Public Sector Pensions

Mike Weir Excerpts

Thursday 8th December 2011 Commons Chamber

[Hywel Williams]

My hon. Friend has made a good point. If Government Members are concerned about the private sector, they should be concerned about the large number of people who have no pensions at all. That is what concerns me, and concerns my colleagues.

[Mr Mike Weir (Angus) (SNP)]

Certain members of the Government are suggesting, as one of their “public against private” arguments, that public sector schemes are gold-plated. In fact, the average public sector pension is about £5,000 a year, and local government pensions can be as low as £3,000 a year, or £80 a week.

[Hywel Williams]

My hon. Friend has anticipated a point that I was going to make, which will doubtless be made again by other nationalist party members. Anyone reading the popular press would imagine that public sector workers were driving around in this year’s model of car and enjoying two or three foreign holidays a year, but that is not, of course, the case.

We say “Let us have negotiations”, but is the 3.2% imposition itself negotiable? What the Government have announced today will merely shift the burden from one group of workers to another. They are trying to squeeze out some sort of deal, but we utterly reject that way of going about things.

--- Later in debate ---

[Mr Weir]

Does my hon. Friend agree that what was said by the hon. Member for Argyll and Bute (Mr Reid) was completely wrong? The Chief Secretary to the Treasury has specifically said that if the Scottish Government do not implement the UK Government’s proposals, their budget will be cut. Barnett consequentials emanating from elsewhere are irrelevant, and besides, the Liberals in Scotland have already called for the money to be spent on numerous things.

[Hywel Williams]

My hon. Friend has put it much better than I could have done. It is not surprising that the Liberals are, as usual, trying to spend other people’s money.

--- Later in debate ---

[Mr Weir]

Will the Minister confirm that the Chief Secretary specifically said that if the Scottish Government did not accept these changes, he would fine them £8 million per month, which amounts to £100 million a year and half a billion pounds over the spending period? How are the Scottish Government supposed, effectively, to pay for this twice, and thereby pay £1 billion?

[David Mundell]

What I can make clear to the House is that as a result of last week’s autumn statement the Scottish Government will receive approximately £69 million extra in resource departmental expenditure limit funds, that as a result of the Budget they received an extra £112 million, and that between the Budget and the autumn statement they received an extra £90 million, which they had not budgeted for.

[Mr Weir]

However, will the Minister please explain what difference that makes, as we are still going to lose half a billion pounds over this spending period? There is still going to be a massive cut if the Scottish Government do not follow what this Government are imposing upon them.

[David Mundell]

The difference it makes is that the SNP will have the option to back up its words with deeds, but instead it fails to do so. Its argument is entirely based on blaming the Westminster Government. It has funds available to make these choices, yet it prefers to deceive public service workers in Scotland by suggesting that everything is entirely at the behest of the Westminster Government.

[Mr Weir]

Will the Minister therefore go to the Chief Secretary and say, “Take away this threat and allow the Scottish Government to do what they want to do for Scottish public sector workers”? Is the Minister happy that there will be this cut of half a billion pounds over the spending period?

[David Mundell]

I know the hon. Gentleman does not want Scotland to remain in the United Kingdom—that is his policy—but he and his Government have the ability to make this choice, as the hon. Member for Dundee West (Jim McGovern) set out, yet they have chosen not to do so.

--- Later in debate ---

[David Mundell]

My understanding is that my colleague the Secretary of State for Health is meeting NHS unions as this debate is going on. There are significant ministerial discussions.

We have set out that the budgets of the devolved Administrations, who have these powers, would not be adjusted accordingly if they chose not to implement the reforms, because they have received higher settlements that reflect the proposed changes. If the devolved Administrations do not implement our public sector pensions reforms, Barnett consequentials will be reduced.

The Treasury wrote to tell the Scottish Government they had to apply the 3.2% increase in contributions or make up the shortfall and presented them with a choice. They could have chosen not to apply the increased contributions and make up the difference to the Treasury, but they followed a now familiar pattern: they failed to take any sort of decision and blamed Westminster at every turn. Their manufactured outrage is a smokescreen designed to cover the fact that they have no answers for the people of Scotland on how they would fund public sector pensions, never mind the wider state pension. We have asked them often enough—

[Mr Weir]

rose—

[David Mundell]

And perhaps the hon. Gentleman will answer us.

[Mr Weir]

The Minister is talking absolute nonsense. Will he not accept that if the Scottish Government did that, they would lose £1 billion from a budget that is already being cut by making the payment then losing money through a clawback from the Treasury?

