The increase in contributions that was announced in the spending review will not be used to pay for pensions. My understanding is that that £2.8 billion is specifically to be used to reduce the deficit—that is in the Red Book. Perhaps the Minister would like to establish in his winding-up speech whether that is right. I also
8 Dec 2011 : Column 458
understand that the proposal was a political choice by the Government rather than being made out of necessity. They have scrapped Labour’s tax on bankers’ bonuses, which was to raise more than £3 billion in revenue, and replaced it with a tax on public sector workers’ incomes.
Those changes are being made against a backdrop of a two-year pay freeze for public sector workers, which of course was announced on the eve of last week’s strike. That was a very provocative statement intended, I suggest, to fan the flames of dissent among public sector workers. The changes also come at a time when inflation is running at about 5%. That in itself has reduced the value of public sector pay by almost 10% in real terms, which is not sustainable in the current climate. We all understand that we have difficult choices to make, and we all understand the state of the economy, but pensions should be considered for the long term. It is patent that that is not happening.
Mr Graham Stuart: Will the hon. Gentleman give way?
Mr Donohoe: No, I am just about to sum up, so I will not give way again.
I finally wish to touch on the effects that the changes will have on our armed forces, a section of the community for whom I have great respect. It goes without saying that this punitive reduction will have a damaging impact on the morale of those who are prepared to make the ultimate sacrifice for our country. We must not punish our young men and women in the forces because one man cannot see the practical implication of his economic policies.
2.37 pm
Guto Bebb (Aberconwy) (Con): First, may I say that I might not be here for the wind-ups, because I have to catch a train to Brussels for Welsh Affairs Committee work? I hope that I will be able to be here, but if not, I present my apologies in advance.
This is an important debate, and I am grateful for the opportunity to contribute. One of the disappointments so far has been the fact that many Opposition Members have implied that coalition Members, whether they are Liberals or Conservatives, despise the public sector in some way. That is simply not the case, and I reject the suggestion completely. As a coalition Member, I find such comments offensive. I depend on state schools for the education of my children, I am the son of teachers and I am married to a public sector worker, so I find such comments completely unfair. Opposition Members should consider the matter carefully before making them.
We are aware of the importance of the public sector, so much so that we are proposing changes that Lord Hutton, the Labour peer who produced the report on the matter, said were possibly not affordable.
Susan Elan Jones: Can the hon. Gentleman confirm that he is not in fact the son of Conservatives?
Guto Bebb: That is an interesting question, and I am not sure. My father certainly ended up voting Conservative, but I cannot comment on my mother, because I think that how somebody votes at the ballot box is their choice entirely.
8 Dec 2011 : Column 459
We are quite often accused of attacking the public sector or introducing unfair policies, yet the coalition Government are trying to deal on a long-term basis with issues that the previous Labour Government did not deal with. When we talk about fairness, which is important in this debate, I wonder where the comments of Labour Members were on the raid on private sector pensions. Where were their comments in defence of people with poor rates of pension provision who were saving with their own money—working people saving for their retirement? Where was the Labour party when it came to defending those people when the previous Labour Government raided pensions to the tune of £5 billion a year? That was a scandal. It was not fair, but we heard nothing from Labour Members.
Even worse, the raid on private pensions was made with the justification of helping young people back into work. In 2010, the rate of unemployment among young people was higher than in 1997. The raid was unjustified, not effective and unfair.
Sheila Gilmore: The hon. Gentleman’s 2010 figure is not wrong—[ Interruption .] Excuse me! It is true to say, however, that the money that was put into reducing youth unemployment worked and that youth unemployment was brought down from the very high level that was inherited in 1997—[Interruption.] No. Only the recession caused youth unemployment to rise.
Guto Bebb: I find the argument that my point was “not wrong” but that somehow the raid was justified to be bizarre to say the least. However, I would challenge the hon. Lady: if she thinks the raid on private sector pensions was justified because the policy miraculously worked—even though youth unemployment went up—I invite her to say that we should reduce public sector contributions because that would help in relation to youth unemployment.
Mr Graham Stuart: The Select Committee on Children, Schools and Families held an inquiry into young people not in education, employment or training. It showed that before the economic crisis, the number of unemployed young people was on a level plane with the number when the previous Government took office. That shows that in all those years of economic growth, young people were left behind by the Labour Government before the spike after the financial crisis. What the hon. Member for Edinburgh East (Sheila Gilmore) said was absolutely false.
Guto Bebb: I thank my hon. Friend for the clarity of his point.
The proposal is a reasonable one. We are aiming to protect those on lower pay. Some in my constituency of Aberconwy will be astounded by the figure given by the hon. Member for Glasgow North East (Mr Bain)—he stated that only 16% of public sector workers earn less than £15,000. The average wage in my constituency is £23,000 and the average private sector wage in Wales is £21,000, so there will be a question about whether the proposal is unfair.
That reminds me of the comments made on the RPI to CPI change. The change was illustrated with the example of a nurse or dinner lady who earns £8,000 a year. I recently did a call-in programme on Radio
8 Dec 2011 : Column 460
Cymru. A headmaster from the constituency of the hon. Member for Arfon (Hywel Williams), as it happens, called in and stated that the change from RPI to CPI was extremely unfair because it would cost him £200,000. The average private sector pension pot is £30,000. Hon. Members can imagine that the response of the general public when they heard that comment was pretty strong. The changes that the Government are trying to make are changes for the long-term, to try to ensure that we have a system that works.
It is imperative that hon. Members mention some of the e-mails that they have received from the trade union movement. I received one this morning from the Public and Commercial Services Union stating that the claim that the coalition is trying to protect the lower paid is not sustainable. The PCS directs us to a comment by Cathy Newman, who says that it is “fanciful” for the coalition Government to try to claim that they are protecting the lower paid. I am disappointed with that comment, but then the PCS does not bother to remind us of other comments that Cathy Newman has made. She also says:
“Having said that though, public sector pensions, even after these reforms, will still be the envy of many a worker in private enterprise.”
That is the key point in Wales. We are looking at how we can ensure that the people who benefit from extremely good pensions contribute a fair amount towards them. For example, will increasing a teacher’s pension contribution from 6% to 9% have an impact on their take-home pay? Yes, it will—I would be the first to acknowledge that—but it is important to state that to end up with a pension similar to what will be available to a teacher as a result of the changes, somebody working in the private sector would have to contribute 35% or 38% of their take-home pay.
Katy Clark: Will the hon. Gentleman give way?
Guto Bebb: No, I will not take another intervention.
That disparity will still exist because the coalition Government value public sector workers. That is not to say that we do not value people who work in the private sector, but we acknowledge the importance of the public sector, we want to protect it and we want to bring in changes that are sustainable, fair to taxpayers and fair to the public sector. I ask any Opposition Member to tell me what is unfair about asking a teacher to contribute 9% of salary for a pension that a comparable worker in the private sector would have to contribute 35% to achieve. I ask any Opposition Member to stand up and tell me why that is fair. I see nothing.
Finally, I will turn to the Welsh context—
Guto Bebb: I want to get a few points in about Wales to finish.
In this debate, Plaid Cymru Members have said that they are standing up for their electorate and their workers. I applaud them for that. Of course people need to stand up for those who elect them to this place, but it is also important to point out that the constituency of the parliamentary leader of Plaid Cymru has the highest rate of self-employed people in the United Kingdom. What has Plaid said about supporting the pension provision of those individuals?
8 Dec 2011 : Column 461
I accept that Wales has a high percentage of people working in the public sector, but in many constituencies the majority of people are striving to earn a living in the private sector. When we have a limited amount of money, the Government have a responsibility to all taxpayers to ensure that we have a system of pension provision that is fair to all. It is simply not sustainable to expect the three quarters of the people in Wales who work in the private sector or who are self-employed—many of whom live in the constituencies of Plaid Cymru Members—to pay through their taxes for the pensions of those who will retire on better pensions.
These changes will ensure that the public sector is protected, but they will share the burden in a slightly fairer way than at the moment, and I applaud the coalition for bringing forward a long-term change with courage and commitment.
2.47 pm
Lindsay Roy (Glenrothes) (Lab): I congratulate the SNP and Plaid Cymru on their choice of debate today. I take part in this debate with a heavy heart, and with genuine anger and frustration at the way in which public sector workers, who have done such invaluable work in our communities, have been treated by this Government. Some of what I have to say is constructive reinforcement of points already made, rather than unnecessary duplication. These raw sentiments reflect the views of hundreds of public sector workers in my constituency.
One of the hallmarks of a civilised society is the way we treat our citizens—people who have contributed immensely to society throughout their working lives. Indeed, for years there was a genuine trust and confidence in the public sector that, in return for often smaller salaries—although sometimes not—compared with the private sector, they would receive a fair, if generally modest, pension on retirement, and those pensions had been negotiated in good faith. That trust has well and truly evaporated. However, that erosion in trust has not occurred because of the Hutton report, which recognised again the need to review pension contributions as people live longer, but because of the cavalier way this Government have proceeded, on a unilateral basis, to disguise the real purpose of the precipitate 3% increase for public sector workers. To put it bluntly, public sector workers feel that they are sacrificial lambs.
The immediate increase has nothing directly to do with the present affordability, fairness and sustainability of public sector pensions, but everything to do with a cynical attack on ordinary working people at a time of pay freezes, increased VAT, higher fuel costs and a dramatic increase in living costs. The real reason for this smash and grab raid on the public sector was blatantly to contribute to the deficit reduction plan, as highlighted by the hon. Member for Arfon (Hywel Williams).
David Mowat: I have listened carefully to the hon. Gentleman’s argument and he seems to be saying that he supports the proposals in the Hutton report, but does not support what the Government have done. Which aspects of what the Government are doing are not in the Hutton report?
8 Dec 2011 : Column 462
Lindsay Roy: The Government pre-empted Hutton and were precipitate in taking forward the action with the 3% increase.
Not only have public sector workers been penalised, but the wealthier owners in our society, particularly the bankers, have not been challenged in the same way. As taxpayers, we have bailed out the bankers, so some of the richest people in our society continue to be rewarded, and it was some of them who created this financial crisis. Patently, we are not all in this together.
As a cover for their actions, the Government continue to peddle a number of myths, which, if Members will pardon the pun, I will try to scotch. First, it is said that public sector pensions are gold-plated. As we have heard, there are varying figures for this, but they vary between £3,000 to £5,000.
Secondly, it is said that the public sector unions were spoiling for confrontation. Nothing could be further from the truth.
Roger Williams (Brecon and Radnorshire) (LD): The hon. Gentleman is making a powerful point, and many of us have sympathy for those on small and medium incomes, but there are people on large incomes who also receive very large pensions. People pay taxation to provide those high pensions and that is a matter of concern.
Lindsay Roy: I do not want to be drawn to the lowest common denominator. We have already heard the issues surrounding tax relief in the private sector.
Industrial action is a last resort and a signal of anger and frustration among our constituents. Most of my constituents had never taken industrial action in their life and hope not to do so again.
