Public Sector Pensions

Hywel Williams Excerpts

Thursday 8th December 2011 Commons Chamber

[Hywel Williams (Arfon) (PC)]

I beg to move,

That this House recognises and appreciates the valuable work done by public sector workers; believes that they should receive pensions which are affordable, sustainable and fair; further believes that the changes announced since June 2010 by the Government are primarily for the purposes of deficit reduction rather than a move to secure the long-term sustainability of public sector pensions; notes that these changes are unfair on public sector workers who will have to work longer, pay more and receive less in their pension when they retire; further notes the findings of the National Audit Office that the 2007-08 pensions re-negotiation changes will generate estimated savings of 14 per cent. by 2059-60 and the conclusions of the House of Commons Committee of Public Accounts’ Thirty-eighth Report of this Session on the Impact of the 2007-08 changes to public sector pensions (HC 833), that the cost of public service pensions has reduced substantially because of these changes; agrees with criticism in both reports of the failure to develop a long-term strategy for the role of pensions in recruitment and retention to the public sector; condemns the Government’s threat to cut devolved administrations’ budgets if they do not implement the Government’s immediate levy on pensions contributions; and calls on the Government to reverse its unfair changes to public sector pensions.

The motion stands in the names of my right hon. and hon. Friends from the Scottish National party and Plaid Cymru, and of Members from the Labour party and, I understand, from the Social Democratic and Labour party.

Last week, a day of action saw more than 2 million people across the UK join in protests against changes that will make those affected—mainly women—work longer, pay more and receive less when they retire. This year alone, bankers walked away with £7 billion in bonuses. As one constituent said to me last week:

“This is just a way of getting extra cash from public workers. And it is just not fair.”

We are proud to hold this debate on behalf of all those people across the UK who are directly or indirectly affected by the Government’s changes, and we note that despite having 36 Opposition day debates since the changes were announced in June 2010, the official Opposition have not seen fit to devote even one of those opportunities to debate the public sector pensions proposals. Whatever the evasions, the nods and the winks, and the ducking and diving of others, we are glad of the opportunity to show clearly where we stand.

[The Parliamentary Under-Secretary of State for Scotland (David Mundell)]

This is characterised as a joint debate between Plaid Cymru and the Scottish National party, yet last week we saw SNP Members of the Scottish Parliament cross the picket lines to ensure that the Scottish Parliament functioned, while Plaid Cymru Members of the Welsh Assembly refused to cross picket lines and the Welsh Assembly did not function. Where is the coherent position in that?

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[Hywel Williams]

It has clearly escaped the right hon. Gentleman’s attention that the SNP are in government in Scotland, while in Wales—alas—we are not.

[David Mundell]

I am afraid that I do not find that a tenable explanation. All SNP Members of the Scottish Parliament are not in the Government, although they may act like it. Those people crossed the picket lines and spoke in a debate on this very subject.

[Hywel Williams]

Honestly, I think we need to move on to the subject of the debate. I am sure that the right hon. Gentleman will have time later to make those and other fatuous points.

[Alun Cairns (Vale of Glamorgan) (Con)]

I would like to take the hon. Gentleman back to what he said a few moments ago and remind him that when Plaid Cymru was part of the coalition in the Welsh Assembly Government, its members refused to cross the picket lines at that time, too.

[Hywel Williams]

Well, honestly, I am sure that you would not want me to be diverted down this particular route, Madam Deputy Speaker.

[Madam Deputy Speaker (Dawn Primarolo)]

Much as this topic might interest some Members, I think the hon. Gentleman should return to the subject of this afternoon’s debate.

[Hywel Williams]

Thank you, Madam Deputy Speaker.

To summarise our motion, we appreciate the valuable work done by public sector workers and believe that they should receive pensions that are affordable, sustainable and fair. I think that we can have agreement across the House on that. We believe that the Government’s changes are primarily for the purposes of deficit reduction—I do not think we are going to have agreement on that—rather than to secure the long-term sustainability of public sector pensions. These changes are, to our minds, unfair on public sector workers.

