Public Service Pensions Bill

Lord Eatwell Excerpts

Tuesday 12th February 2013 Lords Chamber

Moved by

[Lord Eatwell]

1: Schedule 1, page 23, line 6, at end insert—
“(c) the Defence Fire and Rescue Service”

[Lord Eatwell]

My Lords, this amendment refers to the position of the Defence Fire and Rescue Service within the structure of the Bill. Noble Lords will remember that it was revealed in the discussion of the Bill in Committee—the issue had not been discussed in another place—that the Defence Fire and Rescue Service had an anomalous status relative to that of other firefighters within the UK. In particular, while other firefighters within the UK had their retirement age fixed at the age of 60, together with other uniformed services, the Defence Fire and Rescue Service at that time had a retirement age tied to the statutory retirement age. Therefore, it would be 65, rising in accordance with the pattern planned for the increase in the statutory retirement age.

My hypothesis in Committee was that this was simply a slip and a mistake and that people had just happened to miss the fact that a category of firefighters was not covered in the actual language of the Bill. I therefore expected that, once the Minister had taken the matter back—he conceded in Committee that he had not had the opportunity to consider it with any great care—the mistake would be understood and the firefighters would be included with the other uniformed services, having their retirement age fixed at 60, as is the case with the other uniformed services. However, to my considerable surprise, this has not been the case. I understand that the firefighters—and, indeed, the Ministry of Defence Police, to which I will turn in a moment—have met the Minister and that he has turned down this proposition. He has substituted for it the assurance that their pension age would be maintained at 65 and not, perhaps, go up with the statutory pension age, although his assurance was not terribly clear in the sense that it referred to a three-year differential between the statutory retirement age and that for Ministry of Defence firefighters. In due course, when it gets to 68 or 69, as we all live longer, those firefighters would see their retirement age go up—or so I presume; perhaps the Minister can clarify that later on—while that of their colleagues in the rest of their fire service would stay the same, at 60.

The Minister has one fundamental question to answer. It is an answer that not just this House but the firefighters themselves deserve. How does their job differ from that of local authority firefighters? In what way is it less onerous, when they have to work on military establishments, dealing on occasion with extremely dangerous materials, and occasionally also in war zones? How is their job less onerous? In those circumstances, why should we have this situation in which their retirement age is five years higher?

I wonder whether the Minister has taken the trouble to find out when the Defence Fire and Rescue Service members actually retire. If he did take that trouble, he would find out that the majority of them retire before the age of 60. They retire early, with a significantly reduced pension, and they have to do that because they are physically unable to keep going. A study performed by the Civilian Consultant Adviser in Occupational Medicine for the Defence Fire Risk Management Organisation not only produced data but argued that continuing beyond the age of 60 was detrimental to the long-term health of firefighters in the Ministry of Defence Fire and Rescue Service. If the noble Lord had taken the trouble to find out what was actually happening, he would have found out that firefighters in this service are forced to retire early due to their physical condition or because they are unable to pass the regular physical examinations they undergo to ensure that they can perform their duties to the required standard.

--- Later in debate ---

[Lord Eatwell]

Well, my Lords, we got the answer that we all feared. We were told that somehow the unique position of an injustice is such that the injustice should be maintained. We were told that it was not clear how the changes could be implemented. “It’s just too jolly complicated. Our staff aren’t up to it. We haven’t got enough civil servants who can puzzle through all these problems. There is no way through”. That is ridiculous.

We were told that somehow these firefighters would have to be transferred to other pension schemes. I am afraid that that is not the case. Civil Service pension schemes are flexible and perfectly able, as currently structured, to take into account differing retirement ages.

We then heard the proposition that the differential—the unfairness—should be fixed at five years’-worth of unfairness, with the retirement age of MoD firefighters and police being kept at 65. Apparently this is not too difficult to implement. We can find a way to fix the retirement age at 65 but we cannot find a way to fix it at 60. I am afraid that the Minister has significantly reduced the credibility of his own arguments.

He also completely failed to address two fundamental points. He failed to answer the question: in what way do the working conditions of Ministry of Defence firefighters differ from those of local authority firefighters? He failed to take into consideration that the majority of MoD firefighters are forced to retire before the age of 60 because of physical and other health reasons. He also failed to take into account the point made by my noble friend Lord Hutton that this is a fundamental issue of fairness. Given that that is the position, we owe it to Ministry of Defence firefighters and police to agree this amendment. I urge noble Lords to do so and beg leave to test the opinion of the House.

--- Later in debate ---

[Lord Eatwell]

My Lords, it may be for the convenience of the House if I refer to the amendments tabled in the name of myself and my noble and learned friend Lord Davidson, since the government amendments are substantially responses to the points that we made in Committee. I want to make it clear why we feel that the situation has, let us say, not moved on far enough.

