotiated by the Labour Government, if there were increased costs with regards to longevity, there would be a cap on the employer’s contribution and the additional cost would be borne by the contributors—the scheme’s participants. The issue of longevity was therefore dealt with by agreement with the unions.

[Katy Clark]

I listened carefully to the hon. Member for Finchley and Golders Green (Mike Freer) and I can say to him that while there needs to be a review of the local government scheme, I understand that the current position is that it is perfectly viable. This proposal has been made because Government Members take the view that public sector schemes are too generous and form too large a part of the employment package in the public sector. We actually need to use the public sector schemes as a model to ensure that pensions are a much greater part of everybody’s employment package. If we do not do so, we will simply end up paying in other ways, whether that is because people opt out, or because people will rely on the state as they are living in such poor circumstances. We should have a debate about how we can move towards a situation whereby, collectively, we save more for retirement, so that people have decent pensions that they can afford to live on and do not need to rely on the state in other ways.

18:49

[Robert Neill (Bromley and Chislehurst) (Con)]

I do not agree with the conclusions of the hon. Member for North Ayrshire and Arran (Katy Clark) about the Bill, or with some of the details of her speech, but I am sure that every Member of the House will agree with her warm remarks about the late right hon. Member for Croydon North, Malcolm Wicks. I knew Malcolm as a fellow London politician for many years. Indeed, I knew his late father, who was a former chairman of the Greater London council. I think that everyone would agree that it is a tragedy that Malcolm is not here, because his expertise in this field was recognised throughout the Chamber.

During my time in government I had a measure of responsibility for two of the schemes under discussion, namely the local government scheme and the firefighters scheme. I very much agree with my hon. Friend the Member for Bognor Regis and Littlehampton (Mr Gibb) in his analysis of the Bill, the overall pressures that need to be redressed and the need for reform of public sector pensions. I wholly endorse his analysis of how the negotiations—to which he, I and the Chief Secretary to the Treasury were, in varying measure, party—proceeded. There was greater realism and sophistication to be found in my dealings and negotiations with various public sector unions than in the analysis provided by Members on the Opposition Front Bench. That is a sad commentary.

I want to deal initially with the local government scheme. It has been observed, rightly, that this is the most significant of all the schemes in financial terms. It is hugely important and involves 81 funds. It is the biggest pension fund in the United Kingdom and the fourth largest in the world. We are talking about £145 billion in investments and assets, so getting the local government scheme right is critical for its members, many of whom I have worked with for years, going back to the day on which I was first elected as a councillor at the age of 21, about which all I can say is that I was keen.

[Mr Iain Wright]

In 1862?

[Robert Neill]

Yes, it was shortly after the Municipal Reform Act.

The scheme is important for its members and the council tax payers who fund it. We should also not forget—I will come back to this later—that it is important for the overall British economy, because of its investment potential. Getting it right is important. It is worth emphasising that it is different from the other schemes, because it is largely funded. The Chief Secretary to the Treasury recognised that significant factor, as, I am sure, will the Minister who responds to the debate. It will have consequences, once the Bill is enacted, for how we deal with regulations and secondary legislation with regard to the scheme’s governance and other related matters. There is nothing in the Bill itself—which I warmly support, because reform of all the public sector schemes is necessary—to prevent that from being achieved.

There is clear evidence that reform of the local government scheme is necessary. Reference has been made to the Audit Commission and, at the risk of taking a little longer than I had intended, it is worth quoting what it said in order to make the point. It accepted that the local government pension scheme had funds

“to cover about three-quarters of its future liabilities”

and that it had a positive cash flow. The commission then concluded that the current approach could not be continued indefinitely, the reasons for which included:

“The cost of providing pensions for local authority employees is rising in absolute terms and as a proportion of pay because of increasing life expectancy and action needed to recover funding deficits.”

It was not possible to fund the whole lot. There is no doubt that local government pension funds

“have been affected by lower than anticipated investment returns”.

At the time of the commission’s report in 2009, the value of assets was “about 15% lower” than had been anticipated in the previous revaluation in 2007. I have to say that Opposition Members cannot escape some of the responsibility that the previous Government have for the investment performance of the funds.

[Mr Anderson]

Given his long experience of local government, does the hon. Gentleman have any idea how many councils, including the one that he led, took pension contribution holidays?

[Robert Neill]

I certainly never took any pension contribution holidays. Indeed, I only became a member of the local government pension scheme in 2000, when I was a member of the Greater London authority, so I do not think that the hon. Gentleman’s point is realistic. The performance of the scheme is down to the investment climate in which it operates, and the investment climate is determined by the macro-economic policies of the Government. The hon. Gentleman does not accept the failure of his Government in this context. One of the by-blows of that failure was that the investment returns for the scheme were less than expected and that has added to the pressures on the scheme. It is not the sole pressure, but it has added to them.

The Audit Commission also noted that the cost of pensions affects the amount of money available for local authorities to fund services and it influences council tax decisions, so there were questions about whether the LGPS benefits were affordable in the long term. Although some of those matters have been picked up by prior reforms—I do not pretend otherwise—they were not adequate to deal with the pressures. The Audit Commission concluded that, despite the fact that the scheme had funding, unlike others, reform was needed none the less. It is not just the Audit Commission that has recognised that—so too have the professionals in the local government pensions world. In October 2009 Mike Taylor, the chief executive of the London Pensions Fund Authority—I declare an interest, having been a member of that body for a short period—said that the LGPS needed to respond to increasing longevity because it

“is not designed to pay benefits for ever increasing periods of retirement and, without change, will face extinction…Employer or taxpayer contribution rates currently take all the strain of increasing liabilities in the LGPS. This situation cannot continue and either those costs must be reduced, or employees bear a fairer share of the increasing costs.”

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Will the hon. Gentleman discuss with the chief executive of the LPFA his opinion of clause 16, which will close the existing local government pension scheme and start a new one? As I understand it, closing it might trigger what are known as section 75 crystallisation of debt arrangements, and the burden could fall heavily on local authorities. Does he agree that the Economic Secretary needs to ensure that the crystallisation of costs does not fall disproportionately on local taxpayers?

[Robert Neill]

I certainly agree that the impacts of crystallisation have to be considered carefully. It is worth saying, however—I was going to come to this point later, but I will deal with it now—that the reason why we are dealing with the matter in this way is in no small measure the result of an agreement between the unions and local government employers. They agreed that it was desirable to have a single reform of the system to deal with both short and long-term pressures, which was referred to as a “single event”, and that it should take place in 2014. There is a technical debate to be had about how best to achieve that while avoiding the risk of crystallisation, and I hope that my hon. Friend the Economic Secretary and his ministerial colleagues will have that debate. However, that is certainly not a reason for opposing the Bill, and I do not think for one moment that it undermines the major thrust of the Government’s reforms. The structural issues that require reform in all the public sector funds, including the LGPS, need more radical work than that.

It seems to me that there is scope to reflect the particular circumstances of the LGPS within the parameters of the Bill, and I hope that Ministers will recognise that. It is still significantly funded, and at its best it has very high standards of governance. Many of us in local government have wanted to examine the capacity of some of the smaller schemes, and I believe that there is scope for the Government to encourage greater collaboration between some of them, or perhaps even mergers. The large and well run ones such as those in Greater Manchester, London and elsewhere have good governance arrangements, and I concede the point that was made about the Greater Manchester scheme. There is no reason why we cannot ensure that those arrangements are reflected in the secondary legislation that flows from the Bill. That will be a desirable outcome.

I hope that there will be democratic local accountability through elected members serving on the boards of schemes. I do not think it is necessary to impose a one-size-fits-all approach on the governance of schemes in order to achieve the important financial and structural reforms that are needed, which I support the Government in taking forward. We can reflect the particular circumstances of the local government scheme within the parameters that the Government have rightly set. That also applies to certain aspects of the scheme’s design, because there were constructive negotiations on the LGPS on the basis that the key point was to achieve the required cost envelope, which, as I recall, was 19.5% of salaries. Particular parts of the scheme enable us to do that while reflecting the particular nature of the local government work force and the scheme’s governance arrangements. I hope Ministers will ensure that the commitment to do so is maintained, and I have no doubt that they will.

I referred earlier to the investment potential of the local government scheme. It is already a significant player in many investment markets, but it could do more. I support the Government proposal to lift the cap on the amount that local government schemes can invest in local infrastructure schemes, which is currently an arbitrary 15%. When I was a Minister, I believed passionately in ensuring not only that local authorities had more resources of their own to put towards local investment but that they made the best use of their current assets, so it does not seem unreasonable that we should remove that cap. The professionals in the field have suggested that something like 30% would be a more realistic cap, and I am open-minded about the exact amount.

I recognise that Brian Strutton, from one of the public sector unions, has some concerns about that idea. If I may say so, I regarded him as a responsible interlocutor in my dealings with the trade unions. He rightly recognises that it might be possible to achieve our objectives either through changing the cap, which I think the unions are wary of, or through the creation of a new asset class for infrastructure. I hope that my hon. Friend the Economic Secretary will consider how we can achieve the important objective of giving local schemes a greater ability to invest in local infrastructure. We should not miss that important opportunity.

I turn now to the firefighters scheme. Again, I accept that it has differences from other schemes. A particularly important issue in all my negotiations with the Fire Brigades Union was the retirement age. The final agreement that was achieved, on which I reported to the House shortly before the summer recess, provided us with adequate and proper flexibility to take on board the concerns of our firefighters, whom I greatly respect. Two matters were put forward in that agreement. The first was that there would be a review of contribution levels from 2013-14 onwards, taking into account the impact of opt-outs, to which the hon. Member for North Ayrshire and Arran referred. I am sure the Economic Secretary will confirm that that remains the position.

Secondly, it will be recalled that I commissioned Dr Tony Williams to examine the evidence base for the case that was made about the physical impact of a firefighter’s job and its relation to the retirement age. The new firefighters scheme has had a normal pension age of 60 for new entrants since 2006, so the situation will not change for many firefighters. In addition, the retirement age of 55, or 50 after 25 years’ service, has been protected for entrants from before 2006. There are significant protections built in for long-serving firefighters. Dr Williams is extremely reputable in this field. He is the medical director of Working Fit and has 15 years’ experience as an occupational physician in the NHS as well as experience of firefighting. I hope that my hon. Friend the Economic Secretary will be able to confirm that the Government will look very closely at the outcome of his review.

[Mr Russell Brown]

The hon. Gentleman is absolutely correct in saying that there is some element of protection for firefighters, but we need to look forward, because that is what pensions are about. The new retirement age will keep firefighters working to 60 years of age in future. Are we about to breed supermen and superwomen who will be able to withstand such work at the age of 60?

[Robert Neill]

We need to look with care at the evidence, but that does not mean that we should keep the current generous—I use that word with care—retirement age. Firefighters work very hard, but the nature of jobs changes, and there is a case to be made—I put it no stronger than that—that the job of a firefighter is less physical than it was in some respects, because of the amount of technology and kit that they happily have to assist them. There is also a case to be made that increasing health levels in the population should not be taken out of account.

Equally, although I take on board the point raised by the hon. Member for North Ayrshire and Arran, it is realistic to accept that there are generally fewer “light duty” jobs in the fire service than in the police service. That is because fire authorities generally operate within a lean and flat structure, and there are fewer civilian-style jobs to which people can be moved. We must take all those important considerations on board, which is why the report was commissioned.

[Margot James]

My hon. Friend speaks with considerable authority on the firefighters’ situation, but is he as surprised as I was to hear that increases in longevity have meant that the average policewoman now spends more of her life drawing her pension than she did earning it, which is surely unsustainable? That situation will pertain to male police officers in a few years’ time if nothing is done about the retirement age.

[Robert Neill]

I take on board my hon. Friend’s point, and we must be realistic in all areas of this discussion. Longevity creates a pressure on the scheme, as well as providing greater life opportunities for people who have retired. It is, in part, a result of greater fitness and better health among the population, which can—among other things—enable people to work for longer. That applies in pretty much every other kind of activity, and we cannot regard any scheme as exempt. I accept, however, that there are particular pressures on firefighters, although I suggest to the House that the Government’s proposals recognise that and provide a sensible and evidence-based mechanism for dealing with it.

[Grahame M. Morris (Easington) (Lab)]

I am grateful for the informed contribution from a former Minister. Does he acknowledge that, besides the pressures of longevity, there are risks in increasing contributions for employees? For the firefighters fund, 7% is the magic figure in terms of opt-out. I understand that a poll by YouGov, commissioned by the Fire Brigades Union, indicates that a larger number—12% —of people are very likely to opt out, and that 25% are likely to opt out when the new contributions come into effect.

[Robert Neill]

When I was a Minister, it was precisely for that reason that I included in the agreement a provision for a review of opt-outs in the firefighters scheme before decisions were taken on increases in years 2 and 3. That was in accordance with the proposals set out by the Chief Secretary to the Treasury. We have built in a mechanism to review that risk, but I hope we will find that it does not materialise. I come back to my point that we must probably move away from our slightly entrenched positions on this issue, and be prepared to look sensibly at how to strike an appropriate balance based on the evidence.

We all want the strongest possible pension schemes for those in our public services. I have referred to the two sectors with which I have been most closely associated, and to which I feel the strongest personal commitment, but one could say similar things about many other sectors. If there is a Division tonight, I would not support the Bill without hesitation if I did not believe that we had put in place a framework that will enable us to deliver on our obligations. There are technical matters to address, but I am confident that we will be able to do so as the legislation proceeds. The Bill deals with an important and necessary reform, and I commend it to the House.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. May I gently inform the House that no time limit for speeches has been imposed in this debate as yet, but contributions are going up in length, not down? We started with speeches of 15 minutes, and we have just had one of more than 20 minutes. If Members cannot ensure that their speeches are a little shorter—I put it no stronger than that at the moment—it will be necessary to impose a time limit to ensure that every Member gets into the debate.

19:14

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

I will try to keep my remarks to the point, Madam Deputy Speaker, and enable other Members to get in.

We have heard a lot about some of the changes that have already started to take effect, but one aspect of the Bill that is undoubtedly causing most concern, and proving a sticking point in negotiations with the public sector work force, concerns the equalisation of the normal pension age with the state pension age, and the implications of that for those who may have to work until they are 68.

Although I welcome the exemptions that have been conceded for some of the more obviously physically demanding public sector occupations—police officers, firefighters, members of the armed forces—that is by no means an exhaustive list of public sector jobs that can be extremely physically challenging. Most people would struggle to do many of those jobs into their mid and late-60s, and I hope the Government will listen carefully to employee representatives, and look again at the proposal and at what it might mean for nurses, paramedics, auxiliaries, prison officers and teachers, and others who do stressful and physically demanding jobs. That was one of the principal issues raised across the spectrum of trade unions and other employee representative groups, and the Bill does not currently seem to contain any flexibility to look at the issue in the context of overall negotiations, which is a particular issue in the devolved context.

We need to look at the normal pension age and its alignment with the state pension age in a slightly wider contextual framework, and inject a bit more practical realism into our actuarial spreadsheets. It was a pleasure to follow the hon. Member for Bromley and Chislehurst (Robert Neill), and the issue of life expectancy that he mentioned is important. We all acknowledge that life expectancy is increasing, but that top line trajectory masks great and very marked divergences on a range of demographic and geographic indicators. At this point, may I add my tribute to those of other hon. Members who have mentioned the late right hon. Member for Croydon North, (Malcolm Wicks)? It was he who raised some of these important points during previous debates.

People who have worked in heavy industry, for example, tend to die younger than those who have worked in professional occupations. People in deprived neighbourhoods live shorter lives than those in affluent areas, and on average women tend to live several years longer than men. One aspect of that divergence that does not receive nearly enough attention yet is pertinent to the debate is healthy life expectancy—the number of years in which we can expect to enjoy good health. Healthy life expectancy is rising, but it is not rising as quickly as life expectancy.

In Scotland we have one of the lowest life expectancies in Europe, and men and women can expect to live almost two years less than the UK average, at just over 76 years for men, and just over 80 years for women. The key point, however, is that healthy life expectancy is only 61.9 years for women and 59.5 years for men. The health of many men has already been seriously compromised several years before they reach the current retirement age. Those figures come from the Registrar General for Scotland; they are official Government figures.

Last month, the TUC published research indicating that in the UK as a whole, only 54% of men aged between 60 and 64 are actually in work, which, on the face of it, seems fairly consistent with official figures on healthy life expectancy. Women can obviously claim their state pension at an earlier age so they fare a bit better, but even then only 62% of women between 56 and 60 are in work. We as legislators must be a lot more realistic about how long we can expect people to be fit for work. Furthermore, those figures do not include people who have moved into part-time work because of their health, or taken on unpaid caring responsibilities for a spouse whose health has been compromised. Many people also leave the workplace to look after grandchildren.

