Public Sector Pensions

Debate between William Bain and David Jones

Thursday 8th December 2011 Commons Chamber

[The Parliamentary Under-Secretary of State for Wales (Mr David Jones)]

This has been a lively and at times impassioned debate—quite understandably, because the issue that we have been discussing is of the most extreme importance.

I should like to put a number of matters squarely on record at the very start of my remarks. First, I wish to make it absolutely clear that Government Members greatly value the services that the public sector performs, both in contributing to the economy of this country and in providing the services that each and every one of us needs. To suggest that we do not is grossly to misrepresent the case.

Secondly, I wish to object most strongly to the expression “gold-plated pensions”, which has been bandied about on the Opposition Benches. No one on the Government side of the Chamber is in any way suggesting that public sector workers enjoy gold-plated pensions—I have not heard that expression voiced by Government Members. Nevertheless, it was clearly a deliberate tactic on the part of Opposition Members to misrepresent the position by suggesting that Government Members regard the public sector as feather-bedded—we do not.

The fact of the matter, as one hon. Member mentioned some time ago, is that this time bomb has been ticking for a very long time indeed. The previous Government sought to address it but did so only partially. This Government are taking the difficult decisions that will be needed to put public sector pensions on to a sustainable footing for the years to come.

The hon. Member for Arfon (Hywel Williams), who opened the debate, suggested that it was positively Government policy for public sector workers to work longer, pay more and get less in return. The fact is that the Government’s proposals are aimed at ensuring that this generation and future generations of public sector workers receive pensions that properly reward their efforts after a lifetime’s work.

I echo the congratulations offered on the arrival of Jack and Rosie, the grandchildren of the hon. Member for Central Ayrshire (Mr Donohoe), but I should point out that they will benefit from the Government’s proposals. As the hon. Gentleman says, at the age of 70 they will require sustainable pensions, and they will thank this Government for taking the necessary decisions to put pensions on to a sustainable footing.

Lord Hutton’s analysis—many hon. Members said that they agreed with the general thrust of his report—shows that there are three drivers for reform, the first and most important of which is longevity. The average 60-year-old in this country will live 10 years longer than the average 60-year-old in the 1970s lived. Over the same period, the annual cost of public service pensions has increased by a third—it reached £32 billion last year. That simply must be addressed.

The second driver is flexibility, because public sector pension provision no longer reflects how the modern labour force work and live. The third driver is fairness, which is also important. The current schemes, which are predominantly final salary schemes, mean that lower-paid public sector workers effectively subsidise the pensions of the higher paid.

The reforms implemented by the previous Labour Government have not been sufficient to reverse the huge increase in the costs of public sector pension schemes as a consequence of increased longevity. The position is straightforward: either public service pensions are reformed, or our children and grandchildren—Jack and Rosie—will bear the cost of a virtually unsustainable financial benefit.

[Mr Bain]

The OBR fiscal sustainability report, which was published in July, makes it quite clear that public sector pensions are affordable. I refer the Minister to the chart that illustrates that the public sector pension share of gross domestic product will fall to 1.6% by 2060. Surely that does not tie up with his last remark.

[Mr Jones]

I refer the hon. Gentleman to the comments of Lord Hutton, who pointed out that his commission felt that there was a rationale for short-term cost savings in recognition of a substantial, unanticipated increase in longevity. In practice, these savings can be realised only by increasing member contributions. To suggest that it is impossible to address this problem in any way other than by increasing contributions is frankly fallacious and deceitful, and the Opposition know that.

The hon. Member for Arfon and others asked what negotiations were taking place. It is important to put it on the record that my right hon. Friend the Secretary of State for Health has met the NHS unions today, and my right hon. Friend the Minister for the Cabinet Office is also meeting the civil service unions later today. Negotiations are indeed proceeding apace, and to suggest that they are not—as the hon. Member for Hayes and Harlington (John McDonnell) did—is wrong.

The hon. Member for Angus (Mr Weir) claimed that 27% of workers will leave public sector pension schemes as a result of increased contributions. The Government have set out that those earning less than £15,000 will see no contribution increase whatever, and those earning less than £21,000 will see a maximum increase of 1.5 percentage points by 2014-15.