The third myth was that the immediate 3% increase was recommended by Hutton; it was not. The fourth is that the intensive and serious negotiations between senior Ministers and senior trade union officials had continued right up until the 11th hour; they had not. Senior leaders last met on 2 November. To add insult to injury, this coalition Government decided to break the pension link with the retail prices index and move to the consumer prices index, thereby having a significant detrimental effect on the value of pensions, with a drop of between 11% and 14%.
All mainstream political parties fully recognise that there needs to be a comprehensive review of public sector pensions to ensure fairness, sustainability and affordability. At no time did we pretend that challenging decisions would not have to be made about contributions, entitlement and retirement age. Reform was to be strategic and phased and it would inevitably involve difficult decisions as people are living longer. It is now incumbent on the Government to engage as a matter of urgency in serious and meaningful negotiations at the most senior level and as immediately as possible with trade unions to agree an acceptable settlement.
Fundamentally, we need to draw up a long-term plan for decent pensions in the public sector, to continue to engage high-quality recruits, to retain the many committed public servants who do a tremendous job on our behalf and to reward fairly those who reach their pension age. I therefore urge the Government to go home and think
8 Dec 2011 : Column 463
again, rescind these unfair short-term changes and to bring to the table a fair, affordable and sustainable plan for long-term pension reform.
2.53 pm
Iain Stewart (Milton Keynes South) (Con): Although it is always a pleasure to follow the hon. Member for Glenrothes (Lindsay Roy), I must confess some disappointment that I have not yet heard from a member of the Scottish National party. In my short contribution to this debate, I should like to focus on what I think is the Scottish nationalists’ real motive behind the motion and the debate on public sector pension reform—their ambition for the Scottish Parliament to have full control over public sector pensions as part of its drive towards fiscal autonomy and full separation. Let me draw the House’s attention to the words last week of the First Minister, Alex Salmond:
“The way to stop this Parliament and Government being hamstrung by the policies of the UK Government is to give us the financial independence that we require in order to do that.”
That is clearly his aim. [Interruption.] And from a sedentary position, Scottish nationalist Members endorse it. That aim is at the heart of the motion.
Notwithstanding the local variation within the devolved Administrations over the administration of pension funds, to which my right hon. Friend the Minister referred, it would be a hugely retrograde step to move away from a unified United Kingdom public sector pension scheme.
Stewart Hosie: There is no unified public sector pension scheme, but there is a police pension scheme, a firefighter pension scheme, a Scottish teachers’ scheme, a local government scheme and an NHS superannuation scheme. They are all different; there is no unified scheme. The hon. Gentleman is simply wrong.
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.”
“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.
8 Dec 2011 : Column 464
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.
Stewart Hosie: The hon. Gentleman cannot argue that these are in-year contributions and then make the case that there is a pension pot requiring actuarial rules. There is either a pot of money that is paid for and needs to be disaggregated, or there is not, but he has just said that there is not one because it is paid for in-year. Which is it?
Iain Stewart: That is not my point at all.
David Mundell: It is just a smoke screen.
Iain Stewart: Absolutely. It is just a smoke screen.
It would create an enormous muddle if we had to pull apart the pension contributions, and we have heard absolutely nothing from the Scottish nationalists about how they would do that.
Gordon Banks: Although there might not be a pension pot, there is a pot of responsibility.
Iain Stewart: I am sorry but I did not catch the hon. Gentleman’s point.
Gordon Banks: There is a pot of responsibility. There might not be a pension pot, but there is a pot of responsibility, and it is that responsibility for future pensions that the SNP would have to bear.
Iain Stewart: The hon. Gentleman makes a good point.
As well as the nightmare of disaggregating the fund, a range of dynamics would be set in train that would be difficult to forecast. I remember when the Scottish Executive set a pay increase for teachers that was more generous than that given to teachers in England—I think it was back in 2001. That resulted in a significant transfer of teachers wanting to work in Scottish schools because of the more beneficial terms. If we move from a unified pension scheme, we will set in train in those difficulties in accounting for who is responsible for paying what.
Sheila Gilmore: Will the hon. Gentleman give way?
Iain Stewart: If the hon. Lady will forgive me, I will not give way. I have been quite generous, and I want to bring my remarks to a conclusion shortly to allow as many other Members as possible to take part.
The other thing about which we have heard nothing from the Scottish nationalists is how they would pay for a more generous pension scheme in Scotland—if, as I
8 Dec 2011 : Column 465
assume, that is their intention. In the confines of a short speech, I shall not go into the whys and wherefores of the cost of separation from the United Kingdom; my point is that we should consider pension reforms in the context of the United Kingdom. There are passionate views on both sides about what that future should be, and I completely respect the views that many hold in arguing for a sustainable pension scheme for the future, which is what we all want.
The hon. Member for Central Ayrshire (Mr Donohoe) is not in his place now, but earlier he referred to his new grandson. I recall following him in a debate a few weeks ago in which he announced to the House the safe arrival of, I think, Rosie, his new granddaughter. It is those children—those being born now—for whom we should be looking to ensure we can afford a decent pension, whether in the private or public sector, when they reach retirement. I hope that we can come to a decent consensus and conclusion on pensions, but it is not helped when the Scottish nationalists raise a smokescreen and attempt to turn this into a constitutional point, in order to achieve their aim of separating Scotland from the rest of the United Kingdom. Breaking up that system would be a nightmare.
Madam Deputy Speaker (Dawn Primarolo): Order. Before we proceed with the debate, I need to change the time limit again, because there are still more speakers left than time will allow for. I am reducing the limit to five minutes per contribution. Again, I cannot calculate the consequences of interventions. The time limit has gone from seven to five minutes because things are taking longer; therefore, it may be necessary to change it again, although I hope not. Members can either take less than five minutes or choose not to take any interventions. It is up to them.
3.2 pm
Graeme Morrice (Livingston) (Lab): Thank you, Madam Deputy Speaker. I shall try to take less than five minutes, which is predicated on my taking no interventions.
I welcome this afternoon’s debate, although I am somewhat surprised that the Scottish National party, whose Members have not given a speech yet, has chosen the topic of public pensions, given the very thin ice on which they find themselves with this issue. While 300,000 public sector workers and over 70% of the people of Scotland backed last week’s day of action, the SNP sided with the Tories and Lib Dems, and refused fully to support pensions justice. Not for the first time, the SNP’s warm words do not match up to its actions. Many are now asking: what is the difference between the SNP Administration in Holyrood and the coalition Government here? The SNP implements Tory cuts in public sector pensions, pay, jobs and public projects. Indeed, last week’s revelations about the submission to the Hutton inquiry from the Scottish Government’s Scottish Public Pensions Agency showed that the SNP is prepared to suggest even deeper cuts to pensions than those proposed by the Tory-led coalition. Perhaps the SNP Members here today can explain why their party in Scotland is doing the Tories’ dirty work for them.
8 Dec 2011 : Column 466
Like, I am sure, those of numerous other Members, many of my constituents have contacted me to condemn the Government’s actions on public sector pensions. They have already had forced on them a change in the pension calculation from RPI to CPI, which Hutton says represents a 15% cut in pensions benefits.
Dr Whiteford: Why did the hon. Gentleman not vote against the move from RPI to CPI when he had the chance?
Graeme Morrice: What I am not supporting is this coalition Government’s position on public sector pensions, and I am certainly not supporting the SNP and Scottish Government input into the issue. When they had the opportunity, they went to the Scottish Public Pensions Agency and argued for a position that was even more draconian than that of the Tories and Lib Dems.
Many people face plans to increase contributions by an average of 3.2%, but, as we heard from several hon. Members, not a penny of the money raised will go into pension schemes. The constituents who contacted me are hard-working, public sector employees carrying out vital jobs. They have kept our public services going and have already made a major contribution to tackling the deficit. They have endured a pay freeze for two years and face an increase of only 1% when the freeze ends—in effect, another pay cut. They are not only angry about the Government’s proposals to make them pay more and work longer for less pension but are incensed at the insensitive and misleading way in which Ministers have dealt with this issue. Above all, they are fed up with hearing about “gold-plated public service pensions” and other misinformation about this complex issue.
The Hutton report clearly rejected the idea that public pensions are “gold-plated”. Figures from the National Association of Pension Funds show that the median salary-linked public sector pension currently paid out is worth £5,600 a year, compared with £5,860 in the private sector. Of course, there are many medium and low-paid workers in the private sector who have little or no pension provision, which is a serious problem, but that is not a reason for public service pensions to be attacked by this Government. The artificial divide that the Government have sought to foster, pitting public against private, is failing those at the heart of the debate—the millions of people who need a good pension on which to retire.
To conclude, it is time for the Government to come clean on this issue and drop the myths and misinformation about public service pensions that they have been peddling for months. Public service pensions were reformed by the previous Government and are both affordable and sustainable. The Pensions Policy Institute has estimated that existing pensions reforms have reduced the immediate cost of benefits by 12.5% and should result in savings of around £13 billion on the NHS, teachers’ and civil service schemes, spread over a 50-year period. The question now is whether the Government choose to negotiate a fair and reasonable deal or continue with their ideological drive to undermine public services, demoralise public service workers and destroy their pensions.
3.7 pm
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
8 Dec 2011 : Column 467
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
8 Dec 2011 : Column 468
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
8 Dec 2011 : Column 469
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.
3.14 pm
John Robertson (Glasgow North West) (Lab): It is an honour to follow that rant by the hon. Member for Angus (Mr Weir). I have great respect for him, and I never thought I would see the day when he would lose it, but there we go.
I had prepared a longer speech than I am able to make under the current time constraint, but I do want to make a few points. Thinking of the two Government parties reminds me that this is Christmas time, and as Scrooge is one of my favourite characters I am waiting for one of them to come up with a few statements such as that we should “reduce the surplus population” or, “Are there no workhouses?” That seems to be their policy on pensions and pensioners.
Mike Crockart (Edinburgh West) (LD): Does the hon. Gentleman welcome the fact that 1 million pensioners in Scotland are now £5.30 a week better off because of this Government?
John Robertson: I thank the hon. Gentleman for the extra minute his intervention gives me.
I found it surprising that the nationalist parties wished to hold a debate on this issue as I could not remember their raising it in the past. In fact, so bad was my memory that I contacted the Commons Library to find out when a nationalist Member had last raised the issue. This was the response:
“Thank you for your enquiry which was passed to me by the Library’s Business and Transport Section. You asked for statements in the House by Scottish National Party and Plaid Cymru MPs on public sector pensions. Unfortunately, there were barely any mentions of public sector pensions so I have included references to pensions in general in case they are useful.”
The House of Commons Library staff could find only four examples of the SNP raising this subject, and those examples were far from “useful”. I felt relieved that I did not give the Library staff too much work to do.
The Library searched back to 2006 and found that the hon. Members for Na h-Eileanan an Iar (Mr MacNeil) and for Moray (Angus Robertson) have not made any references to pensions in the Chamber since then. When the Library staff asked if I wanted them to search back even further, I was worried they would have to call in an archaeologist. The hon. Member for Arfon (Hywel
8 Dec 2011 : Column 470
Williams) said in his opening speech that some parties’ Members did not raise this topic; I suggest he looks at his own house first.