We also note that the findings of the National Audit Office for the 2007-08 period show that pensions re-negotiated at that time will generate estimated savings of 14% by 2059-60. The conclusions of the 38th report of the Public Accounts Committee reveal that the cost of public service pensions has reduced substantially because of those changes. We agree with the criticism in both reports of the failure to develop a long-term strategy for the role of pensions in recruitment and retention in the public sector, and we condemn the Government’s threat to cut the devolved Administrations’ budgets if they do not implement the Government’s immediate levy.

[Mr Elfyn Llwyd (Dwyfor Meirionnydd) (PC)]

I am following my hon. Friend’s argument closely and I agree entirely with what he says. Does he agree that there is a link between this drive to the bottom on public sector pay and the Chancellor’s view that we should be looking at regional pay? This flexibility is all about a drive to the bottom, and it is unacceptable out there; people will not have it.

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[Hywel Williams]

My right hon. Friend makes an excellent point, to which I shall return later. The Prime Minister’s numerous assurances that he is not in favour of driving down public sector pensions, and that it is not a race to the bottom as far as he is concerned, are strange in view of the actions of his Government.

Finally, our motion calls explicitly on the Government

“to reverse its unfair changes to public sector pensions.”

Let me make it clear from the outset that no one I have spoken to wanted to go on strike. Everyone wants a reasonable settlement. My nationalist party colleagues and I hope that the talks between the unions and the Government will continue, and will reach a successful conclusion in the terms that I have outlined. We understand that the unions have accepted the continued need for negotiation and further change. Perhaps the Minister who winds up the debate will tell us when the two sides met most recently in the last month, who was involved—there have been questions about who was speaking for whom—and when they intend to meet again.

[Julian Smith (Skipton and Ripon) (Con)]

As the hon. Gentleman develops his argument, will he be comparing the positions of employees in the public sector with those in the private sector, who for many years have been having to increase their contributions in order to receive decent pensions?

[Hywel Williams]

Government Members have deployed such arguments time and again, which is strange given that in other contexts, such as that of education, they always deny that they are lowering standards. It is not about levelling down, they say, but about levelling up—yet when it suits them, it is the other way around. The hon. Gentleman clearly was not listening when I made that point earlier.

[Stewart Hosie (Dundee East) (SNP)]

The hon. Member for Skipton and Ripon (Julian Smith) has advanced a spurious argument. There are some very good private sector schemes and some very good public sector schemes. Some private sector schemes have gone bust, and some public sector schemes require an in-year top-up. This is not about “private good, public bad”, or the other way around. It is about having good schemes, full stop. It is about fairness, and about not levelling down in either the private or the public sector.

[Hywel Williams]

My hon. Friend has made a good point. If Government Members are concerned about the private sector, they should be concerned about the large number of people who have no pensions at all. That is what concerns me, and concerns my colleagues.

[Mr Mike Weir (Angus) (SNP)]

Certain members of the Government are suggesting, as one of their “public against private” arguments, that public sector schemes are gold-plated. In fact, the average public sector pension is about £5,000 a year, and local government pensions can be as low as £3,000 a year, or £80 a week.

[Hywel Williams]

My hon. Friend has anticipated a point that I was going to make, which will doubtless be made again by other nationalist party members. Anyone reading the popular press would imagine that public sector workers were driving around in this year’s model of car and enjoying two or three foreign holidays a year, but that is not, of course, the case.

We say “Let us have negotiations”, but is the 3.2% imposition itself negotiable? What the Government have announced today will merely shift the burden from one group of workers to another. They are trying to squeeze out some sort of deal, but we utterly reject that way of going about things.

[David Mundell]

I think it important for the hon. Gentleman to clarify whom he means by “we”. The Scottish National party is in government in Scotland, and a number of choices are available to it. For instance, there are funds that it could allocate to reduce pension contributions, but it has chosen not to do so.

