Public Service Pensions Bill

Chris Leslie Excerpts

Tuesday 4th December 2012 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 3—Fair deal—

‘A member of a public service pension scheme is entitled to remain an active member of that scheme following—

(a) the compulsory transfer of his contract of employment to an independent contractor; and

(b) any subsequent compulsory transfer of his contract of employment.’.

Amendment 11, in clause 3, page 2, line 25, at end insert—

‘(5A) This Act shall not apply to scheme regulations relating to local government workers in Scotland unless the Scottish Parliament approves its application.’.

Amendment 12, in clause 7, page 4, line 29, at end insert—

‘(3A) A scheme under section 1 which replaces a final salary scheme may only be established as a career average revalued earnings scheme or a defined benefits scheme of such other description as Treasury regulations may specify.’.

Amendment 4, in clause 12, page 8, line 9, after ‘scheme manager’, insert ‘and employee representatives’.

Amendment 19, in clause 16, page 9, line 36, leave out subsection (1) and insert—

‘(1) New scheme regulations made under section 1 and 3 shall replace existing schemes’ current regulations and shall take effect on the amendment date.

(1A) Following the implementation of new scheme regulations under subsection (1), benefits shall only be provided in accordance with those new regulations.’.

Amendment 20,  page 10, line 5, leave out ‘closing’ and insert ‘amendment’.

Amendment 21,  page 10, line 6, leave out ‘1 April’ and insert ‘2 April’.

Amendment 32,  page 10, line 7, after ‘scheme,’, insert—

‘(aa) 1 April 2016 for a Scottish scheme,’.

Amendment 22,  page 10, line 8, leave out ‘5 April’ and insert ‘6 April’.

Amendment 23,  page 10, line 10, leave out ‘(1)’ and insert ‘(1A)’.

Amendment 24,  page 10, line 21, leave out ‘(1)’ and insert ‘(1A)’.

Amendment 25,  page 10, line 23, leave out ‘closing’ and insert ‘amendment’.

Amendment 26, page 10, line 27, at end insert ‘regulations’.

Amendment 27,  page 10, line 28, leave out ‘(1)’ and insert ‘(1A)’.

Amendment 28,  page 10, line 28, leave out from ‘benefits’ to ‘includes’.

Government amendment 35.

Amendment 7, in clause 28, page 15, line 12, leave out ‘may’ and insert ‘must’.

Amendment 8,  page 15, line 12, after ‘new’, insert ‘defined benefit’.

Government amendments 36 to 39.

[Chris Leslie]

Having spent a considerable number of weeks serving on the Bill Committee, I am pleased that we now have the opportunity to press the Government on questions that remain unanswered and largely unaddressed. Considerable changes are being made to many of the public service pension schemes as a result of Lord Hutton’s report on the future shape of those schemes. The report was largely welcomed throughout the House and that has contributed greatly to the improvement of the reforms. However, a number of the report’s aspects have not been adopted in full by the Government in this Bill, and we are concerned about that.

New clause 2, the first in a considerable group of suggested changes specifically to pension schemes, would implement recommendation 18 on page 132 of the Hutton report that

“public service pension schemes should issue regular benefit statements to active scheme members, at least annually and without being requested”.

At present, defined benefit public service schemes are obliged to provide such information only if they are requested to do so. That limited obligation is set out in the Occupational Pension Schemes (Disclosure of Information) Regulations 1996, but normal occupational pension schemes that do not have an arrangement for either a final salary or career average payment at the end of the scheme are obviously a different state of affairs from defined contribution schemes. New clause 2 would simply implement Lord Hutton’s recommendation and ensure that public service workers have a better understanding of the benefits that they have accumulated to date and what they stand to receive if they continue working until their normal retirement age.

We had a very healthy debate on this matter in Committee, where the exchange of views did not follow the usual to-ing and fro-ing of partisan speechmaking. A number of Members agreed that it would be very healthy if we improved the information and transparency for employees to enable them to make more informed decisions in planning for their savings and their financial future. For example, members of the schemes would be better able to judge whether they were saving enough for their retirement. The new clause is therefore compatible with the aim of reducing people’s need for state benefits in retirement—something that many Members across the House want to achieve.

When we tabled a similar amendment in Committee, it gained quite a degree of vocal support. The hon. Members for Bedford (Richard Fuller) and for Finchley and Golders Green (Mike Freer), who are in the Chamber today, helpfully pressed the Minister to resist his usual logic, which says in big block capital letters, “This is an Opposition amendment; thou shalt resist this devious device by Labour Members to do something nasty in the legislation.” That was not our intention. We actually wanted to implement Lord Hutton’s recommendation and bring defined benefit schemes into the modern age, especially in respect of communicating more regularly and effectively with scheme members. I live in hope that those hon. Gentlemen will chip in and offer their support again, because surely the goal of improving people’s understanding of their pension and helping them to plan more effectively for their retirement should find favour on both sides of the House.

[Mike Freer (Finchley and Golders Green) (Con)]

Will the hon. Gentleman give way?

[Chris Leslie]

I will give way. In fact, I was just about the quote the hon. Gentleman. He said:

“If we want people genuinely to prepare for their pensions, we need to give them the maximum amount of information. Just suggesting that it is good practice without putting in place any requirement is the wrong thing to do.”––[Official Report, Public Service Pensions Public Bill Committee, 22 November 2012; c. 455.]

It gives me great pleasure to give way to the hon. Gentleman.

[Mike Freer]

I am flattered that the shadow Minister should pay such attention to my words. Does he agree that it is rather perverse that when taking out a pension, particularly a private pension, a customer has to read reams of documentation about the risks, the forecasts, the potential growth rates and what might or might not happen, but when one has a public service pension, that level of detail is not provided and, most importantly, the annual statement provides scant information, even if it is requested?

[Chris Leslie]

That is an anachronism that has to change. The hon. Gentleman is correct that just because somebody is in a public service scheme or a defined benefit scheme does not mean that they should not think through carefully what the financial consequences will be for them on retirement. This Bill is the perfect opportunity to take that small but significant step forward.

In Committee, the Minister initially went into rebuttal mode and said that we could not have the new clause for a number of reasons. At first, he said that there were different ways of providing information to members of the scheme, that we did not want to be too prescriptive and that legislation was not necessary. However, the new clause does not prescribe the manner in which the information is provided; it would merely ensure that annual statements were provided in some form.

The Minister’s other objection in Committee was that defined benefit schemes in the private sector are not obliged to provide annual statements, so it would not be right for public sector schemes to do so. However, Government Members again disagreed. I cannot do better than to quote again the hon. Member for Finchley and Golders Green:

“We have a pensions problem in this country, and saying that private sector schemes are not required to provide statements—though many do…—is not a good enough reason for not requiring public sector schemes to provide them.”––[Official Report, Public Service Pensions Public Bill Committee, 22 November 2012; c. 455.]

Amen to that excellent argument. The Minister said at the time that he would consider the issue further.

Last week, I wrote to the Minister saying that it was our intention to table new clause 2. I rather hoped that he would table his own variant. Usually, there are accusations that the Opposition have not thought through the drafting of the phraseology of an amendment and there is some technical reason why it cannot be accepted. However, we have offered the Minister the chance to correct that. It is a matter of great regret that the Minister did not come forward with his own new clause. Perhaps I should be more optimistic and assume that that means that the Minister will stand up and accept new clause 2 straight away. That would be fantastic.

It is worth noting that all defined contribution pension schemes are required by the 1996 occupational pension schemes regulations to provide much more detailed statements than those proposed in the new clause. There is therefore no reason to think that there would be any problem in implementing the arrangements.

It would be helpful if the Minister made this change. If he wants to do it in the House of Lords when the Bill gets down there, we could probably accept that, but I think that most Members would accept the change.

[Richard Fuller (Bedford) (Con)]

In Committee, we also talked about the risk of people with public sector pensions making the perverse decision not to contribute to their pension because they feel that the contribution rate is going up significantly, missing the fact that a significant contribution is being made to their pension scheme by the taxpayer. Does the hon. Gentleman feel that the new clause would assist members of public sector pension schemes in identifying what a large contribution the taxpayer is making, and therefore help to reduce the number of people who take the irrational step of opting out of the pension scheme?