I am sure all Members know people who work into their 70s and beyond with robust health and enviable levels of energy, and thanks to equality legislation fewer barriers are now in the way of older people who want—or need—to continue working beyond the state pension age and are able to do so. However, we cannot just cross our fingers and hope that older people will be able to continue in their jobs until they are 68. All the evidence tells us that most people will have developed some serious health problems by that stage in their lives, which may well affect their ability to work. That is not just in heavy occupations, but across the board.

Even if we allow for continued improvement in health outcomes, which I am sure everyone aspires to, and if life expectancy continues to rise, we need to factor in the realistic likelihood that a significant proportion of people will not be fit for work in physically demanding jobs by the time they reach 68. My worry is that those who are forced to leave their jobs early because of ill health face having to live on actuarially reduced pensions. That might well save the public pension schemes money, but it will significantly reduce their standard of living and quality of life in old age. It might even force some to rely on state benefits. The hon. Member for North Ayrshire and Arran (Katy Clark) alluded to that. We currently spend about £13 billion a year in means-tested benefits for older people, most of whom have worked hard all their lives, often in low-paid jobs or in unpaid caring, and do not have occupational pensions. Supporting those people through means-tested benefits is probably the least efficient way we could ensure they have a dignified old age.

As other hon. Members have said, today is not the day to debate the chronic problems with, and abysmal state of, private sector pensions and the reasons for them, but the warning is there: we should not pull the public sector down to the base level—the absolutely inadequate level—of private and voluntary sector pension schemes. That would be a recipe for spending a lot more on means-tested benefits in the long term.

I was struck by the briefing from the Prison Officers Association, not least because the proposed reforms will affect hundreds of prison officers in my constituency who work at Peterhead prison. The POA points out that, although the average age of prison officers in the UK is rising, prisoners are getting younger, and, in its words, “more dangerous”. It is concerned that many prison officers in their 60s might struggle to pass the physical fitness test that all prison officers undertake to ensure they have the physical strength, stamina and stability to, for example, use control and restraint techniques in the course of their duties. Prison officers make the case that there is a direct parallel between their job and that of police officers, and cannot understand why the recognition that police officers might not be able to do their job effectively beyond 60 has not been extended to them. Will the Minister offer some clarification on the Government’s thinking? Is there scope to reconsider the situation for prison officers? Prison officers point out that, if people are forced to leave their job early through ill health, they could put greater financial strain on the system. For example, it could cost a great deal more if they retire on work-related medical grounds than if they retire normally at a sensible age.

Nurses are another group who do heavy work, so the pension age has potentially significant implications for them. The Royal College of Nursing has formally rejected part of the Government’s proposal, but it makes the point that the Government need to keep the link between the normal pension age and the state retirement age under review, as recommended by Lord Hutton. It has asked that that commitment is made explicit in the Bill, and that the review process is conducted independently. I hope Ministers take that on board.

The RCN has also asked the Government to postpone making a decision on the equalisation of the normal pension age and state pension age until the working longer review in England has reported and the Government have had time to consider its recommendations. In the light of what I have said, I hope the Government take that point seriously, because it would be a sensible approach—the review will help to inform good decision making in the longer term.

Another major concern of trade unions and employee representatives—hon. Members have made points on this, so I will not repeat them—is that the retrospective powers in the Bill allow the Government to amend it with limited consultation. Trade unions and employee representatives are legitimately concerned about instability and uncertainty for scheme members. The consequences of people losing confidence in the pension system and dropping out of it are much bigger—that has happened in other sectors when pensions have become unsustainable. I hope the Government consider that in Committee.

The hon. Member for North Ayrshire and Arran raised specific aspects of devolved pensions regulation. I am by no means a spokesperson for the Scottish Government—I urge hon. Members to direct their questions to the Ministers responsible—but I hope I can shed some light on certain parts of the Chief Secretary to the Treasury’s opening remarks. I also want to ask questions for clarification from him and the Minister who will wind up the debate. My understanding is that occupational pensions policy is largely reserved, although Scottish Ministers have Executive responsibilities for the NHS, teachers, firefighters, police and local government pensions schemes, subject to a number of constraints. The major constraint is budgetary—the Treasury controls the purse strings, and Barnett consequentials have a knock-on impact on a Government who are working on a fixed budget and have no borrowing powers.

Will the Minister confirm that formal approval is needed from the Treasury for any legislative changes to the NHS and teachers schemes? What is the Government’s thinking on the Treasury approval required in relation to the firefighters and police schemes? My understanding is that the Government are trying to introduce a Treasury approval requirement for those schemes. Will Ministers confirm what they are doing? Are they seeking a memorandum of understanding to claw back powers from the Scottish Government on police and firefighters’ pensions? Scottish Ministers have had discretion to determine the design of the police and firefighters schemes, although the settlements have always mirrored agreements in other parts of the UK. So far, the benefits of consistency have been thought to outweigh any benefits of divergence. I am not sure whether that balance of opportunity will be seen in the same light if the proposals are implemented.

I believe Scottish Ministers have responsibilities in relation to the local government scheme, provided the powers are exercised within primary legislation. In practice, that scheme, too, has mirrored that of the rest of the UK. To return to points made earlier, I understand that the local government scheme has been reformed, and that “cap and share” arrangements are in place. It is funded differently from other public sector schemes, and decisions on it are made in Scotland by those who manage it. It is worth pointing out that, in Scotland, the public sector local government scheme does not seem to have any financial problems. There is no immediate shortfall—in fact, it is currently running a surplus—and neither the Convention of Scottish Local Authorities nor trade unions are of the view that there is any need for reform. The Government could helpfully clarify why they believe that scheme needs to be reformed. Is this the right time to do so? Public sector workers are in tight financial situations. Most have seen their contributions increase dramatically, and many had their incomes squeezed.

I cannot with any confidence answer the question put to me by the hon. Member for North Ayrshire and Arran on the legislative consent motion. My understanding is that there is no need for a legislative consent motion for most of the Bill, because pensions policy is largely reserved. However, I believe legislative consent would be required for some of the reforms to non-departmental public bodies and some judicial offices. I am guided by the Bill’s explanatory notes, so perhaps the Minister could explain if the situation is different. The Unison briefing asserts that further legislative consent is required with regard to the local government scheme, but I have not seen the legal arguments that back that up or substantiate it. Perhaps UK Ministers are in a position to clarify the UK Government’s understanding of the situation.

[Katy Clark]

I am grateful to the hon. Lady for going through the detail as she understands it. The Bill will have massive implications for our constituents. Does she agree that, if the Unison legal advice is correct—that a legislative consent motion is necessary in relation to the local government pension scheme—everything should be done by the Scottish Government to ensure that the negotiations taking place in Scotland between them and trade unions take precedence in terms of the outcome for our constituents?

[Dr Whiteford]

I certainly agree that it is important that we get a fair and equitable solution in the local government pension scheme. I cannot speak for the Government, but I know that some of the negotiations have been very difficult. From speaking to trade union representatives in recent weeks, it is clear that they recognise the constraints within which the Government are working—and they value the tone of some of the negotiations that have taken place so far—but Ministers in Scotland have been negotiating with one hand tied behind their backs. Greater flexibility, especially on age, would go a long way to helping to reach an equitable conclusion.

Underlying this debate is the need to maintain confidence in public sector pensions, which are really very modest. They keep people just above the poverty line, especially women who have worked in low-paid jobs most of their lives and have very modest pensions that keep them just above the level of means-tested benefits. People are not unreasonable in their expectations, but asking them to pay more, work longer and receive less is not a reasonable proposition to put to our public sector workers. I hope that the Government can and will do better.

[Several hon. Members]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I am going to put a time limit on speeches now. It will be 12 minutes from the next speaker, after which I will review it. We may not get to all the Members who wish to speak by 9.30, when the winding-up speeches will start. If Members take a lot of interventions and go considerably in excess of 12 minutes, I will have to cut the time again.

19:31

[Stephen Williams (Bristol West) (LD)]

I shall try to keep within the 12 minutes: it is my intention to make only a short contribution.

First, I wish to establish some general principles for why reform is needed. They can be grouped into two areas. The first is the general societal changes that have taken place that necessitate reform and to which the Government must respond, such as the increase in life expectancy and the changes in employment practices over recent decades. The second is the changing balance over time between the sharing of the cost of public sector pensions between the taxpayers, through the Government acting as employer, and the employees who receive the pensions.

It is important to establish that the reforms in the Bill would be needed with or without the current cost pressures that the Government face. We hope to bring public sector borrowing under control by 2017, but these reforms are intended to last for a generation. They are not driven by the short-term need to recover costs: they are driven by a long-term desire to ensure that public sector pensions survive into the future in a sustainable way.

Any reform should be done fairly and, as far as I and my Liberal Democrat colleagues are concerned, protect those in the public sector on the lowest earnings. The overriding principle should be that the public sector should continue to act as an exemplar to other employers. There should not be a race to the bottom: the public sector should set the gold standard for affordable and attractive public sector pensions that attract the very best people into the public sector, who are paid in a fair way and guaranteed a secure and attractive income into retirement.

The first principle is that of life expectancy. We all know that we would hope for ourselves and people in our families to live longer. Indeed, people retiring now at age 60 can expect to spend 40% of their adult life in retirement—so only 60% of their adult life would have been spent in work. The state pension age has been changed relatively infrequently over the 103 years of its existence. If it had been uplifted in line with life expectancies, people would now be drawing their state pensions at age 75. Several other countries, in particular Scandinavian countries, have ongoing commissions that examine life expectancy and uplift pension ages according to that evidence. That might be a good approach in the future for this country.

The biggest societal change driving the need for reform is the difference that has arisen over time between private sector and public sector remuneration. It always used to be much quoted that pay in the private sector was more attractive than in the public sector and that part of the balancing factor to make public sector employment attractive was a good pension, and perhaps other good terms and conditions. In recent decades, that maxim does not hold. Indeed, the Institute for Fiscal Studies said that in 2011 people in the public sector doing a broadly similar job to people in the private sector were likely to be paid about 8.3% more. But pension provision in the public sector continues to be much more attractive and offered on a much wider scale than to people in the private sector.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Does the hon. Gentleman regret the way in which the Government have pitted public sector pensions against private sector pensions, when in fact the average local government pension for men is £4,000 a year and for women is £2,600? There is no doubt in my mind that this is an intentional attack on public service and the public sector as a whole.

[Stephen Williams]

The hon. Lady’s final sentence illustrates her prejudice against the Government’s intentions. This is not an attack on the public sector. The coalition Government are trying to ensure that public sector pensions remain across the board, so that every person in the public sector is able to access a pension, which is not the case in the private sector, as I am about to say; that they are affordable to the taxpayer; and that they are offered on very good terms. Without reform, those provisions would not be in place. I would not want to be associated in any way with an attack on public sector employees who perform services that are absolutely vital to all of our constituents. I would not want to be associated with any reform predicated on that basis, and I genuinely think that that is not the basis on which the reforms are being carried out—from the perspective of both parties in the coalition.

On coverage, 100% of public sector employees are in theory eligible to join a pension scheme, because it is offered to everyone, but only 35% of employees in the private sector are able to join a scheme, and only about a third have a contribution made to their scheme by their employer. There are many schemes in the private sector in which the employer simply does not make a contribution. There may be a scheme, but it is not funded by the employer. The biggest anomaly is in the type of scheme available to people in the different sectors, between those on defined benefit, final salary or career average schemes, and those who are on defined contribution schemes. Currently, just under 80% of people in the public sector are in defined benefit final salary schemes, but only 9% of people who work in the private sector are able to access such schemes. That percentage is falling year on year, and soon nobody will be joining a final salary scheme in the private sector. Many of them will be closed and no further contributions made by current members.

There is also the cost to the public purse of maintaining public sector pensions, which puts an onus on us to look at the case for reform. Those costs have to be shared between the Government as the employer, all of us as taxpayers, and the employees themselves, who will ultimately be the beneficiaries. Between 1999 to 2009, the cost of the NHS pension scheme rose by 47%, the cost of the civil service scheme by 23% and, as we heard from the hon. Member for Bognor Regis and Littlehampton (Mr Gibb), who is not in his seat, the cost of the teachers’ pension scheme by 37%. That has necessitated a shift in the contribution rates of the employee, who is the beneficiary, and the employer, who is the Government and the taxpayer. For instance, there used to be rough parity in the teachers’ pension scheme—the employee put in 5% and the Government 5%—but employees now contribute 6.4% and the Government about 14%. That is unfair on the general mass of taxpayers who cannot access these types of schemes. So there is an imbalance between the public and private sectors, and the cost to the Exchequer of public sector pensions is now £32 billion. Those costs cannot be allowed to grow uncontrollably.

The pension reforms must be done fairly, however, so I am pleased that there will be no change to the terms and conditions and contributions of employees who earn up to £15,000—about 15% of the public sector work force. Some 750,000 people will see no change in their pension contributions and will still be able to draw the pension they expect at the moment. Those on salaries of up to £21,000 will have their increases capped at 1.5%, so a typical employee on £21,000, after 20% tax relief—everyone gets tax relief on their pension contributions—will pay just £8 extra a month to remain in a defined benefit scheme. And, of course, employees within 10 years of retirement this April will see no change in their terms and conditions and expected pensions.

It is also entirely fair that over time we move to a career average scheme. That will benefit the broad mass of people in the public sector, who have annual salary increments but whose starting salary after inflation is not drastically different from what they start with. A final salary pension scheme, on the other hand, disproportionately benefits those in the public sector who someone described as the star performers—the people on huge incomes, the senior managers, head teachers and directors. It is fair, then, that we move to a career average scheme.

Our own arrangements, which no one has mentioned thus far, are now entirely a matter for the Independent Parliamentary Standards Authority. If, however, the public sector moves to a career average scheme, Members should expect IPSA, which now sets our terms and conditions, to move us on to a career average scheme, rather than a final salary scheme, as well.

There is no doubt that reform is needed—that is shown by demographics and the change in employment practices—and it is right that the Government are doing it in a way that is fair to public sector employees as well as to taxpayers. That will ensure that public sector pension schemes are not only the best on offer in the country but are offered on terms that are sustainable.

19:43

[John Healey (Wentworth and Dearne) (Lab)]

It is a pleasure to follow the hon. Member for Bristol West (Stephen Williams), who made a very balanced speech. He is right that reform is required. That is accepted and supported by hon. Members on both sides of the House.

I start from a simple principle: pensions are pay deferred. They are part of people’s terms and conditions, often part of their contract of employment, and, in the public sector, part of the deal for public service workers who often give a lifetime’s commitment to the service in which they work. Two things follow from that: first, pensions are principally the property of the scheme members, who defer their pay and put that pay in the hands of managers and trustees; and, secondly, changes to people’s pension terms should involve those members—those whose money it is—through consultation, negotiation and agreement.

That is what the Labour party did with the far-reaching reforms we put in place in government. We agreed and established changes to reflect the increasing age of the population, to manage the changes effectively, to control the costs to taxpayers and to increase contributions overall from scheme members. We did that with the armed forces in 2005, the police, firefighters and local government workers in 2006, and teachers, the NHS and civil servants in 2007. Across all areas, we introduced increases in the pension age, changes to the contribution rates from members—especially the higher paid—and a “cap and share” arrangement that limited absolutely the liability of taxpayers to future increases in costs. As a local government Minister, I was responsible for the local government pension scheme, which we radically reformed not just for new members but for existing members. Furthermore, we did so without closing the scheme, and there is no need to accept what is provided for in clause 16 and do that this time around either.

The reforms recognised the pressures of cost, population and life expectancy. They also recognised that pensions were deferred pay, that changes to contribution rates and benefits should be consulted on and agreed, that most public sector workers were low-paid and that their pensions were far from gold-plated. The average pension for NHS workers last year was a little over £7,500, while the average for a local government worker this year is just £4,406. After our changes, in 2010 the National Audit Office concluded:

“As a result of the changes, which are on course to deliver substantial savings, long-term costs are projected to stabilise around their current levels as a proportion of GDP. The changes are also set to manage one of the most significant risks to those costs, by transferring from taxpayers to employees additional costs arising if pensioners live longer than is currently projected.”

The Government have failed to build on those reforms. They did not even wait until the Hutton review, which they commissioned, had fully reported before in October 2010 the Chancellor hit public service workers with a 3p in the pound surcharge—a public service pensions tax that had nothing to do with long-term pension reform and everything to do with a short-term cash grab to try to deal with the deficit; and this from a set of workers that, at the same time, was being squeezed by a public sector pay freeze, hit by a VAT increase, subject to rising energy bills and suffering from deep cuts in tax credits. That is where the Government lost the moral authority to claim we were all in it together and to be a one-nation party. Furthermore, changes such as the switch from the retail prices index to the consumer prices index were imposed without warning, consultation or agreement.