[Hywel Williams]

Again, I do not want to go down that particular avenue—[Interruption.] I have some things to say that the Minister might like to listen to. My hon. Friends will be responding to his point later, but let me say now that the possibilities to which he alludes constitute a broad spectrum of theoretical options for consideration, and that the Scottish Government have expressed no preference. I am sure that others will say more about that later.

[Stewart Hosie]

The Minister said that a number of choices were available to the Scottish Government. As he will know, the choices are rather limited by the UK Government’s threat to withdraw £8 million a month— £100 million a year—from the Scottish budget if we do not stick to their timetable. I am sure he agrees that that rather limits the choice of manoeuvre for a Government who do not want to go down that path.

[Hywel Williams]

I am sure that the £100 million cut that the UK Government are dangling before them is proving very persuasive for the Scottish Government, given the difficult position that they are in. I am sure that more will be said later about that as well.

[Mr Alan Reid (Argyll and Bute) (LD)]

Because of the council tax freeze in England, the Barnett consequentials provided an extra £66 million for the Scottish Government, and they received hundreds of millions extra as a result of the autumn statement. Does the hon. Gentleman not agree that the Scottish Government can choose whether or not to use that money to prevent an increase in pension contributions?

[Hywel Williams]

The hon. Gentleman is a keen student of Scottish affairs, and possibly of Welsh affairs as well. He will know that the block grant has been falling, and that the choices available are limited.

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

Does the hon. Gentleman not accept that the Labour-run Scottish Executive also had to make choices? When they undertook to introduce free travel for the elderly, they had to do so on the basis of the block grant, and the SNP would have to take a similar hit if they did what the motion suggests.

[Stewart Hosie]

The budget was going up at that time.

[Hywel Williams]

As my Scottish colleague says, the budget was going up then.

[Mr Weir]

Does my hon. Friend agree that what was said by the hon. Member for Argyll and Bute (Mr Reid) was completely wrong? The Chief Secretary to the Treasury has specifically said that if the Scottish Government do not implement the UK Government’s proposals, their budget will be cut. Barnett consequentials emanating from elsewhere are irrelevant, and besides, the Liberals in Scotland have already called for the money to be spent on numerous things.

[Hywel Williams]

My hon. Friend has put it much better than I could have done. It is not surprising that the Liberals are, as usual, trying to spend other people’s money.

[Mr Reid]

Will the hon. Gentleman give way?

[Hywel Williams]

No, I must try to make some progress. No doubt the hon. Gentleman will have an opportunity to speak later.

Whatever the Government say, the 3.2% is seen by workers and by the general population as an additional and carefully targeted tax, aimed largely at those who have the least means to pay. As for the negotiations, they must be based on proper evidence rather than on the cases that the Prime Minister quoted selectively during last week’s Question Time, which were so effectively debunked in Radio 4’s “'More or Less” programme and in Channel 4’s “FactCheck”.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I congratulate my hon. Friend on the excellent speech that he is making. Is he aware of a study by the Fire Brigades Union, which found that 27% of its members were likely, or very likely, to leave their pension schemes if employee contributions were raised? What effect does he think that would have on the sustainability of schemes if it were translated across the public sector?

[Hywel Williams]

There is clearly a danger that some schemes will become unviable, which would mean that in the longer term those who no longer had pension schemes would become even more dependent on the state. I am sure that Government Members would not want that to happen.

[Guto Bebb (Aberconwy) (Con)]

I am sure I heard the hon. Gentleman say that the 3% increase in pension contributions would target those least able to pay. I believe that the average public sector wage in Wales is about £26,400, compared with £21,700 in the private sector. Furthermore, do not the Government’s proposals protect those earning less than £15,000 a year?

[Hywel Williams]

That argument fails to take several factors into account, such as the 710,000 people who will lose their jobs and the 1% pay freeze that looms before us at a time when inflation is eating into the real value of wages.

