Parliamentary Contributory Pension Fund

David Anderson Excerpts

Monday 17th October 2011 Commons Chamber

[Sir George Young]

My hon. Friend’s amendment would delete the following words:

“and accordingly invites IPSA to increase contribution rates for hon. Members from 1 April 2012 in line with changes in pension contribution rates for other public service schemes.”

It is perfectly legitimate to say that one can deduce that he does not want Members’ pension schemes to reflect other public service schemes.

[Mr David Anderson (Blaydon) (Lab)]

On that point, will the right hon. Gentleman give way?

[Sir George Young]

Let me make a bit more progress and then I will give way.

The motion also states that

“IPSA should introduce…a new pension scheme for hon. Members which is informed by the Commission’s findings”

by 2015. That is a similar timetable to that for the rest of the public service. However, as with other public service pension reform, changes should neither be retrospectively made nor have an impact on past benefits.

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[Sir George Young]

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

[Mr Anderson]

I was pleased to sign amendment (a), but I want to make it clear that my case is very different from what the Leader of the House described. I believe that we are in exactly the same boat as every other public sector worker in the country and that we should be treated the same. We should be allowed, with our trustees, to negotiate with IPSA as local government pension schemes are being negotiated with their trustees and their employers. It should not be the Government who set the standard for the pensions—it should be the pension schemes.

[Sir George Young]

The hon. Gentleman will know that paragraph 15 of schedule 6 to the CRAG Act states:

“Before making a scheme under paragraph 12 the IPSA must consult…the trustees of the Fund,”

so there is that opportunity for dialogue.

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[Ms Eagle]

I do not think that I was making that argument, and I hope that the negotiations will be meaningful and successful.

[Mr Anderson]

It is quite clear from my discussions with people in the negotiations that the Government are not negotiating seriously: they have made the point that they want a 3% reduction no matter what. All they are talking about is how they should do it, not whether they should do it, and no evidence has come forward—there are no actuarial reports and there is no cognisance—of the impact that the number of people dropping out, which could be in the hundreds of thousands, will have not just on those schemes, but on the investment potential of those schemes.

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[Mr Donohoe]

I have to disagree with the hon. Lady, and I will tell her why. If we put things out to independent arbiters such as the Senior Salaries Review Body, and they make recommendations after consultation with all sorts of bodies, I would argue that the Government should not intervene. In that case in particular, we should not have overturned that decision. This is where we have gone wrong so many times in the past. In the great number of years that I have been a Member of Parliament, I have seen this happen time and again, and my research leads me to believe that every Prime Minister since 1945 with the exception of John Major has interfered in the conditions of service of Members of Parliament to the detriment of those conditions.

I feel strongly about this—so strongly that, as the arch-enemy of IPSA, I argue on the basis of what I have seen that it is far better for it to have that independence, which is clearly documented in legislation, than to have this constant interference in the conditions of service of Members of Parliament. There has not been a great understanding by the Government of some of the elements of the arguments with IPSA.

Given that pay and pensions are linked, it is only sensible for IPSA to take stock not only of all elements of conditions of service, but of the whole question of pensions, which I have always believed to be deferred income for any individual in employment who has a pension fund.

Other considerations relating to IPSA in consultation with trustees include the fact that it has to wait for a valuation. Here, as I say, the Government have not fully understood the position on Members’ pensions or the calculations of where they should go in respect of any increase in contributions, any increase in the age of retirement or any other element affecting those pensions. Clearly, the results of the 2011 valuation of the scheme will shortly be finalised, which I take as a very strong argument for leaving the decision about increases in contributions, if there are to be increases, to IPSA itself. As far as we are concerned, we are in a cost-sharing scheme, as a result of which we must see what the actuary says about any changes to contribution rates before taking a decision that puts us in line with anybody else. As Members will know, there have been increases to pension contributions over a relatively recent period, which I do not think any other members of the public sector have had to face. I suggest that it is important to take that into account, as we are told it will be by IPSA.

I suggest that trustees would also recommend giving further thought to other cost-saving measures in the scheme to make it simpler and to make the benefits clear in a way that everybody understands. From the discussions I have had with Members of Parliament over the last few weeks, I believe that there has been a misunderstanding of many aspects of the scheme. That needs to be taken into account. We also need to consider, if possible, as a means of getting away from increases in contributions, the whole question of increasing the pension or retirement age. It could be part of the answer to some of the problems we face.