[David Mundell]

I have already set out all the additional money that the Scottish Government have received since the budget settlement last year from which they could have made these choices. Sometimes, choices are difficult, but the Scottish Government prefer to pretend to people that they are on their side while not being willing to take difficult decisions.

--- Later in debate ---

[Iain Stewart]

If the hon. Gentleman forgives me, I was using shorthand. I am well aware that there are different schemes for different professions within the public sector, but in a UK context they are broadly similar between Scotland and England.

Paragraph 5.26 of the Hutton report reads:

“There has been scope for some variations in terms to meet local circumstances, but the resulting pension schemes have essentially been the same as those established by the UK Government. That has, for example, helped to prevent pension terms becoming an obstacle to transfers of staff and skills within a sector of the public service. It seems reasonable to continue with this approach.”

Paragraph 5.27 reads:

“The key design features should be part of a UK-wide policy framework that extends to Scotland, Wales and Northern Ireland, with limited adaptations of other features to meet local circumstances.”

I agree with that but it would be hugely disruptive to try to break apart what has been a unified system up until now.

[Mr Weir]

How does the hon. Gentleman square that with the Minister’s accusation about the Scottish Government not making changes to the pension scheme?

[Iain Stewart]

As I said, in quoting from the Hutton report, local variations can be provided for, and that is exactly what my right hon. Friend the Minister said. There is no inconsistency at all.

Most public sector pension schemes—with the exception, I think, of the local government one—are pay-as-you-go schemes. There is not a separate fund, a pot of money or assets that are invested and then pay out. The current pensions are paid for from current receipts and underwritten more widely by the Government, with the expectation that tomorrow’s pensions will be paid for largely by tomorrow’s contributions. With fiscal autonomy or full separation, however, how would all that be disaggregated? It would lead to an enormous muddle over who was liable to pay for what and over who would be liable for the shortfall in future pension payments accrued under the current system? Were we to move down that road, I would wish to train as an actuary, because a lot of them would make a lot of money from disentangling everything. [Interruption.] Indeed, they earn a good money as it is. But they would earn even more.

--- Later in debate ---

[Mr Mike Weir (Angus) (SNP)]

I congratulate the hon. Member for Livingston (Graeme Morrice), as it takes a special kind of brass neck to attack the SNP attitude to strikes when his own party leader condemned the strikes and the hon. Gentleman and his colleagues were quite happy to sit here and debate them on the day.

We in the SNP are committed to public sector pensions that are affordable, sustainable and fair, but we believe the coalition Government are wrong in their policy. It is blatantly unfair to increase public sector workers’ contributions to their pensions schemes at this time and in this way. Frankly, it is nothing more than a naked cash grab to reduce the deficit and it does nothing to address the sustainability of pensions over the longer term. It is especially wrong to impose an additional 3p tax on already hard-pressed households that are facing pay freezes—it will get worse over the next two years, as the 1% increase announced by the Chancellor last week is highly unlikely to keep pace with the rate of inflation—significant increases in national insurance contributions, higher VAT , rising inflation and rocketing costs for fuel and energy.

Indeed, it has been calculated that the impact of pay freezes and pay restraint over three years is costing public sector workers 15% of the value of their income, while the change from RPI to CPI, which I am glad my hon. Friends voted against, could worsen benefits by a similar amount. That is a dramatic reduction in living standards both for those working in the public sector and for pensioners.

Throughout this pensions debate, many Government supporters have consistently referred to gold-plated pensions in the public sector and, frankly, given the impression that anyone retiring from the public sector receives a substantial pension. That is utter rubbish: many public sector workers are in low-paid jobs and their pension entitlement is in line with what they earn and pay into the schemes, so the amount they get paid as pensions is correspondingly modest. Most public sector pension payments amount to less than £5,600 a year, and in local government the figure falls to £3,000, while 50% of women pensioners receive less than £4,000 a year, or £80 a week. That is hardly a fortune, especially in comparison with the grotesque amounts paid to the disgraced ex-bankers who caused the economic mess in the first place.

[Brandon Lewis (Great Yarmouth) (Con)]

Does the hon. Gentleman not think that there is at least some fairness in a system that puts several thousand pounds more into the pension pot of the lower-paid workers whom he mentioned, who will no longer pay for the largest pensions in the public sector under the new scheme?

