Public Sector Pensions

Jim McGovern Excerpts

Thursday 8th December 2011 Commons Chamber

[David Mundell]

I do realise that—and that may be the only point on which I agree with the hon. Lady.

I thank the hon. Member for Arfon (Hywel Williams) for opening the debate. He spoke for about 20 minutes, and in that time he at least said exactly the same about Scottish National party policy on this issue as was revealed in a two-and-a-half-hour debate in the Scottish Parliament last week, which was precisely nothing. I will return to that subject.

As the hon. Member for Edinburgh East (Sheila Gilmore) has already mentioned, no Member would disagree with the following sentiments in the motion:

“That this House recognises and appreciates the valuable work done by public sector workers”

and

“believes that they should receive pensions which are affordable, sustainable and fair”.

Indeed, those sentiments form the foundations of our reform of public service pensions. Our objective is to put in place new schemes that are affordable, sustainable and fair both to taxpayers and public service workers. Let us be clear: public service pension reform is needed. The costs have increased by a third in the last 10 years, to £32 billion, and the Office for Budget Responsibility forecasts that, without reform, spending on pensions will rise by almost £7 billion over the next five years.

Understandably, this is a contentious issue, but fairness remains the cornerstone of our approach. We believe that public service workers deserve a good pension in retirement, as a fair reward for a lifetime spent serving the public. We recognise the vital contributions made by teachers, nurses, council employees and civil servants to the well-being of our society now and in the future.

That is why in June 2010 my right hon. Friend the Chancellor commissioned Lord Hutton, a Work and Pensions Secretary in the previous Government, to take an unbiased and clear-headed look at public service pensions and make proposals for reform. His landmark report has set the parameters of the debate, and it has been rightly lauded for its depth and vision.

Lord Hutton set out an overwhelming case for reform. He said that

“the status quo is not tenable”,

that

“future costs are inherently uncertain”,

and that at present the public

“cannot be sure that schemes will remain sustainable in the future.”

In his interim report, he found that there was a clear justification, based on the past cost increases borne by the taxpayer, to increase contributions in the short term to ensure a fairer distribution of costs between taxpayers and members. We accepted that recommendation, and increases in member contributions will take place, starting next year. However, next year’s increase merely reflects the increase already planned by the previous Government. We remain committed to securing in full the overall savings of £2.3 billion in 2013-14 and £2.8 billion in 2014-15 that we announced at the 2010 spending review.

In his final report, Lord Hutton produced a blueprint for a new landscape of public service pensions. It is based on retaining defined-benefit schemes but moving to a fairer career-average basis, and increasing the retirement age in line with the state pension age to protect the taxpayer against future increases in life expectancy.

[Jim McGovern (Dundee West) (Lab)]

Presumably the Minister is talking about UK public sector pension schemes, whereas the motion seems to be specifically about devolved pension schemes. Does he agree that if there is a solution, it will be that the separatists in Edinburgh just say, “We won’t apply any changes”? Does he also agree that their excuse of continually saying, “The big bad boy in London did it” and then running away is wearing thin?

[David Mundell]

On that point, I can agree with the hon. Gentleman. The Scottish Government have considerable flexibility to make their own choices, but they have chosen not to do so.