Charter for Budget Responsibility

Debate between Mark Durkan and Danny Alexander

Wednesday 26th March 2014 Commons Chamber

[Danny Alexander]

Shadow Chancellor. I am glad he agrees that he is flatlining.

This has been an important debate, and I agreed with the hon. Member for Hackney North and Stoke Newington (Ms Abbott) in one respect. She was right to say that this was an important debate on an important subject and should be treated as such. However, it is for precisely those reasons that I support the cap that we are debating, as does my party. Let me explain why. During the debate a few myths have grown up about the cap, which I want to tackle. Fundamentally, as my hon. Friend the Member for Birmingham, Yardley (John Hemming) made clear, the motion is about accountability to Parliament and about the transparency of public expenditure decisions.

[Mark Durkan (Foyle) (SDLP)]

Will the right hon. Gentleman give way?

[Danny Alexander]

I do not have much time; I intend to make some progress.

Fundamentally, the motion is about ensuring that we have greater control over public expenditure in this country, and that where a Government wish to deviate from the plans they set out to this House, they must return to the House to explain why they want to make a change, or what action they will take to deal with the pressures that have emerged.

One of my priorities when I came into office as Chief Secretary was to increase the amount of public expenditure that is under the direct control of Government, and indeed under the direct control and accountability of this House.

Oral Answers to Questions

Debate between Mark Durkan and Danny Alexander

Tuesday 14th May 2013 Commons Chamber

[Danny Alexander]

As I said in answer to earlier questions, the Government have taken forward a package of measures. The Youth Contract, which is helping half a million young people, the massive expansion and improvement in the quality of apprenticeships, helping young people all around the country, and the Work programme make up a proper package of measures to do what the hon. Gentleman and I agree about—try to help more young people off benefits and into work. The problem has been building up for many years, and he should be a bit more humble about it.

[Mark Durkan (Foyle) (SDLP)]

Would a meaningful G8 outcome on tax evasion involve the Chancellor’s revisiting the controlled foreign company rules that he introduced? They incentivise the use of tax havens and deny revenue to the Exchequer here and, more so, to developing countries.

Public Service Pensions Bill

Debate between Mark Durkan and Danny Alexander

Monday 29th October 2012 Commons Chamber

[Danny Alexander]

If I may, I will come to that issue in a moment. The arrangements for the NHS pension scheme have been agreed, and the reforms have been taken forward on that basis. That includes the link between the normal pension age and the state pension age.

[Mark Durkan (Foyle) (SDLP)]

Will the Chief Secretary give way?

[Danny Alexander]

I will go on with my speech, if I may. I hope that I will be able to answer the hon. Gentleman’s question as I do so. I will not take interventions at the moment, as this is an important subject. I will perhaps take some at the end of this section.

We have all heard the cries “68 is too late”, along with similar slogans, but it is crucial that people understand the facts behind the proposals in the Bill. The pension age is a calculation point, not a fixed date up to which people must work in order to receive their pension. Public service workers will still be free to choose when to retire, either earlier or later than the state retirement age. When a person retires at a different age, their pension benefits will be adjusted, to take account fairly of the fact that they are taking them earlier or later than the date against which they have been costed. People will still have the freedom to choose when to retire, however. The Bill does not deprive public servants of that choice.

Lord Hutton said that the Government should ensure that the link between the public service schemes and the state pension age should be reviewed to ensure that it continued appropriately to track longevity. We will do that. The Bill does not provide for such a review, however, and nor should it. We have already committed to come forward with details of how the review of the state pension age will be conducted. We will review the normal pension age of the schemes, to consider whether the state pension age appropriately tracks longevity in the public service schemes. The process will be determined once the detail of the state pension age review system is settled. That is the right way to proceed, and it would be inappropriate for the Bill to attempt to second-guess that.

[Mark Durkan]

The Chief Secretary is emphasising the importance of clause 9 in facilitating future adjustments in relation to pension ages. Why, then, does he also seek to justify the Henry VIII provision in clause 3, which will allow the Government radically and retrospectively to alter pension terms at any time, or times, in the future?