Let me deal first with Amendments 37, 38 and 39 because they make a proper, logical story. They seek to remove from Amendment 36 the role of the authority in deciding whether an adverse effect on the pensions payable has in fact occurred. In other words, the authority has to decide whether its measures should be challenged in consultation. This is as if, in a game involving Manchester United, penalty decisions against it were to be made by Sir Alex Ferguson. I am sure that he, as a talented football manager, would then make a decision on a reasonable basis. However, with all due respect to that distinguished person, do we think that these decisions would be made in a way which was balanced? I could choose any other football manager, including Mr Wenger, who apparently never sees things that happen on football pitches.

I refer to balance because in Committee the noble Lord, Lord Newby, in setting out the criteria that he applied in these circumstances, said that he wanted to achieve a sensible balance between members’ protection and the role of the authority. It seems that while the proposed new clause in Amendment 36 provides for a significant protection for members of the scheme, it is still not balanced in that it leaves the authority with the responsibility for deciding that its own measures have had an adverse effect on those members. In those circumstances, even the most reasonable person is likely to be reluctant to feel that measures which they are taking have a negative impact upon the scheme. Our amendments simply remove the role of the authority so that the new clause would say,

“containing retrospective provision which appears … to have significant adverse effects”.

In those circumstances it seems to me that the authority, facing the responsibilities that the noble Lord referred to, and without the protection of the statute giving it the decision-making responsibility—a decision-making role or power—would take a more balanced and reasonable view. These amendments are to encourage reasonableness on behalf of the authority.

Moving backwards, our Amendments 22 and 23 refer to what is now Clause 12, which deals with the employer cost cap. The problem with this clause is in subsection (7), where it is recognised that steps to change the cost cap may result in an,

“increase or decrease of members’ benefits or contributions”.

In other words it may decrease members’ benefits so that the action of using the cost cap to encourage efficiency and efficient management of pension schemes may result in the retrospective diminution of benefits which members feel that they have accumulated.

The key question is whether Amendment 36 covers that eventuality. The eventuality that it covers is,

“where … the responsible authority proposes to make scheme regulations containing retrospective provision”.

Changing the cost cap may have retrospective consequences but does not contain retrospective provision. Much as we welcome the general intent of Amendment 36, then, it does not deal with one of the significant cases of retrospection that still deface the Bill. Amendments 22 and 23 are designed to protect the benefits of pensioners against retrospective effect, perhaps unintentional, when there is some change in the cost cap. We are delighted to see the noble Lord, Lord Sassoon, here performing duties that were formerly performed for him.

Those two amendments are necessary unless the Minister can find a way for Amendment 36 to refer not simply to regulations containing retrospective provisions but to regulations that have retrospective consequences. That would be a way, I suggest, to transform Amendment 36 from a rather imperfect structure to one that would deal with retrospection throughout the Bill.

The amendments that I and my noble and learned friend have tabled are in the spirit of Amendment 36 and indeed of the Government’s laudable attempts to remove the retrospective elements—the ones, that is, which are unnecessary and potentially harmful to members; I understand that there are technical retrospective elements that are necessary—but I feel that they have not yet managed to achieve what the whole House wishes to achieve. Our amendments would contribute to that goal.

[Lord Flight]

My Lords, I should be grateful if the Minister could comment on the extent and the manner to which the Government’s amendments to the ability to make changes and to make retrospective changes affect the fundamental issue of affordability. I apologise for raising this issue yet again but it is fundamental. We start, as everyone knows, from the OBR advising that there will be a cash flow deficit of £15.4 billion by 2016-17. My related question to the Minister is: what is the Government’s estimate of the additional cash flow deficit costs of both increasing longevity and, more particularly, the new single-tier pension proposals made by the DWP? It strikes me that two separate silos have been working on this, with the Treasury in one and the DWP in the other. Precisely what the effects of the loss of employer and employee NI contributions and the ending of contracting out will be on the deficit of pay-as-you-go public sector schemes seems to some extent to be a mystery.

I think it was in Committee that the Minister advised that he felt the estimates I suggested were too high; thus I would be grateful if he would comment on what the Government’s estimates are. My revised estimates, done with the assistance of Michael Johnson, who many noble Lords will know has done significant work on the subject, are that there is an additional cash flow cost from longer longevity of the order of £2 billion per annum, and there may now be an additional £3.4 billion resulting from the loss of public sector employers’ NIC rebates with the ending of contracting out and a further £4 billion per annum as a result of public sector employees continuing to enjoy an enhanced occupational pension as if contracted out while still being entitled to further accruals under the new single-tier state pension, once it appears. In contrast, private sector employers who are contracted out will be permitted to change their scheme rules, effectively to reduce pensions paid, without trustee consent. As I have said, I cannot believe that the prospect of a potential cash flow deficit of some £24 billion per annum will be acceptable to whoever is in power at that stage, given the state of the public finances. Dare I say that it seems that not only the Opposition but the Government are ignoring the affordability issue with regard to this legislation as it passes through both Houses of Parliament?

I would be grateful for a response to the question about to what extent room for manoeuvre is being reduced by the government amendments. Secondly, what is the Government’s revised, post-OBR estimate of the total cash flow deficit cost of the arrangements under the Bill?