Our constituents have gone on strike with the greatest reluctance. They are not the wild-eyed extremists so beloved of those on the Government Benches. Members of the National Association of Head Teachers—scarcely a hotbed of left-wing insurrection—went on strike last week for the first time in 140 years. Anna Brychan, director of the NAHT in Wales, summarised the arguments advanced by many public service workers who felt that they had no choice but to go on strike. I shall paraphrase what she said, because it was very lengthy. She said that the NAHT was not persuaded by the unsustainable and unaffordable argument. The pension changes in 2007-08, according to the figures from the National Audit Office, showed savings of 14%, but no re-evaluation has been made since the previous apparently permanent settlement. May I draw the attention of the House to my early-day motion 2198, which makes that point?

[Guto Bebb]

Will the hon. Gentleman give way?

[Hywel Williams]

I must press on, as I have rather a lot to say. Time is pressing, and it is a short debate. Of course, the hon. Gentleman can make his own speech, unless he has to leave the Chamber, but I give way.

[Guto Bebb]

Was not the individual whom the hon. Gentleman has just mentioned—Anna Brychan—once a member of Plaid Cymru who worked for the party in Cardiff?

[Hywel Williams]

So did the hon. Gentleman, before he jumped. I know him very well. He is a very nice man and is trying hard to be a nasty curmudgeon, but he is failing entirely.

[Jacob Rees-Mogg (North East Somerset) (Con)]

Does that not prove the general point that there is more rejoicing in heaven over one sinner who repenteth than over the 99 who remain unrepentant?

[Hywel Williams]

It depends on whether they are going up or down.

Returning to the comments made by the NAHT, I refer to the written question tabled by my hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) on 21 November. In his response, the Minister of State, Department for Education, the hon. Member for Bognor Regis and Littlehampton (Mr Gibb), said:

“The latest valuation of the teachers’ pension scheme was published in November 2006. This was the actuarial review of the scheme as at 31 March 2004.”—[Official Report, 21 November 2011; Vol. 536, c. 87W.]

In other words, there has been no formal published valuation since the 2007 changes were introduced, so how can the Government claim that the scheme is unaffordable?

The NAHT also says that contribution increases are all about plugging the deficit, not about making pensions affordable. Teachers are already doing their bit: they have a pay freeze, and below-inflation pay increases to look forward to. In respect of the higher pension age, they recognise the implications of the population living longer, as we all do. That must be debated, but we need to be sensible. Teaching, the NAHT says, is physically and emotionally demanding, and expecting people to do it at 68 is “an ask too far”. That is also the view of other unions that I have consulted. Shane Price, my local Fire Brigades Union representative, asked me:

“Would you want, or expect, to be carried out, coughing and spluttering from a blazing building by a 68 year old fireman?”

Clearly not. In any event, says the NAHT, the changes will distort the age profile of the profession. There is a need to ensure a throughput of young people, and that will be jeopardised. Younger teachers will be affected most by the proposed pension scheme, and they may opt out altogether, as we have discussed.

The NAHT says that this is an attack on education. It wants to attract the brightest and the best—that is what pupils deserve—and while the salaries are not great given the demands of the job, the professional rewards are enormous. We cannot afford for people to discount those professional rewards because their conditions of service are dramatically reduced. These are serious, responsible points. They are made, it is true, by people who are looking after their own interest, but uppermost in their mind is the future of our children, the future of education and of the teaching profession in general.

[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

I thank the hon. Gentleman for giving way—he has been extremely generous in accepting interventions. Having read the motion, I agree with almost all of it, particularly the part in which he identifies who is responsible for the attack on public sector pension schemes. May I therefore assume that he will continue his criticism of the enemy within—the coalition Government—and not be tempted to criticise anyone else?

[Hywel Williams]

The bulk of my speech, as one would expect, is about the Government’s proposals, but the hon. Gentleman will have to wait and see.

Lleu Williams from University and College Union Wales told me:

“We are pleased that MPs will debate public sector pensions a week after tens of thousands of people in Wales took industrial action to show how angry they are…The action last week, alongside the debate on public sector pensions, is testament to the strength of feeling on these issues”

in Wales. He continued:

“We hope today’s debate sends a clear message from the people of Wales to Westminster that we will not go quietly into the night over these proposed changes.”