Jonathan Edwards: The hon. Gentleman’s party has had 36 opportunities to raise the issue since the Government made their public pension proposals, so why has it not raised it for debate in the House?
John Robertson: I thank the hon. Gentleman for giving me a further minute, and I will now carry on with my speech.
The hon. Member for Aberconwy (Guto Bebb) has referred to my right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown) removing, when he was Chancellor, the £5 billion tax break to the insurance industry, which was worth more than £100 million at the time. However, the hon. Gentleman and his colleagues always let slip from their minds the actions of their Iron Lady. I have not seen the recent film on Margaret Thatcher, but I am reliably informed by someone who has that, sadly, it misses out how in 1980 she broke the link with final salaries, thereby hurting 10 million pensioners at the time and millions more since, and that that cost a minimum of £15 billion a year. That puts the £5 billion into perspective. I notice that the hon. Gentleman is no longer in his place; I think he left the Chamber about five seconds after finishing his speech. His train must have been leaving early.
Let me return to the question of why this is an important issue to me and my constituents. I have 13,500 pensioner households in my constituency. We have one of the highest concentrations of pensioners in Europe and the highest amount of single women pensioners in the entire country. About 6,500 claim pension credit in my constituency alone, which is consistently ranked seventh out of all parliamentary constituencies, so hon. Members can see why this subject is so important to me.
My home town of Glasgow is a fairly youthful city compared with others in Scotland. However it has a considerable and growing elderly population. We face large and severe pockets of pensioner poverty—my constituency is, sadly, not immune to that. In addition to the 8% of Scottish pensioners who live in absolute poverty, one in 10 over-65s are classed as “materially deprived”. When I was elected for my constituency in 2000, four out of five single pensioner households in Scotland lived on an annual income of £15,000 or less. So hon. Members can understand why I feel that we should not be heading for a race to the bottom on pensions. I want good pensions for those in both the private and public sectors.
I recall a debate in 2002 when the Minister for Universities and Science, complained that the then Labour Government were using misleading tactics. He must share my anger at the current Government’s misleading statistics on public sector pensions, for example, the constant use of enormous figures for overall pensions liability. There is a frequent tactic to cite figures as a proportion of a single year of GDP, ignoring the fact that payments on pensions are spread. To listen to the Government, we would think that these pension schemes are all in a ruinous state, but as of 31 March 2010, local government pensions in Scotland had a total of 226,554 active members making contributions, and 158,511 pensioners
8 Dec 2011 : Column 471
and dependants in receipt of payments. The local government scheme in Scotland has funds worth more than £20 billion, which is equivalent to a fifth of Scottish GDP. It could pay out all its pensions for the next 20 years without a single penny more in contributions—there is currently a £300 million surplus.
The reason I am standing up to speak today is that we have to stand up for the pensioners of the future. I believe, as I said in my speech in 2002, that all parties should put aside political points of view and stop their point scoring on pensions to make sure that they represent the people who really count. That offer was refused by those now on the Government Benches. I still make that offer, because I still think that we should all sit down to solve the pension problem as a group, not just as individuals.
Madam Deputy Speaker (Dawn Primarolo): Order. I am going to have to change the time limit again if we are to get all the speakers in. I am going to reduce it to four minutes from the next speaker. I make the same point as I have made every time I have reduced the time limit, which is that interventions are not included in that calculation. If extra time is added for interventions, some Members will now not be called in this debate. I hope that is clear.
3.23 pm
Katy Clark (North Ayrshire and Arran) (Lab): I strongly welcome the chance to debate this topic. I will focus very much on the Government, rather than on what the SNP Administration in Edinburgh are going to do, because the focus has to be on making sure that we have national schemes that ensure that everybody in this country has a decent pension. The negotiations are happening down here, but the historical reality has been that the Scottish schemes have simply led to a mirroring of whatever has been decided in the national discussions. So people in Scotland are looking closely at what the coalition Government are doing. It would be very unfortunate to do anything other than maximise the pressure on this Government at the moment.
When we have debates on this issue, Government Members all too often raise the appalling situation of private sector pensions in this country. We do need to treat that as a priority, because the loss of manufacturing, the rise of low-paid and insecure jobs in the private sector, and the decision by firms to take payment holidays and by employers to fail to invest in private pensions schemes when times were good have led to so many private schemes coming to an end. As we have already heard, however, on average public sector pensions in this country give people only up to about £5,600 a year. The reality is that those people will not be able to live on that kind of income in retirement.
I believe the debate we need to have is about how to set up schemes in both the private and public sector that ensure we are saving sufficiently both individually and collectively to ensure a decent income in retirement. I am therefore concerned that the Government are moving away from the decision on auto-enrolment, which will happen in May 2015 rather than April 2014. The Government’s proposals for public sector pensions mean
8 Dec 2011 : Column 472
that people will have to pay more with the 3.2% increase, will have to work longer and will get a worse pension at the end of it.
We have heard a lot about teachers from both the Minister and from the hon. Member for Aberconwy (Guto Bebb) and teachers are a good example. We hear so much about the deficit but this debate is not about that; it is about the long-term arrangements that must be put in place. The Government’s proposals are not about the sustainability of the schemes. We must ensure that both employers in the public sector and individuals are putting enough in. The proposals for teachers mean that compared with the current scheme, which costs 20.5% of pay with the employer paying 14.1% and the individual 6.2%, the employer’s contribution would be reduced to 10.5%. We are seeing that throughout the proposals put on the table by the Government.
The Government are using the economic situation to cut their contribution, as an employer, to public sector pensions while at the same time increasing the contributions of the worker. Many people will opt out of pension schemes if the proposals go ahead. Let us ensure that over the coming weeks we put pressure on the Government so that they seriously consider public sector pensions and make proposals that will lead to pensions that people can live on.
3.27 pm
Nia Griffith (Llanelli) (Lab): I want to pay tribute to all those public sector workers who work hard, often in gruelling and unglamorous tasks, day in, day out. Some are very highly qualified and have chosen to work in the public sector, passing up opportunities to work more lucratively in the private sector. Traditionally, the pay-off has been job security and pensions. Those who have perhaps not been so lucky as to get many qualifications are often in thankless tasks for which they get very modest pay—cleaners, refuse collectors and so on. They receive low wages and meagre pensions. The average public sector pension of £5,600 and the average for local authority workers of £3,000 are far from the gold-plated myth peddled by the Conservative party and its friends in the media.
Back in 2007-08, there were tough negotiations on public workers’ pension schemes, and I am sure that I was not the only Member who received correspondence, particularly from teachers. The then Labour Government entered into dialogue and negotiation, however, and unions played their part responsibly, accepting the need to make public sector pensions sustainable. Changes were agreed. The deal negotiated with the previous Government in 2007 made costs stable, and the National Audit Office described it in the following way:
“The 2007-08 changes are likely to reduce costs to taxpayers of the pension schemes by £67bn over 50 years, with costs stabilising at around 1% of…GDP or 2% of public expenditure. This”
is “a significant achievement”. Before this Government made any changes at all, public sector pensions had both been reformed and made affordable.
I turn now to the division between the private and public sectors, which is a disgraceful way to approach this topic. Frankly, we are all involved in both, whether through family members or people in our communities. John Hannett, the general secretary of the Union of
8 Dec 2011 : Column 473
Shop, Distributive and Allied Workers—a union that operates entirely in the private sector—says that it supports the strikes:
“We support our colleagues in the public sector in their fight for fair and decent pensions and to protect the services which our members rely on.”
We all know that the real scandal is in private sector pensions. Sometimes we are told that the costs or the recession have meant that nine tenths of final salary pension schemes in the private sector, once the most popular arrangement, are now closed. The fact is, however, that the employers have realised that they can get out of their obligations to society and their employees, leaving the taxpayer to pick up the costs of supporting people in retirement.
One of the biggest dangers is that more people will opt out of pension arrangements. There are three main risks associated with that. First, if people earning less than the average are asked to contribute about £80 a month, they will face a terrible choice of either feeding and clothing their children now or paying towards a pension for their retirement. That will leave many short of a pension when they retire.
Secondly, that leaves a huge problem for the state, because of what it will have to pick up. We will be sitting on a ticking time bomb. With private sector pensions going and public sector workers opting out, a huge number of people will be totally reliant on the state in their old age.
Thirdly—a problem for the present day—if people are not contributing now, there will soon be a cash crisis in those pension pots, which is something I do not think has been fully addressed. There will be a present-day shortfall in the money available for paying out to the people who have paid in to their pension schemes. Those are very real problems. Imposing a 3% increase on people in this undemocratic and devastating way is completely unacceptable. It needs a total rethink, and the sooner, the better.
3.30 pm
Mr Iain McKenzie (Inverclyde) (Lab): I think that we all agree that there is an economic crisis in the UK, but it was caused neither by excessive public spending nor by the “gold-plated” pensions and pay of public sector workers. It was caused by a recession triggered by the banking collapse of 2007. Employees in the public sector have been subject to pay freezes and continuous efficiency savings, and time and again they have risen to the challenge and accepted that they need to play their part in these difficult times. They now find the future quality of their retirement is at stake and their much-prized pensions, which are possibly one of the main attractions of a public sector career, will be greatly reduced.
The Government tell us that the average public sector worker will be better off following the change to their pension, but what they quote as average earnings is not what Opposition Members regard as average earnings. Many public sector workers in my constituency of Inverclyde earn nowhere near the average the Government quote and will not be better off with this change in their pension. The Government tell us that we must follow
8 Dec 2011 : Column 474
the lead taken on pensions by the private sector, but I believe that that would be a race to the bottom on pension provision.
The private sector visited its pensions long before the world-wide finical crisis hit. It took contribution holidays and savagely stripped employees of decent pensions while excluding new employees from joining final salary schemes. Indeed, I recall my predecessor, the late David Cairns, some time ago naming and shaming a major private sector employer in my constituency over its unacceptable cuts to its pension scheme.
Pete Wishart: We have just discovered that Labour Members are down to a one-line Whip, which means they will not vote on the motion. Surely they could put aside what they describe as their historic hostility to the SNP and do the right thing by public sector workers by supporting the motion. Why are they not backing it?
Mr McKenzie: I thank the hon. Gentleman and will now carry on.
We want to see not an equality of misery in pensions, but fairness. Public sector pensions are not gold-plated, but I accept that they require collaborative review. Instead, public sector workers are being told that they must work longer, pay more and expect less. Trade union leaders who called the strike action on 30 November were branded as militants by Government Ministers, and the Prime Minister described the day of action as a “damp squib”—hardly diplomacy, if they are indeed engaged in negotiations.
We again see the Government promote policies that are hurting but not working, and their plan to guide us out of these difficult times is clearly failing. For Scotland, this is a double whammy, with the SNP Government in Scotland in many ways excelling this Government in the failure league. We need to accept, as the Hutton report did, that public sector pensions are not gold-plated and that many public sector workers, especially women, will retire on an annual pension of around £5,600 a year.