[Chris Leslie]

Even though the quality of the scheme has been eroded, as we saw with the unilateral imposition of the average 3% increase in employee contributions—that might even have been before Lord Hutton reported—they are still good defined benefit schemes and we encourage public sector members to stay in them. We have debated our concerns elsewhere over whether the viability of the schemes will be jeopardised by employees being deterred from joining or deciding to opt out. However, we encourage members to stay in the schemes. Unfortunately, the 3% additional contribution is not part of this legislation, so it would be outwith the scope of the Bill to table amendments on that or to debate it. That is a great shame.

It is important that annual benefit statements include not only the employee’s contribution, but the employer’s contribution, as set out in the new clause. If the defined benefit schemes are good, there is no reason not to have that level of clarity and transparency. I have no problem with accepting that that should be part of the information that is given to scheme members. I hope that the Minister will accept that.

New clause 3 is one of the most important proposals in this group. The Government promised to implement what is known as the new fair deal, which is one of the most important aspects of the agreement that was reached in the negotiations between the employee side and Government or employer side of the scheme. The new fair deal would ensure that all public service workers who were compulsorily transferred to an independent contractor, be it a private company, a charity or another third sector body, would be entitled to remain an active member of their public service pension scheme. That is a basic requirement and it was a core part of the agreement. We were glad that the Government committed to it.

The Chief Secretary to the Treasury confirmed the Government’s commitment to the new fair deal in a written statement in July, which stated that

“the Government have reviewed the fair deal policy and agreed to maintain the overall approach, but deliver this by offering access to public service pension schemes for transferring staff. When implemented, this means that all staff whose employment is compulsorily transferred from the public service under TUPE, including subsequent TUPE transfers, to independent providers of public services will retain membership of their current employer’s pension arrangements.”—[Official Report, 4 July 2012; Vol. 547, c. 54WS.]

That is an improvement on the current fair deal arrangements, which ensure that outsourced staff receive broadly comparable arrangements to those under the public service schemes. The Government’s promise to implement the new fair deal was central to the rationale and at the heart of why many public service workers agreed to support the new proposed pensions reform, even though aspects of it were detrimental to them.

[Sheila Gilmore (Edinburgh East) (Lab)]

A few months ago in the Open Public Services White Paper, the Government expressed enthusiasm for transferring services to voluntary organisations and social enterprise—we have not heard so much about that recently. If that is to work, however, is it not particularly important to have the proposed provision on pensions?

[Chris Leslie]

Many public service workers whose services have been transferred to independent providers, whether they have been outsourced, find themselves in the voluntary sector or wherever, still want to ensure that their deferred wages—that is what pensions are—will be protected in a particular way. That was a positive development in the negotiations, but to what extent has such protection found its way into the Bill? That is why the Opposition are concerned and have tabled new clause 3.

[Mr Nick Gibb (Bognor Regis and Littlehampton) (Con)]

The hon. Gentleman will know that the fair deal arrangements introduced in 1999 by the Labour Government were not statutory. Why was he happy to support and serve in a Government who had a non-statutory approach to the fair deal, but in opposition he seeks to make that approach statutory?

[Chris Leslie]

The situation now is different because of the level of trust on which public service employees feel tested when looking at significant changes by the Government. Employee contributions were unilaterally increased by 3% without consultation or discussion—that was simply imposed, even though Lord Hutton was putting measures through. The evaluation arrangement was unilaterally changed from the retail prices index to the consumer prices index. A typical public service employee must have said, “Hold on a minute. Are we supposed to just take this on faith? We are glad that the Government are in negotiations, but as we know, Ministers are here today and gone tomorrow.” In no way do I cast aspersion on the Economic Secretary who I am sure will remain on the Front Bench in days to come. However, we cannot simply rely on statements from particular Ministers at a particular point in time.

[John Healey (Wentworth and Dearne) (Lab)]

My hon. Friend is absolutely right about trust, which is critical following the experience of many public service workers and Government decisions on pensions. Does he not underplay the importance of the fair deal? He described it as a positive development in the negotiations, but for many public service workers and their unions it was not just a positive development but a deal maker that allowed them to accept a package which, as he said, was detrimental in other areas. It was important that people took that provision as a clear guarantee, but doubt has now been cast on it, which underlines the importance of including it in the Bill and therefore the importance of new clause 3.

[Chris Leslie]

My right hon. Friend is correct. When we get a sense of the Government pulling the odd thread here or there or watering down elements of the provision—if I may mix my metaphors—it is no wonder that people start to question whether the words of Ministers at a particular point in time will carry through into what should be a 25-year commitment as set out in legislation. The provision was part of those negotiations but it has not found its way into the Bill.

Even more worryingly, the Economic Secretary made some peculiar statements in Committee about something that we thought was a done deal. He said:

“it is important that we consider in full the views of all stakeholders, including of course those who will be affected, through further consultation before making a final decision on the issue. It would therefore be inappropriate to include the fair deal policy in the Bill.”––[Official Report, Public Service Pensions Public Bill Committee, 22 November 2012; c. 459.]

It is as though negotiations had not been completed or decisions reached. Indeed, it sounded very much as if the Government were reneging on their commitment.

The Government need to lay to rest any suggestion that they are going back on their promise, and the only way to do that is to accept new clause 3. Failure to do so risks reopening debates and potential disputes with public service workers who will—justifiably—feel they have been misled.

[John McDonnell (Hayes and Harlington) (Lab)]

Part of the concern and need to write such provisions into the Bill comes from the fact that no one predicted clause 3. It has been described as a Henry VIII clause, as it gives sweeping powers to Ministers to legislate on schemes through statutory instruments or even retrospectively.

[Chris Leslie]

Indeed; we will debate some of the worst aspects of clause 3 later. It feels as though when writing the Bill Ministers did not consider it as enshrining an arrangement involving give and take on both sides. They have included certain things to the advantage of the employer, but there are scant—if any—safeguards of sufficiency and longevity for the employee, and that is causing anxiety.

[John Healey]

My hon. Friend is making an important argument in response to the intervention by my hon. Friend the Member for Hayes and Harlington (John McDonnell). It is not just that the Bill includes certain things that advantage employers; the measures are principally to the advantage of the Treasury, which is given the whip hand and ultimate say over schemes that should be run by their members and managers accountable to them.

My hon. Friend quoted the Economic Secretary in Committee. When the Minister rises to his feet, is it not important that he explain the discrepancy between what he said in Committee and what the Chief Secretary to the Treasury said to this House in December last year? He said:

“Because we have agreed to establish new schemes on a career average basis, I can tell the House that we have agreed to retain the fair deal provision and extend access for transferring staff.”—[Official Report, 20 December 2011; Vol. 537, c. 1203.]

There is a big difference between those two statements and the Economic Secretary needs to explain himself on that point.

[Mr Speaker]

Order. Before the hon. Member for Nottingham East (Chris Leslie) replies, let me say that although I have indulged the right hon. Member for Wentworth and Dearne (John Healey) on this occasion I hope he will not repeat such a long intervention. I do not want him to induce the hon. Member for Corby (Andy Sawford) into following bad habits. That would be a very undesirable state of affairs.

[Chris Leslie]

It may be a bad habit but it was a jolly good intervention. I do not often do this, but I commend my right hon. Friend for quoting the Chief Secretary to the Treasury. What is the difference between the Chief Secretary and the Economic Secretary? Well, one is a Liberal Democrat and the other a Conservative. However, my right hon. Friend should take that with a pinch of salt, as I too have a quote from the Chief Secretary, who said that

“establishing a relationship of trust and confidence between the Government and public service workers is critical to the success of these reforms.”

How long will this coalition Government persist? What we need is not just a commitment from a Liberal Democrat Chief Secretary to the Treasury whose parliamentary and ministerial career might not endure. We need to know what would happen should there be the dreadful set of circumstances of a Conservative majority Administration. Would a promise on the new fair deal, given only verbally by Ministers, endure in such circumstances?