I have heard from the other side that union members did not support the strike—they have deserted the cause, as it were. UCU general secretary, Sally Hunt, confirms that it saw record recruitment levels both before and after the strike. That gives the lie to that one. Finally, the National Union of Teachers welcomes today’s debate and says that rather than creating an unnecessary and damaging divide between the public and private sectors, Ministers would do well to focus their attention on securing fair pensions for all if future Governments are to avoid pensioner poverty on an unaffordable scale, which is the point that I made earlier regarding future dependence on state benefits.

I shall refer briefly to that bunch of hard, crazed revolutionaries, the British Medical Association, which strongly opposes the plans set out by the Government to reform the NHS pension scheme, including increased contributions from doctors; raising the standard pensionable age for staff; and devaluing many pension settlements. It queries whether the NHS pension scheme is in need of reform, given that it underwent a major overhaul only three years ago. It says that the scheme is in very good financial health, and generates a surplus for the Treasury. Indeed, over the seven years from 2009-10 to 2014-15, the NHS pension scheme is expected to provide a surplus of £10.7 billion for the Treasury.

The BMA is engaged with the Governments in Westminster and in the devolved nations on the proposed reforms to pensions, but it has not ruled out balloting members on industrial action over the matter. It is thinking of moving towards action, and its decision will be informed by a ballot at the beginning of the year. That is just a sample of the views and arguments that we have heard—there are plenty more.

One of my constituents, a small business person—such people are often cited by the Government as those who would suffer as a result of the strike—said to me on the day of the strike:

“They”—

the Government here in London—

“think that people like me don’t support the strike. They’re wrong. A lot of my business comes from county council workers. How will I keep going if they don’t have the money to spend?”

That shows the interaction and co-dependence of the public and private sectors in areas such as mine.

[Alun Cairns]

If that argument is to be sustained, is it not logical that the way to resolve the economic problem is simply to make the public sector as big as possible, and the private sector can then profit?

[Hywel Williams]

I am surprised to hear the hon. Gentleman arguing for that. I thought he took the contrary view, but perhaps my sense of irony is underdeveloped.

The Office for Budget Responsibility estimated in March 2011 that 400,000 people in the public sector would lose their jobs. In its response to the autumn statement, that rose by nearly 80% to a disastrous 710,000. One further, crucial reason as to why we in Plaid Cymru and the Scottish National party have called this debate is that public sector jobs are disproportionately important to countries and regions outside London and the south-east. Paying an extra 3% out of their wages is bad for individuals wherever they live, and I have particular sympathy for those in inner-city areas with high costs such as public service workers in central London. Looking across the UK, the 3% imposition and the job losses will have a particularly strong impact on Scotland, Wales and the north of England, especially as the private sector is generally weaker in those areas.

That will be even more the case if the Government follow Labour’s lead in 2008 and introduce regional rates of pay, as my hon. Friends have said. The figures on the size of the public sector are clear, sad and revealing. Briefly, in Scotland the public sector accounts for 28.6% of jobs; in the east the figure is 23.7%; in the north-east it is 29.4%; in the south- east it is 22.8%; in Wales, unfortunately the figure is highest at 31.2%; and in London it is 22%. There is a clear north-south divide. The people we represent will be hit particularly hard, as will our local economies because of the grotesquely distorted, south-east-weighted economic development of the UK and the obsession with the City of London.

This morning I received an e-mail from Mr Mark Rowe, a PCS member from the Devon area. I do not know Mr Rowe; I have never met him, and I do not know what his politics are, but he said this in his e-mail:

“Dear Mr Williams, Thank you for supporting hard working public servants in their struggle over pensions. It is good to know that someone is. We had a huge rally through Torquay on the 30th, hardly a ‘damp squib’”—

as it was described by the Government. He added that there had been “much public support” and asked why Labour are not “fighting our corner”. Public sector pensions have not been the subject of a single full Opposition day debate in the House for the past 18 months, despite the fact that Labour has had 36 Opposition day debates since the public sector pension changes were first introduced in 2010.