Mr David Hamilton (Midlothian) (Lab): Does my hon. Friend agree that many Labour Members are aghast at the SNP’s duplicity? On one hand the SNP is attacking the Opposition, and on the other hand it is putting forward proposals that are draconian, compared with what the Government have done. Indeed, it could do otherwise if it wanted.
Mr McKenzie: I agree. Public sector pensions are not gold-plated, and many, especially women, who work in the public sector will retire on an annual pension of some £5,600—a paltry £100 per week. They ask for fairness in their pensions now if they are not to ask for benefits in their retirement.
3.35 pm
John McDonnell (Hayes and Harlington) (Lab): I just want to make a couple of brief statements, and I apologise for not being present for the opening speeches, but I was actually speaking at a conference on vulnerable workers.
I just ask the Government to let the negotiators negotiate. When the civil service unions attended the schemes’ talks this week, they were told what they can and cannot discuss. They cannot discuss pension age, despite the previous assurances that Ministers have
8 Dec 2011 : Column 475
given them. All schemes have to relate to the state pension age, so, even though some schemes may be able to afford a pension age of 65 years old, the Government are refusing to allow them even to negotiate it. The unions are also told that indexation is off the agenda, and that the index has to be CPI, not earnings, as Hutton recommended, or RPI, as currently.
The schemes have to be career-average. The civil service unions are not allowed to discuss contributions, which have to increase by 3.2% so that the average contribution is 5.6%. Costs always have to be within the scheme’s limit, but in addition the only transitional protection that they can discuss is 10 years for those aged 50, plus the three to four years of tapering for those just below that age. Even if the unions find savings, they cannot use them in another way for further protection. They cannot discuss Treasury assumptions about the discount rate, actuarial reductions for early retirement or any normal pension scheme issues. They are told also that they cannot discuss the abatement rules, which enable staff to take their accrued pension and work on. They can discuss the accrual rate, but that is all predetermined by the other elements not being open for negotiation.
So, what the civil service unions are allowed to discuss in the negotiations is nothing of substance, and in reality we face further industrial action because the Government will not allow negotiations to take place. The Government take an intimidatory attitude by putting things on the agenda and, if they do not get their way, then taking them off.
I echo what other Members have said about the contempt with which negotiators have been treated. I watched the discussion between the Minister for the Cabinet Office and Paymaster General and Mark Serwotka, the general secretary of the Public and Commercial Services Union, when the Minister accused him of not being at meetings. I now discover that Mark Serwotka was at every meeting that the Minister was at—matched on every occasion. If the Government are not deliberately provoking this dispute, they are walking into further industrial action because of their refusal to allow negotiations to take place.
I have toured around, talking to individual unions, and I have spoken to several union executives this week, but the depth of anger does not come from general secretaries or from executives; it comes from rank-and-file trade unionists, most of whom have never taken industrial action in their lives but all of whom are dedicated to the public service that they seek to provide.
So I just appeal to the Government: start negotiating properly; allow proper discussions to take place; seek to avoid industrial action; stop the abuse—the “damp squib” provocations that the Prime Minister has made; and start telling the truth about what people are going to get, because they are going to work longer, get less and pay more. If we look at the calculations that have been made using the Government’s own calculator, we find that no one will get more unless they work for many more years, and teachers and others do not want to work until they are 68 years old just to get some form of pension income that they can live off.
I urge the Government to get back to the negotiating table and to take their restrictions off the negotiations. They are dealing with people who are dedicated to
8 Dec 2011 : Column 476
public service, who are willing to settle and who do not want to seek further industrial action. I warn the Government that if they do not negotiate properly, there will inevitably be more disruption and more industrial action—and that the Government will be to blame for it.
3.39 pm
Sheila Gilmore (Edinburgh East) (Lab): I do not intend to repeat the statements about the importance of public sector pensions that have been made so eloquently by many of my colleagues.
I am surprised that SNP Members, who among others have called this debate, have apparently not wanted to speak in it, because only one has done so. However, some of the comments they have made in interventions need to be addressed. It is not true to say that Labour Members have not raised the subject of public sector pensions in this House. Perhaps SNP Members were not here on 30 November to hear what the Leader of the Opposition said at Prime Minister’s questions and were not here during the Opposition day debate that followed, when several Members from my party made very strong speeches in support of public sector workers and on the pensions issue.
Moreover, in this week’s Opposition day debate on the economy, only one SNP Member was present, for a short time—the hon. Member for the Western Isles (Mr MacNeil). I will not attempt to pronounce the Gaelic name for his constituency because, as a lowland Scot, Gaelic is not native to me, and I am not going to pretend that it is. That was the extent of their interest in debating the economy and the issues that are so important in underpinning this debate on pensions, because unless we get the economy right, we will be in some difficulty. Today, several SNP Members left the Chamber early, presumably to put out their press releases to say how they had raised this important issue, but in reality they have not.
In the motion, SNP Members condemn the coalition Government for not being prepared to give them the money directly so as to be able to relieve some, but by no means all, public sector workers in Scotland of the contribution increase. They cannot have their cake and eat it within the system. They cannot have the Barnett consequentials when they like them and decide that they do not want them when they do not like them. Yes, it would be different if they achieved independence, although at that point we would have to ask, “How are you going to afford all the things that you say you are going to afford?”
David Mundell: Is the hon. Lady as surprised as I am that we have not heard a single mention of independence from SNP Members? As I understood it, that was their solution to all the pension issues in Scotland.
Sheila Gilmore: I suspect that in the fantasy world of the debate on independence, as it tends to be, SNP Members would indeed say that that is the answer, but they have to know how they would fund that and about issues to do with tax and making people as well off as possible.
During the SNP Member’s brief appearance in Tuesday’s debate on the economy, he kept talking about the Scandinavian economies. Of course, in the Scandinavian economies there is a very different view of taxation. It is
8 Dec 2011 : Column 477
disingenuous of the SNP to want to pose as a low-tax party and tell people that they can have wonderful public services and, at the same time, council tax freezes—which, by the way, are very regressive because they most benefit the people who are best off. The SNP has to decide where it wants to be. It deliberately put such a sentiment in the motion because it wants to be able to say that Labour Members will not support it.
We are in support of public sector workers. We do not think that what the Government are doing is right. We feel, very strongly, that we have to stop what this Government are doing, which is constantly to pit one group of workers against others. They are setting public against private, setting people in work against people who are out of work, and stirring up what I heard described on two occasions on Radio 4 at the weekend as an atmosphere of anger and bitterness. In the discussions on phone-in programmes about what is happening, all the clips were of people shouting at each other, saying, “Why should I, as a private sector worker, pay for your pension?” No commentator said, “Where is that anger being generated from?”, but it is being deliberately stirred up by this Government—
Mr Deputy Speaker (Mr Nigel Evans): Order. I am sorry, but we have to start the wind-ups now.
3.44 pm
Dr Eilidh Whiteford (Banff and Buchan) (SNP): This has been a wide-ranging debate and I think that there is agreement across the House that pension provision in the long term needs to be affordable, sustainable and fair, not just for public sector workers but for all old age pensioners.
Although we agree on those long-term objectives, the central contention of the debate has been that the short-term measures to reduce the deficit will hit public sector workers but be of no benefit to them. The issue at the heart of the debate is that the proposed 3.2% increase to public sector pension contributions is a straightforward cash grab by the Treasury on public sector workers. It has nothing to do with building long-term sustainability into our pensions system, but is unequivocally a short-term measure to cut the deficit.
Several hon. Members have pointed out that this is not fair and not affordable for a public sector work force who are already feeling the full effects of austerity measures that have gone too far, too fast. Most public sector workers are facing a two-year pay freeze, a 1% pay rise in 2013, increases in VAT and national insurance, and inflation of more than 5%. The cost of their essentials, such as heating, food and fuel, is going through the roof. The pressure on household budgets is intense and is getting worse.
In that context, increasing pension contributions for short-term gain is just the wrong thing to do. It is being done at the wrong time, for the wrong reasons and in the wrong way. It carries the risk that large numbers of people, especially part-time workers, will drop out of schemes altogether because of the immediate financial pressures that they face.
I think, and most Members on both sides of the House agree, that public sector pensions matter. They matter to the one in five people who are directly affected.
8 Dec 2011 : Column 478
They matter to the rest of us who depend on public services and who realise that our public service work force are critical to the delivery of high-quality services. Above all, they matter to all of us who care about the welfare of older people in retirement. All of us want to enjoy a decent level of income. For parts of the country that have a high dependency on the public sector work force, the issue is even more acute.
David Mundell: What I do not understand about the hon. Lady’s logic is that the Scottish National party has said that it wants to have a referendum on independence for Scotland in the next four years. The area on which that would most significantly impact is pensions and pensioners, yet in her contribution and in the contributions of her fellow SNP Members, we have heard nothing about independence or about how pensions would be provided, guaranteed or sustained in an independent Scotland.
Dr Whiteford: I refer the right hon. Gentleman to the Order Paper and the motion that we are debating. It will come as no surprise to anybody in the House that I believe in independence—I am an SNP Member. However, we are talking about public sector pensions and the Government’s proposals. It might be a nice distraction for the Government to talk about other issues that are equally relevant to Scotland’s future.
One of the most disappointing things about this debate has been that the Government have tried to defend their proposals by constantly highlighting the disparity between public and private sector pensions. We owe a debt to the hon. Member for North Ayrshire and Arran (Katy Clark) for pointing out the detrimental state of private sector pensions. When the Government responded to the interim Hutton report, my understanding was that they accepted its conclusion that pensions should not become a race to the bottom. However, speaker after speaker on the Government Benches has resorted to the argument that because private sector pensions are really poor, public sector pensions should be levelled down. That will not in any way address our pensions challenge. It is not sustainable and it is not fair to anyone in the private or public sector.
We have some of the highest levels of pensioner poverty in Europe. Currently, 30% of pensioner households and a massive 43% of single pensioners, most of whom are women, are in receipt of income-related benefits, whether that is pension credit, housing benefit or council tax benefit. Having large numbers of older people on means-tested benefits is not the way to do things. It is the price that we pay for poor pension provision. It is not an efficient way to support people in retirement.
The other big myth that has been well and truly blown out of the water today is that public sector pensions are gold-plated. Quite simply, they are not. Member after Member has pointed out that most public servants retire on modest incomes. The PCS points out that its average member’s pension is only £4,200 year. That is £80 a week, which is only £4 above the Government’s pensioner poverty figure. If such people’s pensions are reduced or they opt out because of the new conditions and contribution increases, it will simply put the burden back on means-tested benefits to keep people out of abject poverty in their old age.
8 Dec 2011 : Column 479
In local government, in which 67% of the work force are women, the average woman’s pension is only £2,800 a year. Almost half of local government workers are on pensions of less than £3,000, and even in the NHS, in which salaries are much higher because of the professional qualifications involved, three quarters of members are still on pensions of less than £9,000 a year.
