Public Service Pensions Bill

Debate between Richard Graham and Chris Leslie

Monday 29th October 2012 Commons Chamber

[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.