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I shall outline some of the changes that have taken and are taking place. All major public sector pension schemes have been under review since the 2002 pensions Green Paper and, as a result of these reviews, reforms in these schemes are now well under way. These reforms aim to ensure the long-term sustainability of the schemes. Thus far, agreement was reached in May 2006 with teaching unions on a set of reform proposals for the teachers’ pension scheme, and a new scheme has been operating since January 2007. Cost sharing with employees and capping of the employer contribution rates form a part of the scheme rules laid down in legislation. The Cabinet Office announced a new Civil Service scheme which has operated since July 2007 and which also
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Reforms also include increases in normal pension age for new entrants from 60 to 65 for the three main central government schemes, and the local government scheme includes arrangements to phase out the rule that has enabled scheme members to retire without a reduction in pension before reaching that scheme’s normal pension age of 65. New schemes for the Armed Forces, police officers and fire fighters have already been introduced in 2005 and 2006. So there has been a significant change.
It is suggested also that there is a lack of information about public sector pensions. A large amount of information is already publicly available on the terms, benefits and affordability of schemes. Public service pension schemes are monitored on a regular basis through built-in mechanisms such as the annual resource accounts and evaluation reports on the majority of schemes. Alongside these, in 2004 the Government introduced an annual evaluation of the financial sustainability of spending on unfunded public service pensions as part of a long-term public finance report published by the Treasury. The latest report, published alongside the Budget Report 2008, makes it clear that the long-term spending on unfunded public service pensions is affordable and sustainable.
I say to the noble Baroness, Lady Noakes, that one can come up with all kinds of figures depending on what discount rates you apply to projected streams of figures, but the real test for unfunded schemes should surely be the Government’s ability to fund them year by year on a long-term basis. That is exactly what the long-term financial report seeks to address.
I do not believe it is necessary to establish a commission further to review or evaluate these schemes. Indeed, we fear that such a body, which could not come free of charge, would act as a destabilising influence, a point made by my noble friend Lady Turner, compromising the successful implementation of reforms that are starting to deliver better value for taxpayers. I hope that the noble Lord is reassured by what I have said and will feel able to withdraw his amendment. I suspect not.
Lord Kirkwood of Kirkhope: My Lords, I am grateful to the Minister for that reply, but it just will not do. I set myself a little test of whether we would be given two particular figures. The first was the Government’s figure for unfunded liability, and I noticed that we did
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The second thing that I was anxious to see whether the Government would share with us was the essential year-on-year cost saving from the 2002 Green Paper reforms. Answer came there none on that question either. If the Minister cannot give me figures for these things, that illustrates the fact that this is very hard. He talks about available information, but some of it is technical and you have to know where to look for it. I did my best over the past week to get all the information that was available to me. If I had not had the Pensions Institute’s report, I would have been struggling to form a view about whether this was a sensible thing to do.
There is a huge amount at stake here, and this is an issue for Parliament. If we as parliamentarians are willing to let the Government get away with not being required to produce the information that we need to make objective decisions, we are not doing our job properly.
Lord McKenzie of Luton: My apologies, my Lords; I did not address those specific questions. With regard to the unfunded public service pension liabilities as calculated, the latest figure I have is the one the noble Lord cited, £650 billion. That figure looks at a stream of payments and applies some form of discount rate to it.
I urge the noble Lord—this is the more important thing—to look at the projections for public service pensions that are made in the long-term public finance report, because they reflect the agreement made in 2005. The latest report, published in March 2008, showed that expenditure on unfunded public service pension benefits remains affordable; it is projected to increase from around 1.5 per cent of GDP to a maximum of 2 per cent over the next 50 years. I remind him, when he considers those figures, that they partly reflect that there are now more people working in the public sector than in the past: more nurses, more teachers, more doctors. We should be pleased about that. However, the sustainability of that can be seen in the long-term public finance report.
Lord Kirkwood of Kirkhope: My Lords, I am also grateful for that, although the Minister refers me back to a document that I have already been looking at. Something like a Turner-commission view of that technical document would be much more useful to me as a policy-maker. Of course the Government produce raw technical data, but having an oversight on a long-term basis by people who have a lot of experience in the field, as all three of the Turner commissioners had, adds value in a way that such a commission would but which the raw data that the Minister has adverted to just do not supply.
