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Jo Swinson (East Dunbartonshire) (LD):
I am sure that my hon. Friend shares my welcome for the Government’s acceptance of the amendment tabled by our hon. Friend the Member for Northavon (Steve Webb). It is surely vital for the House to reduce the costs to the taxpayer—both in the short term and, as the Deputy Leader of the House pointed out, in the medium term, hopefully as a result of the Senior Salaries Review Board review—because it is simply unsustainable for us as MPs continually to go back to the taxpayer asking for more money for our pensions. It is unsustainable in terms of MPs’ pensions and, ultimately, with so
many people living longer, that kind of action will be unsustainable in terms of public sector pensions more generally.
Mr. Heath: My hon. Friend is absolutely right. If the issue is longevity, as I suspect it is, some of our constituents will have an easy answer to the longevity of MPs—
Andrew Stunell (Hazel Grove) (LD): Off with their heads.
Mr. Heath: My hon. Friend reads my mind perfectly. Longevity is something we have to live with— [Interruption.] I am sorry. The view of the general public, rightly or wrongly, is that pension schemes are uniquely helpful to Members of Parliament. We must take account of public opinion in that respect.
We must take careful cognisance of a further reason: there is a problem with all public sector pensions. Unless we in the House can clearly demonstrate that we are taking a lead, we will not be able to introduce the necessary reforms to public sector pension schemes. Public sector pensions are not constructed in the same way as private sector pensions now are. There is an unsustainable difference, and unless we are prepared to take difficult decisions, we will not be able to square that circle. We will not persuade a single person working in the public sector that there is a necessity to reform pension schemes if we are unable to reform our own.
Mr. Chope: I agree wholeheartedly that the consequences of longevity should be borne by the members of a scheme. Is Liberal Democrat policy therefore that the consequences of longevity should be borne, for example, in the police force scheme, by the policemen themselves, rather than by the taxpayer?
Mr. Heath: There are real problems with the police scheme. As the hon. Gentleman might recall, I used to be chairman of the Avon and Somerset police authority. One of our recurrent problems in balancing our budget each year was the difficulty of paying for the police pension scheme. Many things are not clearly understood about the police pension scheme, not least the contribution made by police officers, but the difficulty has never been resolved.
The same applies to the pensions of chief fire officers, for instance. When I was leader of Somerset county council, I worked out that the council was sustaining in work or pension 10 chief fire officers, who tend to retire early and who had schemes that cost a lot of money. I do not resent public sector workers having adequate pensions, but we must accept that there will be increasing difficulties in paying for some of those pension arrangements out of the public purse. We must be honest about that, as we must be honest about all our difficulties with the national Exchequer and the deficits that we are building up. We must work out how to do so with respect for the individuals concerned, understanding the circumstances of those who work in the public sector while recognising that the current position is increasingly unsustainable.
Andrew Stunell:
I have listened with care to my hon. Friend’s wise words. Does he agree that it is impossible for the House to change public sector pension arrangements
for other groups until it has tackled the issue for Members of Parliament? It is no good taking splinters out of other people’s eyes when we have planks sticking in our own.
Mr. Heath: I always thought that the biblical expression was “mote”, but perhaps we no longer refer to motes in the House. However, my hon. Friend is right.
Mr. Andrew Love (Edmonton) (Lab/Co-op): I have listened carefully to the debate, which seems to be ranging into the parliamentary pensions under review by the Senior Salaries Review Body. Should Members of Parliament accept that review in totality before it reports?
Alan Duncan: It is part of a fragmented process.
Mr. Heath: I note the comments of the hon. Member for Rutland and Melton from a sedentary position, and he is right. We have not given a sufficiently clear brief as to what exactly we expect to emerge from the process. I seriously hope that when we ask external bodies to look at these matters, we accept the results of what they say. However, we also have to be aware of the context in which we work and, as I have suggested, set an example of how we expect pension schemes in the rest of the public sector to evolve. I would have some difficulty if the two were incompatible. That is my honest response. However, my argument has always been that when we ask independent bodies for their advice, generally we should accept it unless there are strong reasons not to do so.
As I said, I am no expert on pensions. It is important that we hear from those who are experts. They can ask all the difficult questions, such as those that the hon. Member for Brent, North (Barry Gardiner) put to the Deputy Leader of the House. I have great sympathy with her; a glazed look came over her eyes as she was asked those complicated questions, to which I certainly would not know the answer. On the basis that the Government are going to accept the amendment, I hope that we can agree to the motions. I also strongly welcome the fact that the Government have accepted, albeit with a slight time delay, our arguments on the Science and Technology Committee.
2.51 pm
Mr. David Drew (Stroud) (Lab/Co-op): I want to elaborate on my intervention on the hon. Member for Rutland and Melton (Alan Duncan). However, I start by saying that I welcome the Government’s new-found heart on the Science and Technology Committee. I wish that every success and hope that we can call it the “Ian Gibson Memorial Committee”, although that might be too controversial at the moment.
