Public Service Pensions: Government Contributions

Roberta Blackman-Woods Excerpts

Wednesday 19th December 2018 Westminster Hall

[Dr Roberta Blackman-Woods (City of Durham) (Lab)]

It is a pleasure to serve under your chairmanship again, Sir Christopher.

I thank my hon. Friend the Member for Merthyr Tydfil and Rhymney (Gerald Jones) for securing this important debate. I am grateful to him because he is shining a light on a very important issue that Parliament has not given enough attention to. The reduction in Government contributions to public sector pensions from 2.8% to 2.4% will have a huge impact and place additional strain on our already overstretched public services, unless the Government take action to ensure that public bodies are compensated for their additional contributions.

By 2021, police services will be expected to find an extra £420 million, which equates to the loss of a further 10,000 police officers if all the authorities set a balanced budget. The change is also estimated to cost our fire services an extra £150 million by 2023, which is equivalent to running 150 fire stations. The problem seems particularly acute when it is placed alongside the cuts to local government, because the poorest local authorities in this country have borne the biggest cuts—my own authority in Durham will have seen a massive 60% cut in its budget between 2010 and 2020. If the Government do not compensate our local authorities properly for the measure, we will see a further negative impact on our public services. In our own local communities, we all know how stretched the police and fire services already are. It is important for them to be funded adequately by the Government.

As we heard from my hon. Friend in his excellent and comprehensive contribution, at the moment the Treasury is giving no guarantee that the additional moneys will be compensated beyond 2019-20. According to Treasury analysis, the measure is expected to increase employer contributions by £1,970 million in 2019-20 and £2,005 million by 2020-21. We are not talking about a small amount of money that those bodies can easily plan for; those are huge sums of money that will really impact on the delivery of our public services. We are asking those public services to plan for the future with no real idea of what their budget will be. To assist with effective planning, if nothing else, the Government need to come forward with information about what they will do about compensating for those additional contributions, because none of us wants to see further damage done to our public services.

My hon. Friend alluded to a further problem, namely what is happening to our universities, which are not being compensated at all for the additional contributions that they have to make. For the teachers’ pension scheme, the Treasury agreed to compensate schools and colleges —again, only for the limited period for which it is compensating everyone else, up to 2019—but not universities, which run such schemes for their lecturing staff. Furthermore, that particular problem exists only for the new universities, so apart from anything else the Government are being extremely unfair. They are singling out the post-1992 universities for particular trouble, and they are simply not looking at the huge impact on university funding.

University funding has already been affected by the freeze in tuition fees with no additional money coming through from Government, and now we have the additional pension contributions. Again, we are not talking about small amounts of money. The increase in the teachers’ pension scheme is one of 7.3% to employers, bringing their total contribution up to 23.68%. That has a massive impact on university budgets. For the civil service—while we are at it, we might as well look at this, too—there is a 6.1% increase for civil servants and a 6.22% increase for the NHS. As the hon. Member for Strangford (Jim Shannon) said, that will have a huge impact on the NHS.

I am always pleased to see the Minister in his place, but given the nature of today’s debate, a Treasury Minister should have come to this Chamber to answer on behalf of the Government why they have produced additional uncertainty for all the public services, including the civil service and the NHS, by not giving them an assurance of compensation for the increased contributions. Furthermore, a number of us have been asking questions for a while about why the new universities are being treated so unfairly, and we need an explanation from the Government. That has not been forthcoming to date.

The Universities and Colleges Employers Association has said:

“The proposed employer contribution increases will without doubt have a detrimental impact on universities, their staff and their students at a time of great uncertainty and we would urge the Treasury to reconsider.”

I endorse that message, and I look forward to hearing what the Minister has to say.

--- Later in debate ---

[Mr Hurd]

I understand the hon. Gentleman’s point and I absolutely respect his local authority experience. I am certainly not in denial about the financial pressures, particularly on our police system but also on certain fire services as well. He is right that, in the early years of needing to get back to living within our means and controlling public expenditure, some fruit was easier to pick than others, and it gets harder. However, I was making the point that we are talking about £120 million of savings agreed by the police—this is not a Home Office number—over the next two years through collective procurement. That is just smart buying.

The hon. Gentleman will know very well, and it is the same for the fire service, that a fragmented system of more than 40 different forces each doing their own thing —buying helmets, uniforms and equipment independently—is not necessarily the most efficient route to getting the best value for our constituents. All I am saying is that, even after eight years of tightening and reducing budgets, we can still find £120 million left on the table because of inefficient procurement practices. I hope he welcomes that. That money was effectively being wasted and can be better used for frontline service delivery. I hope he agrees.

