Public Service Pensions Bill

Lord Wharton of Yarm Excerpts

Monday 29th October 2012 Commons Chamber

[Jackie Doyle-Price (Thurrock) (Con)]

I am pleased that Labour Members have acknowledged the need for the Bill and the need to reform our public service pensions. I was struck by several good points made by the hon. Member for Dumfries and Galloway (Mr Brown) and the right hon. Member for Wentworth and Dearne (John Healey), although I found the desire to pit Government Members against public servants disappointingly partisan. I have to advise Opposition Members that Government Members equally respect the contribution of our public servants. We have retired teachers and former armed service personnel here, and we greatly value their contribution. What sits behind the Bill is the desire to make public service pensions secure and beneficial for the long term.

Given that we are all living longer, it is simply necessary to ask people to pay higher contributions. Unless we do so, we will have to find more money from all taxpayers to support the deficit and the provision of public sector pensions. That is simply not fair. The cost to the taxpayer of public service pensions has risen to £32 billion a year, which is an increase of a third over the past decade. They cost just under 1% of gross domestic product in 1970, but the figure is 2% today and, without change, it will continue to rise. The average 60-year-old now lives 10 years longer than was the case in the 1970s, so it is simply not sustainable to leave pensions as they are.

We are tackling the challenge of funding public sector pensions at the same time as we are attacking our structural deficit and the aftermath of a financial crisis. That has led some of our public servants to conclude that they are being asked to bear the consequences of the actions of the bankers, but that is simply not the case. We are where we are because our current system is not financially sustainable, and it is disappointing that Opposition Members allow people to think otherwise. Even without the deficit, and even if the financial crisis had never happened, we would have to reform our public pensions to make them affordable and to secure their long-term future. With these reforms, our public servants will be guaranteed a secure pension with terms that are as generous as those enjoyed by anyone.

The need for change is simple. We all need to make provision for our own retirement, and if we do not put more in, the taxpayer will have to. The Bill will cut the costs to taxpayers by nearly half, while continuing to ensure that the public sector receives the best pensions available. The Bill is therefore a good deal for taxpayers and a good deal for public service workers. It is frankly unfair to expect future generations to pick up the tab by paying more taxes, especially when they are already dealing with the consequences of financial irresponsibility by facing higher taxes and higher house prices. I want all people—whether they work in the private or the public sector—to be able to keep more of what they earn and to pay less in tax. All taxpayers will benefit if we can reduce the burdens on the state and make public pensions self-funding.

Even with these changes, our public pensions will continue to be among the best available. They will also be progressive. A switch to career average pensions across the board will reduce taxpayer liability while letting employees keep their defined benefits. The pensions will also be fairer to all. Final salary schemes disproportionately benefit those on the highest earnings, and many low-paid workers will get a better pension under the Bill. I am pleased that the Government have made changes to benefit the lowest earners, meaning that 15% of our public sector workers will not have to make an increased contribution. I am also pleased that benefits that have been built up will be protected and that members will continue to receive a guaranteed benefit in retirement.

[James Wharton (Stockton South) (Con)]

I am listening to my hon. Friend’s speech with great interest. We have already heard a lot about retrospection and the importance of certainty. Is it not the case that the reforms will hopefully give long-term certainty about the affordability of public sector pensions, so that future Governments will not have to review these pensions yet again and people will be able to plan properly for their retirements?

[Jackie Doyle-Price]

I completely agree with my hon. Friend. It is important that we bite the bullet now and lay the foundations for future security. If we delay, we will be asking for more contributions from taxpayers and workers themselves, so it makes perfect sense to deal with the problem. We cannot postpone the inevitable, and Government Members are not prepared to do so.

I am sure that many Members will have received representations on these issues. Most of those that I have received have come from police officers who are worried about the changes. Most public sector employees have recognised that the terms under which they were paying into their pensions were not sustainable in the longer term, not least because they have seen what happened to the pension provision of their friends and family members in the private sector. People in the private sector would have to contribute more than a third of their salary each year to get an equivalent pension, so I am not surprised that only a third of public sector workers voted to strike over this issue last November.