The Government have tried to sell us their proposals on the basis that low and middle-income earners will be protected from contribution increases, and may even be better off as a result. That is one of their key claims. However, because of the switch in indexing from RPI to CPI, all public sector workers will lose out in the longer term, and they will all be working longer. That indexing switch has been mentioned in the debate, and I am sorry that more Members did not vote against it when they had the chance to do so back in February. They have a chance to rectify that now, and I hope that they will support us in the Lobby today.
Perhaps the most misleading aspect of the Government’s approach to the contributions increases is that they have said there will be protection for low-paid workers. As the Minister admitted earlier, the contributions of part-time workers will be calculated on the basis of full-time equivalent salaries, which will have massive implications for women, who make up the vast majority of part-time workers. About 32% of the women in our work force work part-time so that they can combine employment with unpaid work in the home or looking after others.
The Government have said that workers on incomes under £15,000 will not pay increased contributions, and that other low earners on up to £21,000 will pay reduced contributions, but when we look at the small print, we see that those thresholds, calculated on the basis of full-time equivalent salaries rather than their actual take-home pay, will mean that even professional people such as nurses and teachers who work part-time will have their pension contributions increased.
Mr Reid: But in Scotland, the Scottish Government decide the pension contributions of teachers, health service workers, local government workers, the police and firemen. If the hon. Lady believes in her argument, does that mean that when the SNP implements the contribution increases in Scotland, it will make an exemption for low-paid part-time workers?
Dr Whiteford: I am grateful to the hon. Gentleman for allowing me to point out two things. The first is the Scottish Government’s living wage, which has been raised to £7.20. That will significantly protect the household income of low-paid workers. The second and more substantial is the role of the Scottish Government in the matter. There has been a lot of chat around the Chamber about the room for manoeuvre that the Scottish Government do or do not have. Let me make it clear that the Chief Secretary to the Treasury wrote to the Cabinet Secretary in Scotland, John Swinney, pointing out that the Treasury would cut the budget by £8.4 million a month—that is half a billion pounds over the spending review period—if the Scottish Government did not impose the pension increases.
Mr David Hamilton: Will the hon. Lady give way?
Dr Whiteford: Not at the moment.
8 Dec 2011 : Column 480
The unions recognise that the Scottish Government have very limited room for manoeuvre. Their choice is very simple: they impose the increases or take the money out of another part of the budget, in other words pay twice. It is clear that even if the Scottish Government were to ignore the requirement and tried to find the money from somewhere else, the Government would cut that money from the budget.
Mr Hamilton: Will the hon. Lady give way?
Dr Whiteford: Not on that point.
I am grateful to the hon. Member for Hayes and Harlington (John McDonnell) for pointing out the approach that the Government have taken in the negotiations with the trade unions. It seems to me that they have used a similar approach with the Scottish Government, whose choice has been limited. They have been dictated to, and there has not been a basis for a sensible, grown-up negotiation.
Another point made in the debate has been about the Scottish Public Pensions Agency. The key point is that it was not recommendations that were put forward but a series of theoretical options. That was part of the process of the Hutton consultation, and it was quite proper for the Scottish Government to set out a range of theoretical positions. I am sorry that that has dominated the debate so much.
We all recognise the challenges of pension reform, but we want it to be done in a truly equitable way that does not encourage a race to the bottom. We have to acknowledge the progress that has already been made to put public sector pensions on a more sustainable footing and the mechanisms that already exist, but punishing public sector workers through a short-term tax grab will do absolutely nothing to tackle the inadequate pension provision in the private sector. It is nothing but a tax grab, and it is disappointing that the Government have relied so heavily on the arguments that we have heard today. In tough times, all people realise that they have to take a share of the pain, but public sector workers do not want to carry the can.
3.54 pm
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.
8 Dec 2011 : Column 481
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.
8 Dec 2011 : Column 482
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.
Nia Griffith: Does the Minister understand that that £15,000 limit is the full-time equivalent salary? If a person works fewer hours and earns only £8,000, but on a salary that full-time would come out as £16,000, they will pay increased contributions?
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—
Stewart Hosie claimed to move the closure (Standing Order No 36).
Question put forthwith, That the Question be now put.
Main Question accordingly put.
The House divided:
Ayes 11, Noes 242.
[4.3 pm
AYES
Corbyn, Jeremy
Hopkins, Kelvin
Hosie, Stewart
Llwyd, rh Mr Elfyn
Lucas, Caroline
MacNeil, Mr Angus Brendan
McDonnell, John
Robertson, Angus
Weir, Mr Mike
Whiteford, Dr Eilidh
Williams, Hywel
Tellers for the Ayes:
Pete Wishart and
Jonathan Edwards
NOES
Adams, Nigel
Afriyie, Adam
Amess, Mr David
Andrew, Stuart
Arbuthnot, rh Mr James
Bacon, Mr Richard
Baker, Norman
Baker, Steve
Baldry, Tony
Baldwin, Harriett
Barclay, Stephen
Baron, Mr John
Beith, rh Sir Alan
Benyon, Richard
Beresford, Sir Paul
Berry, Jake
Bingham, Andrew
Blunt, Mr Crispin
Boles, Nick
Bottomley, Sir Peter
Bradley, Karen
Brake, rh Tom
Brazier, Mr Julian
Brine, Steve
Brokenshire, James
Brooke, Annette
Bruce, Fiona
Buckland, Mr Robert
Burley, Mr Aidan
Burns, Conor
Burns, rh Mr Simon
Burstow, Paul
Burt, Lorely
Byles, Dan
Cable, rh Vince
Cairns, Alun
Carmichael, rh Mr Alistair
Carmichael, Neil
Cash, Mr William
Chishti, Rehman
Chope, Mr Christopher
Clappison, Mr James
Clifton-Brown, Geoffrey
Coffey, Dr Thérèse
Collins, Damian
Colvile, Oliver
Cox, Mr Geoffrey
Crabb, Stephen
Crockart, Mike
Crouch, Tracey
Davey, Mr Edward
Davies, David T. C.
(Monmouth)
Davies, Glyn
Davies, Philip
de Bois, Nick
Djanogly, Mr Jonathan
Dorrell, rh Mr Stephen
Doyle-Price, Jackie
Duddridge, James
Duncan Smith, rh Mr Iain
Dunne, Mr Philip
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Jonathan
Fallon, Michael
Featherstone, Lynne
Foster, rh Mr Don
Fox, rh Dr Liam
Francois, rh Mr Mark
Freeman, George
Freer, Mike
Fullbrook, Lorraine
Fuller, Richard
Gale, Mr Roger
Garnier, Mr Edward
Gauke, Mr David
Gibb, Mr Nick
Gilbert, Stephen
Glen, John
Goldsmith, Zac
Graham, Richard
Gray, Mr James
Grayling, rh Chris
Green, Damian
Greening, rh Justine
Gyimah, Mr Sam
Halfon, Robert
Hames, Duncan
Hancock, Matthew
Hands, Greg
Harper, Mr Mark
Harris, Rebecca
Hart, Simon
Harvey, Nick
Haselhurst, rh Sir Alan
Heald, Oliver
Heaton-Harris, Chris
Hemming, John
Henderson, Gordon
Herbert, rh Nick
Hinds, Damian
Hoban, Mr Mark
Hollingbery, George
Hollobone, Mr Philip
Holloway, Mr Adam
Hopkins, Kris
Horwood, Martin
Howell, John
Hughes, rh Simon
Huppert, Dr Julian
Hurd, Mr Nick
Jackson, Mr Stewart
James, Margot
Javid, Sajid
Jenkin, Mr Bernard
Johnson, Joseph
Jones, Andrew
Jones, Mr David
Jones, Mr Marcus
Kawczynski, Daniel
Kirby, Simon
Knight, rh Mr Greg
Kwarteng, Kwasi
Lancaster, Mark
Laws, rh Mr David
Leadsom, Andrea
Lee, Jessica
Leigh, Mr Edward
Leslie, Charlotte
Letwin, rh Mr Oliver
Lewis, Brandon
Lidington, rh Mr David
Lilley, rh Mr Peter
Lopresti, Jack
Lord, Jonathan
Lumley, Karen
Macleod, Mary
Main, Mrs Anne
Maude, rh Mr Francis
May, rh Mrs Theresa
Maynard, Paul
McCartney, Jason
McCartney, Karl
McLoughlin, rh Mr Patrick
McPartland, Stephen
McVey, Esther
Menzies, Mark
Mercer, Patrick
Metcalfe, Stephen
Miller, Maria
Mills, Nigel
Morgan, Nicky
Morris, David
Morris, James
Mowat, David
Mundell, rh David
Murrison, Dr Andrew
Neill, Robert
Newmark, Mr Brooks
Norman, Jesse
Offord, Mr Matthew
Ollerenshaw, Eric
Opperman, Guy
Ottaway, Richard
Patel, Priti
Pawsey, Mark
Penning, Mike
Penrose, John
Percy, Andrew
Phillips, Stephen
Pincher, Christopher
Poulter, Dr Daniel
Prisk, Mr Mark
Raab, Mr Dominic
Randall, rh Mr John
Reckless, Mark
Rees-Mogg, Jacob
Reevell, Simon
Reid, Mr Alan
Rifkind, rh Sir Malcolm
Robathan, rh Mr Andrew
Robertson, Mr Laurence
Rogerson, Dan
Rosindell, Andrew
Ruffley, Mr David
Russell, Bob
Rutley, David
Sanders, Mr Adrian
Sandys, Laura
Scott, Mr Lee
Sharma, Alok
Shelbrooke, Alec
Skidmore, Chris
Smith, Miss Chloe
Smith, Henry
Smith, Julian
Soames, rh Nicholas
Soubry, Anna
Spelman, rh Mrs Caroline
Spencer, Mr Mark
Stanley, rh Sir John
Stewart, Bob
Stewart, Iain
Stewart, Rory
Streeter, Mr Gary
Stride, Mel
Stuart, Mr Graham
Sturdy, Julian
Swayne, rh Mr Desmond
Swinson, Jo
Syms, Mr Robert
Timpson, Mr Edward
Tomlinson, Justin
Truss, Elizabeth
Turner, Mr Andrew
Tyrie, Mr Andrew
Vaizey, Mr Edward
Vara, Mr Shailesh
Vickers, Martin
Walker, Mr Charles
Walker, Mr Robin
Watkinson, Angela
Weatherley, Mike
Webb, Steve
Wharton, James
Wheeler, Heather
Wiggin, Bill
Willetts, rh Mr David
Williams, Mr Mark
Williams, Roger
Williams, Stephen
Williamson, Gavin
Willott, Jenny
Wilson, Mr Rob
Wollaston, Dr Sarah
Wright, Jeremy
Yeo, Mr Tim
Young, rh Sir George
Zahawi, Nadhim
Tellers for the Noes:
Norman Lamb and
Mr Robert Goodwill
Question accordingly negatived.