We do ourselves a great disservice. A canard has been allowed to spread, deliberately and maliciously, that we have an all-singing, all-dancing, most wonderful pension scheme that cannot be improved on, and that we must feel really guilty about anything to do with it and must never argue back that it is a high-contribution scheme, which has evolved over time and takes account of many of the frailties of people who serve in the House. It has to be looked at from the position that many do not do well out of the parliamentary scheme.
My starting point is that although the average time of service is 12 and a bit years, which some of us have just about reached, many hon. Members do not serve anything like that time. Many people who come into politics, particularly parliamentary politics, have made enormous sacrifices in their lives. They do not have other pensions to fall back on. I know from personal experience, having talked to people who retired at the last election, that the pension on which they were relying from this place was effectively the only decent pension they got, but of course it was only for the time that they served here.
Steve Webb (Northavon) (LD): The hon. Gentleman is my constituency neighbour and nobody would accuse him of being greedy or grasping, and his conduct repeatedly shows that he is not that kind of person. Therefore, I am slightly puzzled by his argument. He seems to be saying that for people with a poor pension record who come into Parliament, the parliamentary scheme should make up for lost time. That would apply to people who have had nothing before and those who have very generous provision, because the same rules apply to all of us. Surely he is not saying that our scheme should make up for the mess of the rest of our pension rights, whether we have them or not.
Mr. Drew: No, I am not saying that. I would have voted for the amendment because it is right and proper in these times of austerity that we in this place make sacrifices, and I am pleased that the Government saw the rightful nature of the amendment and accepted it. My point is that we need to argue the case that parliamentary pensions are not the golden goose that some people pretend they are, and I look forward to hearing from the hon. Member for Bournemouth, West (Sir John Butterfill), who knows the true situation much better than probably anyone else in the House and I do.
Unless we make that point, we shall for ever be written about as though the pension were one of the perks that go with the job—one of the elements that make us more equal than most. As we heard from the hon. Member for Christchurch (Mr. Chope), many other people in the public sector receive better pensions than we do, and that may be a good thing. The hon. Member for Northavon (Steve Webb) shakes his head. He ought to talk to some chief police officers and chief fire officers. If they were honest, they would say that their pensions were far better than ours. They have security, which is the one thing that we never have in this place. Given the way in which things are going, some Members may have even less security than they thought they had. We need to introduce some balance.
Kelvin Hopkins (Luton, North) (Lab): I sympathise with much of what my hon. Friend is saying. He has mentioned balance. Surely public sector pensions—perhaps including ours—have been in the firing line recently not because they are particularly good, but because of the failure, weakness and diminution of pensions in the private sector. I have every sympathy for anyone who is currently suffering a threat to his or her occupational pension. Should not the Government, and indeed all of us, seek ways in which to ensure that the private sector does not suffer as it seems likely to?
Mr. Drew: My hon. Friend will not be surprised to hear that I entirely agree with him. Perhaps we should spend more time thinking about private pensions, rather than indulging in navel-gazing by discussing our own pensions.
The hon. Member for Macclesfield (Sir Nicholas Winterton)—I might call him my hon. Friend in this context—made a useful observation. We are in our present mess because, as has happened with so many other pensions, we allowed an undue holiday to arise, with the result that the pot is far less full than it should be. Let me reinforce the hon. Gentleman’s point by saying to the Minister that it would be good to see the figures. If nothing else, that would enable us to hold our heads a little higher and to say, “Yes, this is the additional Treasury support for which we have asked—after all, the Treasury is our employer whether we like it or not—but the Treasury gained throughout the period during which there was either no contribution or no additional contribution, as there should have been, because of the holiday.”
Notwithstanding what has been said about the so-called £5 billion raid, I have always been adamant in my belief that one of the two greatest problems in the public sector is the pension holiday. That is certainly true in much of the private sector, but anyone who considers some of the ways in which local authorities have manipulated pension funds over the years will see what I mean. The other great problem is the mania for early retirement. In the Equality Bill Committee on Tuesday, I argued against what is lovingly described as “the national default retirement age”, which I used to call “65”, because I consider it to be a form of discrimination. As I said then, one of the things on which we ought to pride ourselves—I will cast no aspersions—is the fact that no such discrimination exists in the House of Commons. Many Members remain here until they are well past 65 and there is no pressure for them to go any earlier, other than what the electorate might do to them. The early retirement mania has never affected this place in terms of its representation.
Barbara Keeley: I have some information that may help my hon. Friend and others who have referred to the pension holiday, as the reduction in Exchequer contributions has been described. This year’s increase is entirely due to higher costs caused by the longevity to which Members have referred. It is possible that the years of reduced Exchequer contributions led to increased contributions in 2003 and 2006, but it remains the case that the Government do not pursue a policy of overfunding during a period of surplus. Whatever Members may think about actuarial science, the Government have to follow the guidance of the Government Actuary.
Mr. Drew: I hear what my hon. Friend says, but I always thought it the epitome of madness that when more money was available, we imposed a cap, so that when we were then in a time of difficulty, we never had enough money because no surplus had been built up in the better times. I never saw the logic in that, but that is of history.