Given the Minister’s trajectory and career momentum, I want to hear a commitment from him to the new fair deal on behalf of the Conservative party. That might mean something, although I would still prefer to see it in the Bill. It would be invidious for the Government to speak against new clause 3, let alone vote against it if we decided to test the opinion of the House. I am conscious of the time so I will move on.

Amendment 11 relates to issues of local government workers in Scotland and would exclude the Scottish local government pension scheme from the Bill, unless agreed to by the Scottish Parliament. Primary legislation on public service pension schemes has always been reserved to the UK Parliament. Scottish Ministers have had responsibility for regulations for public service schemes but those have been subject to Treasury approval and have tended to mirror arrangements for England and Wales. The exception is the Scottish local government pension scheme, which is a funded scheme that has not been subject to Treasury approval in the past. The Bill extends certain prescriptions to the design of the Scottish local government pension scheme that, in practice, have previously been left to Scottish Ministers to negotiate and decide—most importantly, they negotiated and decided on normal pension age; that benefits should be based on career-average revalued earnings and not final salary; on the cost cap, as it is known; and on rules for governance and fund valuations.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

Does the hon. Gentleman agree that, if the Scottish Government can find the ways and means to fund their pensions, they should be free from penalties from the Treasury at Westminster?

[Chris Leslie]

That comes down to how the legislation is drafted. There are different financial consequences for local government pension schemes than for other public service pension schemes. That is why we need clarity in the legislation. I am conscious that the Scottish National party Government in Scotland have argued that there is no need for a legislative consent motion to cover the matter because, in theory, the UK Parliament always had primary legislative power over the local government pension scheme in Scotland but has hitherto chosen not to use it. The Government in Scotland have been quick to accept the UK’s proposals, which is unusual, because they normally argue that more power should sit with Holyrood. The movement of the regulation-making powers means that the Scottish Government will not need to grapple with difficult decisions on the reform of certain pensions, but the Opposition feel it would be better for Members of the Scottish Parliament to have an opportunity to scrutinise and debate the application of the legislation to the local government pension scheme in Scotland. Amendment 11 to clause 3 would mean that the Bill would not apply to the local government pension scheme in Scotland unless that is explicitly approved by the Scottish Parliament. The hon. Member for Banff and Buchan (Dr Whiteford) and others have tabled parallel amendments—I gather they are in the third group, so we will probably return to this debate later.

Amendment 12, which is in my name and that of my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson), relates to another key Government promise made to public service workers. It seeks to enshrine in the legislation another Government promise made to public service workers—the Government promised that their final salary schemes would be replaced with career-average revalued earnings schemes. That would ensure that public service workers continue to receive a defined benefit pension.

The Bill does not explicitly honour that promise, and clause 7 provides that schemes created under the Bill can be defined benefit or defined contribution schemes, or any scheme of any other description. That is fundamental to the arguments on the Bill, but it is also fundamental to the arguments that Hutton made and the agreements that were reached. All schemes were supposed to be succeeded by career-average defined benefit schemes. In some cases, the Government might like to continue small defined contribution schemes, but the amendment would not affect those; it would apply only to final salary schemes and ensure that they are replaced with another defined benefit arrangement. The amendment therefore simply seeks to put the Government’s promise to public service workers on a statutory footing.

A similar amendment was opposed in Committee, but the reasons given by the Minister were concerning. He claimed that the Government intended to replace the final salary schemes with career-average schemes, but that “the flexibility embedded in” the Bill

“could be helpful to scheme members in future.”

He added that

“it would not be appropriate for this Government to tie the hands of future generations and pension scheme members who might decide that, subject to the protection offered by the enhanced consultation and reporting obligations of clause 20, defined benefit schemes were no longer the most appropriate for public service workers.”––[Official Report, Public Service Pensions Public Bill Committee, 13 November 2012; c. 291-92.]

That is not the first time we have heard the Minister’s bizarre argument that legislation could bind the hands of future Governments. No Government can bind the hands of their successors in that way. Unless the Minister has an insight into changes in the democratic process of which we are unaware, that remains absolutely the case.

Therefore, the argument that clause 7 provides welcome flexibility to scheme members now or in future is, in the Opposition’s view, potentially misleading. In the rare circumstances that a defined contribution scheme is better than the defined benefit one, and scheme members and the Government wish to change schemes to defined contributions schemes, clauses 19 and 20 allow that to happen. Clause 7 provides no flexibility that does not exist in clauses 19 and 20. If we do not make the amendment, we allow the Government to go back on their promises. We seek to keep them to their word on those arrangements.

I know that many hon. Members wish to speak to proposals in this large group, so I shall make my final point on the question of closing local government pension schemes. My hon. Friend the Member for Corby (Andy Sawford) and the hon. Member for Finchley and Golders Green (Mike Freer), among others, have had extensive experience of local government schemes. In Committee, there was anxiety that the Bill mentions closing existing LGP schemes and beginning new ones. The problem with closing schemes is that there can be unintended and adverse consequences. We heard in Committee about triggering debts which might need to be crystallised on closure. Of course, not just big local authorities but small academies, charities and others are members of such schemes. They might find that they suddenly need to shell out one great lump of money simply because an existing scheme closes and the deficit needs to be dealt with there and then.

The Minister assured us that regulatory provisions did not require such crystallisation, and that there could be protections. The Opposition are not massively happy with that, but even if we accept the Minister’s word that closure does not mean closure, thousands of employers in the local government pension fund have individual admission agreements governing the terms of their participation—the agreements are not necessarily in a standard form, meaning that there could be thousands of different admissions contracts for the schemes. It is likely that at least some of the agreements will set out various powers for local authorities in the event of closure, including the power to collect a debt from the employer equal to its share of the scheme’s deficit. That would put a massive strain on participating employers and could put some of them out of business.

The Minister gave assurances on some of those points in Committee, but he missed the problem that the Bill allows local authorities to close their funds. The Government cannot prevent them from doing so under the Bill. The problem of triggering debts therefore remains substantive. There is also the question of whether closure means closure or continuing a scheme. The Opposition believe that a different approach is needed and that the Bill needs better drafting, which is why we have tabled amendments 20 to 28. We are not trying to add costs to the public purse and are keeping the Government’s proposals, but we are saying that it would be better to amend an existing scheme rather than to close and reopen it. They are in some ways technical proposals, but it would be better to err on the side of caution and provide that new regulations can amend scheme rules to ensure that all future benefits are accrued according to the provisions of the Bill and negotiated arrangements.

Those are essentially my comments on the Opposition’s proposals. My hon. Friends and others have tabled amendments in this group, but I shall let them make the case for them.

[Mr Gibb]

I rise to speak briefly to Opposition new clause 3, which is on fair deal arrangements. Hon. Members will be aware that fair deal arrangements were originally addressed by Lord Hutton in his interim report in October 2010. Hutton was concerned that the arrangements at that time created barriers to the plurality of public service provision. He said:

“At present, when employees are transferred to non-public service bodies, the organisation they move to is required to ensure that there is ‘broadly comparable’ pension provision for future service, through the Fair Deal provisions…This arrangement has maintained the level of pension provision for those compulsorily transferred out of the public sector. However…this can make it harder for private sector and third sector organisations to provide public services because providing a ‘broadly comparable’ defined benefit pension scheme can be significantly more expensive and risky for private sector organisations than for public sector employers.”

That was the starting point of the debate. In box 1.A—a shaded box, the hon. Member for Nottingham East (Chris Leslie) will be intrigued to know—Lord Hutton concluded:

“Ultimately, it is for the Government to consider carefully the best way of moving forward with Fair Deal in a way that delivers its wider objective of encouraging a broader range of public service providers while remaining consistent with good employment practices.”

[Mr Gibb]

I congratulate the hon. Member for Corby (Andy Sawford) on his election to the House. His intervention indicates the seriousness with which he takes his new role. I am grateful for that and I take his point. All of us on the Government Benches want to ensure that we have sustainable, good-quality defined benefit pensions in the public sector, but to achieve that there has to be major reform to public service pensions for a raft of reasons to do with longevity, cost, poor performance of the stock market in the past 12 years and tax changes that occurred in 1997. For all those reasons, if we are to have good-quality, defined benefit pensions for public service employees, there have to be major reforms.