The Government are legislating after losing the trust of public service workers, who simply do not trust them with their pensions or with this pensions legislation. It might not be the Government’s intention to reduce benefits already accrued, to prevent the flexibility to link the normal pension age with the state pension age, or to make further sweeping and radical changes or reforms without proper scrutiny or consultation, but the legislation, as it stands, can be used in that way, whatever the intention of Ministers. That is why it is important to get this legislation right. It is even more important because this is a broad, sweeping framework Bill in which many of the detailed changes will lie in the regulations and scheme rules.

As both a former local government Minister, like the hon. Member for Bromley and Chislehurst (Robert Neill), and a former Treasury Minister, let me say that my main concern is about the local government pension scheme. The Treasury has never really recognised the difference between the local government pension scheme and other public service pension schemes. Unlike other main schemes, the local government scheme is a funded scheme. It has £150 billion in assets, it raises an annual income significantly greater than its expenditure each year and it has seen its investment income cover at least a third of its expenditure on benefits in each of the last few years. Unlike all the other main schemes, employer contributions in the local government pension scheme are set locally by 89 separate funds, each with its own investment strategies, its own member demographics and its own range of employers—in other words, the flexibility to match the responsibilities and pressures that those funds face.

Unlike in other main schemes, the governance of the local government pension scheme reflects local municipal roots, while the respective roles and responsibilities of those managing and overseeing the scheme are different from those for the national schemes. Finally, unlike in all the other main schemes, simply meeting the liabilities is not the only concern of those managers. Stability is a vital element, as is the participation rate. The reforms that we put in place—those now being negotiated—reflect those concerns. This is a broad-brush Bill, and the same centralised powers, controls and restrictions over the unfunded schemes do not fit well with the local government pension scheme. As the shadow Chief Secretary said, some significant debates and amendments are required in Committee.

There are some serious flaws in the Bill. I will offer the Minister four for starters. First, the Chief Secretary confirmed in response to interventions from me and the hon. Member for Foyle (Mark Durkan) that clauses 3 and 11 allow scheme regulations to make retrospective changes to the benefits that people have already worked for and paid for. As such, they threaten one of the central tenets of pension saving: that what one has accrued is safe and that the terms on which it was accrued will be honoured, which is as true for the private sector as it should be for the public sector. Secondly, a running theme throughout all 38 clauses is a Treasury power grab—the centralisation of control over all elements of schemes, from valuations to scheme regulations, with no requirement to consult even the scheme members, who are most directly affected.

Thirdly, there is a legislative lock in clause 9 between the normal pension age and the state pension age for all but firefighters, the police and the armed forces. Therefore, even if there is a strong case, which is now being looked at, for that link to be made flexible for some workers in the NHS, the legislation does not permit it. Fourthly, last December the Chief Secretary made an important commitment to the House on behalf of the Government on the retention of current protections for public sector workers who are outsourced and the extension of fair-deal provisions for all staff transferring employers. Schedule 9 enables that to occur in the civil service, but it does not ensure that it will occur, and it must.

Finally, let me say this to the Treasury Minister and his colleagues. There are many excellent minds among the civil servants in the Treasury, but frankly they do not know everything. They sometimes make mistakes and sometimes others know more than they do. I shall give a couple of examples. The dates for the so-called closure of the local government scheme in clause 13 are wrong, as is the date for ensuring that transitional protection, as promised, is in place. As the Minister prepares for the debates and the amendments in Committee, I hope he will take seriously the points and concerns raised tonight. I hope he will be ready to make amendments where there is a good case for doing so, because in the end that is how we get a public pensions system that is fair to taxpayers for the long term, but remains fair to those public service workers who give so much of their time—their whole lives—to support others.

19:54

[David T. C. Davies (Monmouth) (Con)]

I will try to keep my comments as brief as possible. I want to address some of the remarks that I have had thrown back at me as a supporter of this Bill and this coalition Government—not so much by Members, whom I have listened to carefully this evening, but in the newspapers, from the unions and from politicians in other political parties who have sought to make capital out of this issue.

Let me say clearly from the start that I—and, I believe, every single member of this coalition Government, whether from our position as Members of Parliament or from personal experience—very much support and respect the role of public sector workers across the United Kingdom. I know from personal experience about the very hard work done by the police officers in London with whom I work. I know about the paramedic who came to the aid of a member of my family recently and solved a problem for them. I also know about those who are teaching my three children the three Rs in a local state school. I know from personal experience, not just through my work, just what a good job public sector workers do, and I do not think there is anyone in this coalition Government who wants to do anything to undermine the pensions of public sector workers or undermine their role in any way whatever.

It was the hon. Member for Banff and Buchan (Dr Whiteford) who talked about the problems in the private sector. Although we should not be making comparisons, it is perfectly true to say that people in the private sector have lost out greatly, and they have done so partly as a result of the previous Government’s policies. We have heard all about the tax on dividends, but there are all sorts of other, subtle ways in which private sector pensions were undermined by the previous Government. They included, for example, demanding that financial institutions buy Government bonds and gilts, instead of allowing them to invest larger proportions of their money in stocks and shares, as well as enacting policies that kept stocks and share prices down. However, those are matters to be debated on another occasion.

What is clear is that we are not going to allow what happened in the private sector to happen in the public sector. We saw the misery that that caused for people—our constituents—and we do not wish to see it happen to other hard-working people. At the same time, however, we cannot ignore the fact that although people may well be doing physical jobs in the public sector, there are people in the private sector who also have to do physical jobs. We do not seem to have heard much about them. What about the lorry drivers? I used to do that job for four or five years, and it can be hard and physical. What about all the people who work in factories? What about builders? Why should they have to work so many extra years to pay for the pensions of people retiring years before them who may not be doing physical jobs at all? To some extent we have to make some comparisons.

[Mr Anderson]

I agree with the hon. Gentleman about workers in the private sector who should also have better arrangements. If he comes forward with a private Member’s Bill, will he allow me to become part of that process, so that we can legislate to ensure that those people are looked after properly, as public servants should be too?

[David T. C. Davies]

There is of course a wider problem. When I bring forward that Bill, which the hon. Gentleman will be supporting, I will be looking carefully at the maths, because what I think is absolutely disgraceful is promising people in the public or private sector things that cannot possibly be afforded.

I have heard the argument from trade union officials that says: “Why is this happening? It’s all because of the banks.” It has not been mentioned today, but that is something that people have come out with. However, when we examine the figures, we see that the problem has absolutely nothing whatever to do with the banks. The Treasury Committee looked at the amount of money that some banks were given—on a temporary basis; most of it will be coming back—which it calculated as about £120 billion. However, the national debt today stands at £1 trillion, which is almost 10 times that figure. Most of that debt has been caused by politicians overspending. However, when we take into account public sector pensions, the figure for the national debt goes from £1 trillion to £2 trillion at the very least. Indeed, last April the Office for National Statistics issued figures suggesting that the total amount that Britain will need to cover its pension liabilities over the next few years is £7 trillion. I must admit that I do not know how many years ahead that figure covers—I assume it covers quite a few—but it is an absolutely astonishing sum of money. I did a quick calculation and worked out that if £1 million represented 1 cm on a graph, we would need a graph that was 40 miles long, stretching all the way to Reading, to show our current liabilities. We cannot ignore the current financial situation.

Thinking about what has gone on with pensions in the past few years reminds me of an analogy. I used to work in the private sector, for a small family transport business. I wonder what would have happened if, one day, the directors of the company had gone through the books and, instead of collecting money from their workers over the years and investing it for the pensioners of the future, they had simply taken their workers’ contributions and used them to pay for the pensions of the people who were retired at that time. It would have been a sort of giant pension Ponzi scheme, and it would probably be illegal if it were ever tried out.

Anyone bringing about such a situation would have two options. One would be to pretend that there was no problem, and to try to gain short-term popularity with their work force by continuing to pay generous pensions that they could not afford. One way of doing that would be to borrow a vast sum of money from the banks to employ more people whom they could not afford, and to use their contributions to pay for the pensions of the workers who had just retired. That is more or less what has been happening over the past few years.

The alternative is far more sensible, and it is what this Government have done. We have opened up the books and said that we simply cannot afford to do this. We know that a much larger work force is going to retire in the future, and that they are going to live even longer, so there is no point in making promises that we cannot possibly keep. We have only to look at the recent history of the past 30 or 40 years to see what happens when countries can no longer balance their books. That is happening in Greece at the moment, and it has happened in recent years in Russia and Argentina, and across south-east Asia in countries such as Thailand. It happens over and over again, and we must not think that, just because this is the United Kingdom, we can somehow buck the basic rule of economics.

I am proud that this is the first Government to have gone into an election saying, “We’re not going to spend more of your money. We’ll spend as much as we can, and we will spend it well, but we are not going to make promises that we cannot afford to keep.” We are going to protect public sector workers, particularly the lowest paid, but we are also going to ensure that the country is in a financial situation that will allow it to guarantee the pensions of those public sector workers who are going to retire not just in the next few years but in the decades ahead. In other words, we are going to trade short-term popularity—the easy thing to go for—for the long-term interests of public sector pensioners in this country. I hope that Opposition Members will, for once, do the responsible thing and support us in this vital work.

20:02

[Mr Russell Brown (Dumfries and Galloway) (Lab)]

It is ironic that we are discussing pensions today, given that much of what we have seen in the press over the past 10 days or so has been about the comments of the Secretary of State for Work and Pensions on whether we, as taxpayers, should support unemployed families with two or more children. No thought has been given to who those children are, but they will become the next few generations of taxpayers who will be making contributions to support pensions, either through public sector pensions or by putting money into the pot to provide benefits for others. I am pleased that we have moved on from having a go at households in which no one is working to looking at a different group of people.

I want to put on record the fact that some of the poorest paid people in our country are public sector workers. As my good friend and colleague, my right hon. Friend the Member for Wentworth and Dearne (John Healey), said earlier, pensions in the public sector are actually pay deferred. That is exactly right, and when we end up with poor pay in the public sector, we also end up with poor pensions.

Much has been said about Lord Hutton’s report. The commission firmly rejected the claim that current public sector pensions were gold-plated, and we have heard that the average pension paid to public sector scheme members is about £7,800 a year, while the median payment is about £5,600. We have also heard that half of women public sector pensioners get less than £4,000 a year.

Labour Members recognise that public sector pensions need to be reformed, which is why we have consistently argued that there will need to be some kind of an increase in contributions and, as the population gets older, an increase in the retirement age. We have also been clear that any settlement or agreement should meet three tests, which are slightly different from the Government’s four tests, although there are elements on which we agree.

The first test is affordability: will the changes deliver a fair deal for taxpayers when times are tight, when taxes are rising and when spending is being cut? The second test is fairness: will the changes deliver a fair deal for public sector workers on low and middle incomes whose pensions are far from being gold-plated and who have given a great deal to the services in which they work and on which each and every one of us—in the House and throughout the country—depend? The third test is sustainability, because anything that any Government do needs to be sustainable. Will the changes deliver a workable settlement for the long term that does not undermine the sustainability of existing schemes and that can be flexible in the face of rising life expectancy?

I recently took the opportunity to meet several serving police officers in my constituency, and I have been tasked with raising their concerns in the Chamber this evening. We often talk about the good job that the police do, but I almost never hear people talking about police service pensions. For the sake of clarity, I should point out that although certain public sector pensions in Scotland are administered by the Scottish Government, the reality is that the decisions reached here in Westminster are followed—or mirrored, as the hon. Member for Banff and Buchan (Dr Whiteford) said—north of the border.

Despite the stated opposition of the Scottish Government’s Finance Secretary, John Swinney, to the increase in pension contributions, he confirmed in a statement to the Scottish Parliament on 21 September 2011 that the Scottish Government would apply the increase in employee contributions for the NHS, teachers, police and firefighters schemes in Scotland. As my right hon. Friend the Member for Wentworth and Dearne said, that represents an additional 3% tax on those workers in the public sector.

[Dr Whiteford]

Is the hon. Gentleman aware that, before that decision was made, the Chief Secretary to the Treasury wrote to the Scottish Finance Secretary to say that if those contributions were not increased, £8.4 million a month would be removed from the Scottish Government’s financial settlement until such time as the Scottish Government followed the lead of other parts of the UK? I do not know what the hon. Gentleman thinks John Swinney should have done in those circumstances, but I believe that his hands were completely tied. Not only would the Scottish Government have lost that money out of the block grant, but they would have had to find it from another budget. In effect, therefore, they would have had to pay for those contributions twice.

[Mr Brown]

I am pleased that the hon. Lady has come into the debate. I am not sure whether she was here when I intervened on the Chief Secretary to the Treasury to ask whether any such penalty had been suggested, but he did not answer my question in a straight manner, so I thank her for that intervention.

The serving police officers whom I have met are seriously concerned and feel that they have been let down by their representative body, the Scottish Police Federation. We all know about the technique of divide and conquer, yet with regard to the pension changes, it has become clear that we are seeing protection—understandably—for those nearing retirement age, but that that is being provided at a cost to those who joined the police service between 1992 and 2006. Those who fall into that category feel that they have been abandoned and hung out to dry.

Those people joined the police service under certain terms and conditions, one of which was that after paying their contributions into the pension fund, they could retire after 30 years and then qualify for a lump sum and a pension. One officer pointed out that he was halfway through that 30-year period. It was difficult for him to get a forecast, but the closest he could get was an indication that having worked an extra seven years, his lump sum would be about 30% of what was first anticipated, while the pension would be about 70% of what was expected. We all go through life making plans, and for some of us retirement comes that little bit sooner. When people cannot recover ground as they move towards retirement age, it leaves them in a real dilemma. As one chap pointed out, “I had looked at retiring at a specific age. My lump sum would have cleared my mortgage. I now need to rethink where I am going.”

There is a strong belief that section 2 of the Pensions Act 1995 prevents the Government from changing pensions, so I hope that the Economic Secretary will put a clarification of that point on record. The first Winsor report of many years ago stated that officers could not work beyond the age of 55, but we are now seeing a significant change. Officers will be subject to a fitness test, but what will happen if someone fails such a test? Will they be made compulsorily redundant?

We know about some of the activity on our streets today. We should not just condemn groups of people, but there are criminals out there, and I would hate to think that police officers will be trying to chase younger people on foot. If officers are between the ages of 55 and 60, there is every chance that criminals will be significantly younger than them. We will be asking the police to do a task that is beyond many people’s comprehension.

Police officers are asking the Government why there is a further review, given that the scheme was changed in 2006 and every officer who joined after that time is on the new 35-year scheme. Many who joined after 1992 are halfway through their service period and their financial future looks extremely uncertain. We all recognise that police officers are not in a position to take strike action—in all honesty, I do not think that they would—but the fact is that those who joined between 1992 and 2006 feel as if they have been singled out.

Although, according to my Front-Bench team, we will not divide the House on Second Reading, I share colleagues’ real concern about retrospection, which has been raised on several occasions. I look forward to colleagues seeking to improve the Bill in Committee and working to offer some protection to those who work —day in, day out—to deliver the services in our public sector that each and every one of us demands.

20:10

[Jackie Doyle-Price (Thurrock) (Con)]

I am pleased that Labour Members have acknowledged the need for the Bill and the need to reform our public service pensions. I was struck by several good points made by the hon. Member for Dumfries and Galloway (Mr Brown) and the right hon. Member for Wentworth and Dearne (John Healey), although I found the desire to pit Government Members against public servants disappointingly partisan. I have to advise Opposition Members that Government Members equally respect the contribution of our public servants. We have retired teachers and former armed service personnel here, and we greatly value their contribution. What sits behind the Bill is the desire to make public service pensions secure and beneficial for the long term.

Given that we are all living longer, it is simply necessary to ask people to pay higher contributions. Unless we do so, we will have to find more money from all taxpayers to support the deficit and the provision of public sector pensions. That is simply not fair. The cost to the taxpayer of public service pensions has risen to £32 billion a year, which is an increase of a third over the past decade. They cost just under 1% of gross domestic product in 1970, but the figure is 2% today and, without change, it will continue to rise. The average 60-year-old now lives 10 years longer than was the case in the 1970s, so it is simply not sustainable to leave pensions as they are.

We are tackling the challenge of funding public sector pensions at the same time as we are attacking our structural deficit and the aftermath of a financial crisis. That has led some of our public servants to conclude that they are being asked to bear the consequences of the actions of the bankers, but that is simply not the case. We are where we are because our current system is not financially sustainable, and it is disappointing that Opposition Members allow people to think otherwise. Even without the deficit, and even if the financial crisis had never happened, we would have to reform our public pensions to make them affordable and to secure their long-term future. With these reforms, our public servants will be guaranteed a secure pension with terms that are as generous as those enjoyed by anyone.

