Public Service Pensions Bill

Andrea Leadsom Excerpts

Tuesday 4th December 2012 Commons Chamber

[Sajid Javid]

My hon. Friend made passionate contributions in Committee, where he made that same point. I will say the same thing in reply. The Bill and other changes we have made to public sector pensions deliver significant cost savings for the Government and future taxpayers, but maintain our commitment to generous, fair pensions that are sustainable in the long term for people who serve in the public sector.

The Bill is not simply about bringing costs under control and ensuring that schemes are sustainable. We are also seeking to address issues of unfairness that exist within the current scheme designs.

[Andrea Leadsom (South Northamptonshire) (Con)]

The Minister mentions unfairness. Does he agree that one of the greatest unfairnesses was when the previous Government got rid of advance corporation tax relief on pension funds, which destroyed the private sector pensions industry and left many private sector workers much worse off than this excellent Bill?

[Sajid Javid]

My hon. Friend is absolutely right—the change to which she refers had a dramatically negative impact on private sector pensions.

The benefit structure of many existing schemes has led to benefits being disproportionately directed towards higher earners.

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[Chris Leslie]

In an era of increasing life expectancy, it is right and necessary to reform public service pensions in order to ensure that they are affordable and sustainable in the long term. That is why Labour made significant changes to public service provisions when in office, including through increasing the normal pension age from 60 to 65, introducing a cap-and-share mechanism to protect taxpayers from increasing costs and reforming contribution levels. According to the Public Accounts Committee, those reforms, implemented by the previous Government, will save the taxpayer £67 billion over 50 years.

Unfortunately, instead of building on those reforms, the Government ripped up many of them, making sensible reform harder: they have imposed, without negotiation, a steep 3% rise in contributions and a permanent switch in the indexation of future pension income from RPI to CPI. Announcing those changes before the Hutton report on pensions was even published was unfair and needlessly provocative. Those changes are not in the Bill, however, so we did not have a chance to address them in amendments and in Committee and on Report.

Conversely, the main aims of the Hutton reforms in the Bill are ones with which we broadly agree, most notably the shift from final salary to career average defined benefit schemes, the increase in pension age to take account of increasing longevity, and a mechanism to ensure that increasing costs are contained within schemes and do not fall squarely on the taxpayer. It is important for the sustainability of public service pension schemes that those changes are implemented properly, which is why we do not wish to oppose the Bill this evening. However, as we said on Second Reading, we have serious concerns about the detail of the Bill. We said that we hoped the Government would work constructively with us in Committee and the other place to improve it. There was some movement from the Government, but in our view it was not sufficient.

[Andrea Leadsom]

Can the hon. Gentleman therefore confirm that his party would not change the future pensions link from CPI back to RPI?

[Chris Leslie]

I do not think it would be sensible to make a permanent “no review” announcement when it comes to indexation, particularly when some of the projections have been showing that the future burden on the taxpayer might not be as great as the Government have made out. For the time being, we have not been able to make propositions on that, because the scope of the Bill did not allow it.

However, we proposed amendments in a number of other crucial areas in seeking to improve the Bill, focusing particularly on the questions of trust and confidence. We sought to improve the Government’s proposals in a number of ways, most notably in implementing the fair deal—a commitment that was integral to the agreements that had been reached. I am glad that the Minister had the opportunity to correct his words on the local government pension scheme aspect of that, because there were some ripples emanating through the Chamber from some of the previous words he uttered. There is also the question of the Government’s ability to reduce accrued benefits retrospectively. They should have been stronger on that and firmer commitments should have been given as guarantees on replacing defined benefit schemes with new career average defined benefit schemes.

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[Chris Leslie]

We did not table any amendments on judicial pensions. I suspect that the question of relative taxpayer support for private pensions might come up tomorrow in the autumn statement. I am intrigued that hon. Members have castigated previous Governments for changes that have affected private sector schemes. It will be interesting to see what the effect will be on the sustainability of some of those pension pots, but we can only speculate at this stage and see what happens. However, this question is certainly of the moment. It is only a matter of hours before the Chancellor stands up and—undoubtedly—makes his announcement on pensions tax relief. We will see what happens at that point, but we felt that some significant proposals needed to be made.

[Andrea Leadsom]

rose—

[Chris Leslie]

I am conscious of the time. I would be grateful if the hon. Lady let me conclude my remarks.

It was argued that we must not bind future Governments by amending the Bill. That was not a very strong argument, given that legislation can be introduced at any time. We also felt that safeguards were needed to address people’s concerns about the effective sequestration of their deferred wages—their pension savings—by retrospective changes. At no point did we propose amendments that contradicted the Hutton principles. We sought to be constructive, and I am grateful that the Minister recognised the constructive changes that we proposed.

We had some significant victories, and I am grateful to the Minister for at least keeping an open mind on some of these points. In particular, I am pleased that we managed to get a guarantee—it is due in the other place—that future members of defined benefit schemes will receive an annual benefits statement setting out full information on changes to their pensions. That is a big step forward, and I am grateful that the Minister moved on that point.

We will want to come back to some of those questions in the other place, particularly those on scheme capability reviews and the working longer review in the NHS, and to ask why the Government are irrationally not letting those arrangements come to fruition in the drafting of legislation. I am still not fully convinced that the issue of the closure of local government pension schemes has been adequately dealt with, but I know that the Minister has said that he is happy to look into it.

Many colleagues will naturally have serious doubts about the Bill. That is entirely understandable, given the differences between it and the Hutton proposals. However, pensions reform is important both for the taxpayer and for scheme members themselves. Our hope is that the other place will see the strength of our arguments and make the changes that this House has been unable to secure. We hope that their lordships will appreciate that only through changes to the Bill will we achieve successful and sustainable pension reform. It is with that hope in mind that we shall not oppose the Bill at this stage, but we hope for further improvements in the other place.

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[Andrea Leadsom]

I welcome this Bill for three particular reasons. First, I welcome the move to career average rather than final salary, which is absolutely key. Secondly, linking eligibility to normal pension age to the state pension age is very important. Thirdly, transitional relief for people with 10 years to go before they retire is vital. I commend the Government for their work.

I have two further points. First, it is a shocking indictment of the last Government that in 1995 there were 4.1 million public sector workers in a defined benefit scheme, while in 2011 there were 5.3 million—an increase of more than a million public sector workers on defined benefit schemes. Surely it is the legacy of the last Government’s spending money we simply could not afford that has put us in a position where we have had severely to curtail some of the benefits that public sector workers enjoyed in the past.

Finally, 79% of workers in the public sector have defined benefit pensions as against 9.4% in the private sector. Again, it is a complete indictment of the last Government that they have taken what was one of the best private sector pension arrangements in Europe and made it one of the worst. It will be a great pity if the Opposition do not welcome the attempt in this Bill to sort out the mess that they left us.