The Government have been clear, open and transparent in the negotiating process, and an ample number of documents are circulating that set out precisely the conclusion to the negotiations, not least the proposed final agreements. The idea that without changing primary legislation the Government can somehow slip through major changes to the quality of benefits to the employees, which the hon. Gentleman is talking about, is just not in the real world. All Governments have to behave reasonably, and this Government are no different from any other. Not only have they behaved reasonably in these negotiations, but, I believe, they have given rise to high-quality public service pension arrangements that offer benefits way beyond the arrangements in the private sector. That is a sign that the Government recognise the important contribution that public sector employees make to our society.

I point the hon. Gentleman to the consultation on the new deal that took place between March and June 2011. That was a broad consultation, to which there were more than 100 responses. In July this year, in a written ministerial statement, the Chief Secretary to the Treasury stated:

“the Government have reviewed the fair deal policy and agreed to maintain the overall approach, but deliver this by offering access to public service pension schemes for transferring staff…this means that all staff whose employment is compulsorily transferred from the public service under TUPE…to independent providers of public services will retain membership of their current employer’s pension arrangements.”—[Official Report, 4 July 2012; Vol. 547, c. 54WS.]

That is on the record and should provide the hon. Gentleman and the rest of the House with the assurance they need.

[Chris Leslie]

We hear what the Liberal Democrat Chief Secretary to the Treasury says, but can the hon. Gentleman, as a Conservative MP, give us a guarantee that that would also be the case under a future Conservative Government?

--- Later in debate ---

[Mr Gibb]

I listened carefully to my hon. Friend and to the Chief Secretary and I did not find any difference. My hon. Friend was addressing whether particular matters should be in primary legislation; the Chief Secretary was setting out the case for the policy.

On teachers’ pensions, there was anxiety that the current arrangements, under which teachers in the independent sector can be members of the teachers’ pension scheme if their employer signs up to the scheme, might be put in jeopardy by the words of Lord Hutton’s interim report, so the Chief Secretary’s statement was welcome news to teachers. Paragraph 8 of the proposed final agreement states:

“the Government agrees to retain Fair Deal provision and extend access to public service pension schemes for transferring staff. This means that all staff whose employment is compulsorily transferred from maintained schools (including academies)…under TUPE…will…be able to retain membership of the Teachers’ Pension Scheme when transferred.”

That is welcome news. The agreement goes on to state:

“The Government’s decision on Fair deal means that…independent schools which already have access to the Teachers’ Pension Scheme will continue to do so (for existing and new teachers); and new teachers and independent schools will continue to be able to join the scheme under the existing qualifying criteria.”

When we debated the issue in Committee, the hon. Member for Nottingham East conceded that the new fair deal

“is an improvement on the current fair deal arrangements”,

but, as he has just now, he complained that

“the promise does not appear in the Bill.”––[Official Report, Public Services Pensions Public Bill Committee, 22 November 2012; c. 458.]

He will be aware, however, that the fair deal arrangements were non-statutory when they were introduced in 1999, and that they remained non-statutory when they were revised in 2004. Notwithstanding the fact that the new fair deal arrangements are an improvement on the old ones, if it is good enough for a Labour Government for the policy to be non-statutory, it ought to be good enough for the hon. Gentleman. As my hon. Friend the Minister made clear in Committee, the recently published Government response to the fair deal consultation included draft guidance setting out how the new policy would work in practice. Given all the public statements by my hon. Friend the Chief Secretary and the published guidance and consultation documents, the hon. Gentleman should be assured by the commitments given.

[Chris Leslie]

Does the hon. Gentleman not understand the sense of anxiety that many public sector employees feel? Their trust was shattered because of the unilateral decisions on RPI to CPI and the 3%. They are saying, “Don’t we need more safeguards?” Can he understand why they would want safeguards now that might not have been necessary in the past?

[Mr Gibb]

Of course, that is an assertion by the hon. Gentleman. I do not recognise that crushing of confidence. What the Government had to do when they came into office was tackle a huge public sector deficit of £156 billion, and they have done that. As a consequence of the difficult decisions the Government have taken, the capital markets have been assured that the Government are getting the public finances under control. That itself should assure beneficiaries of public service pensions that the Government will put the public finances in a stable condition and so avoid the need for the sort of draconian changes to public service pensions being implemented in other European countries as they seek, rather belatedly, to tackle their public deficits.

--- Later in debate ---

[Sajid Javid]

As I said, virtually every month the Chief Secretary has written to the Scottish Government, and they have had plenty of opportunity to respond. As I said to the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson), if, even at this stage, the Scottish Government wanted to suggest amendments, those amendments would be given serious thought in the other place.

I commend Government amendments 35 to 39 to the House.

[Chris Leslie]

I will start with the good news that the Minister is willing to concede the principle, if not the words, of new clause 2 on member communications. That is an important change of heart. We wanted annual benefit statements to be sent out proactively to members of defined benefit public service pension schemes, as they are for defined contribution schemes. We encountered a bit of resistance in Committee, but the Minister has thought again, particularly in the light of the views of the hon. Members for Bedford and for Finchley and Golders Green, and of many of my hon. Friends who made the same argument. I welcome the fact that the Minister has been persuaded of the spirit of the amendment. We do not get many victories for common sense in legislation, but this is one of them, and I pay tribute to him. It is a mark of distinction for him that we have managed to have him think afresh about the argument, reflect on it, and bring matters forward in the House of Lords. When our constituents receive these annual letters in the post, they can thank him for that extra information, as well as the hon. Members who have argued for it. [Interruption.] The letters may of course arrive online as well.

The Minister did not say much about Government amendment 35, but that also feels like a famous victory. It means that existing members of final salary schemes in public bodies will definitely be able to stay in those schemes. We are sometimes grateful for small mercies in these legislative processes.

I turn now to the less good news. I heard what the Minister said about our amendment 12, which would ensure that defined benefit schemes that have ended are superseded by new defined benefit schemes. It is a moot point, and we have our disagreements about it. I shall not press the amendment to a vote at this stage, although I am sure that the issue will be revisited in the other place.

Amendments 19 to 22 relate to the closure of local government pension schemes and whether that means that they are really being closed or merely amended. We are worried about the potential for unintended adverse consequences in how the legislation is drafted. However, the Minister said that our amendments were well-intentioned, and that is good enough for me at this stage. They were, indeed, well intentioned and that is another issue that we will want to revisit in the other place.

We have debated the question of devolved responsibilities and amendment 11, which would clear up some of the confusion, particularly in relation to applications by the Scottish Government for legislative consent motions. We feel strongly that there needs to be some clarification on the issue, but the Minister was helpful in saying that the Government want to consider it, so I shall not press that question, although it is very important.

The new fair deal is a promise whereby existing members of public sector pension schemes will be allowed to retain their membership even if they are transferred or outsourced to the private sector, but we have still not received a commitment to that beyond Ministers’ verbal promises. The Minister has said that more work needs to be done, that they need to explore further the issues and that they do not want to pre-empt ongoing work, but that does not sound like the decision that we and many on the employee side thought had been made for a clear and unequivocal commitment to the new fair deal. It is integral to the deals that were agreed in the process leading up to this Bill. I cannot see what harm can be done by including the new fair deal in statute. It is a question of trust, so I want to press new clause 3 to a Division. With those words, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Fair deal

‘A member of a public service pension scheme is entitled to remain an active member of that scheme following—

(a) the compulsory transfer of his contract of employment to an independent contractor; and

(b) any subsequent compulsory transfer of his contract of employment.’.—(Chris Leslie.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

--- Later in debate ---

Scheme regulations

[Chris Leslie]

I beg to move amendment 10, page 2, line 16, at end insert—

‘(3A) Scheme regulations shall not make any provision which would have the effect of reducing the amount of any pension, allowance or gratuity, insofar as that amount is directly or indirectly referable to rights which have accrued (whether by virtue of service rendered, contributions paid or any other thing done) before the coming into operation of the scheme, unless the persons specified in subsection (3B) have agreed to the inclusion of that provision.

