Public Service Pensions

Baroness O'Cathain Excerpts

Tuesday 20th December 2011 Lords Chamber

[Lord Lea of Crondall]

I echo the opening remark of the noble Baroness, Lady Kramer, in referring to the constructive nature of the recent negotiations, albeit at the eleventh hour. I hope that the Minister will take care in saying who represents 5 per cent of what. One minute he is talking about the total public sector negotiation and the next minute he picks out a statistic which is to do with the Civil Service. We ought to be very careful not to pick and mix in that particular way.

I hope that the Minister will comment on a general point: namely, now that we have reached where we have got to, it would be very useful for all of us to discourage people from going in for rhetoric such as many Members of the Minister’s party, both in this House and in the Commons, have indulged in. Their slogan can be summarised as, “Private sector employment is productive; public sector employment is unproductive”. It is not just the Daily Mail, the Daily Express, the Daily Telegraph and the Murdoch newspapers that say that—it is members of his own party in this House and the other House. I do not mean that anyone in this House tonight has said that, but it has been said on other occasions. Such comments are quite ridiculous. People will think that nurses and teachers are unproductive, and that hedge fund managers and second-hand car dealers are productive. Is it not time that, in a modern social democracy or mixed capitalist economy—I do not mind what you call it—we agreed that that is a ludicrous way of dividing people up?

That leads to the point that we must get on with improving pension provision in the private sector. The Adair Turner report on auto-enrolment has been stymied to some extent. Is it not important that we do not have a race for the bottom as regards pensions? I am glad that we have drawn back from that to some extent.

Am I not right in thinking that CPI has been selected instead of RPI because CPI has been growing more slowly in recent years? Would the Government have preferred CPI to RPI if it had been growing faster? I have been around for long enough to know that that is exactly how the Treasury thinks. I ask the Minister whether he agrees with me that there is a position in the final set of correspondence which refers to CPI plus 1.5 per cent or 1.6 per cent, and that that is the rationale for some of the arithmetic, which—understandably, given the Government’s predicament—is based on getting more in for the Treasury, hence the 3 per cent take-away.

Finally, is this not also the time to say, given the huge growth in pension pots for the top 0.1 per cent of people—which is scandalous and is getting up the nose of everyone in the country, apart from that 0.1 per cent—that the idea that we are all in this together is a bad joke, unless that issue is also addressed?

[Baroness O'Cathain]

My Lords—

[Lord Sassoon]

I am sorry—I thought there was a new and welcome procedure whereby Back-Benchers could answer questions on my behalf. That is an excellent idea, but it might require discussion before we do something so radical.

I should first be clear about the interesting analysis of the noble Lord, Lord Lea of Crondall, on how we have got to this point and what else we should be doing. When he talks about an eleventh-hour deal, it is worth reminding the House that the final deal was put on the table by the Government on 2 November. The agreement today is entirely in line with what was put on the table then, well ahead of the strike action on 30 November.

The question around CPI and RPI broadly relates to the nature of the deal whereby individual negotiations were carried out, scheme by scheme, around the level of benefit accrual and indexation rates. That is why we allowed considerable flexibility for the unions to vary the balance of factors within the total cost caps that were set. That is why a variety of different approaches was taken. There was considerable flexibility within the overall parameters set by the Treasury.

As to the question of what people in the private sector should be doing, perhaps we had better stick to public sector pensions, which are very important and should be what we are talking about.

[Baroness O'Cathain]

I must apologise to my noble friend for jumping up. It is just that I was slightly goaded by the noble Lord, Lord Lea of Crondall. I want to come back to him about the CPI versus RPI issue, because I have a pretty long memory, too. In the early stages of the Monetary Policy Committee and the Labour Government, there were endless discussions every month about the RPI. One of the reasons that the statisticians wanted to move to the CPI was so that they could get month-by-month comparisons with mainland Europe—the EU. That is exactly why it happened, and then it all started to go wrong. We should have a discussion off the Floor of the House and go to the Library to look at all that. It was fascinating stuff, and an enormous number of people wanted to go for the CPI, as opposed to the RPI.

[Lord Lea of Crondall]

I should be very glad to have such a discussion, but I have an even longer memory. For many years, I represented the TUC on the Retail Prices Index Advisory Committee, which was abolished by the Treasury when we made a recommendation that it did not like. The recommendation in about 1970 was that we should stick with the RPI for general purposes because—