The need for change is simple. We all need to make provision for our own retirement, and if we do not put more in, the taxpayer will have to. The Bill will cut the costs to taxpayers by nearly half, while continuing to ensure that the public sector receives the best pensions available. The Bill is therefore a good deal for taxpayers and a good deal for public service workers. It is frankly unfair to expect future generations to pick up the tab by paying more taxes, especially when they are already dealing with the consequences of financial irresponsibility by facing higher taxes and higher house prices. I want all people—whether they work in the private or the public sector—to be able to keep more of what they earn and to pay less in tax. All taxpayers will benefit if we can reduce the burdens on the state and make public pensions self-funding.

Even with these changes, our public pensions will continue to be among the best available. They will also be progressive. A switch to career average pensions across the board will reduce taxpayer liability while letting employees keep their defined benefits. The pensions will also be fairer to all. Final salary schemes disproportionately benefit those on the highest earnings, and many low-paid workers will get a better pension under the Bill. I am pleased that the Government have made changes to benefit the lowest earners, meaning that 15% of our public sector workers will not have to make an increased contribution. I am also pleased that benefits that have been built up will be protected and that members will continue to receive a guaranteed benefit in retirement.

[James Wharton (Stockton South) (Con)]

I am listening to my hon. Friend’s speech with great interest. We have already heard a lot about retrospection and the importance of certainty. Is it not the case that the reforms will hopefully give long-term certainty about the affordability of public sector pensions, so that future Governments will not have to review these pensions yet again and people will be able to plan properly for their retirements?

[Jackie Doyle-Price]

I completely agree with my hon. Friend. It is important that we bite the bullet now and lay the foundations for future security. If we delay, we will be asking for more contributions from taxpayers and workers themselves, so it makes perfect sense to deal with the problem. We cannot postpone the inevitable, and Government Members are not prepared to do so.

I am sure that many Members will have received representations on these issues. Most of those that I have received have come from police officers who are worried about the changes. Most public sector employees have recognised that the terms under which they were paying into their pensions were not sustainable in the longer term, not least because they have seen what happened to the pension provision of their friends and family members in the private sector. People in the private sector would have to contribute more than a third of their salary each year to get an equivalent pension, so I am not surprised that only a third of public sector workers voted to strike over this issue last November.

[Mark Reckless (Rochester and Strood) (Con)]

I understand that the public schemes are generally generous in comparison with those in the private sector, but does my hon. Friend have a view on the relative generosity of the police scheme, on which we have received a lot of representations? The police clearly have quite a high pension, but they pay a large amount in. Is it fair that they have had to pay so much more than civil servants, for example, whose contribution is much smaller?

[Jackie Doyle-Price]

My hon. Friend makes a good point. We will benefit from an examination of the individual schemes in Committee. My hon. Friend the Member for Bromley and Chislehurst (Robert Neill) made several good points about the financial sustainability of the local government scheme compared with others. We need to look at what we expect of all our public servants in the round, and the issues raised about the police are quite persuasive. We need to look in detail at what we are proposing not just for public sector workers as a group, but for individual worker groups. We also need to remind public sector workers who are witnessing the debate that their accrued rights are protected, and that there will be protection for those who are within 10 years of retirement.

The Bill will deliver sustainable public service pensions. It will almost halve the cost to taxpayers, and it will rightly ensure that public sector workers continue to receive the best available pensions. It provides a good deal for the taxpayer and for public servants, and I am happy to support it.

20:20

[Mr David Anderson (Blaydon) (Lab)]

Let me begin by declaring an interest. For 20 years I was a member of the mineworkers pension scheme, for 16 years I was a member of the local government pension scheme, and for the past seven years I have been a member of the parliamentary pension scheme.

This is a debate about trust, or rather about the breakdown of trust. The people who are covered by the Bill are those we trust with our most precious possessions: our children, our partners, our parents, our families and our communities. As we all know, when things are going wrong it is the public servants we turn to, and in whom we place the maximum trust.

We turn to the firefighters when our safety is compromised, our homes are at risk and our lives are in danger. We turn to the police when we are in trouble, when we face the despair caused by burglary, car crime or petty theft, when our kids go missing, and when we are being persecuted by nuisance neighbours or antisocial behaviour. We turn to the nurse when we are at our lowest ebb, when we are desperate for help, and when we need real human kindness. We turn to the doctor when we are at a loss to explain our pain, when we need their skills to put us back together again, and when we feel that there is nowhere else to turn.

We turn to the social worker when we are in despair because of our parents’ dementia, when our youngsters are hooked on drugs, and when we need real help to sort out life’s real problems. We turn to the home care worker when we cannot cope any longer with our daily lives, when we need a stranger to come into our homes and become a friend, and when only an extra pair of hands will do. We turn to the teacher to take our children on to the next stage of life’s journey, to shape our kids for the world to come, and to inspire our most precious gifts.

There are so many more: the bin man, the caretaker, the school meals lady, the gravedigger, the gardener, the midwife—and, among the hundreds of others, the so-called back office staff. They are the people who make the front line work effectively, and the people whom the Government disparage most of all. All those people are trusted by us to do the right thing when we need them to. We expect—no, we demand—that they do their jobs properly, and we trust them to do so. But trust is not a one-way street: if we expect those people to do the right thing, we should do the same.

For decades, many of those workers have been putting their trust in us as representatives of the state, and have paid into pension funds every week or every month in the belief that they will be rewarded properly for their work. Let no one in the Chamber claim that public servants somehow get a free ride when it comes to pensions. As was pointed out earlier by my right hon. Friend the Member for Wentworth and Dearne (John Healey), they have given up a percentage of their pay in order to have a decent retirement and not to have to rely solely on welfare payments in old age.

There is no free lunch for those workers, no matter how much the divisive policy of the Conservative party or the TaxPayers Alliance may try to claim it is so. The Bill clearly undermines the trust that these workers have been able to place in their pensions for decades. Just five years after the agreement to changes that were supposed to be affordable and sustainable, they are seeing the imposition of changes that will significantly weaken their potential to plan properly for their retirement.

We should hear no more about unaffordability until we in the House face up to our culpability in terms of where we find ourselves today. It was Members of Parliament who allowed public sector scheme employers to take lengthy contribution holidays while the lads and lasses at the front end had no such luxury. The classic example, which I raised earlier—and it is not the only one—is Royal Mail. Between 1998 and 2001, it made no contributions whatsoever to the pension fund. Now we are told that the service must be privatised because there is a huge black hole in the pension fund.

[Richard Graham (Gloucester) (Con)]

Why didn’t you do something about it?

[Mr Anderson]

Actually, we did do something about it in 2001.

Just think what ordinary postmen and postwomen could have done with a 13-year contribution freeze. They could have bought a new house or a new car, or taken better holidays. But no, these were not things for the workers; they were just for the employers, and now the workers are feeling betrayed again.

The Government are using the economic mess that global capitalism got us into, and which they have entrenched, as an excuse to attack the future well-being of the people in whom we place our trust. Instead of letting sensible negotiations take place on sector-specific schemes, they are pressing ahead with a Bill that will have huge consequences for millions of dedicated public servants. Yes, Hutton means change, but it does not mean destabilisation and mistrust.

If people do not have trust in their pensions, two things will happen. First, those who are already in schemes will opt out, and secondly, new starters will not join. What will be the result? Ultimately, the schemes will fail, and that will not just be bad for scheme members who will not be able to rely on decent pensions when they retire. It will impose an enormous burden on the welfare system, and—as was pointed out by the hon. Member for Bromley and Chislehurst (Robert Neill)—there will be a huge impact on the country’s investment potential if the schemes do not flourish.

Can anything be done to prevent such an outcome? We are starting from a pretty bad place. Public servants are feeling badly bruised as they face pay freezes, cuts in living standards and job losses. Three quarters of a million will be on the dole after receiving their P45s from the Chancellor of the Exchequer. They face service cuts—people who have worked for donkeys’ years will go out of the door—and they have already been hit by increased pension contributions. They are having to work longer to receive their pensions, and when they do receive them, the payments will be smaller. Only a radical rethink in Committee will give us an opportunity to rebuild the trust that those people feel has gone. We must clarify what is being said here tonight and secure some real commitments from the Government if we are to have the slightest chance of giving them any confidence.

Clause 3 grants huge and retrospective powers to the Government to make further radical public sector changes without real consultation. That must be wrong. If the Government can include measures in the Bill that make it clear that the retrospective changes will not have an impact on pensions, that must be done.

Then there is the issue of the link between the state and normal pension ages. A number of Members have raised the worrying discrepancy affecting people who have worked from the age of 15 or 16, perhaps for more than 50 years, in very hard circumstances. The Government have shown a lack of faith by pressing ahead with these changes while a review is being undertaken jointly by unions and employers in the NHS. It is incredible that they should say that they will pay attention to the review after they have passed the legislation, as if it had no meaning whatsoever. What will we end up with? The potential for 68-year-old nurses to be working in mental health establishments, for 67-year-old home care workers to have to put older people to bed, and for prison officers aged 65, 66 or 67 to be fighting with men who are locked away. That is lunacy.

Clauses 5 and 6 deal with the establishment of a pensions board in the NHS. We need a real commitment from the Government to allow member representation on those schemes. Clause 10 empowers the Treasury to take control of valuations of pension schemes. That has never been the case before; there has always been partnership working. If the unions are cut out of the decision making on pension schemes and the schemes are seen to be determined by the Treasury, people will lose faith in the new system, as they will if the actuarial valuations are dictated by the Treasury. People do not trust the Treasury to look after them properly. The hon. Member for Bromley and Chislehurst and my right hon. Friend the Member for Wentworth and Dearne spoke about the local government pension scheme. I hope the Minister takes on board the points raised, because it is different from other schemes.

The Chief Secretary to the Treasury told us that the trade unions and the Government have come to a collaborative view. I know he is from another part of the country from me, but I think he must be from another planet. The fact that the Government have done what they want to do and the unions have faced that reality and have done what they have to do, day in and day out, to try to get the best deal for their members should not in any way be mistaken for collaboration.

It always used to be said that pensions were saving for a rainy day. Well, I have got news for the Government: “It’s raining cats and dogs, and you’ve stolen the umbrellas.”

20:30

[Andrea Leadsom (South Northamptonshire) (Con)]

I was rather delighted by the Bill. I think it is an unmitigated good news story, so it is rather depressing to follow the hon. Member for Blaydon (Mr Anderson) who, more than any other contributor today, is talking down an extraordinarily fair, logical and sensible settlement. I would draw to his attention the comments of his colleague the shadow Chancellor, the right hon. Member for Morley and Outwood (Ed Balls), who told the TUC annual congress on 11 September this year:

“We must be honest with the British people that under Labour there would have been cuts, and that on spending, pay and pensions there will be disappointments and difficult decisions from which we will not flinch. Because the question the public will ask is: who can I trust?”

It is a great shame when Opposition Members deliberately talk down a settlement that is extraordinarily fair to both the taxpayer and our public sector workers.

This is an unmitigated good news story, of course, because we in Britain have some of the best public service sector servants in the world and the best public services in the world. Is it not fantastic that we are all living longer—that we can now expect to live a good 10 years longer than in the 1970s? That is an unmitigated good, but it has enormous consequences for public policy.

One of the consequences is that people will need to work for longer. It is ridiculous for people to be retired for a third of their lives. That is not only unaffordable; it is nonsensical for those individuals. It is appalling to think of people spending 20 or 30 years fully retired with nothing to do but tend their garden and look after their grandchildren. People do not want to do that. It is completely ludicrous to suggest that people should continue to retire at the age of 60 when they are going to continue to live for another 20, 30 or even 40 years. That is completely unsustainable and illogical. The Bill makes sense of such points in a way that is completely fair to the taxpayer and the public sector workers. I congratulate the Government on producing such an extraordinarily fair Bill.

I want to disabuse the Opposition of a couple of the myths. They say that the unions claim that average local government pensions are just £3,800, and that for women they are less than £2,800, but they fail to point out that that includes people who have worked for only a very short time in the public sector. They should be talking about what people would be retiring on if they were to spend their entire career in the public sector. The fact is that many women will be far better off than is claimed. Members on both sides of the House have been very concerned about lower paid women in both the public and private sectors retiring in poverty. Under our proposals, women will be far better off because the Bill safeguards the lowest earners’ pensions. They will not face increased contributions to their pensions, and they will be better off than they previously were. That is very good news.

[Dr Whiteford]

One misleading aspect of the pensions contribution debate is the claim that people earning under £15,000 will be protected. It is often overlooked that these figures are calculated on a full-time equivalent basis. Many women work part time, and they will find that they have to pay high pension contributions even though their salaries are very modest.

[Andrea Leadsom]

I think what the hon. Lady is saying is that somebody who would be on, perhaps, £60,000 a year but who is working a day a week and is therefore taking home about £12,000 a year will have to pay higher contributions. Is that what she is saying?

[Dr Whiteford]

I am thinking of nurses or teachers, whose salaries would be more in the average earnings category. If they work half-time, they will find that their pensions contributions increases will be calculated on the basis of a full-time equivalent so this measure will not help women on low incomes.

[Andrea Leadsom]

That is a rather extraordinary point. Public sector pensions will be paid and calculated on the basis of a full-time equivalent salary, so our approach is entirely consistent. Moving to career average schemes will also make things much fairer for women. It will mean that high flyers who are promoted late in their career and then earn a significantly higher salary will no longer retire on an extremely generous pension. Those who have spent their career sometimes doing part-time work and sometimes doing full-time work will have a career average pension, which will be much fairer.

It is also right that we link public sector pensions to the normal state retirement age—that is a matter of fairness. If the state retirement pension kicks in at 66, it is right that, with exceptions—notably those who have armed forces, firefighter and police pensions—people start to draw their public sector pension at the same time as their state pension. That is all about fairness.

[Chris Leslie]

The hon. Lady will know that in the past—I believe this was in the Pensions Act 2011—people were given short notice about changes to the pension age. Does she agree that, ideally, a good 10-year notice period should be given so that people can plan ahead? If this is pegged to the state pension age, people should have sufficient opportunity to plan with enough forethought.

[Andrea Leadsom]

The hon. Gentleman will recall that the Government made great efforts to ensure that the cliff edge affecting certain women born in a certain couple of years disappeared. He will also be pleased to note that the pensions of those with less than 10 years until retirement will not be affected by this measure, which provides the ring-fencing for those with not long to go until retirement age. I would have thought that he would welcome that—again, on the basis of fairness between those workers and the taxpayer.

Of course, two thirds of private sector workers are not members of a pension scheme. We have heard hon. Members from all parts of the House say that we do not want a race to the bottom. We are proud of our public sector pension provision, and nobody would wish to see it brought down to the abysmal level of private sector pensions. However, it would be pleasing if Opposition Front Benchers were to concede their part in the destruction of private sector pensions, which has made a significant contribution to putting us into this pitiful position; private sector pensions have been decimated by the actions of the previous Prime Minister.

An important point of fairness is involved in the fact that the taxpayer contributes three times more to a civil service employee’s pension than the average private sector employer pays in. The employer contribution rate to the civil service pension scheme is 19%, whereas the average private sector employer contribution rate for a defined contribution pension scheme is only 6.4%. To get the same pension in the private sector, someone would have to contribute about a third of their salary.

[Sheila Gilmore (Edinburgh East) (Lab)]

There is something extraordinary in what the hon. Lady has just said, which several of her colleagues also said. They say, “We don’t want to compare with the private sector. We don’t want to have a race to the bottom.” They then say, “But” and come out with a long string of comparisons about employers not paying as much. If this has nothing to do with comparisons with the private sector, they should stop comparing.

[Andrea Leadsom]

The hon. Lady makes an extremely good point. I am not advocating that we reduce public sector pensions to the private sector level, but this does, of course, absolutely bear comparison. This Government are not reducing public sector pensions to the pitiful state the Labour Government left private sector pensions in when they left office. That is precisely the point I am trying to make. We are proud of the fact that our public sector pensions will remain among the best in the world. That is something to be very proud of, and the Opposition should be congratulating the Government on having achieved that at this extraordinarily difficult time.

Let me disabuse Members of one final myth. The Opposition like to say that private sector workers earn more, so private sector pensions make up for the shortfall in salaries. That is not the case. The Institute for Fiscal Studies calculates that on average hourly public sector wages are 7.5% higher than hourly private sector wages, even when we take into account an individual’s education, age and qualifications. That is a very important point. Public sector pensions do not subsidise lousy working rates—quite the opposite, in fact. Those in the public sector rightly have a good deal in their employment and in their pension. That is what we wanted to achieve and I commend those on the Front Bench for doing so.

The most important aspect is sustainability, because what we had was unsustainable. Over the past decade, public sector pension costs increased by a third in real terms. Between 1999-2000 and 2009-10, the amount of benefits paid from the five largest public service pension schemes increased by 32% in real terms. In five years’ time, we are set to spend £33 billion a year on public sector pensions—more than on police and transport combined and 1.8% of GDP.