Another misunderstanding is the view that this scheme is expensively funded in itself. Schemes like this should be treated differently from unfunded or notionally funded schemes, as assessing changes to member contribution rates should take into account any excess returns generated by funded schemes from the investment strategy. I understand that the London Pension Fund Authority scheme, which is a funded scheme, might not be subject to the general contribution increase that the Government hope to implement. If there are exceptions there, they can be made anywhere else. I am convinced that an awful lot of negotiations are still to take place, and these will bring to the fore some of the elements of the pension fund that are not best understood.

[Mr Anderson]

Is there not a big problem with this whole debate in that we talk about these things as if they are a matter of negotiation, but in fact what we are really talking about is the fact that the Government are imposing a stealth tax on all public sector workers? They are not having negotiations about that, and they are not taking actuarial advice or the effect of the schemes into account. All they are saying is, “There will be an increase on public sector workers’ pensions” as a matter of fact—without allowing negotiations about any scheme to be taken into account.

[Mr Donohoe]

I am not in a position to answer that, as it is for the Leader of the House to do so, although I certainly have some sympathy with what my hon. Friend says.

Some of the closest comparators to Members are senior civil servants. Members of the civil service pension scheme and other schemes such as the scheme for staff of the House of Commons and the House of Lords pay either 3.5% or 1.5% contributions, depending on when they joined the civil service. For that contribution, they either build up a pension at the rate of one sixtieth, or one eightieth plus tax-free cash sum—which equates to one sixty-fourth—with a retirement age of 60, or they build up a pension at the rate of one forty-third with a retirement age of 65. That must be taken into account along with everything else in which we will be involved between now and 2015. It is clear from the discussions that have taken place that consideration must be given to all elements of Members’ contributions.

People may think that I only represent the House in this regard, but I have constituents who are aggrieved by what is happening to their pension funds, and I have every sympathy with them. However, I am here almost as a shop steward—I am not sure that that expression is much liked on the Government Benches—to represent Members in the context of their conditions of service. People describe this as a gold-plated scheme, but although it is a good scheme—indeed, I would argue that it is a brilliant scheme—what is not understood is that only a few Members of Parliament retire from this place with a full pension. Of the 650 serving Members of Parliament, only 35 would leave with one today. Another thing that is not understood is that most Members pay for the rate of one fortieth, which means paying 11.9%. So the scheme cannot really be described as gold-plated.

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[Mr David Anderson (Blaydon) (Lab)]

It would be hard to argue with what the hon. Member for Colchester (Bob Russell) has just said if we had not already agreed to do this. We are halfway down the line, and we have been since before the last general election when we said we would give IPSA this responsibility. The debate should have stopped then. We should have said, “Right, we agree today that we’re going to do something we should have been doing over the last 16 months. We’re going to tell IPSA to get on with it by sitting down with our trustees and negotiating a settlement based on the way pension schemes across the world operate.”

Why are we having this debate tonight on a lengthy motion that pulls in public sector pensions? I take the Leader of the House at his word of course, but I am convinced that other people will use this debate as a stick to beat public sector workers over the head with. They will say, “MPs have agreed to have their pensions changed, so why don’t you?” That is the wrong way to deal with something as integral to someone’s terms and conditions as their pension. The terms and conditions of public sector workers, or of any other worker in this country, should be based on a genuine debate between the employer representative for the pension scheme—IPSA in our case—and the trustees. They should come together to weigh up the evidence about what the scheme does, what it is there for, whether it is sustainable and whether there is evidence to back changes.

This country faces a situation in which the Treasury is telling us that a levy must be imposed on those in the public sector, which in some cases will be 3% and for us could well be 5%, without any account having been taken of whether it is legitimate, whether it makes schemes affordable or whether, as has been said, it makes them less sustainable. A survey carried out by YouGov for the Fire Brigades Union suggested that 27% of its members could opt out and 12% would be very likely to opt out of their scheme if these changes go through. Unison has suggested that 350,000 people could opt out of these schemes. These schemes are good for the people in them. They are not gold-plated, but they are probably as good as most people in work can get. If people opt out, that will affect not just those individuals but will have a huge effect on the investment potential of this country, because those pension schemes invest heavily in the stock market.

