Public Sector Pensions

Baroness Clark of Kilwinning Excerpts

Thursday 8th December 2011 Commons Chamber

[David Mundell]

I know the hon. Gentleman does not want Scotland to remain in the United Kingdom—that is his policy—but he and his Government have the ability to make this choice, as the hon. Member for Dundee West (Jim McGovern) set out, yet they have chosen not to do so.

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

We should look at what the SNP has actually done in this respect. It has responsibility for the Scottish Public Pensions Agency, whose submissions to the Hutton review were far worse than what the coalition Government propose.

[David Mundell]

I will not presume that the hon. Lady was complimenting the Government, but she is correct in that all four of the suggestions the Scottish Government made to the Hutton inquiry would certainly leave Scottish public sector workers no better off than under the UK Government proposals, and a number of those suggestions would leave them distinctly worse off.

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[David Mundell]

I absolutely agree. The speech from the hon. Member for Arfon seemed to me, particularly on Wales, to be very much an argument for the status quo.

[Katy Clark]

We already know that public sector pensions are, on average, less than £5,600 a year, so if they are going to be even lower what will people live on—state benefits?

[David Mundell]

There is no suggestion that those on the lowest pay will receive lower state pensions. The Labour party has been very keen to engage in such scaremongering, but the Government’s proposals specifically protect those on the lowest earnings of below £15,000.

Before I finish, I want to turn to some of the specifics about Scotland.

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[Guto Bebb]

I thank my hon. Friend for the clarity of his point.

The proposal is a reasonable one. We are aiming to protect those on lower pay. Some in my constituency of Aberconwy will be astounded by the figure given by the hon. Member for Glasgow North East (Mr Bain)—he stated that only 16% of public sector workers earn less than £15,000. The average wage in my constituency is £23,000 and the average private sector wage in Wales is £21,000, so there will be a question about whether the proposal is unfair.

That reminds me of the comments made on the RPI to CPI change. The change was illustrated with the example of a nurse or dinner lady who earns £8,000 a year. I recently did a call-in programme on Radio Cymru. A headmaster from the constituency of the hon. Member for Arfon (Hywel Williams), as it happens, called in and stated that the change from RPI to CPI was extremely unfair because it would cost him £200,000. The average private sector pension pot is £30,000. Hon. Members can imagine that the response of the general public when they heard that comment was pretty strong. The changes that the Government are trying to make are changes for the long-term, to try to ensure that we have a system that works.

It is imperative that hon. Members mention some of the e-mails that they have received from the trade union movement. I received one this morning from the Public and Commercial Services Union stating that the claim that the coalition is trying to protect the lower paid is not sustainable. The PCS directs us to a comment by Cathy Newman, who says that it is “fanciful” for the coalition Government to try to claim that they are protecting the lower paid. I am disappointed with that comment, but then the PCS does not bother to remind us of other comments that Cathy Newman has made. She also says:

“Having said that though, public sector pensions, even after these reforms, will still be the envy of many a worker in private enterprise.”

That is the key point in Wales. We are looking at how we can ensure that the people who benefit from extremely good pensions contribute a fair amount towards them. For example, will increasing a teacher’s pension contribution from 6% to 9% have an impact on their take-home pay? Yes, it will—I would be the first to acknowledge that—but it is important to state that to end up with a pension similar to what will be available to a teacher as a result of the changes, somebody working in the private sector would have to contribute 35% or 38% of their take-home pay.

[Katy Clark]

Will the hon. Gentleman give way?

[Guto Bebb]

No, I will not take another intervention.

That disparity will still exist because the coalition Government value public sector workers. That is not to say that we do not value people who work in the private sector, but we acknowledge the importance of the public sector, we want to protect it and we want to bring in changes that are sustainable, fair to taxpayers and fair to the public sector. I ask any Opposition Member to tell me what is unfair about asking a teacher to contribute 9% of salary for a pension that a comparable worker in the private sector would have to contribute 35% to achieve. I ask any Opposition Member to stand up and tell me why that is fair. I see nothing.

Finally, I will turn to the Welsh context—

[Katy Clark]

rose—

[Guto Bebb]

I want to get a few points in about Wales to finish.

In this debate, Plaid Cymru Members have said that they are standing up for their electorate and their workers. I applaud them for that. Of course people need to stand up for those who elect them to this place, but it is also important to point out that the constituency of the parliamentary leader of Plaid Cymru has the highest rate of self-employed people in the United Kingdom. What has Plaid said about supporting the pension provision of those individuals?

I accept that Wales has a high percentage of people working in the public sector, but in many constituencies the majority of people are striving to earn a living in the private sector. When we have a limited amount of money, the Government have a responsibility to all taxpayers to ensure that we have a system of pension provision that is fair to all. It is simply not sustainable to expect the three quarters of the people in Wales who work in the private sector or who are self-employed—many of whom live in the constituencies of Plaid Cymru Members—to pay through their taxes for the pensions of those who will retire on better pensions.

These changes will ensure that the public sector is protected, but they will share the burden in a slightly fairer way than at the moment, and I applaud the coalition for bringing forward a long-term change with courage and commitment.

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

I strongly welcome the chance to debate this topic. I will focus very much on the Government, rather than on what the SNP Administration in Edinburgh are going to do, because the focus has to be on making sure that we have national schemes that ensure that everybody in this country has a decent pension. The negotiations are happening down here, but the historical reality has been that the Scottish schemes have simply led to a mirroring of whatever has been decided in the national discussions. So people in Scotland are looking closely at what the coalition Government are doing. It would be very unfortunate to do anything other than maximise the pressure on this Government at the moment.

When we have debates on this issue, Government Members all too often raise the appalling situation of private sector pensions in this country. We do need to treat that as a priority, because the loss of manufacturing, the rise of low-paid and insecure jobs in the private sector, and the decision by firms to take payment holidays and by employers to fail to invest in private pensions schemes when times were good have led to so many private schemes coming to an end. As we have already heard, however, on average public sector pensions in this country give people only up to about £5,600 a year. The reality is that those people will not be able to live on that kind of income in retirement.

I believe the debate we need to have is about how to set up schemes in both the private and public sector that ensure we are saving sufficiently both individually and collectively to ensure a decent income in retirement. I am therefore concerned that the Government are moving away from the decision on auto-enrolment, which will happen in May 2015 rather than April 2014. The Government’s proposals for public sector pensions mean that people will have to pay more with the 3.2% increase, will have to work longer and will get a worse pension at the end of it.

We have heard a lot about teachers from both the Minister and from the hon. Member for Aberconwy (Guto Bebb) and teachers are a good example. We hear so much about the deficit but this debate is not about that; it is about the long-term arrangements that must be put in place. The Government’s proposals are not about the sustainability of the schemes. We must ensure that both employers in the public sector and individuals are putting enough in. The proposals for teachers mean that compared with the current scheme, which costs 20.5% of pay with the employer paying 14.1% and the individual 6.2%, the employer’s contribution would be reduced to 10.5%. We are seeing that throughout the proposals put on the table by the Government.

The Government are using the economic situation to cut their contribution, as an employer, to public sector pensions while at the same time increasing the contributions of the worker. Many people will opt out of pension schemes if the proposals go ahead. Let us ensure that over the coming weeks we put pressure on the Government so that they seriously consider public sector pensions and make proposals that will lead to pensions that people can live on.