[Richard Fuller]

On that point about overall fairness and sustainability, does my hon. Friend believe that the Government could have gone further in ensuring sustainability by looking to move towards a fully funded form of public sector pension scheme? There is still an exposure for the public purse in the future. and although the Minister is putting in some cost control, we could have gone further, could we not?

[Andrea Leadsom]

Of course, my hon. Friend is quite right: we could have gone much further. Across Europe, public sector pensions and terms are being cut with immediate effect to deal with the appalling debts that countries have run up, whereas this Government are putting in place measures that are entirely fair and sustainable both for the taxpayer and the public sector worker.

Let me conclude by saying again that it is an unmitigated good thing that people are living longer, healthier lives, and that we should celebrate our public sector workers and the job they do. They do a fantastic job for us of which we are very proud and we want to ensure that they are fairly rewarded, in a way that is sustainable for the public purse for many decades to come.

20:42

[John McDonnell (Hayes and Harlington) (Lab)]

I declare an interest as a member of a local government pension scheme.

Let me put it clearly on the record that the Bill does a number of simple things: it means that civil servants—teachers, firefighters, hospital workers and council workers—will work longer, pay more and get less. That is the reality. It was said that this has been agreed by the trade unions, but it has been rejected by the Public and Commercial Services Union, the National Union of Teachers, the Prison Officers Association, the Fire Brigades Union and the National Union of Rail, Maritime and Transport Workers, which represents the royal auxiliary workers. Not a single union has supported the Bill or expressed satisfaction with it, and that includes all those in negotiations, the Royal College of Nursing and the British Medical Association. Why? For me, the Bill embodies the Government’s policy and prime objective that the economic crisis will be paid for by public sector workers rather than those who caused the crisis in the first place. It typifies the Government’s approach.

[Richard Fuller]

One issue is the fact that the cost that will fall not during this Parliament but on future taxpayers—our children and grandchildren. Does not the Bill do something to relieve some of the burden on future taxpayers? As the Intergenerational Foundation has said, that is a fair way to proceed.

[John McDonnell]

Let me quote the Treasury, which has said that the cost of the unfunded public sector schemes—I am particularly interested in the civil service one—as

“a share of GDP was 1% in 2007-08 and was projected to rise to only 1.2% in 2057.”

Only 18 months ago, the National Audit Office produced the report, “The cost of public service pensions”, and showed that

“when projections of liability are based on earnings, the total annual payments from the civil service pension scheme will be largely stable over the next 50 years.”

So no, I do not accept that analysis, and neither did the Treasury at the time.

I oppose the Bill. Members of my Front-Bench team will abstain tonight, I believe, because they hope they can amend the Bill. The Bill is unamendable to make it acceptable to me. Therefore I oppose it and I wish to have the opportunity to vote on the Bill if I can. If that means walking through the Lobby on my own, I will. I will find a teller somewhere, I hope.

The Bill is extremely damaging to the well-being and living standards of ordinary working-class people. We know that. My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) quoted the definitive piece of work, an independent analysis from the Pensions Policy Institute, which is a charity funded by the Nuffield Foundation to undertake the research. It confirmed that the Bill means that pension benefits will be cut by a third. My hon. Friend the Member for Leeds West (Rachel Reeves) referred to the shift from RPI to CPI, which was a further 11% cut. What the cuts in pension benefits mean is exactly as others have said—a reduction in participation that will ultimately threaten the viability of the schemes. Perhaps that is what the Bill is about—the degradation of the schemes so that they will eventually be replaced by the private sector.

Let me deal with the issue of private sector pensions, which is dragged out on every occasion. It is a rewriting of history. Let us go back to the 1980s and 1990s. The state pension was undermined by the Thatcher Government when they broke the link between earnings and pensions. That also undermined the earnings-related element of the state pension. They encouraged people to enter private sector schemes but, as we heard, they allowed many employers to take pension holidays, not for one or two years but for long periods. Eventually that undermined the schemes and a number of them in my constituency were wound up almost overnight.

Individuals were urged to enter into their own arrangements, which they did, only to be fleeced on their endowment policies and other mechanisms. Previous Governments, particularly in the 1980s and 1990s, destroyed private sector pensions and now this Government are moving on to destroy public sector pensions in the same way.

[Mark Reckless]

I do not want to let this point go—the hon. Gentleman’s claim that somehow Baroness Thatcher broke the link with earnings. Between 1974 and 1979 Labour claimed to link earnings and pensions, but for much of that time wages went up by less than prices, and for five months of the highest inflation in that period they were not linked at all, giving pensioners a very bad deal.

[John McDonnell]

Under legislation promoted by Thatcher, the House in 1981 broke the link. That undermined in the long term the value of the state pension—it is irrefutable—and then undermined the earnings-related portion of it.

[Mark Reckless]

Will the hon. Gentleman allow me to refute that? For the first two years of the Thatcher period, there was a link. The only other period in which there was purported to be a link was under the previous Labour Government. For much of the Thatcher period there was no link and wages went up by less than prices.

[John McDonnell]

There was always a link with earnings or inflation, and pensions went up accordingly. Why did the previous Government not replace it? I sought on every Budget to enable that to happen and I wish we had done so.

[Andrea Leadsom]

rose—

[John McDonnell]

Let me press on with the points that I am making.

What the Government are now doing is exactly the same as they did to private pensions, but we were told by the Chief Secretary that this is a settlement for a generation—that it will restore stability and predictability to public sector pensions for the next 25 years. No, it does not. As has been said before, the Henry VIII clauses in the Bill not only have the potential to undermine future benefits but are retrospective. I urge Members to look at the BMA’s legal advice on clause 3 and the vast remit that that gives future Governments to undermine future protections. Under clauses 3 and 21 and other clauses, public sector pensions do not even get the protection afforded in the private sector. In the private sector, if an alternative benefit is proposed, it must be actuarially evaluated as a viable alternative and one that does not undermine an equivalent benefit.

I agree with my right hon. Friend the Member for Wentworth and Dearne (John Healey)—we all agree on this—that pensions are deferred earnings, something people invest in and, therefore, something they should have some say in, but the Bill will take away all participatory control by the members who contribute. As he said, the Treasury will now control the design of the schemes, the revaluations and how they are undertaken, and the cost cap and what is included within it. There is a lack of commitment in the Bill, contrary to all that Hutton said, to ensuring that any future changes or reforms are made on the basis of agreement or at least joint engagement.

I am now secretary of the Fire Brigades Union parliamentary group and wish to circulate the evidence the FBU provided to Ministers on the physical work firefighters now do. Under the new pension scheme the retirement age in the fire services has been lifted to 60. The previous Government argued that there would be preventive measures to enable firefighters who could no longer undertake the physical rigour of the job to undertake lighter duties, as the hon. Member for Bromley and Chislehurst (Robert Neill) said. This year, 16 posts in the whole the country have been offered for redeployment alone, so that is unreal. Frankly, I do not believe that a 60-year-old firefighter can cope with the rigours of the job, no matter what improvements there have been in technology.

The hon. Member for Banff and Buchan (Dr Whiteford) mentioned the briefing from the Prison Officers Association. There are five physical tests that every prison officer has to undertake in order to be able to continue doing the job. If they fail in any one, they cannot do the job. The POA therefore predicts, quite rightly, that the cost of medical retirements will outweigh any savings gained as a result of the increased pension age. The same information came from the Royal College of Nursing with regard to nurses and paramedics and from the National Union of Teachers with regard to teachers teaching at 68.

The Government said that they would set up the longer life review. Its first meeting was held in September and the results will not be out for at least another six months, yet this Bill allows no flexibility. My right hon. Friend the Member for Wentworth and Dearne was right: even if the money is there and the employer agrees with it, the Bill provides no flexibility in any of the proposed schemes. It is lunacy to bind the hands of negotiators in that way.

There is no legal requirement on the pension boards to consult or negotiate, contrary to what Hutton recommended, and we can see no representation from the work force. There should at least be some assurance in the Bill that there will be an element of representation on the boards. With regard to the closure of the existing schemes, some protections are being put forward, but there is none on ill health or redundancy. I find clause 23 almost sinister. It will enable employers to offer benefits as an alternative outside the schemes, which is another way of using private sector schemes to undermine the public sector overall.

I am worried about this Bill, which is why I want to vote against it. I think we will look back on today as the day when public sector pensions started on a downward slope, with the erosion of benefits and increasing contributions leading eventually to the undermining of the schemes and their closure. I think it will result in many people being impoverished and greater inequality being created in our society. That is why I will oppose the Bill tonight.

[Mr Tom Harris (Glasgow South) (Lab)]

On a point of order, Mr. Deputy Speaker. I apologise for interrupting the flow of the debate, but I need to raise an important matter. It will be recorded in tomorrow’s Hansard that the Minister of State, Department for Environment, Food and Rural Affairs, the hon. Member for Somerton and Frome (Mr Heath), told Members that the Government’s commitment to introducing a ban on the use of wild animals in circuses was confirmed by the fact that such a commitment was made by Her Majesty in the Queen’s Speech to Parliament. You will, I know, agree that that is a powerful riposte to those of us who had dared to doubt the Government’s good faith on this issue. However, a subsequent inspection of the two most recent Queen’s Speeches of this Parliament finds no mention whatever of such a commitment. Is it in order for any Minister to pray in aid of his argument a part of Her Majesty’s Gracious Speech that turns out to be wholly fictitious? Has the Minister in question contacted you or Mr Speaker to schedule an apology to the House?

[Mr Deputy Speaker (Mr Nigel Evans)]

I thank the hon. Gentleman for his point of order. I have not been notified that any Minister wishes to make a statement on this matter or any other matter from the Dispatch Box this evening. As for whether the Minister was in order to give the response that he did, Ministers and, indeed, all right hon. and hon. Members are responsible for their own speeches.

[John McDonnell]

Further to that point of order, Mr Deputy Speaker. On a serious matter such as this where a Minister has inadvertently misled the House, it is the norm for him to be asked to return to the House as soon as possible to correct the record and explain his position. May we now express the view on the Floor of the House that the Minister has time now to come back to the Chamber to explain the situation?

[Mr Deputy Speaker]

I thank the hon. Gentleman for his point of order, which I am sure those on the Treasury Bench will have heard. Should a request be made to make a statement or to raise a point of order, the Chair will be notified and I will make sure that the House is informed in the usual way.

20:56

[Richard Graham (Gloucester) (Con)]

Thank you, Mr Deputy Speaker, for calling me to speak in this long and important debate on pensions. This is a subject on which we would surely all agree that the object is to get cross-party agreement on issues that affect so many of our constituents, and that should be achievable. Indeed, the coalition Government have already achieved it across the two parties, and by seeking and taking Lord Hutton’s advice they hoped to secure agreement from Labour. In that sense, it is good news that this Second Reading will be unopposed, but it is none the less sad that we have heard so many speeches in which Labour Members were unable to rise to the challenge of reaching agreement and seeking harmony and instead sought to make a series of party political, aggressive and disagreeable contributions to the pensions debate.

Let me start with the hon. Member for Leeds West (Rachel Reeves), who led the debate for the Opposition. She said, for example, that the Opposition had accepted the need for a move from RPI to CPI as an index for pensions only as a temporary deficit reduction measure for the life of this Parliament, and she criticised its timing. However, she completely failed to mention that the Labour party itself had already changed the index for its own pension scheme for its party workers from RPI to CPI before the Government did likewise for all public sector workers. Unfortunately the hon. Lady is not in her seat, but the right hon. Member for Wentworth and Dearne (John Healey), who is here, said that the change had been imposed without warning and called it the moment at which the Government had lost their moral authority. I am sure that he will be able to explain to his own party workers quite what moral authority his party has on this issue, having made precisely the same change. The reality is that both the Labour party and this Government have had to face uncomfortable facts— above all, the consequences of the fact that so many of us are living for so much longer—and have had to tailor pensions accordingly.

The hon. Member for Leeds West rightly expressed concern for public sector workers. She may be a deferred public sector scheme worker herself, as am I and many other Government Members, and it is important for Labour Members to understand that we do not all represent purely the private sector. This is about seeking agreement for public sector and private sector workers from Members of Parliament who have themselves worked in both sectors. She rightly stood up for public sector workers but was unable to give any credit to this Bill, which has completely protected workers earning less than the full-time equivalent of £15,000 a year—some 15% of the work force—and provides considerable protection for people, many of whom live in my constituency, who earn less than the full-time equivalent of £21,000 a year.

The Bill also protects everybody who is within 10 years of retirement, which is very important for so many of our constituents who are in their 40s and early 50s. Crucially, it increases accrual rates, which is a technical point that will be appreciated by those who have worked in the sector, such as the right hon. Member for Wentworth and Dearne. Above all, and most importantly, the Bill protects the risk-free investment nature of a defined benefit scheme.

On that point, I must refer to the speech by the hon. Member for Hayes and Harlington (John McDonnell), who is in his place and whose integrity I respect. He quoted, as he would in his role as the Public and Commercial Services Union representative, the PCS briefing for this Second Reading debate and came to the same conclusion that

“members will work longer, pay more and get less pension.”

The reality, however, is that all of us will live longer, work longer and, if we are lucky enough to have one, get a pension for longer, and those who are public sector workers will have a much better pension than anyone else in the land.

My point to the hon. Gentleman and the hon. Member for Blaydon (Mr Anderson), who is not in his place, is that it is no good simply championing the status quo for today’s workers and betray tomorrow’s. In many ways, that is what happened—I am afraid that the trade unions are partly culpable for this—to private sector DB schemes, which the right hon. Member for Birkenhead (Mr Field) has often referred to as the jewel in the crown. Many of them have closed precisely because the unions could not and would not see the future and adapt before companies decided that they could no longer afford the schemes and closed them.

The point of this Bill—this should be something on which every Member of this House can unite—is that this Government are trying to work with unions and Opposition Members to keep defined-benefit schemes for the public sector, despite the fact that we will all live for so much longer than our fathers and mothers, and that, therefore, the cost of those pensions will be so much greater. To use the analogy of the hon. Member for Blaydon, it may be raining, but this Bill will make sure that the umbrella is kept for public sector workers.

[Chris Leslie]

The hon. Gentleman says that we should all stand together to defend ongoing defined-benefit schemes, so could he explain why the Bill does not honour that commitment? Clause 7 states that schemes created under the Bill can be defined-benefit schemes, but they can also be defined-contribution schemes or

“a scheme of any other description”.

Where is the guarantee that these will be defined-benefit schemes?

[Richard Graham]

I have no idea whether the word “guarantee” is in the Bill. In life, only two things are guaranteed as far as I know: taxation and death. We are talking about not guarantees as such, but a defined-benefit scheme in which the entire risk is taken by the taxpayer and the certainty that gives people the chance to budget in their retirement is with the scheme’s beneficiary. In fact, it is even better than that. As the hon. Gentleman will know, because he has studied these things carefully, the advantage of a career average defined-benefit scheme is that it benefits precisely those workers whom I would have imagined he would be most in favour of protecting.

The Pensions Policy Institute, which the hon. Member for Hayes and Harlington referred to, says:

“The Coalition’s proposed reforms will remove the different outcomes for high-flyers and low-flyers which exist in final salary schemes.”

It goes on to estimate that, under the current scheme, a high flyer

“would have had a pension benefit of 29% of salary, compared to 11% of salary for the low-flyer.”

Under the reforms proposed by this Government, both high and low flyers will have

“the average value of the pension offered being worth 15% of salary”.

That is a significant improvement for the low flyers. I would be astonished if all Members of the House were not in favour of that reform.

The hon. Member for Leeds West recognised that something had to be done, but tellingly, she made no reference at all to three of Lord Hutton’s four tests—affordability, fairness to the taxpayer and governance and transparency. Did she not think they mattered? Should they not be at the heart of what any Government do? That was a disappointing series of omissions.

[John Healey]

The hon. Gentleman said a moment ago that the total risk of the schemes was borne by the taxpayer. Does he not realise that he is making the same mistake as Ministers in not recognising that the local government pension scheme is a funded scheme? The income from its investments last year topped £3 billion, and there is also a strong contribution from employees alongside that of employers. That makes it a case apart from his general argument.

[Richard Graham]

The right hon. Gentleman makes half a good point. I know local government pension schemes very well, as many of them are my former clients. The reality is that they have never been as separate from the public sector balance sheet as he might be implying. One of his predecessors as Economic Secretary, Ruth Kelly, tried to amalgamate the whole lot, recognising their fragility. As the National Audit Office has revealed, the schemes are significantly underfunded, and I think I am right in saying that 20% of all money paid in council tax now goes towards paying the pensions of scheme members. He is right to say that local government schemes are different from others, but they are not quite as different as he suggests.

