Parliamentary Contributory Pension Fund

Bob Russell Excerpts

Monday 17th October 2011 Commons Chamber

[Sir George Young]

Should the House agree to this motion, we will have completed the transition to a wholly independent system for setting and administering MPs’ remuneration. The first and most pressing task was to establish a transparent new expenses scheme in time for the beginning of this Parliament. That was achieved, albeit not without some issues about the operation of the scheme, which have been aired on other occasions. Since May this year, responsibility for setting MPs’ pay has also rested with the Independent Parliamentary Standards Authority; under the relevant legislation, MPs will not vote on their own pay again. Today’s debate on MPs’ pensions represents the final piece of the jigsaw. Once the powers in relation to pensions have been transferred to IPSA, it will have responsibility for looking in the round at the whole remuneration package for Members of Parliament.

The motion before us should not come as a surprise to the House.

[Bob Russell (Colchester) (LD)]

The right hon. Gentleman says this is the last piece of the IPSA jigsaw. Is he satisfied that all the other pieces of the jigsaw are perfectly placed?

[Sir George Young]

I know that my hon. Friend is not so satisfied. He will know that a Committee of the House is looking into the legislation and that there is a committee that liaises between this House and IPSA. I think that the latter is aware of his views on the improvements that need to be made to the scheme. This motion relates not to the allowances that, I believe, are his preoccupation but to pensions.

Before we rose for the summer recess, I set out the Government’s approach to hon. Members’ pensions in a written ministerial statement, and I also published the motion we are debating. Should the House agree to support the motion, we will have protected the principle that MPs’ remuneration should be independently assessed and determined and demonstrated to our constituents that we understand that Parliament must not be insulated from the fiscal circumstances affecting the rest of the country.

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[Sir George Young]

Indeed; the Government welcomed Lord Hutton’s report, including the interim report, the final report and the budget. He made it clear that he wanted to retain a defined benefit scheme, and on that basis negotiations are continuing. IPSA will be mindful of that recommendation by Hutton—and, indeed, of the hon. Gentleman’s views.

The Constitutional Reform and Governance Act already provides full protection for pension benefits already earned, including a link to the salary on leaving the scheme, so any new scheme would apply only to future service. Furthermore, the legislation includes comprehensive provisions requiring IPSA to consult widely before making any changes to parliamentary pensions.

[Bob Russell]

rose—

[Sir George Young]

I think I had better give way first to the hon. Member for Blaydon (Mr Anderson).

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[Ms Angela Eagle (Wallasey) (Lab)]

As the Leader of the House says, the motion seeks to deal with some unfinished business from the previous Parliament. The order that we are debating is necessary to commence the provisions of section 40 and schedule 6 of the Constitutional Reform and Governance Act 2010. Those parts of the Act transfer responsibility for hon. Members’ pensions to the Independent Parliamentary Standards Authority. That legislation was passed, with all-party agreement, by the previous Government. It gained Royal Assent in April last year, just before the general election, and there was a general feeling that it was wrong for existing arrangements to be left unchanged, and that the independent determination of salaries should extend to cover pay and pensions. Having voted for the primary legislation that brings about that switch of responsibilities, we Labour Members will not oppose the motion today.

The order will change the current arrangements, under which the Leader of the House—in effect, the Government —determines MPs’ pension arrangements through regulations. Following the 2009 report by the Committee on Standards in Public Life, the previous Government accepted in principle that the independent regulator should be given statutory responsibility for MPs’ pay and pensions. While that change was being legislated for, there was, quite properly, input from the trustees of the parliamentary contributory pension fund, which ensured that Members’ accrued rights had protection consistent with that provided to members of other occupational pension schemes. There was also agreement to amendments that ensured that the parliamentary contributory pension fund would continue to be a trustee-based scheme with appropriate member representation, and that required IPSA to obtain trustees’ consent before making changes in the administration of the scheme.

[Bob Russell]

The hon. Lady rightly draws attention to the history that has led to our discussing the motion today, and to what happened in the previous Parliament. After 18 months’ experience of IPSA, does she have total confidence in that organisation’s ability to deliver our pensions?

[Ms Eagle]

We all have our IPSA stories, and we could probably dine out on them—with each other, and we would not claim it back. We all have stories about some of the absurdities of the scheme, especially at the beginning, when it was bedding in. There has been considerable progress, and I would like further progress to be made. There are ongoing ways in which we in this House can bring to light any remaining absurdities, and I hope that we can continue to iron them out. The principle of independent determination is right. IPSA seems as good a body as any—not withstanding the chaos at its beginning—to undertake all that responsibility. Clearly, we will have to wait and see whether my confidence will be rewarded, but I am willing to give IPSA a try. I know that the hon. Gentleman is somewhat more sceptical about the authority than I am.

[Ms Eagle]

I will come on to make a few short, in-order remarks about that aspect of our debate, but I think that most Members of the House would agree that we cannot expect to be treated differently from other public sector workers; that is a principle that most of us would share.

I was talking about appropriate Member representation on the trustee board, and the fact that IPSA, under the primary legislation and the order, will have to obtain the trustees’ consent before making changes to the administration of the scheme or the management of the scheme’s assets. Again—this is an important principle—it is entirely in keeping with the usual practice of other funded schemes. It is important that we maintain that parallel.

The order will change the legal structure of the parliamentary contributory pension fund. It will become an IPSA scheme and the power to amend it will be vested in IPSA rather than in the Government via regulations tabled by the Leader of the House, so the Leader of the House is giving away powers in the order. He seems to be quite happy about that. IPSA will acquire the duty to do all this, rather than the current Leader of the House.