[Danny Alexander]

The hon. Gentleman will know that the provisions in the clause to which he refers mirror directly those in the Superannuation Act 1972, which this Bill in many cases replaces. It was passed in the year I was born, and it has been used by a number of Governments to make adjustments to public service pensions. We have set out in the Bill certain elements of the scheme, particularly the pension age link, and the fact that the schemes need to be CARE schemes and certainly cannot be final salary schemes in future. The provisions to which the hon. Gentleman refers are in fact more limited than those in the 1972 Act. It is appropriate that we continue in broadly the same way, because that has stood the test of time. I hope that, by setting out the Government’s intentions here and in Committee and by undertaking detailed negotiations with work forces, we will have ensured that people know precisely how we intend to use these powers. I think it is clause 23—I might have got that number wrong—that refers directly to the 25-year guarantee that I mentioned earlier. I hope that that will give people some assurance that our scheme designs will stand the test of time.

--- Later in debate ---

[Danny Alexander]

In that case, we followed the recommendations of Lord Hutton—and, indeed, previous practice. The point I made just a moment ago—I am sure the hon. Lady was listening carefully—is that the provision does not stipulate the date to which people must work. Clearly, if people wish to retire earlier, they can do so and take an actuarially reduced pension or, indeed, retire later and take an actuarially enhanced pension.

[Mark Durkan]

rose—

[Danny Alexander]

I am going to make some progress, if I may.

The second and third tests of Lord Hutton were fairness to public servants and fairness to taxpayers. The Government have worked hard to ensure that the reformed pensions are fair and continue to provide a generous level of retirement income for public servants as a fair reward for a career spent serving the public. The Government made a commitment that these schemes would be at least as generous at retirement for those on low and middle-income earnings. We have delivered that commitment in a number of ways.

First, clause 16 allows transitional protection to be provided for those who have already had a long career in public service and are approaching retirement. I said in November last year that the offer provided that those within 10 years of their normal pension age on 1 April this year would not see any changes to their pension, nor the date at which they can draw it. The Bill ensures that the current final salary schemes will remain open to people who are covered by the transitional protection criteria in those schemes. Most of the proposed final scheme designs include the transitional offer as we set it out; however, the local government scheme in England and Wales has chosen alternative arrangements as sought by their trade unions and employers.

Secondly, we have honoured our commitment to retain the final salary link for people who have already built up some service in final salary schemes, as the provisions in schedule 7 make clear. Although these people will move on to CARE schemes by 6 April 2015 at the latest, their accrued years of final salary benefits will be calculated and paid at their final retirement salary—not their 2015 salary.

Most importantly for low and middle-income earners, we are putting the fairness back into public service pensions. Clause 7 provides that the new default for public schemes will be based on career average earnings, rather than on final salary. Final salary schemes are unfair to the majority of the work force as they disproportionately reward those who progress to senior roles compared with the majority of staff who have more consistent career paths. These outmoded schemes provide lower effective benefit rates to the people that carry out the core front-line work in our public services—the nurses, police officers and our armed forces whose work is so valuable to everyone here.

Career average schemes are fairer to the members and to taxpayers alike. Under final salary schemes, it is the taxpayer that picks up the cost of those high flyers who attain high salaries by the time they leave public service. Such members can receive twice as much in benefits per £1 of contributions that they have paid towards their pension. This is clearly unfair, which is why this Bill will not allow final salary schemes to continue after 2015. For members, pension benefits will be based on the amount that they earn over their career. That means their pension benefits will directly reflect the contributions that they and their employer make over their career.

The Bill ensures that these pensions remain among the very best available—and rightly so, if we are to continue to be able to recruit and retain the right people to undertake these crucially important roles. A key objective of the reforms is to ensure a fair balance of risks between scheme members and the taxpayer. To achieve this, Lord Hutton recommended that the Government establish a mechanism to control the future costs of pensions.