The hon. Member for Leeds West mentioned the fear that public sector workers would opt out of schemes altogether, because they might become unaffordable, and thereby become a burden on the state in a different way. I think it is fair to say that she did not recognise that opt-out rates have not altered. There is good reason for that, because although contributions are higher than they were, the value of a defined-benefit scheme is still considerable. In case her concern becomes real and there are large numbers of opt-outs, the Government have built into the Bill a provision for regular reviews to address the situation if and when it arises.

Several Opposition Members have expressed the concern that the Government are trying to set the private sector against the public sector. I have already totally rejected that point. All Government Members are as committed as anyone to helping every worker get some form of pension as quickly as possible. The hon. Member for Oldham East and Saddleworth (Debbie Abrahams) missed the crucial point that the Government are trying not only to make defined-benefit schemes sustainable for the public sector, but to get millions of workers in the business sector to have a pension at all through the auto-enrolment scheme. It is disappointing to me, and I think to others, that she did not understand that.

Several Members have claimed that the real scandal is the lack of pension provision in the private sector, but it is a curious fact that one legacy of the previous Government is that 13.5 million workers in the private sector have no pension at all. Some Ministers in the Labour Government did good work, including the late Member for Croydon North, to whom I pay tribute for his work in the pensions sector. However, as with so many things, it has fallen to the current Government to seek an agreement and to implement reforms that will give people without pensions the chance to have something to retire on for the first time in their lives.

Today’s debate has covered many aspects of the Bill. As I said, it is a good thing that its Second Reading will not be opposed today, but I can see that there will be many arguments ahead in Committee.

Let me leave with hon. Members the points that I make to everyone in my constituency who is employed in the public sector and is in a defined-benefit scheme, whether they are teachers, nurses or other workers. First, the defined-benefit pension has fabulous benefits for all those involved, especially lower-paid workers; secondly, the increase in accrual rates means an improvement of some 8% for public sector workers; thirdly, anyone within 10 years of retirement is completely protected; and finally, I hope that the Opposition will drop their instinctively tribal approach, and recognise that the Bill tries to reform public sector pensions in a way that will, above all, be sustainable. Should our children and grandchildren work in the public sector, they will receive a career average defined-benefit pension, as will today’s workers, should the Bill go through successfully.

[Several hon. Members]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. The winding-up speeches will begin at 9.30 pm.

21:10

[Sheila Gilmore (Edinburgh East) (Lab)]

I have a feeling that an instruction has gone out to those speaking in support of the Government, and it appears to have been, “Be nice to the public sector.” Speaker after speaker has taken great pains not only to praise the public sector and public sector workers, but to accuse the Opposition of daring to suggest that there might be another view.

I have sat in the Chamber over the past two and a half years, and I do not think I imagined the numerous occasions on which Government Members spoke of gold-plated pensions and the overall extra cost of pensions, or indeed imagined the whole way in which the public sector has been treated. We are clearly now meant to assume we imagined that, but public sector workers have had a pay freeze and are facing job losses in many parts of the country.

On top of that, the view expressed for two and a half years that the public sector is holding back the economy formed much of the justification for many of the policies that followed. We have been told time and again that if we cut back the public sector, the country’s economy will spring to life, and that the public sector is exercising a great drag on the economy. If we put those things together, it is perhaps not surprising that Opposition Members, and many workers in the public sector, have concluded that the coalition Government do not particularly like or support the public sector, however supportive they may be of individuals or people they have come across. That is the backdrop against which the whole debate has been set, and that is why people are still sceptical and concerned about some aspects of the Bill.

If contributions had not been made, quite separately, on the restructuring of the pension schemes, and if we were not working against the general backdrop of the Government’s view of the public sector, many people, including Opposition Members and public sector unions, would perhaps not be asking: where is the guarantee? It is not good enough to say that we want to put pensions on a firm and definite footing; we must ensure that that happens. When parts of the Bill suggest to any casual reader that that may not be the case, one can understand why people have doubts.

The Bill does not rule out further changes for any number of years, let alone 25 years; nor does it rule out the possibility that some public sector schemes in future might be defined contribution schemes. We have heard lots of praise for defined benefit schemes by hon. Members on both sides of the House, but the Bill opens up the possibility—this is what people have spotted when reading it—that we could see the introduction of a defined contribution scheme.

We must be clear, therefore, on whether we are giving long-term protection. Pensions are a long-term business. The problem for pension provision in this country—whether state, public sector employee or private sector pensions—is that taking the long-term view has proved to be difficult. I will not take lectures from Conservatives, who suggest that the only reason why the private sector moved away from defined benefit schemes, or indeed from providing pensions altogether, is due to a policy of the previous Labour Government, because the Tory Government under Mrs Thatcher destroyed the state earnings-related pension scheme. They did not reform it and say, “Over the longer term this may prove to be quite expensive and we might have to look, for example, at its accrual rates,” which were generous; they destroyed it, in the name of giving people the freedom to make their own choices. I remember exactly what happened. People said, “Oh well, if I don’t have to pay in to this, I won’t pay in to anything.” Twenty or so years later, those people are no doubt approaching retirement with very little pension. That was extremely destructive legislation. In its place, people did not at that stage get defined benefit schemes. Often, they were encouraged to go to insurance companies and other such organisations to take out pensions of a defined contribution type, but those schemes have not provided them with an adequate pension in their upcoming retirements. If we are to have a cross-party consensus—I do not know whether we will—security for the future must be built in to the Bill.

Hon. Members have said warm words about why some people will not be fit to work through to normal retirement age. However, if people are not fit to work, we need flexibility in the Bill—it cannot be left until later. Ministers have criticised previous legislation on a range of issues for being too inflexible, and have argued that that makes it difficult to make changes later. We need flexibility on the pension age. If we lock the normal retirement age for public sector pensioners to the state pension age in the Bill, it will be difficult to have flexibility, even if it proves to be needed on health or other grounds. We do not want people who do not work to that later age claiming benefits and losing a lot of their assets. Nowadays, many people who claim employment and support allowance can do so on a contribution basis for only a year. If they have other income, they will not get means-tested benefits. Many people who end up leaving work early on health grounds lose a great deal of money.

We are concerned about those in the private sector who are in that position. Even with the state pension age as it is, many people, particularly men in the 60 to 65 age group, are not working on health grounds. I therefore urge the Government to look again at that factor. If they are serious about their concern for people who might find it difficult to work in public sector jobs on health grounds, they need to make it possible to relax the rules in future.

Parts of the Bill require changing. It is important that we go ahead and make those changes, and that we do not say, as has been suggested by some Government Members, that the Bill is already perfect.

21:19

[Grahame M. Morris (Easington) (Lab)]

In the limited time available, I wish to highlight a particular concern. The Chief Secretary’s contribution seemed to suggest that this is a done deal, and various coalition Members suggested that this is a wonderful Bill with cross-party consensus. I agree with the grave concerns expressed by my hon. Friends the Members for Blaydon (Mr Anderson), for North Ayrshire and Arran (Katy Clark) and for Hayes and Harlington (John McDonnell), not least about the retrospective powers the Bill will give to the Secretary of State without reference to Parliament. In my view, we should have a sensible negotiation on sector-specific schemes, as alluded to by the hon. Member for Bromley and Chislehurst (Robert Neill).

The deal has not been agreed with the firefighters. The key issue for them is normal pension age, which other hon. Members have mentioned, and the proposed increases to the employees’ pension contributions. The Government’s offer published on 24 May 2012 included a commitment to review both the normal pension age for firefighters and firefighters’ contributions. That review is ongoing, and the issue of normal pension age for firefighters is key.

Clause 9 sets a normal pension age of 60 for firefighters in the proposed pension scheme. The NPA is defined in the Bill as

“the earliest age at which the person is entitled to receive benefits under the scheme (without actuarial adjustment) after leaving the service to which the scheme relates”.

This means that, in effect, the Government propose that firefighters should continue to attend house fires, factory and office fires, car accidents, explosions, civil disturbances, terrorist incidents, floods and other emergencies until they are 60 years of age.

At present, nearly 24,000 or two thirds of firefighters in a pension scheme are members of the firefighters pension scheme—the FPS. The normal pension age for those firefighters is 55, with most able to retire in their early 50s. The Fire Brigades Union believes that the proposal is unworkable for firefighters and will destroy the firefighters pension scheme.

This issue goes to the very nature of firefighting. Firefighters perform a number of activities, individually and in teams, such as running, crawling, climbing, lifting, lowering, carrying and hammering. Common activities include ladder lifting and raising, hose running and connection to water supplies, manipulating and operating portable pumps, rescue and evacuation procedures, and wearing breathing apparatus. Worst-case scenarios involve casualty evacuations, search and rescue, operating heavy search equipment, propping and shoring up buildings—as we saw in my area recently during the floods—and carrying equipment over uneven surfaces, which we saw during the dreadful train disaster on the west coast main line.

The public rightly expect the fire service to operate in inherently dangerous situations to save life and property and to render other assistance. The firefighters pension scheme reflects the nature of the job. Firefighters’ work can be

“physically demanding and require sustained effort for long periods, often in arduous conditions”.

It is a career widely recognised as among the most extreme non-military occupations in modern life. I remind the House that currently less than 1% of our firefighters work beyond the age of 55—for good reason. The national pension age of 60 proposed in Lord Hutton’s pension report is for the Government to consider—he did not recommend it as a figure carved in stone—but no evidence was provided to justify it. The Fire Brigades Union has written to him seeking his supporting evidence for it, but as yet it has received no reply.

There are several issues relating to ongoing reports into the merits of a firefighter NPA beyond 55, but the important point, which the hon. Member for Bromley and Chislehurst, the former fire service Minister, referred to is that fundamentally the role of firefighters has not changed. The introduction of IT and changing working practices have fundamentally changed how Members of Parliament and other professions operate, and perhaps have made our lives easier, but that is not the case for firefighters—at least, I can find no evidence for it.

No evidence has been produced to show how firefighters can maintain their health and fitness in order to work safely until they are 60. There are recognised aged-related declines in physical potential. We all suffer from them—well, perhaps you do not, Mr Deputy Speaker, but the rest of us do—and, because firefighting is a physically challenging profession dealing with safety-critical emergencies, such concerns are a matter of life and death for firefighters and the public. Academic papers generally conclude that only elite athletes can maintain well into their 50s the levels of fitness required by the UK fire and rescue service, and the majority of fire and rescue services already have fitness policies in place.

My hon. Friend the Member for Hayes and Harlington referred to the limited opportunities for redeploying firefighters no longer fit for active service. The FBU recently surveyed every fire and rescue brigade to determine what opportunities there were for redeploying firefighters deemed unfit for operational duty on health grounds. In England, fewer than 100 firefighters are in that position, but that is with an NPA of 55. Out of the 46 English fire and rescue services, only five confirmed that they currently had any redeployment opportunities, while the total number of opportunities currently available in the whole of England amounted to 16 posts—and that, remember, is with the normal pension age at 55, so we can imagine how much greater the demand would be if it was 60. I am concerned that such a scenario will end up damaging an essential public service and costing the public purse more.

I referred to studies that the FBU carried out through YouGov. I do not propose to rehearse those points. However, it also engaged the services of an expert actuary to carry out an assessment. It indicated that a considerable number of firefighters would no longer contribute to the scheme. The public will not thank the House or the Government for advocating a pension scheme based on an unworkable NPA and on sacking hard-working firefighters in the years before they can retire after a lifetime of public service.

Higher NPAs could be more expensive. During previous discussions on firefighters’ pensions, the Government Actuary’s Department confirmed that increasing the NPA from 55 to 60 would lead to more ill-health retirements. As I mentioned, the FBU, seeking to quantify that, engaged a specialist firm of actuarial consultants to assess the potential impact of a rise in ill-health retirement under the existing scheme. The evidence shows the substantial cash-flow problems that such contribution increases would create for the sustainability of the scheme. Indeed, the worst-case scenario is that the new pension scheme will prove unworkable and will crash. There is a danger of a significant number of firefighters opting out of the new pension scheme, thereby making it unsustainable for the rest. I believe the Department for Communities and Local Government estimated the savings from the new arrangements at £33 million a year. However, if more than 7% of firefighters opt out—the true figure may well be 12% or more—the likelihood is that those savings will be wiped out, with an even greater cost to the public purse.

Firefighter pensions are rightly seen as part of a social contract with firefighters—men and women who risk their own well-being throughout long careers to help others. I do not believe that the general public will support breaking this well-established covenant, and neither should the Government.

21:30

[Chris Leslie (Nottingham East) (Lab/Co-op)]

This has been a thorough debate, and I welcome the contributions made by Members from both sides of the Chamber.

We need reforms that enhance the sustainability of pension schemes. In an era of significant demographic change, it is right to reform the pension system to ensure affordability for both employees and employers—which in the case of the public sector is the taxpayer. The sustainability of a decent pension scheme was the focus of several tough decisions made by the previous Labour Administration. The changes made to public service provision when we were in office included raising the pension age from 60 to 65, introducing a “cap and share” approach that would protect Exchequer revenues and share costs between employees and employers, and reforming contribution levels, which rose by 0.4% for teachers and up to 2.5% for NHS staff. The Public Accounts Committee says that those changes would save the taxpayer £67 billion over a 50-year period, so considerable reform took place under the previous Administration.

However, the Government have mishandled subsequent reform. As we have heard from some of my hon. Friends, when the Government were formed in 2012 by the Conservatives with their good friends the Liberal Democrats, instead of building on the changes that we made, they decided to rip them up, thus causing major problems. Their incompetent and shambolic handling of the reform process has also made it much harder to build a consensus on some of the many sensible long-term reforms proposed in my noble Friend Lord Hutton’s report, as my hon. Friend the Member for Blaydon (Mr Anderson) said. We have to find better ways of rebuilding trust and achieving consensus on these vital matters.

The Government are compelling major changes without negotiation in a way that is both crude and unfair. In particular, by unilaterally imposing a steep 3% rise in contributions prior to any negotiations or even the completion of Lord Hutton’s review, and by making a permanent switch in the indexation of future pension income from RPI to CPI, the Government provoked strike action, at a cost to the country and the users of public services. They also provoked deep cynicism among public service workers. These changes were not recommended by Lord Hutton, but were unilaterally introduced, in an unfair and provocative way. The Government’s aggressive approach to this serious and sensitive issue resulted in months of stalemated negotiations. It is a matter of deep regret that the Government have lost the confidence and damaged the morale of hundreds of thousands of public service workers, whose engagement is vital at a time when they are being asked to accept ongoing pay restraint.

Many hon. Members have noted that Lord Hutton produced a thoughtful and comprehensive report on the way forward, using a number of the changes made by the previous Administration as a starting point for negotiations. The document was very useful. He was right to suggest that career average schemes could be fairer than final salary schemes—several hon. Members have made that point—and to say that we should be asking people to work for longer, given the increase in life expectancy. He was also right to stress the need to approach these issues in a careful, balanced way, and to avoid a race to the bottom on pension provision. It is those aspects of Lord Hutton’s report that I wish the Government had looked at more carefully and taken to heart. The Bill is only part of the story, as the unfair increases in contributions and the changes in indexation that have already been imposed do not appear in it.

The Bill contains a series of proposals that we need to consider on their merits. As it consists mainly of enabling legislation that is designed to put new schemes on a clear and equal footing, we will not oppose its Second Reading, but we will hope to address a number of serious concerns in Committee. My hon. Friend the Member for Hayes and Harlington (John McDonnell) has very strong opinions on these matters, which I respect, but I want us to try to find opportunities to improve the Bill in Committee.

All too often when Opposition amendments are tabled in Committee, we see brand new Ministers, with the advice of their officials, opening up their briefing books to find the word “resist” in block capitals, and then simply parroting the notes that have been put into their folders. However, I am sure that that will not be the case with the Economic Secretary to the Treasury, for whom I have great hopes. Let us pray that the Bill’s Committee stage will involve a genuine exchange of views, and give us the opportunity to look into the detail and dig into some of the Bill’s anomalies and, indeed, failures.

Several hon. Members referred to key aspects of the Bill that contain glaring deficiencies. For example, my hon. Friend the Member for Dumfries and Galloway (Mr Brown) and my right hon. Friend the Member for Wentworth and Dearne (John Healey) referred to the retrospectivity involved in the changes to scheme regulations. By allowing scheme regulations to make retrospective changes, the Bill gives the Government the power to reduce benefits that have already been accrued. Many hon. Members will be surprised by that, because most assume that such things are sacrosanct.

My right hon. Friend the Member for Wentworth and Dearne was right to point out that the proposal comes into conflict with the European convention on human rights. It also goes against the central tenet of pension provision, which is that what has been accrued cannot be reduced, because it has already been earned. That is an important principle, because how can public service workers have any security about their future retirement if they know that the Government can retrospectively reduce the benefits that they have already earned at any point? This should not be a partisan matter, but the contract between the employer and employee is important, so I urge the Minister to listen to the genuine concerns that have been raised in the debate.

