Public Service Pensions Bill

Debate between Robert Neill and Chris Leslie

Monday 29th October 2012 Commons Chamber

[Robert Neill]

I certainly never took any pension contribution holidays. Indeed, I only became a member of the local government pension scheme in 2000, when I was a member of the Greater London authority, so I do not think that the hon. Gentleman’s point is realistic. The performance of the scheme is down to the investment climate in which it operates, and the investment climate is determined by the macro-economic policies of the Government. The hon. Gentleman does not accept the failure of his Government in this context. One of the by-blows of that failure was that the investment returns for the scheme were less than expected and that has added to the pressures on the scheme. It is not the sole pressure, but it has added to them.

The Audit Commission also noted that the cost of pensions affects the amount of money available for local authorities to fund services and it influences council tax decisions, so there were questions about whether the LGPS benefits were affordable in the long term. Although some of those matters have been picked up by prior reforms—I do not pretend otherwise—they were not adequate to deal with the pressures. The Audit Commission concluded that, despite the fact that the scheme had funding, unlike others, reform was needed none the less. It is not just the Audit Commission that has recognised that—so too have the professionals in the local government pensions world. In October 2009 Mike Taylor, the chief executive of the London Pensions Fund Authority—I declare an interest, having been a member of that body for a short period—said that the LGPS needed to respond to increasing longevity because it

“is not designed to pay benefits for ever increasing periods of retirement and, without change, will face extinction…Employer or taxpayer contribution rates currently take all the strain of increasing liabilities in the LGPS. This situation cannot continue and either those costs must be reduced, or employees bear a fairer share of the increasing costs.”

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Will the hon. Gentleman discuss with the chief executive of the LPFA his opinion of clause 16, which will close the existing local government pension scheme and start a new one? As I understand it, closing it might trigger what are known as section 75 crystallisation of debt arrangements, and the burden could fall heavily on local authorities. Does he agree that the Economic Secretary needs to ensure that the crystallisation of costs does not fall disproportionately on local taxpayers?

[Robert Neill]

I certainly agree that the impacts of crystallisation have to be considered carefully. It is worth saying, however—I was going to come to this point later, but I will deal with it now—that the reason why we are dealing with the matter in this way is in no small measure the result of an agreement between the unions and local government employers. They agreed that it was desirable to have a single reform of the system to deal with both short and long-term pressures, which was referred to as a “single event”, and that it should take place in 2014. There is a technical debate to be had about how best to achieve that while avoiding the risk of crystallisation, and I hope that my hon. Friend the Economic Secretary and his ministerial colleagues will have that debate. However, that is certainly not a reason for opposing the Bill, and I do not think for one moment that it undermines the major thrust of the Government’s reforms. The structural issues that require reform in all the public sector funds, including the LGPS, need more radical work than that.

It seems to me that there is scope to reflect the particular circumstances of the LGPS within the parameters of the Bill, and I hope that Ministers will recognise that. It is still significantly funded, and at its best it has very high standards of governance. Many of us in local government have wanted to examine the capacity of some of the smaller schemes, and I believe that there is scope for the Government to encourage greater collaboration between some of them, or perhaps even mergers. The large and well run ones such as those in Greater Manchester, London and elsewhere have good governance arrangements, and I concede the point that was made about the Greater Manchester scheme. There is no reason why we cannot ensure that those arrangements are reflected in the secondary legislation that flows from the Bill. That will be a desirable outcome.

I hope that there will be democratic local accountability through elected members serving on the boards of schemes. I do not think it is necessary to impose a one-size-fits-all approach on the governance of schemes in order to achieve the important financial and structural reforms that are needed, which I support the Government in taking forward. We can reflect the particular circumstances of the local government scheme within the parameters that the Government have rightly set. That also applies to certain aspects of the scheme’s design, because there were constructive negotiations on the LGPS on the basis that the key point was to achieve the required cost envelope, which, as I recall, was 19.5% of salaries. Particular parts of the scheme enable us to do that while reflecting the particular nature of the local government work force and the scheme’s governance arrangements. I hope Ministers will ensure that the commitment to do so is maintained, and I have no doubt that they will.

I referred earlier to the investment potential of the local government scheme. It is already a significant player in many investment markets, but it could do more. I support the Government proposal to lift the cap on the amount that local government schemes can invest in local infrastructure schemes, which is currently an arbitrary 15%. When I was a Minister, I believed passionately in ensuring not only that local authorities had more resources of their own to put towards local investment but that they made the best use of their current assets, so it does not seem unreasonable that we should remove that cap. The professionals in the field have suggested that something like 30% would be a more realistic cap, and I am open-minded about the exact amount.

I recognise that Brian Strutton, from one of the public sector unions, has some concerns about that idea. If I may say so, I regarded him as a responsible interlocutor in my dealings with the trade unions. He rightly recognises that it might be possible to achieve our objectives either through changing the cap, which I think the unions are wary of, or through the creation of a new asset class for infrastructure. I hope that my hon. Friend the Economic Secretary will consider how we can achieve the important objective of giving local schemes a greater ability to invest in local infrastructure. We should not miss that important opportunity.

I turn now to the firefighters scheme. Again, I accept that it has differences from other schemes. A particularly important issue in all my negotiations with the Fire Brigades Union was the retirement age. The final agreement that was achieved, on which I reported to the House shortly before the summer recess, provided us with adequate and proper flexibility to take on board the concerns of our firefighters, whom I greatly respect. Two matters were put forward in that agreement. The first was that there would be a review of contribution levels from 2013-14 onwards, taking into account the impact of opt-outs, to which the hon. Member for North Ayrshire and Arran referred. I am sure the Economic Secretary will confirm that that remains the position.

Secondly, it will be recalled that I commissioned Dr Tony Williams to examine the evidence base for the case that was made about the physical impact of a firefighter’s job and its relation to the retirement age. The new firefighters scheme has had a normal pension age of 60 for new entrants since 2006, so the situation will not change for many firefighters. In addition, the retirement age of 55, or 50 after 25 years’ service, has been protected for entrants from before 2006. There are significant protections built in for long-serving firefighters. Dr Williams is extremely reputable in this field. He is the medical director of Working Fit and has 15 years’ experience as an occupational physician in the NHS as well as experience of firefighting. I hope that my hon. Friend the Economic Secretary will be able to confirm that the Government will look very closely at the outcome of his review.

Firefighters (Industrial Action)

Debate between Robert Neill and Chris Leslie

Tuesday 26th October 2010 Commons Chamber

[Robert Neill]

With every respect to my hon. Friend, whose interest in the matter I acknowledge, I do not think that the introduction of emergency legislation will help to resolve a difficult scenario. We need to ensure that we make some serious progress. However, I want to take this opportunity to say that I stand second to none in my respect and admiration for the fire service and for the men and women who work it up. I have been involved with it, in the various forms of my public life, for the best part of 25 years, which is why I am so saddened that the leadership of the union has so badly misjudged the timing of this dispute and let down the brave men and women among its membership.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

Is it not clear that the lamentable settlement that the Minister achieved in the spending review will result in cutbacks not just in London but across the rest of the country, and that that will lead to disagreements and disputes fanning out everywhere? For instance, is he happy about reports that the number of fire engine appliances in Nottinghamshire is to go down from36 to 30?

[Robert Neill]

The attempt by the hon. Gentleman to distract us from the immediate situation in London by making reference to the spending review does him little credit and is frankly unworthy of the seriousness of the situation. This dispute was in existence long before the spending review took place, and I hope that he will concentrate on resolving it. We can have debates about the spending review in more appropriate circumstances.