Clauses 10 and 11 establish an employer cost cap in the public service schemes. This will provide backstop protection to the taxpayer to ensure that any unexpected risks associated with pension provision are shared between employers and scheme members. With foreseeable longevity risk controlled through the pension age link, this really is a backstop, which under normal circumstances should not need to be used. Everyone in a public service pension scheme will see their pensions reformed along the same lines. I do not believe in special cases at a time when we are reforming the pension arrangements of those who provide essential services to the public.

[Danny Alexander]

I do not think that the right hon. Gentleman is right in this instance. In fact, had the “cap and share” arrangements introduced by the last Government been allowed to operate, they could have manifested themselves—[Interruption.] No, the right hon. Gentleman is wrong. They could have manifested themselves in both a reduction in benefits and an increase in costs to members. The right hon. Gentleman is free to explore the matter in Committee, and I am sure that he will.

I should add that I have some further information relating to the right hon. Gentleman’s earlier intervention. The working longer review is acknowledged in the proposed final agreement on the NHS pension scheme, which specifically states that early retirement factors allowing retirement before the state pension may be considered should the review suggest that that is necessary.

As we have established, public body pension schemes and public service schemes operated by the devolved Administrations are required to make equivalent changes to their schemes as swiftly as possible. In the case of public body schemes, it has not been possible in all cases to complete the reform process according to the same timetable. As I said in a written ministerial statement on 16 July, reform is definitely on the cards for these organisations, and the Government aim to complete the work by 2018.

Speaking of special cases, the House should note that the Bill will also close the generous and outdated “great offices of state” pension schemes. They have outlived their usefulness in the modern world. I am glad that the Bill will close them to new office holders and will ensure that people in such roles are given the same pensions as Ministers. As I am sure Members are aware, the Prime Minister waived his entitlement to such a pension when he took office. The current Lord Chancellor is making arrangements to do likewise, as did his predecessor. Mr Speaker announced on the day that we published this Bill that he would retain the pension, but would take it only when he reached the age of 65 rather than drawing it as soon as he left office.

Lord Hutton’s fourth key test related to governance and transparency. The reformed schemes should be widely understood, both by scheme members and by taxpayers. People understand what is in their pay packet each month, and it should be just as easy to understand how their pension works. Under the Bill, the schemes will have robust and transparent management arrangements.

Clause 5 provides for each scheme to have a pension board which will work to ensure that the scheme is administered effectively and efficiently. There will be local pension boards in the case of the locally administered police, fire and local authority schemes. The boards will consist of member representatives, employer representatives and officials. They will operate in a similar way to boards of trustees, holding scheme administrators to account and providing scheme members and the public with more information about the pensions. The board members will be identified publicly, and their duties will be made clear to scheme members. I welcome the greater transparency that the Bill will bring to this area of public pension administration.

Clause 15 and schedule 4 provide for an extension of the role of the pensions regulator, who will improve and police the management and administration of all the new schemes. The regulator is independent of Government, and will be able to utilise its full range of powers to ensure that the public schemes are managed properly and to consistently high standards. Clauses 12 and 13 will ensure that all schemes collate and publish information to improve transparency and enable comparisons to be made between them.

Since the Bill was published, I have received a number of questions about its design. It establishes a common framework of delegated powers which enable schemes to be made in respect of the public service work forces. The common framework constrains the use of those powers on core parts of pension scheme design, such as the link between state pension age and normal pension age, the career average pension structure, and the abolition of the final salary link. Those core elements are fixed in this legislation in order to create fairness and an even degree of cost control across the work forces.

At the same time, the Bill allows flexibility when that is appropriate, enabling the secondary detail of the pension schemes to be adjusted in recognition of the differences between different areas of public service work. Members will know that the final scheme designs agreed vary significantly from work force to work force, properly reflecting differing priorities and concerns within the cost ceilings that I established. The approach builds on that taken in the Superannuation Act 1972, which set out a framework of delegated powers some 40 years ago.

[Mark Durkan]

The Chief Secretary has just mentioned the Superannuation Act 1972 again. Does he accept that section 2(3) of that Act specifically prohibits retrospective effects, whereas clause 3 of the Bill specifically allows them?