Sir Nicholas Winterton: The hon. Gentleman is making an excellent and informative speech. Does he know whether any inquiry or survey has been conducted into how much early retirement, particularly in local government but also in other areas, may have cost pension funds, because people have been able to retire from 50 onwards? I am not referring only to Sir Fred Goodwin and his pension, and the £17 billion pension pot. Is it not true that indulging in early retirement has been very costly for pension funds, because people are drawing a pension very early and living to a ripe old age?
Mr. Drew: I am beginning to think that we are a double act—but of course we are not. Some years ago I put a number of parliamentary questions to the Treasury because I wanted an estimate of those figures, to which the answer was, sadly, “We cannot, and we won’t.” I think that does us all a great disservice, because I believe this issue should be debated. I argue strongly with my colleagues in the public sector that they have a duty in respect of their retirement age. If I were still a teacher, I would be retiring in a couple of years’ time, but I think I would be fairly useful as a classroom teacher beyond that age. Thankfully, many teachers carry on working beyond that age, but there is still a belief that 60 is the retirement age—that that is the age at which people should go, come what may. I shall park that point now, but I feel strongly about it.
I want to make two further points. We talk about longevity being the cause of the problem. I cannot prove this, but I have been told by more than one Minister that one reason why the parliamentary scheme was always so robust was that until comparatively recently, being an MP was not the best line of work to be in for having a long and deserving retirement. It may well be that we are becoming more like those in all other walks of life, and are beginning to have a quality of life after we leave this place, but it is important that we look at the reasons for the particular nature of any scheme and argue the case for its special qualities and characteristics.
Let me turn to my second point. The Labour party has a benevolent fund, because until comparatively recently many people retired from this House in a very poor state. We rightly continue to support those people, as those of us who are much better off with a much higher standard of pension provision have an obligation to support those who are not. Again, I want to put on the record that, in contrast with the message that has often been put across, it is not true that we have done much better over a long period than others in the public sector, many of whom we represent. The parliamentary scheme has evolved over time. It is a good scheme now, but it was not always so. Many people have suffered, and we must learn the lessons from that.
This is not special pleading. I absolutely would have supported the amendment of the hon. Member for Somerton and Frome (Mr. Heath)—I was going to refer to him as “right hon.”, but that is only a matter of time—because I agree with him that we must give such a lead. However, it annoys me—occasionally my blood does boil—that whenever the BBC or Sky or the papers are talking about “greedy MPs”, they always have the throwaway line, “who have gold-plated pensions.”
We should at least put on the record that those pensions are not quite as good as some suggest. I have been fortunate because I have been able to conflate my teacher’s pension with the parliamentary scheme, which puts me in a better position. But as I said to the hon. Member for Rutland and Melton (Alan Duncan), we have achieved the position that many schemes should be in—a claw-back, so if someone retires before 65, they are seriously penalised.
Mr. Love: If we really want to get across the message that our pensions are not as gold-plated as is often assumed, we are the last people who should make that case. We need someone independent, such as the SSRB, to make that case for us.
The House appears to be relatively unanimous about the motion, but behind it is a much larger debate about whether we should continue with a defined benefit contribution scheme, like most of the public sector. Does my hon. Friend think that that is something that we should protect?
Mr. Drew: My hon. Friend always asks me easy questions. It is worth fighting for a defined benefit scheme, because that is the gold standard that has been created over a long period of time. However, I accept that we cannot have the public sector doing one thing and the private sector doing something else entirely. That is hypocritical and unfair, and we have to have the debate. However, in the public sector, the debate would be much more reasonable if people accepted that 65 was the normal retirement age. In that case, they would make contributions up to that age, which would deal with many of the problems arising from unfair demands on the fund.
Kelvin Hopkins: My hon. Friend has drawn a contrast between the public and private sectors, and it is unfair to the private sector. Does he agree that in the longer term we should look to a universal pension arrangement for employees, under which we all have defined benefit schemes with the heavy involvement of the state, as necessary?
Mr. Drew: Yes, and we have to make the argument that people will have to make reasonable contributions. We are supposed to take the lead on this, but we have let people down by allowing them to believe that their contributions can remain the same even if they live longer and retire earlier. That does not add up, and it has brought many funds crashing down.
I shall conclude my remarks on that gloomy note, but I hope that the next time a journalist makes the throwaway observation that MPs’ pensions are gold-plated, they will also publish their own pension arrangements and what they have managed to get out of the system. They might discover that they are somewhat better off than MPs.
3.8 pm
Sir John Butterfill (Bournemouth, West) (Con): In the debate so far, there has been a lot of conjecture and of looking back to the past, and I wish to try to put it into context.
There was indeed a considerable period during which the Treasury did not contribute the correct amount to the parliamentary scheme. If one looks back to the previous valuation that was conducted by the Government Actuary, one clearly sees that the deficit was approaching £50 million, all of which was attributable to the Government failing to pay the employer’s contribution, which is, of course, funded by the taxpayer. That might or might not have been a correct decision, but it did mean that there was a deficit that had to be covered. The Government suggested that it should be covered by increased Government payments over 15 years.
That has been part of the problem in the perception of where we are going now. The Government’s contribution now looks unreasonably high, whereas a high proportion of it is related to their failure to contribute in the past. That is not just a criticism of the present Government; it also applies to the previous Government.
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