[Mark Durkan]

Earlier, in response to an intervention that I made, the Chief Secretary to the Treasury tried to say that the retrospective provisions in clause 3 would be used only for technical and incidental purposes. Will my hon. Friend test the Government by tabling an amendment in Committee that would stitch that commitment into the Bill?

[Chris Leslie]

What a splendid idea. If that were the Minister’s purpose, I agree that there would be no reason not to specify it in the Bill. That would normally happen in the case of incidental, supplementary or consequential issues but, of course, many people suspect that that is not what is involved.

I also want to talk about the employer cost cap, which can unilaterally result in staff benefits decreasing or their contributions increasing. What is particularly pernicious is the fact that the Bill exempts such changes from even the meagre protections for consultation with staff under clause 20. That clause deals with the consultations and discussions that should be held with staff, but it explicitly excludes the arrangements for the employer cost cap. Clause 11 provides for the cost cap to be determined entirely by the Treasury with no requirement for parliamentary scrutiny, which means that the Treasury can set the cap at an unreasonable level, or use it to reduce pension benefits unchecked, thereby further undermining the security of schemes for retirement provision.

Other hon. Members raised issues under the assumption that the Government’s commitment to a new defined benefit scheme was enshrined in the Bill. It turns out that the Bill does not, in fact, honour such provision. In fact, clause 7 says that a scheme that may be created is “a defined benefits scheme”, “a defined contributions scheme” or a scheme “of any other description.” The only restriction is that a scheme cannot be a final salary scheme. In other words, the Government are enshrining in the Bill the side of the agreement that benefits the Treasury, but they have left out the corresponding promises that they made to public sector workers.

My right hon. Friend the Member for Wentworth and Dearne talked about the fair deal, as it was known, for public service workers who might be outsourced to a private provider. Following the transfer of employment, they should be entitled to accrue pension benefits that are broadly comparable to those that they would have accrued if they had remained in the public sector scheme. The Government’s promise does not extend beyond the civil service, however. We shall press for a commitment for the benefit of other public sector workers, as there is an anomaly in the Bill that such a commitment is provided only to employees of central Government and not to other public service workers.

I have further anxieties about the Bill. It will tie pension arrangements to the state pension age, but of course that can be changed, with no protection for those approaching retirement. The pegging of the Bill to the state pension age erodes security and certainty about the age at which members of various schemes might receive their pensions. In 2011, the Government gave only eight years’ notice of the state pension age changes, which caused great concern at the time. While we accept that actuarial changes to reflect demographics might need to be made from time to time, the Bill ought to prevent any changes from being made to the normal or deferred pension age for those with 10 or fewer years to go before they are due to retire. It is incredibly important to help people to plan ahead with their pension provision, and the Government should be able to offer a concession to ensure that such planning is possible.

Once upon a time, the Government talked about the Hutton report as something to welcome and take forward, but they have ignored Lord Hutton’s recommendation that the link between the state pension age and the age at which members of public service schemes receive their pensions should be regularly and independently reviewed. I am told that the Government agreed in negotiations that such reviews would take place, but that is not enshrined in the Bill. I will be more than happy to give way to the Chief Secretary so that he can clarify whether he is going to make a concession by providing for such a review in the Bill—[Interruption.] If he does not wish to clarify that, it will be for us to press that point by tabling amendments in Committee. I know that Ministers will keep an open mind on many of these points.

There are serious problems with questions of governance. Lord Hutton made a number of important recommendations about scheme governance, such as on the implementation of the pension policy group to consider major changes to scheme rules, on the inclusion of nominated members and independent members of pension boards, on ensuring that pension boards are responsible for the oversight of financial management, and on the commissioning of a review into how standards of administration in public service pension schemes can be improved. Such governance measures would improve the efficiency of schemes’ administration and would follow some of the best practice for scheme governance in the private sector, but the Government have not enshrined many of these recommendations in the Bill. Those omissions are important, so I hope that Ministers will look at them.

My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) talked about the importance of local government pension schemes—they are indeed schemes apart. We welcome the fact that the LGPS is funded, but as I said in an intervention, if Ministers are closing the LGPS in 2014, albeit opening new ones going forward, they must explain what will happen to the obligations under section 75 rules relating to the crystallisation of some of those debts? Hon. Members may not realise that academies and third sector organisations such as charities are part of the local government pension scheme. Forcing them to crystallise some of those deficit arrangements at the point at which the existing schemes end and the 2014 schemes begin could be financially crippling and cause major crises. The Bill also centralises a great deal of control and makes a great many anti-localist changes. Changes to the local government pension scheme will transfer power from local authorities to Ministers.

The Bill is enabling, but it is only part of a story and it needs significant amendment. We will not oppose its Second Reading, but I hope that the Economic Secretary will genuinely engage himself in the Committee stage, will keep an open mind, and will work with us on improving protections for public service workers as well as the taxpayer.

21:45

[The Economic Secretary to the Treasury (Sajid Javid)]

I thank Members for the lively debate that we have had this evening. In the short time that I have spent as Economic Secretary, I have been helping the Government to try to get three Bills through Parliament, this being the third. In each case, the Opposition have backed off from calling a Division. I am becoming a little concerned: I hope that that does not become a pattern of behaviour.

The Bill represents a milestone in the history of public service pension provision, and I am not surprised that some Members feel strongly about it. Legislation that affects the pension rights of more than 6 million public servants is worthy of serious consideration and scrutiny.

I think that we should bear in mind the economic backdrop to these reforms. During its last year in government, the Labour party burdened the UK with the largest budget deficit since the second world war and the largest in the developed world. It amounted to £159 billion. Labour was borrowing £5,000 a second, which means that it would have borrowed about £90 million between the moment we started today’s debate and now. [Interruption.] The hon. Member for Leeds West (Rachel Reeves) asks how much we are borrowing. That gives me a good opportunity to remind everyone that we have cut the deficit by a quarter. That is what has brought the country economic credibility, and that is what has kept interest rates low and given us the time in which to make serious long-term adjustments to public spending costs.

[Sheila Gilmore]

Will the Minister give way?

[Sajid Javid]

I will in a moment.

Because of their long-term nature, pension reforms will not save money quickly, but they make an essential long-term contribution to the health of public finances. We have heard that today from a number of Conservative Members, including my hon. Friends the Members for Bognor Regis and Littlehampton (Mr Gibb), for Bromley and Chislehurst (Robert Neill), for Monmouth (David T. C. Davies), and for Thurrock (Jackie Doyle-Price). As the Chief Secretary has said, it has been forecast that the Bill will save UK taxpayers £65 billion over the next 50 years.

[Richard Fuller]

My hon. Friend talks of savings for the taxpayer. Will he admit that this was a golden opportunity for us to convert public sector pensions from a “tax as you go” model to a fully funded scheme, saving future taxpayers billions and bringing true fiscal prudence to the way in which public sector pensions are set? Why has my hon. Friend missed that golden opportunity to go further and save future taxpayers more money?

[Sajid Javid]

My hon. Friend raised the same issue in his speech. I think it fair to say that that would have involved an excessive fiscal cost, and would have been much more complex than the approach that we have taken. I hope my hon. Friend accepts that.

In preparing this policy, we have been careful to follow the recommendations set out by the former Labour pensions Minister Lord Hutton in his independent report. We have heard much about trade unions today. The head of the TUC, Brendan Barber, whom I met recently to discuss our reforms, has described the report as a “serious piece of work”. He has taken a very constructive approach to the problems that the Government are trying to address.

While we are on the subject of trade unions—

[Sheila Gilmore]

Will the Minister give way?

[Sajid Javid]

I will give way to the hon. Lady in a moment. If I remember correctly, she said in her speech that she was taken aback by the support for the public sector that she observed among Conservative Members. Well, she had better get used to it. My father was a bus driver. He was a proud trade union member, and he was the first person from whom I learned about the importance of our trade unions, and I will never forget that. That is why, in putting this important piece of legislation together, we have been working with trade unions to win their support, and I am pleased we have got it.

I think the hon. Member for Hayes and Harlington (John McDonnell) said that not a single trade union supported our approach. A majority of trade unions have accepted the deal. Unions representing approximately two thirds of members have accepted our proposed schemes.

[John McDonnell]

The Minister must listen to debates. What I said was that not a single trade union supports this Bill in its current form.

[Sajid Javid]

As I said, unions representing two thirds of union members have accepted our proposed schemes, and the vast majority of unions have taken a very constructive view.

[Sheila Gilmore]

rose—

[Sajid Javid]

I give way to the hon. Lady.

[Sheila Gilmore]

I thank the Minister for giving way. I want to take him back to what he said previously. As usual, he chose to frame his comments in the context of the deficit. His Government came to power saying that they would eradicate the deficit within the term of this Parliament. Now, after two and a half years, he says that we should be grateful that he has reduced it by a quarter. His economic policies are not working.

[Sajid Javid]

I was expecting a lot more than that from the hon. Lady. I am proud that this Government have already cut the deficit her Government left behind by a quarter. That is a significant achievement. The shadow Chief Secretary, the hon. Member for Leeds West, said she was unable to commit to keeping the CPI change we have introduced to public sector pensions beyond the term of this Parliament. According to the Office for Budget Responsibility, that would leave a black hole in the public finances of up to £250 billion in current GDP terms over the next 50 years. I look forward to hearing how the Opposition plan to fill that black hole.

[John Healey]

The Minister spoke warmly about his father and trade unions. Which trade unions support this Bill as it currently stands? Can he name even one?

[Sajid Javid]

Since we received the first interim report from Lord Hutton, we have been in negotiations with trade union representatives from almost all the major trade unions. I am pleased to say that most of them have taken a very constructive approach. As I said, trade unions that represent two thirds of trade union members have accepted the schemes we have put forward.

These reforms are not easy, but they are the right thing to do for the long term because they are in everybody’s interests. We must stop the cost of these pensions spiralling out of control. I shall now turn to some of the issues raised today.

Several Members, including the hon. Members for Banff and Buchan (Dr Whiteford) and for Blaydon (Mr Anderson), mentioned the link between the normal pension age and the state pension age. The reality is that we are all living longer and enjoying healthier lives in retirement. The average 60-year-old is now expected to live 10 years longer than in the 1970s. Pension ages of 60 and 65 were set in times when people spent only a few years in retirement, but that is no longer the case. Some fortunate people spend more years drawing their pension than earning their salary. If everyone is living longer, it is only fair that people work a bit longer, too; otherwise we will be asking those in the private sector to work longer and pay more so that those in the public sector can retire earlier having paid less. We cannot ask those people to pay twice over—once for their own pensions and once for those of public servants.

Let me be clear, however: this Government are not forcing anybody to work for longer. As now, it will remain possible to retire earlier than the normal pension age and draw a reduced pension, subject to any minimum age rules that exist. Of course, any benefits from the current schemes can be assessed in full and reduced at the current pension age for those schemes.

Secondly, I must remind the House that the Government have honoured their commitment to protect the rights of those closest to retirement. The Chief Secretary has made it clear that people who were 10 years or less from their normal pension age on 1 April 2012 will see no change in their pension. The Bill delivers that in clause 16.

[Dr Whiteford]

I take the Minister back to the point he made a moment ago. Will he concede that most people who give up work early do so not through choice but because their health has collapsed or they have developed long-term debilitating conditions that prevent them from doing their job?

[Sajid Javid]

The hon. Lady makes a fair point, which is why in many of the schemes, particularly those where that might be a bigger issue, the rules try to take it into account. I hope that she will welcome that.

I do not have much time left and I wish to address some of the specific points that have been made. Some questions were asked about the cost cap embedded in the Bill. That cap is designed as a backstop only, and it will be triggered in unforeseen circumstances that lead to large potential changes in costs. It ensures that cost increases do not go unchecked again, as they did for decades before the introduction of this Bill.

A number of Opposition Members talked of the “cap and share” arrangement put in place by the previous Government as though it meant that no further changes were required to public sector pensions. Let me remind hon. Members of what Lord Hutton said in his report:

“cap and share cannot take account of the increases in cost of pensions over recent decades because people have been living longer.”

Had we kept the arrangements introduced by the previous Government, these questions would not have been answered.

A number of hon. Members also talked about opt-outs. As my hon. Friend the Member for Bromley and Chislehurst said, and as my hon. Friend the Member for Gloucester (Richard Graham) explained well, the incidence of opt-outs as a result of the changes to payments that have already been introduced has had no discernible effect on the use of these pension schemes, but the Government will continue to monitor opt-outs and take opt-out data fully into account before making any decisions on individual schemes.

A number of Opposition Members also raised the issue of public sector pay. Again, Lord Hutton’s commission examined that, and said that public sector workers, on average, had higher pay if account was taken of different qualifications, ages and experience levels. That was also borne out in a report by the Institute for Fiscal Studies.

We also heard some questions about the devolved parts of this Bill, with the hon. Member for Banff and Buchan asking a number. I will not have time to go into them all, but she is right to say that for parts of the Bill we will require a legislative consent motion, and we hope that that will be forthcoming. For the small parts of pension legislation where there is some flexibility for Scotland, Scotland has the flexibility to do something differently, but that would involve a change.

[Katy Clark]

Will the Minister give way?

[Sajid Javid]

I am afraid I do not have time.

In conclusion, we believe that the changes we have made are generous. They provide a fair settlement and deal with public sector pensions in a manner that is sustainable in the long term. The pensions allowed for under the Bill will continue to be among the best available, providing levels of retirement income that many in the wider economy cannot hope to achieve. There will be tapered protections. Public servants will know how much money they can expect to retire on and will have a greater say in the scheme. I therefore commend the Bill to the House.

Question put, That the Bill be now read a Second time.

21:59

Division 88

Ayes: 276

---

Conservative: 232
Liberal Democrat: 41
Democratic Unionist Party: 2

Noes: 19

---

Labour: 11
Scottish National Party: 5
Social Democratic & Labour Party: 3
Plaid Cymru: 1
Alliance: 1
Green Party: 1

Bill read a Second time.

Business without Debate

Monday 29th October 2012 Commons Chamber

Public Service Pensions Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Public Service Pensions Bill:

Committal

1. The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

2. Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 22 November 2012.

3. The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

4. Proceedings on consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

5. Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

6. Standing Order No. 83B (Programming committees) shall not apply to proceedings on consideration and Third Reading.

Other proceedings

7. Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Greg Hands.)

Question agreed to.

Public Service Pensions Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Public Service Pensions Bill, it is expedient to authorise—

(1) the payment out of money provided by Parliament of—

(a) any expenditure incurred under or by virtue of the Act by a Minister of the Crown, and

(b) any increase attributable to the Act in the sums payable under any other Act out of money so provided, and

(2) the charging on and payment out of the Consolidated Fund of any pension or other sum payable under or by virtue of the Act to or in respect of the judiciary.—(Greg Hands.)

Question agreed to.

Business of the House

Ordered,

That at the sitting on Wednesday 31 October, notwithstanding the provisions of Standing Order No. 16 (Proceedings under an Act or on European Union documents), the Speaker shall put the Questions necessary to dispose of proceedings on the Motion in the name of Greg Clark relating to Multiannual Financial Framework not later than three hours after their commencement or at 7.00 pm, whichever is the earlier; and such Questions shall include the Questions on any Amendments selected by the Speaker which may then be moved.—(Greg Hands.)

Committees

[Mr Speaker]

With the leave of the House, we will take motions 5, 6, 7, 8 and 9 together.

Ordered,

Administration

That Rosie Cooper be discharged from the Administration Committee and Mr Keith Vaz be added.

Communities and Local Government

That George Hollingbery be discharged from the Communities and Local Government Committee and John Stevenson be added.

Culture, Media and Sport

That Damian Collins and Dr Thérèse Coffey be discharged from the Culture, Media and Sport Committee and Angie Bray, Conor Burns and Tracey Crouch be added.

Health

That Dr Daniel Poulter be discharged from the Health Committee and Andrew Percy be added.

Work and Pensions

That Harriett Baldwin, Andrew Bingham, Karen Bradley, Oliver Heald and Brandon Lewis be discharged from the Work and Pensions Committee and Mr Aidan Burley, Jane Ellison, Graham Evans, Nigel Mills and Anne Marie Morris be added.—(Geoffrey-Clifton Brown, on behalf of the Committee of Selection.)

Local Government Finance

Monday 29th October 2012 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Greg Hands.)

22:16

[Graham Jones (Hyndburn) (Lab)]

I wish to raise the issue of 12 district councils that face substantial reductions in the overall funding they receive as a consequence of the proposed reforms to local government finance. The councils affected are Great Yarmouth, Bolsover, Barrow-in-Furness, Hastings, Pendle, Preston, Chesterfield, Copeland, Thanet, Breckland, my own constituency of Hyndburn, and that of my neighbour, the hon. Member for Burnley (Gordon Birtwistle).