[Mr Weir]

But the lower paid are being hit in every other way. They are being hit by higher VAT, the higher fuel price and everything else. Their living standards are falling.

Lord Hutton’s report also firmly rejected the claim that public sector pensions were gold-plated. It seems to me that the answer is not to attack public sector pensions, but to take action to try to help private sector pensioners. Unfortunately, however, previous attempts by Government to persuade people to opt out of state pensions, and the state second pension, into private pensions, and the mis-selling that went on, have undermined confidence in private pensions, especially among those on lower incomes. If the Government really want to do something about pensions, they should think about how they can encourage people in private occupations to save for their pensions.

For many years, we have been debating the future of pensions and how to encourage people to save more, but increasing contributions by such a large amount at a time when family budgets are under so much strain may well reduce the number of people who save for the future. There is a real chance that many will feel unable to make the larger contributions and will fall out of pension schemes, which could be a disaster for both the future of the schemes and the public purse. My hon. Friend the Member for Carmarthen East and Dinefwr (Jonathan Edwards) cited the results of an FBU survey, which suggested that 27% of people could fall out of their schemes. In his autumn statement, the Chancellor threw petrol on the flames of public sector discontent by casually introducing the idea of regional pay, which, if implemented, would have a serious impact on Scotland, Wales, Northern Ireland and the north of England.

[Ian Murray]

I have a tremendous amount of respect for the hon. Gentleman, but will he tell us what were the SNP’s proposals to the Hutton review, so that we can make an objective assessment of its position in relation to that of the coalition Government?

[Mr Weir]

I was about to deal with the position of the Scottish Government. They have taken positive action to help to protect household budgets by, for example, freezing council tax for the rest of the parliamentary term, increasing the Scottish living wage to £7.20 an hour for all staff for whom they are responsible, and committing themselves to imposing no compulsory redundancies. In contrast to the Westminster Government, the Scottish Government have sought to focus on protecting Scottish household budgets.

The amendment tabled by the Labour party referred to the devolved Administration. In Scotland—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. The amendment was not selected. As the hon. Gentleman knows, he cannot refer to an amendment that has not been selected, and I am sure that he is not going to do so.

[Mr Weir]

Much of the debate has concerned public pensions in Scotland, Madam Deputy Speaker. I mentioned the amendment merely in passing, but I apologise for doing so.

There are five public sector schemes in Scotland—for NHS workers, teachers, the police, firefighters and local government—all of which are subject to constraints. Formal approval is required from the Treasury for legislative changes to the NHS and teachers’ schemes. It controls the purse strings. Scottish Ministers can determine the design of the police and firefighters’ schemes, although to date they have been negotiated on a UK-wide basis, a position supported by the Labour party. Scottish Ministers can decide on the funded local government scheme as long as the scheme regulations comply with primary legislation.

The Scottish Government sought to protect public sector workers in Scotland from the measures proposed by the UK Government, but the Chief Secretary to the Treasury made it absolutely clear that he would reduce the Scottish budget if they did so. In a letter to the Finance Secretary, John Swinney, on 5 September, he stated:

“If you decide not to take forward these changes, the Treasury will need to make corresponding adjustments to your budget. I would have to reduce the Scottish Government’s budget by £8.4million for every month's delay.”

The Scottish Public Pensions Agency issued a document putting forward options. Its contents were not Scottish Government policy, nor were they SNP policy, and at no time have the SNP and the Scottish Government made such suggestions. The document simply set out options and factual information. It is ludicrous for the two main parties to have a duopoly of despair and to attack the public sector based on the document—the SNP has done much more for public sector workers in Scotland than either of them has done in this Chamber.

--- Later in debate ---

[Mr Jones]

Of course, that is indeed the case, as it was under the proposals that the Labour Government put forward. The fact of the matter is that it will not be the case that 27% will leave pension schemes. In fact, the independent Office—

[Mr Weir]

That is not what I said. I quoted a survey of FBU members which said that 27% may leave that scheme.

[Mr Jones]

I can do no better than refer the hon. Gentleman to the Office for Budget Responsibility, which indicated that 1% would opt out.

There is no doubt that this debate has raised passions, and that is understandable, but the Government’s aim is clear. We will do our best to ensure that public sector workers will continue to have access to pension schemes that are guaranteed, index-linked and inflation-proofed. In the current economic climate, there are many other workers who would be only too grateful to have a similar benefit. Most public sector workers will see no reduction in the pension that they receive, and some indeed will receive larger pension income on retirement than they would otherwise—