8 Dec 2011 : Column 483
8 Dec 2011 : Column 484
8 Dec 2011 : Column 485
Local Government Ombudsman (Amendment) Bill (Money)
Queen’s recommendation signified.
4.16 pm
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill): I beg to move,
That, for the purposes of any Act resulting from the Local Government Ombudsman (Amendment) Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.
Going back to yesterday’s debate, I appear to be the “accredited person” to move today’s motion. I see that my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) is not in his place today, but this is a private Member’s Bill moved by my hon. Friend the Member for Christchurch (Mr Chope), so this is a unique debate.
We are debating the motion because the Government are keen that the Bill in its amended state should move forward. The passing of a money resolution is an important step in that process. The costs to local authorities of implementing the new duties in the Bill—to give written notification of decisions and to review the decisions—are seen as a new head of expenditure to be met out of the grants that local authorities already receive from central Government. Similarly, any increase in the administrative costs of the local ombudsman service associated with the Bill will be seen as a new head of expenditure to be met from the grant that the ombudsman receives from central Government to fund the organisation. The motion refers to payments under other Acts being increased as a result of the Bill, because, technically, a new head of expenditure is a notional increase for the purposes of Commons financial procedure, even though it might not, in fact, give rise to an increase in expenditure.
Against that background, I pay tribute to my hon. Friend the Member for Christchurch for his work on the Bill. I thank him for working so constructively on the proposed amendments, which mean that I can confirm the Government’s intention to support it in its amended state. The Bill was last debated on 18 March. At that stage, the Government were unable to support it. However, it received its Second Reading and the amendments made since make it acceptable to the Government.
We think that the Bill will perform a valuable function. It is right that if a local authority decides to stop or impose restrictions of the kind referred to, the reasons should be set out in writing. There should also be an appeals mechanism if the decision is a negative one. The fast-tracking procedure is helpful. We think that the costs associated with the Bill are, in fact, negligible.
4.19 pm
Roberta Blackman-Woods (City of Durham) (Lab):
I do not want to detain the House unduly. We do not wish to vote against the motion, although I should say that the Bill is being proposed at rather an interesting time. Both Houses of Parliament spent an enormous amount of time debating the Localism Bill, to which many amendments were tabled but were rejected by the Government on the grounds that they would impose
8 Dec 2011 : Column 486
additional burdens and costs on local authorities. It seems odd, to say the least, to find that the Government support a Bill that will definitely place additional responsibilities and costs on local authorities. I also believe that, in this age of localism, the Government are displaying some extraordinarily centralising tendencies, on which the Minister may or may not wish to comment.
Robert Neill: At risk of prolonging proceedings, may I say that the hon. Lady will understand that the Government can support the Bill because the amendments, effectively mean that a local authority will be obliged in stating its reasons to put in writing the product of a process that it must have gone through in any event? We are simply asking authorities to record and set out what they will already be doing as a matter of good governance, so the costs and burdens are rather negligible.
Roberta Blackman-Woods: Well, that remains to be seen. I do not think it is a good idea to legislate on the basis of chance and hope.
It is important, however, that the Bill proceeds to be debated properly in Committee. There are an enormous number of health and safety issues, and Opposition Members are concerned to ensure that citizens are adequately protected. We are also concerned to ensure that extra burdens are not placed on local authorities, especially at a time when they are the subject of such stringent cuts from central Government. We think that is a most unfair approach.
We will not oppose the motion. We want the Bill to go into Committee for thorough discussion, but I must make it clear that that does not mean that we support its provisions in any way.
4.22 pm
Mr Christopher Chope (Christchurch) (Con): I am sorry that this debate is limited to 45 minutes, but I am delighted that the Government have moved this motion and that they support the Bill. The Minister might have confused someone following our proceedings when he said that the amendments made the Bill acceptable to the Government. My hon. Friend is jumping the gun, because the Bill before us is as printed; it has not yet been the subject of any amendments. It will be for the Committee to decide whether the Bill should be amended. In due course, if it goes through Committee and comes back here on Report, it will be for the House to decide whether the Bill is in a form that it can accept.
It is unfortunate that there has been such a significant delay between Second Reading on 18 March—consideration was not completed on that date, but the Bill received a Second Reading in June—and the subsequent period, during which we have been waiting for the money resolution. Without a money resolution, a Public Bill Committee cannot consider a private Member’s Bill that requires such a resolution or even to get the issue before the Committee of Selection. A Committee to look at the Bill cannot be set up unless the Government deign to introduce a money resolution.
It used to be the custom and practice that a money resolution for a private Member’s Bill that had been given a Second Reading would, as night follows day, be introduced by the Government within a short period thereafter, enabling the House to proceed with the Bill
8 Dec 2011 : Column 487
by setting up a Committee for its detailed consideration. What is happening now, however, and has been happening throughout this long first Session of the current Parliament, is that the Government are using their power in relation to money resolutions effectively to curtail the private Member’s Bill process. There have been times when not a single private Member’s Bill has been in Committee, because the Government have been using the money resolution procedure as, in effect, a veto.
As you know, Mr Deputy Speaker, I am inherently supportive of my hon. Friend the Minister, and I do not want anything I am saying to be interpreted as being particularly critical of the Government. If they are indeed enthusiastic about the Bill, however, it is a pity that it will go into Committee, at best, shortly before the very last private Member’s day. It seems as though the Government are able to have the best of both worlds. They are able to say that they support the Bill, but by delaying the money resolution—although I accept that we are discussing it now—they are delaying its progress and implementation.
Today is something of a red letter day. This is my first private Member’s Bill that has secured a Second Reading, it is the first that will be given a money resolution—I am anticipating the House’s decision—and it will, I hope, be able to go into Committee. I am grateful to all my colleagues who have supported it. I am also encouraged by the fact that the Minister does not think that it will cost anything. He said in his speech that the motion was technical, and would not result in significant additional public expenditure. The whole purpose of the Bill is to reduce the burden of public expenditure and regulation on ordinary members of the public, and I should have been concerned if the resolution had been required in order to increase it significantly. I take the point made by the hon. Member for City of Durham (Roberta Blackman-Woods) in that regard.
I am delighted that we have at last been given the chance to adopt a money resolution, and I hope that the motion will be carried without the need for a Division. I look forward to working with Members in all parts of the House in due course to establish whether the Bill can be improved in Committee in a way that will satisfy my hon. Friend the Minister, but he must not anticipate matters and assume that it has already been amended, because it certainly has not been.
4.28 pm
Mr Clive Betts (Sheffield South East) (Lab): It is rather an unusual experience to hear the hon. Member for Christchurch (Mr Chope) support a private Member’s Bill in the Chamber. He generally has another function in life: to prevent new rules and regulation contained in private Members’ Bills from being inflicted on people.
I want to raise two issues. First, discussing a money resolution relating to a Bill giving new powers to a person who does not currently exist is a slightly strange experience. I understand that there is no local government ombudsman at present, which is a matter of concern to me. The other day I received a letter from the permanent secretary at the Department for Communities and Local Government, Sir Bob Kerslake—in response to a letter I sent to the Secretary of State—which provided the helpful explanation that the process for appointing an ombudsman had been halted because the Government
8 Dec 2011 : Column 488
were reconsidering the nature and focus of the post in the light of last July’s public services White Paper.
We have all experienced appointment procedures in which the candidate was not deemed suitable, there was disagreement about the candidate, or we reviewed what the candidate should be doing in the light of the appointment process itself. That appears to be the case in this instance, but the difficulty is that the interviews for the post were held in February. The Select Committee on Communities and Local Government was due to hold hearings to ratify the appointment, but it was only in November that the Government decided to terminate the process. That is nine months of dealing completely inadequately with an appointment to an extremely important position.
Mr Chope: The hon. Gentleman’s criticism of the Government rather mirrors mine of the delay in tabling the money resolution. In the light of his concern and interest, would he be willing to serve on the Public Bill Committee to look at the measure in more detail?
Mr Betts: I will come on to my concerns about the Bill in a second.
Mr Deputy Speaker (Mr Nigel Evans): Order. We are not here to discuss the Bill. We are just discussing the money resolution, which is rather narrow.
Mr Betts: Yes. I made my point about the ombudsman, because there are concerns about the delay to the service itself. Candidates have been waiting for nine months, and that is not an acceptable way of proceeding—I wanted to put that on the record.
I understand your strictures, Mr Deputy Speaker, about the money resolution and not discussing the Bill. However, I return to what the Minister said about not envisaging the measure costing anything to local authorities. There is potential for costs and the spending of extra money precisely because of the way in which the Bill is drafted and how it deals with the extension of powers relating to health and safety. It creates a relationship between the ombudsman and the local authority that is different from the relationship in any other matter that an ombudsman considers. On any other matter, the ombudsman can produce a report that an authority is bound to consider and tell the ombudsman what action it will take, but in this instance there is no requirement for the authority to act in line with the ombudsman’s recommendations.
As drafted, the Bill includes a clear right of redress for the ombudsman against local authorities, including the ability to compel them to pay compensation to event organisers for events that are unreasonably banned or restricted. That is where money comes in. The power that is granted in respect of that issue is different from the power in other issues with which the ombudsman deals. The power to spend the money does not rest with the local authority—it effectively rests with the ombudsman—so we are almost giving a blank cheque or an undetermined ability for the ombudsman to decide in any case how much the local authority should pay in compensation, with the cost to local council tax payers determined by an unelected official, rather than elected councillors.
8 Dec 2011 : Column 489
That is a fundamental issue of public expenditure that the Bill, as drafted, opens up. The Minister may discuss amendments, but the promoter has said that the Bill has not been amended yet. As drafted, that is precisely what it would do, and I have serious concerns about it. The Minister cannot say that under the Bill as drafted there are no spending commitments, but he can say that there are potential spending commitments, which will be determined by unelected people. The counter-argument might be that, as the measure applies only to events that have been unreasonably banned there is a right for judicial review—in which case, why do we need the Bill? However, there is the potential for money to be spent.
Mr Chope: The hon. Gentleman will be reassured to learn that the amendments I have in mind will address his concerns about costs, and I hope that that is a consolation for him.
Mr Betts: I am more than happy to accept the hon. Gentleman’s assurance—perhaps that is what the Minister was alluding to. However, it is rather difficult to debate the Bill as drafted when there are amendments of which we are not aware that would alter its capacity to incur public expenditure. That is what we are addressing and, on that point, I shall conclude.
4.34 pm
Robert Neill: I thank the Members who have contributed to the debate, and I wish to set their minds at rest.
I am grateful to my hon. Friend the Member for Christchurch (Mr Chope) for his comments. I am sure he agrees that he and officials from my Department have had a chance to hold constructive discussions in the time that has elapsed since the Bill was last before the House, and that he will therefore be able to propose amendments to which the Government will be happy to lend their support.