(3B) The persons referred to in subsection (3A) are the persons or representatives of the persons who appear to the responsible authority to be likely to be affected by the regulations if they were made.’.

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Amendment 3, page 6, line 27, in clause 10, at end insert—

‘to be agreed with employee representatives’.

Amendment 5, page 11, line 8, in clause 19, at end insert—

‘with a view to reaching agreement’.

Amendment 34, page 11, line 24, in clause 20, leave out from ‘—’ to ‘(b)’ in line 27 and insert—

‘reach an agreement through consultation with the persons specified in subsection (3), and’.

[Chris Leslie]

Clause 3 is an important part of the Bill, as it makes a series of arrangements for scheme regulations. Hon. Members will now be turning to page 2 in their copies; when they merrily flick through to it, they will discover that subsection (3)(c) states:

“Scheme regulations may…make retrospective provision.”

The theme of retrospectivity gives the Opposition great concern. Essentially, the Bill allows the reduction of accrued pension benefits.

The measure is not qualified in any way: it allows all retrospective provisions, including, essentially, the reduction of the savings that people have put aside, which many regard as sacrosanct—the contributions from their monthly salaries or income into a pensions pot that is supposed to safeguard their financial future in retirement. We now discover that the Bill contains a provision that allows the Government to dip their hand into what are normally regarded as safe amounts of money—the accrued benefits for which people have paid in over their years of service. The Opposition believe that that breaches a central tenet of pension provision. Benefits that have been accrued are deferred earnings and should not be reduced. Retrospectively reducing accrued rights is essentially akin to taking back a portion of an employees’ wage that has already been paid; there is very little difference.

Many hon. Members and many of my constituents find it difficult to resist the grey mist that descends and the heaviness of the eyelids that pensions law tends to bring about, but hon. Members should wake up and realise what is in the legislation. They should recognise that we are talking about the Government’s ability retrospectively to reduce the amounts that ordinary employees have saved for their retirement, which they believe are safe.

Public sector workers and their representatives are extremely concerned about the retrospective powers that the Bill gives to this and any future Government. Understandably, they believe that as long as the Bill contains those powers, the pensions of ordinary working people—public sector employees—are not safe. On 29 October, the Chief Secretary to the Treasury was asked about the retrospective provisions in subsection (3) by the hon. Member for Foyle (Mark Durkan). The right hon. Gentleman replied that there was no need to be concerned about the reduction of accrued benefits, because the Bill mirrored the Superannuation Act 1972 in that respect. It is important to read out his exact words:

“The hon. Gentleman will know that the provisions in the clause to which he refers mirror directly those in the Superannuation Act 1972, which this Bill in many cases replaces. It was passed in the year I was born,”—

in the year I was born too, but let me not digress—

“and it has been used by a number of Governments to make adjustments to public service pensions.”—[Official Report, 29 October 2012; Vol. 552, c. 60.]

The Chief Secretary went further than that when he gave one of those famous quotes—a bit like the George Bush “read my lips” quote—in a speech to the Institute for Public Policy Research on 20 June 2011. He said:

“We will honour, in full, the benefits earned through years of service. No ifs, no buts.”

Well, it turns out that the Bill does not mirror the Superannuation Act 1972 in relation to accrued benefits. The 1972 Act provides that accrued benefits can be reduced only with the consent of scheme members—in other words, only if members of those schemes, employees, agree to such retrospective arrangements—whereas the Bill allows for retrospective reductions without the consent of scheme members.

Given that the Bill does not mirror the Superannuation Act protections in the way the Chief Secretary said it would, we can only assume that it must have been a drafting error by the Minister—perhaps some sort of oversight or typo. We are not sure why the Government did that. We tabled an identical amendment in Committee to ensure that the protections for accrued benefits in the 1972 Act were retained, but, surprisingly, our amendment was rejected. The Economic Secretary said that there was no need to mirror the protections in the 1972 Act, which prompts the question: why on earth did the Chief Secretary to the Treasury say that the Bill contained certain protections when it obviously does not? It may be, as we have said, because the Chief Secretary is from a different political party from the Economic Secretary. We are not quite sure why the Chief Secretary said that it mirrors the Superannuation Act provisions, but this Minister, the Economic Secretary, resisted that arrangement.

As we have said time and again, when employees in the public sector find themselves facing changes, without any consultation, to their contribution rates and radical changes to the valuation arrangements for their pensions, the question of trust comes up again and again. This Minister says, “Oh, don’t worry, we’re not going to use this provision on retrospectivity,” but when employees voice their doubts and say, “Hang on a minute. Why on earth are you putting it in the Bill?” we have to sympathise with them. They will be extremely sceptical of the Government’s motivations.

We tabled the amendment to give the Minister another chance to include the protections that the Government—or at least one Minister—said were already in the Bill. When accrued benefits and retrospective changes were raised in Committee, the Minister did not dispute that the Bill allowed the Government unilaterally to reduce members’ accrued benefits, but he said repeatedly that the Government had promised not to reduce those accrued benefits. He said that that promise—a verbal promise—offered adequate protection to public service workers and that legislative protection was therefore unnecessary. That is an extraordinary argument. Even if this Government intend to keep their promise—that is a big “if”—their words will have no effect on a future Government, particularly a Conservative Administration. Surely the Government appreciate that, among the public, the level of trust in politicians and Ministers is low and that our request that they enshrine this protection in statute is a basic one.

--- Later in debate ---

[Lady Hermon (North Down) (Ind)]

The Bill must, of course, be compatible with the European convention on human rights and the jurisprudence of the Strasbourg Court. Will the hon. Gentleman reflect on whether this retrospective provision on accrued property rights is compatible with the convention? Would it be in keeping with our commitments under the convention to take away property rights retrospectively and without compensation?

[Chris Leslie]

The hon. Lady has hit upon an important point. There are questions about whether it impinges on basic human rights to claw back retrospectively property—assets—that has been legitimately accrued, yet there is a provision here in the Bill to allow that to happen. Of course, Ministers could say, “Well, even though we’ve allowed for the possibility of retrospectivity, we’re not actually legislating for it now, although we might want to leave open the door to do it in the future.” That would be the point when it would impinge on the convention. She makes an incredibly important point. That is the extent of the possible outrage being left open in the Bill. All legislation is supposed to be signed off as being compatible with the ECHR, but that is a moot point and a matter of interpretation. She has focused on a crucial point.

The explanatory notes state that clause 3(3) has been included to facilitate the necessary adjustments to

“pension schemes to accommodate changes in law or where the government does not want to delay the benefit of a particular change but needs time to work out the consequences and appropriate method of making the change.”

Amendment 10 would not necessarily hinder those technical operational issues. Given that it would retain clause 3’s intended purpose, as set out by the Minister, and that the Government have promised not to reduce accrued benefits, there can surely be no legitimate grounds for opposing the amendment.

This is not an Opposition whim. We are cutting and pasting text from the Superannuation Act 1972: for 40 years, those provisions have protected the accrued benefits and rights of ordinary working people, and we are seeking to replicate those protections in the Bill. The amendment would not hinder or adversely affect the Government’s intentions, but would be of enormous benefit and reassurance to millions of public service workers. As the Minister knows, that concern arose extensively in Committee, where we debated the issue at length. I shall be grateful, therefore, if he reflects seriously on the strength of opinion voiced so far from across the spectrum—from employee representatives and others who want those safeguards enshrined in the Bill.

--- Later in debate ---

[Sajid Javid]

I am pleased that the hon. Lady is asking for clarity on this important question. When the Government put this Bill together, it was important, as with any measure, to make sure that it was compatible with existing legislation, including the European convention on human rights. I mentioned it here not to raise the issue of compatibility—of that I have no doubt—but to say that the convention provides protection for property rights. It represents another layer of protection that should reassure people that high hurdles would exist if any future Government tried for whatever reason not to honour the commitments made by this Government.