The primary legislation ensures that there is a requirement, though, for IPSA to consult interested parties prior to determining benefits or contributions in future. In the primary legislation interested parties include the Speaker, the trustees of the scheme, the Senior Salaries Review Body, the Government, and in many ways the most important organisation in all pension deliberations—the Government Actuary’s Department. This is all entirely sensible, and I look forward to IPSA undertaking this work in due course.

[Bob Russell]

It is incapable.

[Ms Eagle]

Time will tell. If IPSA proves incapable, which I doubt, I suspect we will be back here quite quickly, dealing with the consequences. I do not anticipate that we will be in that position.

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[Ms Eagle]

The question from the right hon. Member for Wokingham (Mr Redwood) that I was answering was about the duties of the trustees. My understanding, from reading the primary legislation, is that it does not impact in any differential way on the legal duties of trustees.

[Bob Russell]

On a point of order, Mr Speaker. If those on the two Front Benches cannot agree on a matter of such fundamental importance as this, how on earth can we proceed?

[Mr Speaker]

That is definitively not a point of order. It is a point of obvious and intense frustration.

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

As the chairman of the pension fund, I have had many meetings with the Leader of the House and with the chairman of IPSA. As a consequence of my concerns and those that other trustees had expressed, I wrote to every Member of Parliament. They should have received the letter on Thursday by e-mail and over the weekend by post. I presume that, as a consequence, much that I would have said does not need to be said, but I can assure all Members and former Members that I and the trustees will take on board any observations and questions that they may have.

I would argue that we are where we are today as a consequence of successive Governments, since time immemorial, interfering with MPs’ conditions of service. That is the whole reason for this debate today and why IPSA was introduced. On that basis, it seems strange that even at this late stage, the Government continue to think they can interfere with our conditions of service by putting motions such as this before the House. I reject their position and do not think it is right.

I believe that, having been given its new responsibility, IPSA should be fully independent. It is proving itself to be so in the discussions that I have with it. It has assured the board of trustees that it will operate free of Government interference on this subject and on conditions of service across the board.

[Bob Russell]

Will the hon. Gentleman clarify precisely what he has been promised and who promised it to him? Is it in writing?

[Mr Donohoe]

What has been suggested is in the minutes of the board of trustees, and it is open to the hon. Gentleman to ask for a copy of them. He will see the discussions that have taken place.

[Bob Russell]

rose—

[Mr Donohoe]

I do not have time to give way again, because I am conscious of the fact that so many Members want to intervene or make speeches. Rather than reading out the minutes of meetings, if the hon. Gentleman writes to me I will furnish him with that information.

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[Bob Russell (Colchester) (LD)]

My perception of IPSA over the past 18 months is such that I have zero confidence in it. Although the amendment’s wording is not perfect, it offers me the only opportunity I will have to put that perception on the record, which I can do by voting against the motion. I fear that in the fullness of time Members will rue the day they handed their pensions to IPSA.

However, if it were not for my experience of the last 18 months, which the vast majority of Members share, I would be voting for the motion, as I recognise the importance of our pension scheme and salaries being independent. My reason for not voting for the motion is purely lack of faith in the competence of IPSA. I want to stress, however, that I am not talking about its hard-working staff. They are up the same creek as us; they are in a different canoe, as it were, but, in common with us, they have no paddle.

My criticism is entirely of the IPSA board. One only has to read the minutes of its meetings to realise that it has in mind not user-friendliness in respect of Members of Parliament but, rather, hostility. I serve on the Speaker’s Committee for the Independent Parliamentary Standards Authority and, interestingly, in the 18 months since it was established we have yet to meet the full IPSA board. That is astonishing.

I have concerns about the part of the motion that the amendment would delete. The motion says that following on from the work of the Independent Public Service Pensions Commission, IPSA will draw up a new scheme

“which is informed by the Commission’s findings and their subsequent application to other public service pension schemes”.

I venture that we could latch on to some such schemes without IPSA being involved in any shape or form.

I appreciate that many other Members wish to speak. I have put my concerns on the record and stressed that I am not criticising IPSA staff. My criticisms are purely of the policies of the IPSA board. I conclude by noting that the National Audit Office has issued a report that is not exactly flattering to IPSA. It says it does not represent value for money and that it has brought in a scheme in which 38% of all claims cost more to administer than the claim itself. It has also found that 91% of Members of this House are now subsidising their work and that a large part of the reason for that is the systems introduced by IPSA.

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[Mr Deputy Speaker (Mr Lindsay Hoyle)]

The question is as on the Order Paper. As many as are of that opinion say Aye—[Hon. Members: “Aye”]—to the contrary No—

[Bob Russell]

Not content.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

The Ayes have it, the Ayes have it.

Resolved,

That this House reasserts its view that the salaries, pensions and expenses scheme for hon. Members ought to be determined independently of this House; accordingly invites the Leader of the House to make an order commencing those provisions of the Constitutional Reform and Governance Act 2010 which transfer responsibility for the 5 pensions of hon. Members to the Independent Parliamentary Standards Authority (IPSA); supports the approach to public service pension reform set out in the Final Report of the Independent Public Service Pensions Commission chaired by Lord Hutton of Furness; believes that IPSA should introduce, by 2015, a new pension scheme for hon. Members which is informed by the Commission’s findings and their 10 subsequent application to other public service pension schemes; recognises the case for an increase in pension contributions made in Lord Hutton’s interim report; and accordingly invites IPSA to increase contribution rates for hon. Members from 1 April 2012 in line with changes in pension contribution rates for other public service schemes.