[Pete Wishart (Perth and North Perthshire) (SNP)]

Is the situation not worse than that? Not only has Labour never bothered debating this subject in the House of Commons despite having had so many opportunities to do so, but the Leader of the Opposition described these strikes as wrong.

[Hywel Williams]

rose—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I will be grateful if the hon. Gentleman returns to the topic of his motion, which is the Government’s plans on pensions.

[Hywel Williams]

I will obey your injunction, Madam Deputy Speaker.

As I have said, I have had a great deal of correspondence with the unions, and I have given their point of view, which concurs with ours. We are happy to fight the workers’ corner in this dispute. We are happy to press for a proper pensions settlement, which is why we will press our motion to a Division.

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[Mr Donohoe]

rose—

[Hywel Williams]

rose—

[David Mundell]

May I just make a little progress and then give way again? I think I have been generous with my time.

Our reforms are not retrospective, nor do they seek to correct the past failure of the Labour party; they are driven by the need for fair, affordable and sustainable pensions in the future. We have reached agreement with the unions on the importance of transparency, equality impacts, participation rates and opt-outs, scheme governance and high-level principles to inform consultations on scheme-level pensions.

[David Mundell]

I will give way in a moment.

We have set out our proposals. When we make our reforms, the taxpayer needs to be properly protected from the future risks arising from increases in life expectancy by the link between the scheme normal pension age and the state pension age. On 2 November, after months of negotiations with the trade unions, the Government set out a revised offer that was more generous by 8%.

The offer is generous. Most staff on low and middle incomes will retire on a pension that is as good as what they expect today, and for many it will be better. Lord Hutton has said that it is difficult “to imagine” a more generous offer. The offer includes generous transitional arrangements for those closest to retirement; those closest to retirement should not have to face any change at all. This approach mirrors the steps taken in relation to increases in the state pension age, and it is fair that the same applies here. Anyone 10 years or less from retirement age on 1 April 2012 can be assured that there will be no detriment to their retirement income. However, this enhanced offer is conditional upon reaching agreement. It is an offer that can inform the scheme-by-scheme talks which will continue until the end of the year. Of course, if agreement cannot be reached, the Government may be required to revisit our proposals and consider whether those enhancements remain appropriate.

[Hywel Williams]

Some time ago, the Minister referred to a meeting held yesterday, but will he clarify who was involved? Was a Minister involved in the discussions?

[David Mundell]

My right hon. Friend the Minister for the Cabinet Office and Paymaster General and my right hon. Friend the Chief Secretary to the Treasury have made it clear that the meetings are ongoing on a regular basis in respect of the specific schemes. I am sure that I will be able to give the hon. Gentleman the information he requires.

Our objective remains to agree reforms of the main schemes—those for teachers, health and the NHS, the civil service and firefighters—by the end of the year, and my right hon. Friend the Chief Secretary will update the House in due course. The Government’s preferred scheme would produce better pensions for those on low and middle incomes who have devoted a lifetime to public service. At the same time, public service pensions will remain considerably better than those available in the private sector, as my hon. Friends have suggested. A primary school teacher earning £32,000 per year could receive a pension of £20,000 under our proposals. To earn the equivalent pension in the private sector, an employee would have to pay in more than one third of their salary.

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[Jackie Doyle-Price]

My hon. Friend makes my point much more powerfully than I do.

[Hywel Williams]

On 30 November, the Prime Minister said:

“We rejected the idea that we should level down public sector pensions.”—[Official Report, 30 November 2011; Vol. 536, c. 931.]

Does the hon. Lady agree with that?

[Jackie Doyle-Price]

I totally agree with that comment. I do not recognise any criticism that we are levelling down public sector pensions. We are trying to take this forward in a consensual way.

I welcome the fact that in our proposed reforms we are sticking with defined benefit systems. Many private sector schemes have had to migrate to defined contribution schemes because of the unaffordability of their existing schemes. We recognise that public sector workers are going to have to make a much bigger contribution, but they are doing so to achieve benefits that would be much more expensive if offered to workers in the private sector.