I also think the concerns of the hon. Member for Sheffield South East (Mr Betts) about costs will be allayed. Although I am always loth to correct the hon. Gentleman, who is Chair of the Communities and Local Government Committee, he will appreciate that the functions of the local government ombudsman, as we call that post, are legally carried out by the Commission for Local Administration in England, and while the post of chair of that commission is vacant, two commissioners are still in place, Dr Jane Martin and Ms Anne Seex, and Dr Martin is the acting chair of the commission so there is, effectively, a local government ombudsman in place and able to fulfil those functions.
8 Dec 2011 : Column 490
Low Dose Naltrexone
Motion made, and Question proposed, That this House do now adjourn.—(Angela Watkinson.)
4.38 pm
Nia Griffith (Llanelli) (Lab): First, I want to make it clear that this debate is not about fighting for a very new and expensive drug. Campaigns about drugs are often brought to the attention of Parliament because a patient is fighting to be allowed to have a new and expensive treatment on the NHS. Some of these new drugs are not just expensive because they are new; because of the complex processes required to make them, they will, in fact, often continue to be expensive to produce. Such situations raise dilemmas for decision makers about how access to such drugs can be funded.
This debate is about a very different problem: making an existing drug that is modestly priced available for the treatment of a wider range of conditions. Clinical trials are needed to get full approval for the drug under discussion, but I ask the Minister to consider whether there is any possible way in which it could be made more widely available.
Sometimes patients are faced with unacceptable options for treatment and find themselves researching possible new treatments. That is usually a road that leads to disappointment, but occasionally something useful is stumbled upon, such as low dose naltrexone, or LDN. The problem is that it is what is called an “orphan drug”, which means its patent has expired, so if someone does research on it, a generic manufacturer can subsequently steal the business.
I understand that naltrexone is proved safe in its normal mode of use, and now has a clinical history of 11 years of use in the UK with no problems reported and only minor side effects. LDN is also very low cost, and can be used to treat many conditions that are both chronic and often very expensive to treat with more conventional remedies. Sometimes those more conventional remedies have severe side effects, which then have to be treated with more expensive drugs.
The purpose of this debate is to ask how a drug such as LDN could be made available to patients who ask for it. The most desirable route would be via clinical trials leading to marketing authorisation and then official acceptance from the National Institute for Health and Clinical Excellence and the NHS. A much cheaper and more immediately practical route is to recognise that LDN is a safe choice for patients without many of the risks of drugs currently in use. Doctors could therefore be given official advice not to deny it to patients who want it or wish to acquire it from pharmacists who make it as a “special” at a fair price. There could also be a mechanism for protecting doctors and allowing patients choice. At present, doctors are in a difficult position. If they prescribe anything that is not on an official list, they leave themselves open to criticism, as well as to being sued and possibly losing their right to practise.
The third route is to get it listed as an over-the-counter drug, such as aspirin or paracetamol. I understand that it is considered safer than paracetamol which is sold over the counter, so this might be a reasonable option that would make prescription very easy.
8 Dec 2011 : Column 491
Annette Brooke (Mid Dorset and North Poole) (LD): I congratulate the hon. Member for Llanelli (Nia Griffith) on securing this debate. I am sure that, like me, she has a number of constituents who are benefiting from this drug—I refer particularly to members of the Purbeck and Wareham multiple sclerosis group. It is so frustrating that they cannot get hold of something, through the NHS or in some form that is easily accessible, given that it is definitely making a difference to their lives. I am sure that she would agree that there is a fear that they might not be able to get it one day. What do they do then?
Nia Griffith: The hon. Lady is quite right. These people fear that if they change from one GP to another, or if people are less sympathetic towards this drug—obviously this is something that people have to be convinced about—they may well not be able to get hold of it. Unless there is some form of authorisation and some form of making it an official drug that is more widely available, they do run the risk that she describes.
The problem is that many patients feel let down because what they see as perfectly good therapies, which are cheap but out of patent, are being withheld when patients want them. When doctors cannot refuse a patient’s choice, they can still deny it to them, because clearly the issue of their professional conduct is involved. If the NHS recommends another treatment, quite possibly one that costs thousands and has drug company support, it is often difficult to get the research done to prove the validity of a drug such as LDN.
Some 5,000 people in the UK with multiple sclerosis use LDN, and a few thousand more use it for other conditions, such as Crohn’s disease, cancers, fibromyalgia, autism and so on. Their GPs usually prefer not to sign NHS prescriptions for LDN—indeed, they may refuse to do so—but there are instances of GPs then charging patients for private prescriptions, explaining that they are worried that NHS prescribing guidelines would prohibit them from prescribing LDN and so they would end up in serious trouble if they did so. One GP in Glasgow who prescribes a lot of LDN was reported to the General Medical Council for doing so recently. My constituent Andrew Barnett has told me that his GP has said that his lawyers advised against it, so he writes my constituent a private prescription and charges him £8.50 a quarter for doing so. My constituent then also has to pay for the LDN itself, at a cost of £17.50 a month.
Some 100,000 people in the UK have MS, only 12% of whom use drugs offered by the NHS. Some of the drugs available are risky and very expensive, and there are questions about how effective they are. Yet some 5% of MS sufferers choose to use LDN, because they feel that it helps them and does not have the risks of some other treatments. LDN has proved to be safe in trials at very high doses, but it is unpromoted and hard to get. Because people are now making this choice, there must be a way to get this treatment legitimised on the NHS for patients who ask for it. However, we are told that without substantial trials that is not possible. It is very difficult to find a way to fund any such trials because the drug itself is already licensed and therefore drug companies would not be able to recoup the cost of funding the research by marketing the drug; there would be no money in it for them.
8 Dec 2011 : Column 492
We live in an age where information, including real scientific papers and trials reports, is easily available. Patients who are really determined to make the most of their lives, despite terrible illnesses, and who have the wherewithal to look into the research do seek out information and solutions. We have been using LDN in the UK for some 11 years. Naltrexone has been trialled at high doses to treat heroin addiction and is known to be safe, so the only real thing missing is the marketing authorisation from the Medicines and Healthcare products Regulatory Agency—MHRA—for a formulation of low-dose naltrexone, perhaps in liquid or capsule form. A trial would add proof—or not—of its efficacy.
The cost of a trial is probably considerably lower than the cost of a high-tech drug, because the drug itself is so cheap. Estimates suggest that a single trial can be done with some £7 million, but that is just an estimate based on £1,000 per patient a year for the monitoring specialists, plus up to £3,000 a year per patient for LDN. There would be the costs of recruiting 500 to 800 patients and then something to cover the analysis of the results.
There are no systems available, however, for patients to translate their choice of therapy into a legitimate request, even when they vote with their feet in large numbers. Doctors do not see any danger in the choice except that they worry they might be denying people a more effective option, but, as patients have pointed out, if they need what is perceived to be a more effective option, they can take it alongside LDN anyhow.
My constituent Andrew Barnett, who is highly intelligent, scientifically minded and analytical, has made the assessment that LDN seems to have stopped his disease developing further. The constituents of the hon. Member for Mid Dorset and North Poole (Annette Brooke) have confirmed the same belief. My constituent regrets very much that he did not start using it earlier. If he had done so, perhaps some five years ago, he feels that he would still be working and contributing actively to the economy.
Doctors have to be able to say no to treatment choices for the sake of the patient, but when they have no reasons to deny an option, as is the case with LDN, that should not happen. We should try to ensure that we enable them to prescribe LDN. Doctors all tell us that without the trial, they do not have the confidence to prescribe, so patients face the potential loss of supply of prescriptions if they change doctor, quite apart from the cost of private prescriptions, which is hurtful for many patients who have been reduced to living on income support by sickness or disability.
So, the substance of the debate is about patient access to therapies that cannot get the trials they need for reasons such as not being patentable or the lack of profit in the therapy, especially when the therapy is known to be safe. LDN seems to be the most prominent, in that there are no sensible arguments to deny it to patients who want it and those patients report great satisfaction with it in most cases. It is frankly a disgrace that such options are denied to informed patients who ask for them on the NHS. It would save the NHS so much money to allow this. LDN can be supplied for as little as £17.50 a month, compared with some other expensive drugs, such as £60,000 for Copaxone, £15,000 for Avonex or £90,000 a year for another drug that was recently in the news.
8 Dec 2011 : Column 493
The question is how we can get the trials and get people interested. Academics often rely on backing from pharmaceutical companies to put together their plans and proposals for a research project. It is very difficult to find academics who want to spend that time and energy if they do not know that they will get the backing. They could put in a lot of work without getting any funding for any proposal.
We must face up to the problem of what systems we have in place to provide licensing for drugs such as LDN. One doctor I have talked to, Dr Lawrence from Swansea, tells me that LDN not only seems to have acceptable uses for people with multiple sclerosis but, he feels, has enormous potential for the treatment of cancer. That would be a very worthwhile investigation, considering that we spend so much on looking for answers and on treating the various cancer diseases. Sanctioning the use of LDN would also allow doctors to collect clinical data that could be used to monitor and help prove the effectiveness of the drug.
Naltrexone is already an approved drug at higher doses and research and clinical trials have already shown its effectiveness at low doses to treat auto-immune diseases. Patients have difficulty in getting their GPs to write prescriptions and have to get the treatment privately, but it would be preferable for patients to work with their GPs so that their GPs can monitor them. GPs have had to seek legal advice to find out whether they should be prescribing it and lawyers have advised against it, putting them in a very difficult position.
Among the supporters of LDN are GPs, neurologists and oncologists who have seen patients’ diseases not get worse and there are cases where such specialists have supported its use for the patient and stated that in a written letter to the GP. Even then, the GP has felt unable to prescribe the drug for fear of being considered unprofessional.
Campaigners have worked with local health boards and PCTs to try to determine what knowledge there is about LDN and whether GP practices have heard of it or are using it. The responses came back negative. What can we do so that LDN is offered in addition to other drugs currently prescribed on the NHS? This is about patient choice. It would be nice to be able to make LDN available to patients on a much wider basis, but it is important that patients are monitored by their GPs when using any medication, so we do not simply want a free-for-all. We want the proper medical trials, proof and backing that is needed to show whether it is an effective drug, which will enable it to be made more widely available, but there is a real difficulty, despite the fact that the orphan drug could be a cheap option for the NHS, in funding the sort of research needed to trial it. I return to my initial request and ask the Minister whether there is any way he can make LDN more widely and easily available to patients.
4.50 pm
The Minister of State, Department of Health (Mr Simon Burns):
I begin by congratulating the hon. Member for Llanelli (Nia Griffith) on securing the debate and hope that by the end of my comments, particularly the last section, she will feel that there is a mechanism and a way forward that she will find helpful. Like her, I am
8 Dec 2011 : Column 494
well aware of the interest in the subject from those who feel that LDN is a suitable treatment for a number of conditions, including multiple sclerosis, HIV and various cancers. I am grateful to her for the opportunity to clarify the Government’s position.
