Public Service Pensions Bill

Mark Reckless Excerpts

Monday 29th October 2012 Commons Chamber

[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.

[Mark Reckless (Rochester and Strood) (Con)]

I understand that the public schemes are generally generous in comparison with those in the private sector, but does my hon. Friend have a view on the relative generosity of the police scheme, on which we have received a lot of representations? The police clearly have quite a high pension, but they pay a large amount in. Is it fair that they have had to pay so much more than civil servants, for example, whose contribution is much smaller?

[Jackie Doyle-Price]

My hon. Friend makes a good point. We will benefit from an examination of the individual schemes in Committee. My hon. Friend the Member for Bromley and Chislehurst (Robert Neill) made several good points about the financial sustainability of the local government scheme compared with others. We need to look at what we expect of all our public servants in the round, and the issues raised about the police are quite persuasive. We need to look in detail at what we are proposing not just for public sector workers as a group, but for individual worker groups. We also need to remind public sector workers who are witnessing the debate that their accrued rights are protected, and that there will be protection for those who are within 10 years of retirement.

The Bill will deliver sustainable public service pensions. It will almost halve the cost to taxpayers, and it will rightly ensure that public sector workers continue to receive the best available pensions. It provides a good deal for the taxpayer and for public servants, and I am happy to support it.

--- Later in debate ---

[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.