[Mr Bone]

The hon. Gentleman is putting his point fairly. I might well agree with the Government’s approach to pension reforms, but I am surprised that the motion states that “this House” supports it. This is the wrong debate in which to make that statement.

[Mr Anderson]

I could not agree more with the hon. Gentleman. This debate should be about the processes of this House—House business is about that, not the politics of this House. It should be about whether we agree that this is the right way for Members of this House, and whoever comes after us, to be treated. This should not be about whether this suits someone’s political agenda and allows them to go outside and say, “Look, MPs think it’s legitimate to have a 5% or 3% levy. Why won’t you do the same?”, but my worry is that that is what this is about.

Let us not forget that we had a debate that concluded three years ago about public sector pensions, including our own. That resulted in big changes to public sector pensions. As has been suggested by our trustee colleague, my hon. Friend the Member for Central Ayrshire (Mr Donohoe), a cut-off was introduced: people would retain the benefits if they joined before a certain date, but for those who joined after and for new members the pension contributions would be more and their benefits would be less. Public sector workers agreed to that three years ago on the basis that it would make their pensions sustainable for the future. Nothing has changed since then, except for the fact that the Government want to impose a levy on public sector workers to try to dig themselves out of the hole created by the collapse of the global financial system. That approach is clearly wrong. Public sector workers should not have to carry the can for the failure of the banks, and that is clearly the message being given throughout the world.

My worry is that if we tell people that they should start paying 50% more for their pensions at a time when they face pay freezes, freezes of increments, a tax on shift payments, potential redundancies and so on, they will walk away from these pension schemes, as I said earlier. That will be to the detriment of the schemes, investment and the welfare system, because as people reach retirement age there will be a bigger drain on the welfare state than there would have been had they been able to provide for themselves.

This approach is a con trick. It is not about pensions’ stabilisation; it is about taking money out of the pockets of nurses, firefighters, street cleaners, social workers and home care workers to pay for the failures of capitalism. The truth is that we should stand together with those workers, as public sector workers, in a debate that is about our terms and conditions. They have a similar debate about their terms and conditions and we should say, “We stand in solidarity with you. It’s wrong that the Government are robbing you for your pension and taking money out of your pockets.”

[Richard Graham (Gloucester) (Con)]

I thank the hon. Gentleman for giving way and I should declare an interest as the chairman of the all-party group on occupational pensions. I am puzzled by where the hon. Gentleman is going on this, because the motion is surely all about the parliamentary pension fund rather than about those of trade union members in general.

[Mr Anderson]

If the hon. Gentleman had been here from the start of the debate, he would realise that it has expanded into a discussion about public sector pensions because they are included in the motion, in which the Leader of the House has clearly linked this scheme with other applicable schemes. Some of us who signed the amendment want to remove that link so that we can have a debate about when and whether we will give IPSA the right that it should have had since last May. If we had had that debate, we would not be sitting here now and we could have talked about the issue that most people in the House today want to talk about.

Ultimately, we are showing support for other public sector workers and we are not saying that we are a special case. We are saying that the Government should not make any public sector worker a special case by making them pay a levy to subsidise the failure of the banking system.

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[Mr Heath]

I trust IPSA to carry out its statutory functions and give an independent assessment, but I think that there is no harm whatsoever in inviting the House to agree that we should not claim an exception for MPs. We claim no such thing and therefore expect IPSA to have regard to Lord Hutton’s review and the policy consequences that flow from it.

[Mr Anderson]

Will the Minister make it very clear for the House, the public and, in particular, Len McCluskey that no Member has argued that MPs should be a special case? Everyone has argued that all public sector workers should be treated equally—that they should also be treated properly.

[Mr Heath]

I hope that no hon. Member believes that they are a special case and that, if the House divides this evening, they will bear that in mind when casting their votes. I am simply talking about the perceptions that those outside the Chamber might have. I am very clear about what the perceptions would be if Members supported the amendment, which is why I hope it will not be pressed to a Division. That would only divide the House on something on which we ought to be united.