[Danny Alexander]

There are some technical areas in which that may be necessary, but in practice the adjustments that we are making in the clause to which the hon. Gentleman has referred—and also in clause 11(7), which was mentioned earlier—allow the design of future benefits to change to ensure that costs are controlled, but do not allow changes to accrued benefits. The Bill, however, takes a more balanced approach than the Superannuation Act. The core elements for all public pensions are set out in the Bill. This serves as an important constraint on the delegated powers, to ensure our main objectives for reform are met.

I have also heard representations from Members of the devolved Administrations, but I think we have addressed that matter through earlier interventions. The Bill contains some minor areas that touch on devolved matters in Scotland and Wales, and I have written to all the devolved Finance Ministers to request that they seek legislative consent motions for the appropriate provisions. The Bill covers Northern Ireland, and the Minister of Finance and Personnel there—the hon. Member for East Antrim—has indicated that the Executive are considering a legislative consent motion to that effect. As to the progress of reform discussions in Scotland and Wales, the Government have made it clear that these Administrations have exactly the same flexibility in discussions with their trade unions as Whitehall Ministers have had, and within those parameters there is a great deal of flexibility.

Members who have followed this issue closely will know that the path to these reforms has been a long one, but it has also been a collaborative journey. The public debate on these pensions has been happening ever since this Government came to power more than two years ago. Some 18 months have passed since the Independent Public Service Pensions Commission published its final report, and discussions with trade unions and negotiators have taken place continuously since then. It is now time to take the final step by codifying the key elements of these reforms in legislation.

The framework set out in the Bill provides Parliament, public service employees and taxpayers with an assurance that the new schemes will be consistent, transparent and effectively managed. More than that, it requires new schemes to have common retirement ages, to provide benefits on a fairer basis and to include cost control mechanisms to protect members and other taxpayers from unforeseen changes in the cost of providing pensions.

The Government have set out a settlement that represents a good deal for public sector employees and a good deal for the taxpayer. It recognises the enormously valuable contribution that public sector workers make to our society and ensures a fair balance of contributions between public sector workers and other taxpayers. Taken together, these reforms will ensure that these pensions are sustainable for a generation. That is why the Bill proposes to create a high barrier for future changes to these elements of pension scheme designs. That means that any Government wishing to adjust them within the next 25 years would be required to jump a very high hurdle to do so.

In the UK’s long-term interests, we are facing up to tough decisions that Labour failed to address during its time in office, and we have done so while engaging with the unions every step of the way. We have made huge savings that were long overdue while protecting the entitlement of public service workers to a very good pension in retirement, giving public servants the confidence that future Governments will not need to make further reforms, and giving taxpayers confidence that never again will these costs be allowed to balloon out of control. These reforms therefore also help to repair the mess that Labour made of our public finances.

Fair, affordable, sustainable, good pensions that last: this is a new pension settlement for a generation, and I commend this Bill to the House.

Public Appointees (Tax Arrangements)

Debate between Mark Durkan and Danny Alexander

Wednesday 23rd May 2012 Commons Chamber

[Danny Alexander]

I am grateful for my hon. Friend’s welcome for this work. I am sure that he would not wish Ministers to investigate the tax affairs of individuals, as that way would lie ruin for the country. I cannot make such an estimate for the reason behind my previous comment: taxpayer affairs are confidential and it is for HMRC to deal with particular cases when it finds that avoidance is taking place. What I can say is that there is a very large number of cases and that this relates to the wider question of consultancy and contingent labour in government. He might be interested to know that in 2009-10 the previous Government spent £2.4 billion on contingent labour of various sorts. In 2010-11, thanks to the additional controls on consultancy that we put in place, we reduced that to £1 billion, and I expect the bill to be reduced further in 2011-12. There are things that central Government can do to reduce dramatically those costs across government, and that is precisely what the coalition Government are seeking to do.

