Public Service Pensions Bill

Debate between John McDonnell and Mark Reckless

Monday 29th October 2012 Commons Chamber

[John McDonnell]

Let me quote the Treasury, which has said that the cost of the unfunded public sector schemes—I am particularly interested in the civil service one—as

“a share of GDP was 1% in 2007-08 and was projected to rise to only 1.2% in 2057.”

Only 18 months ago, the National Audit Office produced the report, “The cost of public service pensions”, and showed that

“when projections of liability are based on earnings, the total annual payments from the civil service pension scheme will be largely stable over the next 50 years.”

So no, I do not accept that analysis, and neither did the Treasury at the time.

I oppose the Bill. Members of my Front-Bench team will abstain tonight, I believe, because they hope they can amend the Bill. The Bill is unamendable to make it acceptable to me. Therefore I oppose it and I wish to have the opportunity to vote on the Bill if I can. If that means walking through the Lobby on my own, I will. I will find a teller somewhere, I hope.

The Bill is extremely damaging to the well-being and living standards of ordinary working-class people. We know that. My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) quoted the definitive piece of work, an independent analysis from the Pensions Policy Institute, which is a charity funded by the Nuffield Foundation to undertake the research. It confirmed that the Bill means that pension benefits will be cut by a third. My hon. Friend the Member for Leeds West (Rachel Reeves) referred to the shift from RPI to CPI, which was a further 11% cut. What the cuts in pension benefits mean is exactly as others have said—a reduction in participation that will ultimately threaten the viability of the schemes. Perhaps that is what the Bill is about—the degradation of the schemes so that they will eventually be replaced by the private sector.

Let me deal with the issue of private sector pensions, which is dragged out on every occasion. It is a rewriting of history. Let us go back to the 1980s and 1990s. The state pension was undermined by the Thatcher Government when they broke the link between earnings and pensions. That also undermined the earnings-related element of the state pension. They encouraged people to enter private sector schemes but, as we heard, they allowed many employers to take pension holidays, not for one or two years but for long periods. Eventually that undermined the schemes and a number of them in my constituency were wound up almost overnight.

Individuals were urged to enter into their own arrangements, which they did, only to be fleeced on their endowment policies and other mechanisms. Previous Governments, particularly in the 1980s and 1990s, destroyed private sector pensions and now this Government are moving on to destroy public sector pensions in the same way.

[Mark Reckless]

I do not want to let this point go—the hon. Gentleman’s claim that somehow Baroness Thatcher broke the link with earnings. Between 1974 and 1979 Labour claimed to link earnings and pensions, but for much of that time wages went up by less than prices, and for five months of the highest inflation in that period they were not linked at all, giving pensioners a very bad deal.

[John McDonnell]

Under legislation promoted by Thatcher, the House in 1981 broke the link. That undermined in the long term the value of the state pension—it is irrefutable—and then undermined the earnings-related portion of it.

[Mark Reckless]

Will the hon. Gentleman allow me to refute that? For the first two years of the Thatcher period, there was a link. The only other period in which there was purported to be a link was under the previous Labour Government. For much of the Thatcher period there was no link and wages went up by less than prices.

[John McDonnell]

There was always a link with earnings or inflation, and pensions went up accordingly. Why did the previous Government not replace it? I sought on every Budget to enable that to happen and I wish we had done so.