Public Service Pensions Bill
Debate between David Anderson and Robert Neill(12 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Robert Neill
Yes, it was shortly after the Municipal Reform Act.
The scheme is important for its members and the council tax payers who fund it. We should also not forget—I will come back to this later—that it is important for the overall British economy, because of its investment potential. Getting it right is important. It is worth emphasising that it is different from the other schemes, because it is largely funded. The Chief Secretary to the Treasury recognised that significant factor, as, I am sure, will the Minister who responds to the debate. It will have consequences, once the Bill is enacted, for how we deal with regulations and secondary legislation with regard to the scheme’s governance and other related matters. There is nothing in the Bill itself—which I warmly support, because reform of all the public sector schemes is necessary—to prevent that from being achieved.
There is clear evidence that reform of the local government scheme is necessary. Reference has been made to the Audit Commission and, at the risk of taking a little longer than I had intended, it is worth quoting what it said in order to make the point. It accepted that the local government pension scheme had funds
“to cover about three-quarters of its future liabilities”
and that it had a positive cash flow. The commission then concluded that the current approach could not be continued indefinitely, the reasons for which included:
“The cost of providing pensions for local authority employees is rising in absolute terms and as a proportion of pay because of increasing life expectancy and action needed to recover funding deficits.”
It was not possible to fund the whole lot. There is no doubt that local government pension funds
“have been affected by lower than anticipated investment returns”.
At the time of the commission’s report in 2009, the value of assets was “about 15% lower” than had been anticipated in the previous revaluation in 2007. I have to say that Opposition Members cannot escape some of the responsibility that the previous Government have for the investment performance of the funds.
Mr Anderson
Given his long experience of local government, does the hon. Gentleman have any idea how many councils, including the one that he led, took pension contribution holidays?
Robert Neill
I certainly never took any pension contribution holidays. Indeed, I only became a member of the local government pension scheme in 2000, when I was a member of the Greater London authority, so I do not think that the hon. Gentleman’s point is realistic. The performance of the scheme is down to the investment climate in which it operates, and the investment climate is determined by the macro-economic policies of the Government. The hon. Gentleman does not accept the failure of his Government in this context. One of the by-blows of that failure was that the investment returns for the scheme were less than expected and that has added to the pressures on the scheme. It is not the sole pressure, but it has added to them.
The Audit Commission also noted that the cost of pensions affects the amount of money available for local authorities to fund services and it influences council tax decisions, so there were questions about whether the LGPS benefits were affordable in the long term. Although some of those matters have been picked up by prior reforms—I do not pretend otherwise—they were not adequate to deal with the pressures. The Audit Commission concluded that, despite the fact that the scheme had funding, unlike others, reform was needed none the less. It is not just the Audit Commission that has recognised that—so too have the professionals in the local government pensions world. In October 2009 Mike Taylor, the chief executive of the London Pensions Fund Authority—I declare an interest, having been a member of that body for a short period—said that the LGPS needed to respond to increasing longevity because it
“is not designed to pay benefits for ever increasing periods of retirement and, without change, will face extinction…Employer or taxpayer contribution rates currently take all the strain of increasing liabilities in the LGPS. This situation cannot continue and either those costs must be reduced, or employees bear a fairer share of the increasing costs.”
Oral Answers to Questions
Debate between David Anderson and Robert Neill
Mr David Anderson (Blaydon) (Lab)
1. What estimate he has made of the average change in funding for fire and rescue services between 2011 and 2013.
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)
Driving down the nation’s deficit remains the Government’s principal priority, but we have protected fire and rescue services in the spending review by back-loading their reductions to 2013-14 and 2014-15. As a consequence, the revenue spending power of single-purpose fire and rescue authorities will be reduced by only 2.2% in 2011-12 and by 0.5% in 2012-13.
Mr Anderson
The local chief fire officer in Tyne and Wear advises me that although the average loss across the country is 6.5%, in the metropolitan areas it is 12.9%. He believes that if the cuts go ahead they will lead to a weakening of national and local resilience, firefighters made compulsorily redundant, a further reduction in the number of rescuers, a significant fall in the number of readily available appliances and fire station closures. What will the Minister do to ensure that that prophesy does not come true?
Robert Neill
All local fire and rescue authorities must perform their statutory duties under the Fire and Rescue Services Act 2004 and act in a way that is consistent with their integrated risk management plans. The Government adjusted the fire formula following consultation with local fire and rescue authorities and increased the weighting given to the needs element and risk factors in urban areas.