[Dr Blackman-Woods]

Will the Minister give way?

[Mr Hurd]

I will be delighted to give way to the hon. Lady. I have very happy memories of her shadowing me very effectively many years back.

[Dr Blackman-Woods]

I thank the Minister for those comments. I accept his point about efficiencies. However, we are really talking about the overall size of the cake. The police force and the fire authority in Durham have already significantly reduced in size since 2010, to the point that they struggle to run an effective service. We can talk about procurement and efficiencies, but the pressure on our public services is enormous. That has to be the starting point of these discussions.

[Mr Hurd]

I have the greatest respect for the hon. Lady and I absolutely understand the point she makes. She will not have followed all my public utterances over the last two years or for however long I have been in this role, but I acknowledged right from the start, after listening to the police and fire services, that the frontlines of our emergency services are stretched. I have said so publicly. The actions I have taken through the police funding settlements last year and this year demonstrate, frankly, a move from cuts to increased investment, in direct response to conversations I have had, not least those with frontline officers expressing their frustration about how stretched they are. I absolutely accept that point.

Of course, £120 million, in the context of the £970 million funding settlement, is still at the margin, but the central point is that we cannot give up pushing those who spend public money to demonstrate that they spend it in the most effective way. It is not Government money; it is our constituents’ money. They pay it in taxes and expect it to be used properly. We will not let up on that, because £1 saved through smarter procurement is £1 that can be used for more effective frontline delivery.

I will talk about the implications for the fire service, because that was the main thrust of the shadow Minister’s points. I reassure her that, as we work towards the next comprehensive spending review, the Home Office will do a similar exercise to that which we have done with the police—I will be leading this—to genuinely try to understand the demand on the system, both in terms of the demand on the core statutory duty and also the financial pressures that the system is under. We will ask tough questions on efficiency, the use of reserves and all the things that we debate, but we only do so because we are ultimately stewards of public money—it is not Government money, it is taxpayers’ money—and that is our job. I am absolutely determined, through the CSR, to make sure that both the police and the fire service have the resources they need. I have shown through my words, and more importantly through my actions, that we have responded to those messages about genuine stretch and pressure on the frontline.

In 2019-20, single-purpose fire and rescue authorities will see an increase in core spending power of 2.3% in cash terms. The additional employer pension costs for the fire service will be an additional £10 million in 2019-20. The Government will cover the rest of the increase by providing an additional pension grant of £98 million. Standalone fire and rescue authorities, excluding Manchester, will be able to raise an additional £38 million in 2019-20 if all fire and rescue authorities increase the precept by 3%. We believe that will allow fire authorities to meet their financial pressures and continue to invest in key capabilities.

In addition, fire and rescue authorities hold significant financial reserves, which have increased—this is the point—by over 80% to £545 million between the end of March 2011 and the end of March 2018, which is equivalent to 42% of their core spending power. I will always refer to that, because there needs to be proper transparency and accountability.

The hon. Member for Barnsley East (Stephanie Peacock), who is no longer in her place, talked about the pressures on South Yorkshire. Again, its core spending power increased by 1.7%. It sits on reserves worth almost 50% of its core spending power, and those reserves have increased by £9.5 million since March 2011. Like most fire authorities, it is starting out on the road to independent inspection and it is, I understand, in tranche 3 and will be inspected in summer 2019. One of the things it will be inspected on is efficiency. It will be interesting to see how it comes out of that inspection.

In relation to the police, I genuinely believe that the combination of the specific pension grant, the increase in the Home Office grant, the efficiency savings that we have agreed to realise, the high level of reserves that still remain in the system and a financial settlement that enables increased investment of up to £970 million in 2019-20, if fully realised—it does depend on the actions of police and crime commissioners—will mean that as a country we will invest over £2 billion more in 2019-20 than we did in 2015-16. While Labour MPs continue to make comparisons to 2010, the reality is that since 2015, the Government have recognised that the demand on the police system has risen and become more complex, and we have responded with additional public investment.

Finally, I hope that I have reassured hon. Members that the Government are working closely with both the policing and fire sectors, to ensure that they have the resources to enable them to do their challenging work efficiently and effectively. Alongside that, we are taking steps to ensure that the future funding of public pensions is affordable, sustainable and well balanced.

Question put and agreed to.

Resolved,

That this House has considered the reduction in Government contributions to public service pensions.