[Chris Leslie]

I simply do not understand why the Minister refuses to put clearer unambiguous clarifications, protections and safeguards directly into the Bill. What is the purpose of leaving this as some sort of moot issue about whether there is sufficient jurisprudence to prove compatibility with umbrella protections in the European convention of human rights? That is not strong enough. The Minister must understand that people will be very anxious about this issue; why not clarify it and put it on the face of the Bill?

[Sajid Javid]

If the shadow Minister will allow me to continue my comments on this important issue, I shall, I hope, be able to give him some reassurance, but first I want to explain the reasons for the Government’s approach.

Since the courts could set aside unlawful scheme regulations, responsible authorities have strong reasons to respect pension protection rights.

There is a third reason for our approach. In order to provide the statutory protections that underpin our commitment on accrued rights, the Bill establishes a common set of member consent and consultation requirements. In the case of the new schemes set up under the Bill, any change in scheme regulations will require a prior, statutory consultation with all who are likely to be affected, or with their representatives.

Clause 20 provides that if any changes are made that could have “significant adverse effects” on members, consultation must be conducted with a view to the reaching of an agreement, and preceded by a report to Parliament or the relevant legislature. Any such changes will require explicit approval by that legislature under the affirmative procedure. They cannot simply be nodded through under the nose of Parliament. Taken together, the rule of law and the specific provisions in the Bill should give members the strong reassurance that there is already a very high hurdle against unlawful interference with pension benefits that have been built up.

As I have said, this is an important issue, and we must get it right. We are adamant that the application of universal consent locks is not an avenue that we intend to investigate. As a matter of principle, we do not believe that members, employers or anyone else should be given a ticket unreasonably to hold each other, or the Government, to ransom and to inhibit changes that are for the greater good. The Government feel strongly that it is right to prevent that scenario from occurring in the future, and that is why we cannot support the amendment.

Most retrospective changes in accrued rights are either minor and technical, or in the interests of the vast majority of scheme members. As I have said, however, it is vital that we strike the appropriate balance between member protections and the efficient operation of public service schemes. Although I firmly believe that the provisions in the Bill achieve that balance, I can tell the House that the Government do not have a closed mind on this serious issue, which has been raised thoughtfully by Members on both sides of the House, both today and in Committee. I can only reiterate that we are listening and do not have a closed mind. I am sure that the issue will be discussed in the other place, and we shall listen carefully then as well. I hope that, in the light of the reassurances that I have tried to give, the shadow Minister will consider withdrawing his amendment.

Amendment 3 would place a statutory requirement on the Government to seek the agreement of employee representatives when the data, methodology and assumptions to be used in pension scheme valuations is set. I agree that we must get those elements of the valuations right. We must be sure that a valuation accurately calculates the scheme’s costs. I understand that Members want to be certain that the Government will honour their commitment to ensure that stakeholders are involved in the process, and I can tell the House that they will be so involved.

I believe that the amendment is both unnecessary and unworkable. It is unnecessary because we have already made it clear that the Government will engage with stakeholders over the directions on valuations. Transparency and consultation are extremely important principles, and it is important for everyone to have a say in how the valuation process works, but that does not mean that we will allow the whole process to be stymied by a very small group of people. That would hardly be democratic, let alone a rational way in which to proceed, and it would mean that the employer contributions would not be set at the correct rate. I am sure that that was not the intention of Members when they tabled these amendments, but we think it right for discussions about the valuation process to take place within the normal scheme governance procedures. I am also sure that in the normal course of events the vast majority of the discussions will prove to be sensible and constructive, resulting in broad consensus between all parties. I hope Opposition Members recognise that if the worst happens and the talks break down without a full meeting of minds, it is important that, where necessary, the Government can make the final decisions.

On amendment 5, I understand why Opposition Members want to ensure there is meaningful consultation with scheme members before scheme regulations are made, and clause 19 requires precisely that. All scheme consultations on regulations will be conducted in line with the Government’s consultation principles, as set out by the Cabinet Office. As they make clear, the Government are committed to consulting on our proposals and to ensuring consultations are carried out proportionately. Clause 19 as currently drafted provides for a good and comprehensive consultation standard. It also recognises the genuine interests of the members and employers in how their scheme is run.

The clause ensures that whenever a change is proposed to the scheme regulations, the responsible authority must consult everyone whom the authority considers to be affected. Since this will be a statutory consultation, the authority must set out clearly on each occasion the matters on which it is consulting. It must provide enough information and time to allow for considered responses. The authority also needs to keep an open mind until the consultation has closed, and must give fair and proper consideration to those responses before making its final decision. It is worth setting all of that out in detail in order to reassure those who might feel clause 19 does not provide for meaningful consultation; on the contrary, it does precisely that.

Moreover, there are many reasons why the Government may wish to consult scheme members and other stakeholders when making scheme regulations. In many cases the Government will consult with a view to reaching an agreement for proposed changes. Clause 19 as drafted does not prevent that. As the Government have made clear, the enhanced consultation standard should apply to some elements of the scheme, and they are specified in clause 20. It is not necessary to extend this provision to cover every other possible element of scheme design.

--- Later in debate ---

[Chris Leslie]

I have great sympathy with many of the arguments that my hon. Friend the Member for Hayes and Harlington (John McDonnell) made. He has tabled a series of amendments and has highlighted a couple of appropriate points. He seeks to pin down what happens in respect of changes that affect data, methodology, assumptions and valuations. Those are the long-grass details that many people often put in the box marked, “Too difficult to handle”. However, it is really important that people realise that a tweak here or a change there to the way in which some pension metrics are defined can seriously affect the retirement incomes of hard-working public sector employees, so he is right to shine a bit of a spotlight on those areas. I am not necessarily sure about his drafting, but he has brought an important proposition to the House’s attention. Similarly, he raised some issues we debated in Committee, such as why certain parts of the Bill talk about consultation being done in the way that many of our constituents have become used to—as a cynical box-ticking exercise. There is consultation, but most people have, sadly, grown used to the notion that consultation in that context means a form being sent out that they can send back if they want to, which Ministers will just ignore when it comes back.

Ministers then say that they will have a special enhanced consultation process, which means that it is done with a view to reaching agreement. As the hon. Member for North Down (Lady Hermon) pointed out, even in an enhanced consultation process there is no guarantee that agreement will be reached. It is difficult to know how anybody participating in that consultation would enforce the process, but that consultation is the so-called protection in the protected elements of the Bill. In a sense, my hon. Friend the Member for Hayes and Harlington is debunking a lot of the differentiation between consultation and enhanced consultation.

[John McDonnell]

I have not seen this before, but we now have two types of consultation. The first is, “We’re consulting you because we hope you agree with us,” and the other is, “ We’re consulting you but we couldn’t care what you say to us.” Amendment 34 is simply trying to protect the Government, so that they can demonstrate that they are adhering to their promised level of consultation.

[Chris Leslie]

I suppose it is a case of diet consultation—or consultation-lite—versus full-fat consultation, which I know that my hon. Friend would be far more keen to see. I think he has done the House a service by casting some light on those issues, but I hope he will forgive me if I focus mostly on amendment 10 and the issue of retrospectivity, which is, ultimately, to me one of the worst aspects of the Bill.

I am glad that the Minister said that the Government have an open mind on retrospectivity—at least, he said that they do not have a closed mind, which is a similar thing. We hope for great things in the other place when the question is considered. He gave a set of reasons: a court might come along and set aside scheme regulations or there might be technical reasons for raiding people’s accrued savings and pension benefits retrospectively. I must say to the Minister, however, that when the Chief Secretary to the Treasury—for it was he—promised “No ifs, no buts” and said that he did not want that retrospectivity, not to have put that particular provision clearly and explicitly in the Bill is a major failing that will leave many employees with a sour taste in their mouths. They want some pretty basic protections to stop the notion of clawback and the ability of Ministers to sequester savings that they thought were safe—the deferred wages they have set aside for their long-term well-being.