[Mark Durkan (Foyle) (SDLP)]

I thank the Chief Secretary for his statement and commend him for the action he has taken since the scandal became apparent. If we are to believe that Revenue and Customs is now boarding this Good Ship Lollipop, how will we know whether someone receiving amounts of money from the public purse over £58,200 in future will not exempt themselves simply by ensuring that they accumulate it from a number of Departments rather than one? The measures he has announced today relate to Departments reporting amounts over £58,200 that they are paying to individuals, but they do not seem to address the issue of people pocketing money from a number of contracts with different Departments.

[Danny Alexander]

The hon. Gentleman asks an interesting question, and he is right that someone might be earning small amounts of money from a number of different Departments. Of course, in that case it is likely to be a contractor, of the sort my hon. Friend the Member for Bristol West (Stephen Williams) referred to, who has multiple clients. It is not clear on the face of it that these rules should apply in those cases, but I will certainly consider the sort of case that the hon. Gentleman mentioned.

Tax Avoidance (Public Servants)

Debate between Mark Durkan and Danny Alexander

Thursday 2nd February 2012 Commons Chamber

[Danny Alexander]

My right hon. Friend is absolutely right that we need to be robust about these matters. Frankly, I think this Government have been a great deal more robust on tax avoidance and tax evasion than our immediate predecessor. I certainly agree with the principle that he annunciates, which is that we need to ensure that everyone pays their fair share of tax and that arrangements are not put in place that are in breach of the guidelines that I set out earlier, which specifically say that arrangements to avoid tax for individuals should not be put in place.

[Mark Durkan (Foyle) (SDLP)]

Can we really have any remedy to such scandalous devices without restitution? Will any review by Revenue and Customs have an eye to possible recovery?

[Danny Alexander]

As I said, the arrangement has been ended by the Student Loans Company in this case, as my right hon. Friend the Minister for Universities and Science has said. The review that I have undertaken is looking at the degree to which such practices are prevalent across the rest of Government. I have not given any consideration to the question of restitution, but I shall certainly do so in the light of the hon. Gentleman’s question.

Oral Answers to Questions

Debate between Mark Durkan and Danny Alexander

Tuesday 24th January 2012 Commons Chamber

[Danny Alexander]

I am certainly not going to attempt to take responsibility for things the Chancellor and the Prime Minister said in opposition, but I can take responsibility for what the coalition Government are doing. The announcements made yesterday by the Business Secretary on tackling executive pay went far further than anything the hon. Gentleman’s party did during 13 years in government. That alone should give him pause for thought.

[Mark Durkan (Foyle) (SDLP)]

Giving more powers to shareholders sounds welcome, but we know that their existing powers on executive pay have not been readily used. Should institutional investors not be made more accountable to the millions of ordinary savers whose money is at stake, and does the Chief Secretary believe that the Chancellor would be ready to exercise his reserve powers to make them disclose to their savers how they vote?

[Danny Alexander]

One of the striking things about how the climate of opinion on this subject is changing in recent times has been the change in attitude of institutional investors. The comments of Otto Thoresen, the head of the Association of British Insurers, for example, to the banks in this remuneration round suggests that such investors are interested in and seized of the importance of ensuring that proper levels of remuneration are paid, not unfair rewards for failure.

Public Service Pensions

Debate between Mark Durkan and Danny Alexander

Wednesday 2nd November 2011 Commons Chamber

[Mark Durkan (Foyle) (SDLP)]

Has the Chief Secretary taken into account the particular responsibilities of devolved Administrations and the rights of their public sector workers—many of them low paid, and all of them tax-paying—and do the terms of today’s offer differ from the previous terms about which he wrote to those Administrations?

[Danny Alexander]

The hon. Gentleman makes a very important point. These matters have been discussed regularly at the Finance Ministers quadrilaterals, which bring the Finance Ministers of the devolved Administrations and me together, so people have been kept informed. The tradition has been that the devolved pension schemes follow by analogy the agreements reached at a UK level. I will write to the devolved Finance Ministers to set out what I have announced today, so they can take that into account in their own decisions on these matters.