I welcome the Minister to his place and congratulate him on his promotion; I hope it is successful. However, its great irony in the context of this debate is that he is now the Minister responsible for making the decision on funding. To add to the irony, his council is the one most affected, with a reduction of £3.167 million—equivalent to a 29.3% reduction in core spending. Another irony is that because my researcher took ill last week, I have had the assistance of a researcher who works for my hon. Friend the Member for Luton South (Gavin Shuker), Lara Norris, who is hoping to be Labour’s prospective parliamentary candidate in the Minister’s seat, Great Yarmouth. I thank her for her out-of-hours commitment.

The nub of the issue is that most of these 12 councils face a reduction in Government support of over 22% despite the Chancellor’s suggestion in the autumn statement of 2010 that no authority will suffer cuts greater than 8.8%. In 2012-13, the transition grant was provided to authorities whose spending power would have decreased by that figure. All 12 authorities are shire districts, and 10 of them are among the most deprived districts in England, according to the English indices of deprivation. Tonight’s debate is intended to make the case that the Government’s proposals on creating a new funding baseline should include the historical amounts that councils have previously received but apparently may now lose.

Local government finance is an area of deep complexity that central Government have struggled with for decades. Numerous weighty tomes have been produced on suggested reforms. This Government and the previous Government have taken steps to try to ensure that the system is fair and flexible, and, most importantly, meets the needs of the vast majority of the citizens of the UK. Over many years, the basis of Government funding to local authorities has been a national needs assessment that attempts to determine how much central funding should go to each local council.

[Gordon Birtwistle (Burnley) (LD)]

The hon. Gentleman is making a very strong case on behalf of the 12 district councils. Without the funding, our cuts in Burnley will be 28.7%. This situation arises from a history of make-up money that the previous Administration gave us over a few years and that has now been rolled up and is needed by the authorities. Does the hon. Gentleman agree that the authorities have done everything they can to balance their books and make themselves more efficient, but they would never be able to manage without that money?

[Graham Jones]

I am grateful to the hon. Gentleman for his comments, which I will address as I go along.

The system deals with more than £20 billion each year and funds more than 400 local councils, police and fire authorities. It is based on a vast array of data capture, statistical calculations, needs assessments, local taxation and an overall limit of the funding available. The Department for Communities and Local Government does its very best to produce a workable and fair system, and by and large the system is able to do that for the majority of councils. I believe that all Members accept that basis for local government financial settlement.

Successive Governments have recognised, however, that this imperfect system does not deliver the money needed at a local level in particular cases, especially those relatively small and few in number district councils that face severe depravation issues. District councils such as mine in Hyndburn and neighbouring councils such as Pendle and the hon. Gentleman’s in Burnley, as well as others further south, such as Great Yarmouth and Hastings on the south coast, are all disadvantaged by the complexities of the current system, which is not able to place the money collected centrally through taxation into local people’s hands in a systematic way.

All Governments have recognised the additional challenges faced by the most economically disadvantaged district councils and have provided specific additional funding to them over many decades in order to correct those deficiencies. This has been done by a series of extra Government grants under a variety of names, most recently by the current Government through the transition grant. This money recognises the additional challenges that these councils face and that the overall national system of sharing funds between all councils is simply not sophisticated enough to deliver what is needed and what is fair to the handful of district councils that face the same challenges as some of the most deprived urban areas in our metropolitan areas.

I do not believe that this is a race to the bottom or a party political issue. My own constituency, Hyndburn, was Conservative-run for 12 years until last year, yet made the empirical case for extra funding repeatedly. Similarly, Great Yarmouth was Conservative-run for 11 years until last year and has been predominantly Conservative since 1973. Pendle has nearly always had a Lib Dem or Conservative-led council. Hastings has had a Labour-run council for only six of the past 40 years and Burnley has been Liberal Democrat-run for 10 of the past 13 years. Pendle, Burnley, Great Yarmouth, Thanet, Breckland and Hastings all have Conservative or Liberal Democrat MPs. Those constituencies are deprived—they range from 11th to 58th out of the 350 or so local authorities—and it is the economic disadvantages that they face that create the depravation.

I know that there is some concern that the previous methodology of providing additional funding through a series of non-mainstream grants year after year to the most deprived areas appears to be a perverse incentive. However, I cannot accept that Liberal Democrat and Conservative councils and councillors have the ambition of creating greater deprivation or that their vision is simply cash handouts from the Treasury. Hyndburn council has an ambition—and this funding will help it to achieve it—to lift Hyndburn out of the 100 most deprived constituencies in the country and to be in a position whereby local circumstances are conducive to a better local economy that will result in greater prosperity for the people it represents. An 8.8% cut in funding is a serious enough financial blow to the ability of these authorities to meet their ambitions for their residents without it being escalated unfairly and, I would add, cruelly to a 20% to 30% cut.

The Government now have the opportunity, through the changes they are making to local government finance, to embody the transitional funding that those councils have previously received into their baseline funding. By taking that simple step of adding the previous transitional grant to the baseline funding for the 12 most deprived councils, the Government can permanently ensure that the previous practice of local government funding based on evidence and need remains. Without that simple step, there is a danger that those councils, which deal with some of the most economically challenged areas of the country, will, because of the quirks of the distribution methodology and the inability to achieve precision, have significantly less resources to deal with their challenges.

The overall level of funding needed to help solve the problem is very small, at about £20 million, but it would make a vast difference to what the councils in question can achieve, as it would represent a significant proportion of what they can spend. In the case of my council, Hyndburn, the money that the public face losing through general taxation—for it is their money, their council—is the equivalent of almost 24% of its net budget.

I worry that the sheer scale of cuts facing the councils in question may force them to make obscene decisions. I am sure the Minister will argue that Conservative and Liberal Democrat councils did not waste money when they were running the authorities I have mentioned. There is no fat to cut from them and there are no efficiencies to be made. They have already made efficiencies for several years, and most notably for the past two years. It is worth adding that as district councils they have very small overheads.

The 20% to 30% cuts to the core funding of those councils cannot be made simply through efficiencies. They can be made only through large cuts and the axing of services. In a survey of readers of the Eastern Daily Press, which covers Great Yarmouth, nearly half the 750 residents asked stated that they would want council tax to be increased by the maximum possible should transitional relief be lost. Some 41% wanted to introduce car parking charges, and when it came to cuts the arts and sports came top of the list. I would not be shocked if obscene decisions were made to meet the cuts, such as collecting rubbish every four weeks or selling off parks that do not have a protective covenant.

It is not perverse to ensure that the 12 district councils in question have the funds that they need to deliver the economic regeneration required in their areas. Adding to their funding the amounts that were previously allocated to them through the transitional relief grant is necessary and fair. That £20 million should be rolled into their baseline funding on a permanent basis under the new arrangements, to ensure that they do not receive a disproportionate cut above the 8.8% ceiling. Let us remember that some councils received no cut at all, or only a small reduction, in the 2010 autumn statement. The councils in question face the maximum reduction in funding and the loss of transitional relief, and asking them to shoulder unfair cuts will have a dramatic impact in areas that remain some of the most challenging in the country.

[Mr Dennis Skinner (Bolsover) (Lab)]

I congratulate my hon. Friend on raising the matter. His argument on behalf of the towns in question is very important. In Bolsover, every single pit was closed within a space of 10 years following the 1984-85 strike, and every single textile mill was closed at the same time. That thrust Bolsover into the few most deprived councils, which is why, like he says, it needs help.

[Graham Jones]

I am grateful to my hon. Friend. His council faces cuts of £1.93 million, the equivalent of 25.9% of its core funding. In Hyndburn, similarly, devastating economic impacts over the decades have made it hard for the constituency to compete economically. The loss of the cotton industry was the start of that. There now needs to be infrastructure investment in such areas, so that they can compete economically with others.

The figure involved is small—£20 million in the context of an overall budget in excess of £20 billion. Finding the £20 million needed from that £20 billion so that we can continue to have a fair settlement for the 12 district councils in question would require an adjustment of only one hundredth of 1%.

22:29

[The Parliamentary Under-Secretary of State for Communities and Local Government (Brandon Lewis)]

I congratulate the hon. Member for Hyndburn (Graham Jones) on securing this debate. He has comprehensively set out the pressures that many of us recognise are facing the 12 local authorities in receipt of the 2012-13 transitional relief, as well as highlighting the potential consequences of removing that funding.

The transition grant was paid in 2011-12 and 2012-13 to local authorities that would otherwise have seen a reduction in revenue spending power of more than 8.8% in either year, based on spending power figures as set out in the provisional 2011-12 settlement. The hon. Gentleman will know from the consultation undertaken last summer, following the local government resource review, that the transition grant was not included in the establishment of the baseline for 2013-14. That is because the grant was only ever intended as a one-off, temporary funding stream. Councils will have realised that from the fact it was referred to as a transition grant.

The hon. Member for Burnley (Gordon Birtwistle) made a strong case for those councils that have done excellent work to reduce their overheads, but that is not the case for all councils. The hon. Member for Hyndburn name-checked and promoted my constituency of Great Yarmouth a number of times in his speech, and I am grateful for that. However, that is a good example of an authority that did a lot of work towards shared services and management structures, right up until this year when the Labour council came in and put an end to that. The council is now trying to find the money that it had pledged not to spend, and it realises that it should have gone ahead with the shared services deal that it stopped, thereby saving itself a huge amount of money. The council now has a transition grant that it has not used for any transitional work. At the moment, it is looking at large potential payoffs for chief executives, which it argues is for the purposes of efficiency. That is not the kind of good work to cut back on costs that the hon. Gentleman highlighted and that has taken place in some local authorities.

[Graham Jones]

I appreciate the Minister giving way given that I took some time for my speech, but this is not a party-political issue. Most of the authorities involved were controlled by the Liberal Democrat or Conservatives over the period in question—as the Minister accepted—and the problem to which he refers in his constituency is perhaps a legacy issue with the chief executive. I would not like to make this a party-political issue. It is much broader and longer than that, and membership of these councils has come from parties on both sides of the Chamber.

[Brandon Lewis]

The hon. Gentleman makes a fair point, but we must be clear that his party stood in an election this year saying that it would not do shared services. It won that election and got the political mandate to do that, but it cannot now expect the taxpayer to cover that political vanity. It has to find those savings; it was a transition grant. If they were doing the right thing, councils will have used those grants to find savings and prepare themselves for when the grant ends, as it was always intended to do.

I am aware of the concerns about possible financial pressures raised by local authorities such as Hyndburn. A number of responses to the Department’s technical consultation on the business rate retention scheme raised queries relating to the funding of a transition grant. Those queries deserve full consideration, and I am sure the hon. Gentleman will understand it when I say that the Government will consider carefully all the responses that the consultation received before finalising the design of any scheme. I have also received a number of letters directly, and met people and heard direct representations from councils. I am meeting another group of councillors —including from Great Yarmouth—over the next few weeks.

Let me be clear about why we are introducing changes to the funding of local government from next April, as that will clearly have a knock-on effect and have an impact on the situation. Allowing local authorities to keep a share of business rates will deliver a radical reform of local government funding. It will put a strong financial incentive for economic growth at the heart of the local government funding system. Currently, councils that succeed in attracting new businesses bear burdens—for example, a bigger bill for street cleaning in order to look after busier roads. Under the current funding system, councils do not see any direct financial benefit from those successes. That is why we are introducing proposals that will enable local authorities to keep a proportion of locally collected rates to help fund the services that they provide. That will create direct links between rates collected and local authority income, thereby increasing the financial incentive for local authorities to drive economic growth.

[Graham Jones]

The Minister makes a good point, but it is almost as if he is re-reading a speech about the new homes bonus. There is no housing market in Hyndburn. We need investment in infrastructure, skills and apprenticeships, and, as he said, we need to clean up the industrial estates and attract business. Without the funding, we do not have the levers to make that an attractive proposition.

[Brandon Lewis]

I will come to the new homes bonus, but I would hope that local authorities have been doing what he suggests with the transition grant to do their part for the local community’s economic growth. The incentive in the business rate scheme is there to drive that and to provide greater flexibility and freedom for local authorities to make decisions and manage their budgets efficiently.

As the hon. Gentleman suggested in his speech, for too long, the finance system has encouraged a sense of dependency. Councils have competed with one another in a race to the bottom to present themselves as being more deprived than their neighbours to secure more handouts from central Government. In place of that system, this Government have set out reforms that could deliver a £10 billion boost to the wider economy in the period up to 2020. Councils will have a key role in growing their local economy through the planning system, local transport investment and other levers of which they wish to take advantage. The business rates retention scheme will give councils every possible incentive to create the conditions for local growth.

The new homes bonus, which the hon. Gentleman mentioned, is another way in which local authorities can increase the funding they receive. We have established the bonus as a powerful, simple, transparent and permanent incentive for local communities to increase their aspirations for housing growth. In 2012-13, only the second year of the scheme, we will pay out a total of nearly £432 million to local authorities in England, with an average payment of £1.2 million. The figures will be higher in 2013-14, because they will include the year 3 allocations.

[Graham Jones]

The Minister makes a powerful argument for some parts of the country, but not for the 12 authorities. Does he agree that it is not in local authorities’ gift to purchase houses? It is a question of whether there is demand in the market. Without the infrastructure and the attraction, and the jobs and skills, there is no housing market. The new homes bonus is therefore perverse in those 12 areas.

[Brandon Lewis]

The hon. Gentleman tempts me into creating a fictitious market in any given area. The reforms, including the new homes bonus and business rate retention, are part of a package. No one magic wand will fix every problem. The package will encourage local authorities to develop their infrastructure and economy. The business rate retention could bring about economic growth, and therefore there will be demand for building the right houses in the right areas, which will mean that local authorities can benefit from the new homes bonus.

For each new build, conversion, long-term empty home returned to use or new Traveller’s pitch, a council receives a sum equivalent to the national average council tax for that band. For one band D home, the council would receive £1,439 each year for six years, which comes to more than £8,500. There is also a premium each year for every additional affordable home. I therefore strongly encourage local authorities to take advantage of the opportunities that the new homes bonus provides, not only to improve the supply of housing, but to help increase their income.

Let me return to the business rates retention scheme. The detail of our proposals will enable local government as a whole to keep 50% of the business rates. Some have said that local authorities should keep all business rates, which is not realistic. We have been clear from the beginning that, within a business rates retention scheme, some business rates income would need to be retained by central Government so that the scheme operates within the existing spending control totals.

A 50:50 split means that, although central Government benefit from a share in growth, they also share any risks with local government. Crucially, we have made it clear that all the money will be returned to the local government sector in the form of grants. We have proposed that the local share of the business rates will be split between lower and upper-tier authorities on an 80:20 basis, with 80% going to the districts. That ensures that the strongest incentive is placed on the tier responsible for the planning decisions that are often the key driver for growth.

Two-tier councils also have a greater degree of protection. All two-tier county councils will be top-up authorities. Top-up amounts will be uprated by the retail prices index, thereby ensuring that counties benefit from more protection and less volatility in their budgets. That will help them to maintain their service levels while providing them with the opportunity to benefit from a proportion of growth in their area. The scheme will also include further protections, in the form of a safety net, for those cases where business rate income falls by a certain amount. This will help to ensure that support is available to local authorities who suffer from significant shocks to their incomes, such as the closure of a major local employer—as has happened in the past, as the hon. Gentleman has said.

We have consulted on the appropriate level at which this support should be available. We have proposed that it should kick in at a point between 7.5% and 10%—a range that reflects the need to balance protection, incentive and affordability. The safety net is to be funded by local authorities through a levy on those authorities benefiting from disproportionate growth. The levy arrangements will ensure that adequate levels of funding are available for the safety net, but it will also operate in such a way as to ensure that there is no absolute cap on growth—the more a local authority grows its business rates revenues, the more it will benefit from growth.

Our proposals for business rate retention will provide a real incentive for all local authorities to be proactive in taking decisions that will help to deliver growth and jobs in their areas and to receive a financial reward for those efforts. We recognise, of course, that different areas will have different opportunities, as the hon. Gentleman pointed out, and different challenges. We are confident that these proposals have the right balance of incentive and support.

I hope that my remarks have highlighted the opportunities that our new funding reforms will offer to local authorities through the business rate retention scheme, as well as some of the other opportunities available, such as the new homes bonus. I appreciate that we are also considering the response to this summer’s technical consultation, and we are preparing for the settlement we will put forward in December. Let me be clear that at the moment it is too soon to offer any certainty on decisions about transitional funding. However, as I said at the beginning, I am actively aware of the situation—with my own authority being involved, how could I not be?—and I am actively considering all the views that we have received from across the piece for the need for transitional relief funding for 2013-14. I will be able to inform the House further on that issue should we be able to develop any proposals in December.

Question put and agreed to.

22:41

House adjourned.