We need to ensure that we focus on the confidence of employees in the scheme, as this is their property too, as my hon. Friend pointed out. It is not just the preserve of the Government; they are not simply giving out a pension as though it were a state pension scheme or however they wish to characterise it. These pensions are a joint endeavour between employees and employers and that is why we have said that the Superannuation Act 1972 protections need to be transposed into the Bill. The provision, derived from that Act, states:

“Scheme regulations shall not make any provision which would have the effect of reducing the amount of any pension, allowance or gratuity, insofar as that amount is directly or indirectly referable to rights which have accrued”.

The protection we need is very straightforward and we wanted to put it into our amendment. The Minister needs to go back and think about this again, as it is a signal issue that is at the core of the trust we need to have in the scheme. We want the scheme to work and we want members to stick with it and not opt out, but they need to know that their money and their savings are safe. That is why I would like to test the opinion of the House on amendment 10 by pressing it to a Division.

Question put, That the amendment be made.

--- Later in debate ---

Pension age

[Chris Leslie]

I beg to move amendment 13, page 5, line 21, after ‘age’, insert ‘or deferred pension age’.

[Mr Speaker]

With this it will be convenient to discuss the following:

Amendment 29, page 5, line 21,after ‘section 1’, insert

‘(other than a Scottish scheme)’.

Amendment 2, page 5, leave out lines 22 and 23 and insert

‘65, or current pension scheme age if lower’.

Amendment 1, page 5, line 27, at end insert—

‘(d) prison officers and psychiatric nurses.’.

Amendment 14, page 5, line 28, after ‘age’, insert ‘or deferred pension age’.

Amendment 30, page 5, line 28, after ‘section 1’, insert

‘(other than a Scottish scheme)’.

Amendment 9, page 5, line 28, leave out ‘must be 60’ and insert ‘shall be set out in scheme regulations but must be no more than 60’.

Amendment 16, page 5, line 29, at end insert—

‘(2A) Subsections (1) and (2) shall not apply in relation to any category of public service worker as the Secretary of State may by order specify following the publication of a scheme specific capability review.’.

Amendment 15, page 5, line 30, leave out subsection (3).

Amendment 31, page 5, line 30, after ‘section 1’, insert

‘(other than a Scottish scheme)’.

Amendment 33, in clause 33, page 19, line 25, clause 33, at end insert—

‘“Scottish scheme” means a scheme for the payment of pensions to persons specified in paragraphs (c) to (g) of section 1(2) in respect of service in Scotland;’.

--- Later in debate ---

[Chris Leslie]

We turn now to the part of the Bill relating to pension age. Let me first deal with what we think are drafting anomalies, with which we deal in amendments 13 to 15. Following our further scrutiny of the Bill after the Committee stage, we have noticed a potential anomaly on which we hope the Minister can reflect. There are to be some exemptions in the link between the retirement ages set out in public sector pension schemes and the state pension age arrangements. They are set out in clause 9(2) on page 5 of the Bill—I know that hon. Members are following this avidly—and relate to a person’s normal pension age under the scheme. The clause does not refer, however, to their deferred pension age, which means that the exemptions apply only to active members of pension schemes and not to those who have moved on from their occupation and are classified as deferred members.

The Bill will introduce increased pension ages, but clause 9 as drafted could lead to significant unfairness for some members of the fire brigade, the police and the armed forces, because, under the state pension age arrangement, those specified protected occupations will not be tied to the normal pension age. For example, a firefighter might decide to leave the fire brigade at the age of 58 because he or she feels physically unable to continue until 60, not necessarily due to any specific health problem, but simply due to their increasing age. They will then become a deferred member of the pension scheme, so they will not be entitled to receive the full pension until they reach the state pension age. That is a significant gap, so we think that the amendments are necessary to prevent unintended unfairness. Any extra costs resulting from such changes would need to be fully managed as part of the cost-cap mechanism. Our proposal would not add a burden to the Exchequer, but it would address a potential anomaly in the Bill. The Minister will, therefore, understand why we have tabled amendments 13, 14 and 15. I hope that this is a drafting error and I invite him to reflect further on it.

The Minister will not be surprised to learn that it is amendment 16 that most represents our ongoing anxieties about clause 9 and the problems with the link between the state pension age and an array of public sector employees whom we are asking to work for a considerable length of time. It needs to be said that, with life expectancies increasing, it is right to ask public sector employees to work longer before drawing their pensions. We do not disagree with that. Reforms of the age at which public sector workers retire are necessary if pension schemes are to remain sustainable, which, of course, is in everybody’s best interests. As such, we broadly agree that the normal retirement age for public sector workers should be linked to the state pension age. However, we have serious concerns about the inflexible way in which the Bill has been drafted and how it deals with exemptions to the state pension age.

The Government have understood that certain workers in physically demanding professions are not able to work past a certain age, regardless of their increasing life expectancy. As such, the Bill fixes the retirement age at 60 for fire and rescue workers and for members of the police force and the armed services. So far, so good, but my point is that those are not the only public sector workers with physically demanding jobs, and that is where the debate now takes us.

[Richard Fuller]

To press the hon. Gentleman on his point, he has made the assertion—it may be a fact—that the sole criterion for the exemption of these professions from the normal retirement age is the physicality of the job, but does he accept that there are other differences between those types of public sector workers and others and that that might be why they have been given a different retirement age?

[Chris Leslie]

I wonder what the hon. Gentleman is alluding to; perhaps he should elaborate. The Minister has not said that there are considerations other than the physically demanding nature of being a firefighter, a police officer or a member of the armed forces. Is the hon. Gentleman suggesting that there are different categories of public sector workers beyond some of those physical issues?

[Richard Fuller]

I will clarify my view, although I cannot speak for the Government. One criterion that differentiates these workers, other than physicality, is that they put themselves in danger in their public service, perhaps not routinely, but as an important aspect of their work. A firefighter will run into a burning building to rescue someone, a member of the police force will stop altercations and put themselves in physical danger, and members of our armed forces routinely put their lives on the line for our country. Does the hon. Gentleman not accept that that is an important point of differentiation and that it is not just to do with physicality, which is the basis for amendment 16?

[Chris Leslie]

While I do not disagree about the bravery of those in the professions listed in the Bill, I counsel the hon. Gentleman against taking the prescriptive view that only those categories of employee are engaged in brave acts or in risky professions. I accept that there are risks that go beyond the question of physicality, but there are other professions where the distinction is not as black and white as the Bill makes out. Mental health workers often take significant risks in the course of their duties, for example if they have to restrain patients. Prison officers are often in dangerous situations. Paramedics, hospital porters and others also have very physically demanding duties. There are gradations of physicality and risk.

My point is that there is an anomaly in the legislation, because one cannot be quite as prescriptive as to set out in the Bill particular classes of job and suddenly regard all others as not involving the same level of physicality or risk. I will not say that there are 50 shades of grey, but there are certainly gradations.

[Mr Gibb]

Perhaps I may help the hon. Gentleman to address the conundrum with which he is challenging himself by referring him to the Hutton report, which the Bill is implementing. I refer him to one of the shaded boxes that I know he is very keen on. Recommendation 14 states that the exception to linking the normal pension age to the state pension age should be

“in the case of the uniformed services where the Normal Pension Age should be set to reflect the unique characteristics of the work involved.”

Hutton also states that the uniformed services are in a different position because their current pension age is 55 or less. That is another key reason why there is a different normal pension age for the uniformed services, which Hutton specifically lists as

“the armed forces, police and firefighters”.

[Chris Leslie]

I do not deny the important role that is played by the professions listed in the Bill. What I am saying is that it is not as simple as saying that all other professions should therefore be exempt from considerations about the physicality of their endeavours. One could argue that prison officers, being a sort of uniformed service, have cause to have such protections. My point is that it is inconsistent and unfair to make exceptions for some workers in physical roles and not others. It is by no means clear that 60 is the appropriate age for all firefighters, police and Army personnel, when some of them undertake such demanding physical activity. There is no room in the Bill to make further exceptions to the state pension age link or to respond to any review that makes recommendations about the appropriate retirement age for firefighters, the police or Army personnel. Members who served on the Committee will recall that we cited the working longer review in the national health service, which was set up by Government Members. There is also an ongoing review of the working age in the fire service.