I will begin by talking about the process for licensing drugs in general. An unlicensed medicine is not necessarily illegal in the way an unlicensed driver is; it just means that the regulator has not yet been given the evidence it requires to support a routine place in the market. The Medicines and Healthcare products Regulatory Agency is responsible for the regulation of medicines used in the UK, which includes authorising applications for clinical trials and granting licences for medicines. MHRA gives licences for medicines only after evidence has been submitted to demonstrate the quality, safety and efficacy of the product for the conditions it is intended to treat. That system, whereby licences follow evidence, protects patients and means that there is always a robust, systematic and independent assessment of the safety and suitability of licensed medicines.
In the UK, naltrexone is currently only fully licensed in 50 mg tablet form. That dosage is used to help patients remain free from dependence on heroin, methadone and similar opiates and to help those who are dependent on alcohol, but the drug is not currently licensed at any dose for the treatment of the other conditions that the hon. Lady rightly mentioned, because the evidence necessary for a licence does not exist. However, naltrexone is being prescribed by some doctors in doses of up to 7 mg on an individual patient basis. This is referred to as low-dose naltrexone.
The reason MHRA has not looked into licensing LDN is that it has not received any application or evidence to support it, which means LDN is currently unlicensed. That does not mean that it is necessarily unsafe; it is just that a licence for its use in this country does not exist. The current position is that when a patient needs a medicine an appropriate licensed product should be used. If it is not available, doctors can prescribe a different licensed medicine if they think that it will do the job. If neither of those options is available, an unlicensed medicine may be considered. LDN currently falls into that last bracket. As it involves a significantly lower dose than the licensed form of naltrexone, and as it is untested, it is regarded as an unlicensed medicine.
Legislation supports clinicians when they want to prescribe an unlicensed medicine that they think is necessary to meet a patient’s particular needs. The MHRA checks that the medicine is being manufactured to the right standards, in a safe environment and with suitable materials. Any unlicensed product manufactured in the UK must be manufactured to the specification of the doctor, nurse, dentist or whichever professional prescribed it in the first place. The important point is that the use of an unlicensed medicine is the direct personal responsibility of the professional who prescribed it. They are aware that it is unlicensed, and they prescribe it with that knowledge. The position is reflected in professional guidance, including that of the General Medical Council.
Given that a licensed LDN product is not available in the UK, it can be supplied only as an unlicensed product either manufactured in the UK or imported from somewhere else. Most of the LDN used in this country is manufactured in the UK, but anyone who wants to
8 Dec 2011 : Column 495
import it must be authorised by the MHRA. In the UK, manufacturers produce a number of formulations, including LDN capsules, at strengths ranging from 1 mg to 6.5 mg, and these are produced under a “specials” licence.
The importation of any medicinal product not licensed in the UK must be in compliance with the Medicines for Human Use (Manufacturing, Wholesale Dealing and Miscellaneous Amendments) Regulations 2005, which provides for the import of products when a special clinical need exists for individual patients and when the regulatory authority has not objected to the import. Objections may be made on grounds of known safety or quality issues, or if an equivalent UK licensed product is available. In the case of LDN, there is no ban on the import of products of acceptable quality and safety, and I hope that those comments go some way to reassuring the hon. Lady on her point about the fears of some GPs who had been or were not prescribing the drug.
When medicines are unlicensed, such as LDN, the National Institute for Health and Clinical Excellence does not generally assess them, so it has not issued any guidance on the use of LDN in the NHS. When NICE guidance on a particular drug for a particular condition does not exist, it is for local primary care trusts in England to make funding decisions based on their own assessment of the available evidence. On behalf of their patients, doctors can, through an individual funding request, request treatments that are not usually funded, if they feel that there are exceptional clinical circumstances.
In this situation, a special panel that includes clinicians would carefully consider individual cases. They would use the latest available evidence and make a decision on the basis of a patient’s individual circumstances, but we recognise that there is demand from the NHS and from patients for better access to information about drug treatments, particularly when no licensed product is available, so we are keen to explore whether more can be done to support clinicians, NHS commissioners and patients in their own decision-making by giving them easier access to the best available information. That is why the Department of Health asked NICE to provide a service to support the NHS in deciding whether an unlicensed drug can be used to address an unmet need. Under our plans, NICE will commission expert assessments of the evidence that supports—or does not support—the use of unlicensed medicines, including in rarer conditions. That will help clinicians make decisions about effective treatments and address one of the access problems that patients face. As I said earlier, it is important that we preserve the integrity of the medicines licensing scheme, which is so vital to protecting patients. Any information provided will be designed to inform doctors’ decision making and patients’ choices, not to provide a simple yes or no recommendation.
The Medicines and Healthcare products Regulatory Agency is responsible for the enforcement of the advertising regulations—another important area with regard to this subject. There are also self-regulatory controls operated by the industry body—the Prescription Medicines Code of Practice Authority—and general controls on advertising operated by the Advertising Standards Authority. Regulations state that
“no person shall issue an advertisement relating to a relevant medicinal product which is a medicinal product in respect of which no marketing authorisation or traditional herbal registration is in force”.
8 Dec 2011 : Column 496
The regulations apply to any person and are not specific to the pharmaceutical industry. This prohibition does not prevent independent patient charities from providing balanced and factual information about treatment options, including any that are not licensed. The MHRA has published guidance on its website. The MHRA would investigate any complaint about a breach of the legislation, but has not received any complaint about the advertising of low-dose naltrexone. Whether a charity or another third party was promoting a medicine or providing non-promotional information would be decided on the facts of any specific case.
The hon. Lady will no doubt appreciate that it is in everyone’s interest to see a booming medical research industry in the UK that is successful, is meeting its requirements, and is pushing forward our development and use of advanced medicines to help to bring relief to those suffering acute illnesses or long-term conditions and to help them to manage those conditions better.
Annette Brooke: The Minister is being very clear in his exposition. The question that my constituents continually ask is why the NHS is not in the least bit interested in a treatment that is so cheap, costing about 50p a day, and appears to defer care costs into the bargain. A constituent of mine has been with their consultant to see the prescribing committee of the local PCT, but we still do not have this drug on NHS prescription.
Mr Burns: I am grateful to the hon. Lady for raising that point on behalf of her constituents. The short answer is that it is simply because there have been no clinical trials to assess the drug in its low-dosage levels, and so the conditions of the NHS, under the ways in which we operate in the provision of drugs for patients, have not been fulfilled at this stage. If she will wait for a minute or two, I will get to the nub of the point made by the hon. Member for Llanelli about how we could move forward to seek to address that situation. I hope that the hon. Member for Mid Dorset and North Poole (Annette Brooke) will find the way forward helpful and positive.
The hon. Member for Llanelli will no doubt appreciate that it is in everyone’s interest to see a booming medical research industry in the UK, because that leads to real improvements in the lives of patients, their families and carers, and we are determined to support it. We demonstrated our commitment to health research by increasing spending in real terms up until 2015. In August, my right hon. Friends the Prime Minister and the Secretary of State for Health announced a record £800 million, five-year investment in a series of biomedical research centres and units, which will translate fundamental biomedical research into clinical research that benefits patients and the NHS.
The coalition Government are committed to the promotion and conduct of research as a core function of the health service. The Health and Social Care Bill, which is now passing through another place, will turn this into reality by placing appropriate powers and duties on my right hon. Friend the Secretary of State for Health, NHS organisations, Monitor, and local authorities. We will make sure that the systems and processes for commissioning by the NHS Commissioning Board and by clinical commissioning groups promote, support and fund clinical research. The Government will consult on amending the NHS constitution in order
8 Dec 2011 : Column 497
to support patients to have access to novel treatments and to be part of the development of wider patient benefits, so that there is a default assumption, with an ability to opt out; that data collected as part of NHS care can be used for approved research, with appropriate protection for patient confidentiality; and that patients are content to be approached about research studies for which they may be eligible to enable them to decide whether they want a discussion about consenting to be involved in a research study.
The clinical practice research datalink will be introduced by the MHRA in partnership with the National Institute for Health Research, building on the NIHR’s research capability programme. This £60 million investment will offer data services, including providing access to data for researchers, data matching and linkage services, and data validation, to support the clinical trial and observational study work of the life sciences research community.
The NIHR will launch an updated UK clinical trials gateway in spring 2012. That website will enable patients and the public to access information about clinical trials and will be a development of the test site launched in March 2011. To increase the number of patients who can benefit from being involved in trials via the gateway, the NIHR has also developed a free smartphone app, which is available for iPhone users and will shortly be available for Android users. It provides a practical and innovative way for patients to access information about clinical trials.
I will now turn to the question of clinical trials that the hon. Member for Llanelli raised and that the hon. Member for Mid Dorset and North Poole raised, by default, in her intervention. I think that this explanation may provide the hon. Member for Llanelli with the basis for making progress in her quest. Clinical trials are a fundamental part of the drug development process, as she accepts. Trials and health research more generally are funded by a range of groups in the UK, in particular by the NIHR, the Medical Research Council, medical research charities and industry. The NIHR welcomes high-quality funding applications for research into any aspect of human health, including the use of LDN. Such applications are subject to peer review and are judged in open competition, with awards being made on the basis of the scientific quality of the proposals. As she has suggested, a new clinical trial will be required to support a licence for the use of LDN.
The MHRA regulates clinical trials on medicines when they are carried out in the UK. That includes granting approval to conduct a clinical trial and ensuring,
8 Dec 2011 : Column 498
through inspection, that the highest possible standards are maintained. However, the MHRA does not initiate clinical trials. A clinical trial needs a sponsor. Sponsors have usually come from industry, the NHS or academia. The hon. Lady is seeking Government funding for a clinical trial to prove the efficacy and safety of LDN. I can tell her that funding is available and that university-based researchers can apply for it.
The efficacy and mechanism evaluation programme is funded by the Medical Research Council and managed by the NIHR. It funds evaluation of the clinical efficacy of treatments. If evidence from such evaluations is promising, larger-scale trials can follow. That is one of the purposes for which the NIHR funds the health technology assessment programme. That programme produces evidence on the effectiveness, cost and broader impact of treatments and other types of health care intervention. In the case of LDN, as with all other novel treatments, I cannot prejudge how successful that pathway of research might be, but I can tell the hon. Lady that a pathway does exist, as I have described.
In addition, the hon. Lady expressed concern about whether the systems in place make provision for patients to say what research they would like to happen. I can assure her that patients can make a suggestion for the efficacy and mechanism evaluation programme to consider. Topics prioritised for funding may be advertised, inviting researchers to submit proposals for clinical trials in those topical areas.
I am grateful to the hon. Lady for raising this subject and giving me the opportunity to explain the background to a matter of considerable interest to many people, not least some of her constituents and those of the hon. Member for Mid Dorset and North Poole. I hope the last part of my speech in particular, in which I have explained an existing avenue that they and others interested in LDN may wish to pursue, will be helpful to them.
Nia Griffith: May I take this opportunity to thank the Minister for his very full and helpful reply?
Mr Burns: And may I, in the spirit of Christmas, thank the hon. Lady very much for the way in which she presented her case? It was quite clear from listening to her speech that she rightly felt very strongly about the issue on behalf of not only her constituents but people up and down the country who need LDN and who, at the moment, are having to go through the procedures that she described.