[Mark Reckless (Rochester and Strood) (Con)]

Is the hon. Gentleman’s argument on the basis of physicality collapsing? As my hon. Friend the Member for Bedford (Richard Fuller) said, three professions routinely place themselves in danger much more significantly than other professions. They currently have significantly lower pension ages, so it would be hugely unfair, a cliff edge and very disproportionate, to seek to increase their pension age to 65 or 68 as in other professions.

[Chris Leslie]

That is why amendment 16, which I urge the hon. Gentleman to look at, does not prescribe different pension ages for different categories of worker. We are looking only to give power to the Secretary of State, who

“may by order specify following the publication of a scheme specific capability review”,

to allow disapplication in relation to categories of public service worker for provisions in clause 9(1).

If reviews are ongoing—the Government have undertaken the working longer review in the national health service, and the fire service review—we must ensure almost as an issue of drafting that any conclusions of those reviews can be enacted and reflected in legislation, if the Secretary of State agrees. That is the extent of the amendment; it would simply ensure that if there are technical reviews of the capability of certain classes of employee, the Government will be able to create exemptions from any arrangement. That is why the amendment is narrowly defined. I accept there is a theoretical or philosophical argument about risk and physicality, but to return to the practicalities of our arrangements, we must look at how the legislation is drafted. That is our duty as a loyal Opposition.

[Richard Fuller]

The hon. Gentleman is being generous in giving way. He may regard the amendment as narrow, but I regard it as a broad generalisation that seeks to introduce uncertainty in an otherwise specific Bill. If his principle of physicality is an important test for public sector pensions, is it also an important test for private sector pensions or the state retirement age?

[Chris Leslie]

If a private sector scheme rules to make its own arrangements, it has the flexibility to do so. We are simply saying that in future, some degree of latitude and flexibility should be placed in statute to allow Secretaries of State to take account of the outcome of any reviews. We are not saying there should be a requirement for exemptions to be made; we want to give the Secretary of State the power to implement the findings of any reviews should that be deemed fit.

[Mike Freer]

I sometimes feel as if I am on the wrong side of the Chamber for this Bill, but perhaps I may help regarding the intervention from my hon. Friend the Member for Bedford (Richard Fuller). The private sector does recognise physicality for those such as steeplejacks, chimney sweeps and jockeys who have a significantly lower retirement age. I hope that is helpful to the shadow Minister.

[Chris Leslie]

If only we had been talking about jockeys when the Under-Secretary of State for Skills, the hon. Member for West Suffolk (Matthew Hancock) was in the Chamber; he would have found that helpful intervention most interesting. My respect for the hon. Member for Finchley and Golders Green (Mike Freer) grows by the minute and I am grateful for that interjection.

The key point is whether the reviews can find their course into effect. In Committee, the Minister repeatedly stressed that the working longer review for NHS staff was

“not in any way looking at the link between the normal pension age and the state one.”

Instead he said that it was

“considering the implications of working longer for NHS staff,”––[Official Report, Public Service Pensions Public Bill Committee, 13 November 2012; c. 327-28.]

That seems a slightly contradictory statement. Linking the normal pension age to the state pension age means that people will work longer, and therefore the review will look at the effect on the state pension age link for NHS workers.

The terms contained in the Department of Health document “Reforming the NHS Pension Scheme for England and Wales” include the following objectives for the working longer review:

“Identify any categories of worker for whom an increase in Normal Pension Age would be a particular challenge in respect of safe and effective service delivery and consider how this may be addressed;

Identify any categories of worker for whom an increase in Normal Pension Age would be a particular challenge in respect of their health and wellbeing.”

If that NHS review concludes that a higher normal pension age is inappropriate for certain categories of worker, either because working longer would be physically damaging or because it could lead to unsafe practices in the NHS, the current Bill would not allow those workers to be exempt from the state pension age link in clause 9. I therefore contend that it is irresponsible to make legislation before the findings of the Government’s review are published, without allowing the legislation to accommodate some or all of that review’s recommendations. Given that the working longer review was a key component of the agreement reached between health service workers and their employers, it is unfair to fetter the recommendations that the review can realistically make. It is similarly inappropriate and unfair to fix the retirement age for firefighters at 60 when the working longer review in the fire service is yet to report.

This is an incredibly important issue. I accept that we must note that the cost-cap mechanism in the Bill would ensure that any extra costs of the extra exemptions to the state pension age link will need to be met by the scheme—the Opposition are not saying that the additional costs should fall on the shoulders of the taxpayer—but bearing that in mind and the fact that the clause does not require the Secretary of State to make exemptions, the amendment simply allows flexibility. I cannot see how the Government can object to it.

[Mr Gibb]

Before hon. Members speak to other amendments in the group, may I refer the hon. Gentleman to the proposed final agreements? I have in front of me the one that applies to teachers pensions, but it is similar to other schemes. It states:

“Actuarially fair early/late retirement factors on a cost-neutral basis”

will apply in the agreement. That means that teachers can take early retirement if they wish. If the normal pension age is above 65, they will have an early retirement factor of 3% per year for up to three years. People can therefore take early retirement with a small actuarial reduction in the pension. That deals with the problems the hon. Gentleman describes.

[Chris Leslie]

With the greatest respect, that does not deal with the problems, because there is a difference between the early retirement benefits to which an employee is entitled and those they can get at the normal pension age as defined in scheme regulations. The Government set up working groups and committees in the NHS, fire services and services throughout the country. Those groups have been given terms of reference, but now discover that they cannot implement their findings because of a drafting anomaly in this Bill. All the Opposition are asking is that the Government think again about how the scheme capability reviews come to fruition. This ought not to be a partisan point. I am simply seeking to ensure that we have flexibility in the legislation.

Others will want to speak to the amendments in the group that they have tabled, but I strongly urge the House to support amendment 16.

[Mike Freer]

I said in an intervention that I had some interesting views on the Opposition’s stance. I have sympathy with the thrust of the amendments, but I assure the Minister that it does not extend to voting for them.

Our starting point on the retirement age must be the demographic pressures we face. UK National Statistics data show that in 2008, males were expected to live to 78.1 years and females to 82.1 years, yet by 2011, life expectancy had jumped to 90.3 years for men and to 93.8 years for women, and we could expect to pay almost as many pension cheques as pay cheques. One of my reasons for supporting the linkage—in the main— between public sector pension schemes and the state retirement age is that there is a huge gap between the contribution rates of the employer and employee and what is drawn out as a pension.

The NHS pension scheme tiered employee contributions data, which are published by the NHS, show that the employer pays about 14% and the employee about 8.5%. My rudimentary maths leads me to conclude that 22.5% goes in. Members who took part in the Bill Committee evidence sessions will remember the British Medical Association’s interesting contribution, not least because the BMA said that doctors should pay less and the lowest-paid should pay more for their pensions. The BMA confirmed that the average pension out in the NHS was 49%, so if the contribution rates are putting in only 22.5%, but 49% is coming out, that 26.5% gap has to be covered from somewhere, and it is being funded by the taxpayer. If that taxpayer gap is going to grow because of the demographic time bomb—people are retiring at the same age, but living longer and drawing pensions longer—it will start to be completely unsustainable, undermining the public sector pension schemes in total. That is why the Government are right to link the normal pension age with the state retirement age.

--- Later in debate ---

[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.

[Richard Fuller]

There is one other amendment, which I tabled in Committee, but which we did not push to a vote. Perhaps the shadow Minister can say whether he would be interested in having it proposed in another place. Constituents of mine in Bedford and Kempston are being asked to cough up to pay for the pensions of judges and others on salaries of £150,000. It seems particularly unfair that those on £24,000, which is the average income in Bedford—they are also on a pretty high tax rate—should be asked to contribute to a pension scheme for a judge who will retire on a pension that is two or three times larger than such an income. That has not been changed in the Bill so far. I was not sure in Committee whether the Labour party thought it was fair for my constituents to pay for judges’ pensions. Perhaps the shadow Minister can clarify whether he would like that amendment to be moved in another place.

[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.

[Several hon. Members]

rose—