I am a simple seeker after the truth. We do not have the information we need to do the job properly, and the amendment would be a way of guaranteeing that all we had was the facts. If that destabilises anything, then that is seriously sad. If people are upset by others
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5.54 pm
On Question, Whether the said amendment (No. 74) shall be agreed to?
Their Lordships divided: Contents, 48; Not-Contents, 125.
Addington, L.
Alderdice, L.
Avebury, L.
Barker, B.
Bonham-Carter of Yarnbury, B.
Bradshaw, L.
Carlile of Berriew, L.
Clement-Jones, L.
Craig of Radley, L.
Crisp, L.
Dholakia, L.
Dykes, L.
Falkland, V.
Falkner of Margravine, B.
Fearn, L.
Garden of Frognal, B.
Goodhart, L.
Hamwee, B.
Haskins, L.
Kirkwood of Kirkhope, L.
Lee of Trafford, L. [Teller]
Lester of Herne Hill, L.
McNally, L.
Maddock, B.
Mar and Kellie, E.
Masham of Ilton, B.
Monson, L.
Neuberger, B.
Newby, L.
Northover, B.
Oakeshott of Seagrove Bay, L.
Razzall, L.
Redesdale, L.
Roberts of Llandudno, L. [Teller]
Rodgers of Quarry Bank, L.
Sharp of Guildford, B.
Shutt of Greetland, L.
Smith of Clifton, L.
Taverne, L.
Teverson, L.
Thomas of Gresford, L.
Thomas of Winchester, B.
Tonge, B.
Tope, L.
Tordoff, L.
Tyler, L.
Walmsley, B.
Walpole, L.
Adebowale, L.
Adonis, L.
Ahmed, L.
Amos, B.
Andrews, B.
Archer of Sandwell, L.
Bach, L.
Barnett, L.
Bassam of Brighton, L. [Teller]
Berkeley, L.
Bernstein of Craigweil, L.
Bilston, L.
Borrie, L.
Boyd of Duncansby, L.
Brooke of Alverthorpe, L.
Brookman, L.
Butler-Sloss, B.
Campbell-Savours, L.
Carter of Barnes, L.
Carter of Coles, L.
Christopher, L.
Clark of Windermere, L.
Clinton-Davis, L.
Colville of Culross, V.
Corbett of Castle Vale, L.
Cox, B.
Davidson of Glen Clova, L.
Davies of Oldham, L. [Teller]
Dean of Thornton-le-Fylde, B.
Dixon, L.
Donoughue, L.
D'Souza, B.
Dubs, L.
Eatwell, L.
Elystan-Morgan, L.
Erroll, E.
Evans of Parkside, L.
Farrington of Ribbleton, B.
Faulkner of Worcester, L.
Filkin, L.
Foster of Bishop Auckland, L.
Gale, B.
Gibson of Market Rasen, B.
Gordon of Strathblane, L.
Goudie, B.
Graham of Edmonton, L.
Greengross, B.
Griffiths of Burry Port, L.
27 Oct 2008 : Column 1401
Harris of Haringey, L.
Hart of Chilton, L.
Haskel, L.
Haworth, L.
Henig, B.
Hilton of Eggardon, B.
Hollis of Heigham, B.
Howarth of Newport, L.
Howie of Troon, L.
Hughes of Woodside, L.
Hunt of Kings Heath, L.
Janner of Braunstone, L.
Jones, L.
Jones of Whitchurch, B.
Jordan, L.
Kennedy of The Shaws, B.
Kingsmill, B.
Kirkhill, L.
Lea of Crondall, L.
Leitch, L.
Lipsey, L.
Lofthouse of Pontefract, L.
Low of Dalston, L.
McIntosh of Hudnall, B.
MacKenzie of Culkein, L.
Mackenzie of Framwellgate, L.
McKenzie of Luton, L.
Massey of Darwen, B.
Maxton, L.
Meacher, B.
Montgomery of Alamein, V.
Moonie, L.
Morgan, L.
Morgan of Drefelin, B.
O'Neill of Bengarve, B.
O'Neill of Clackmannan, L.
Patel, L.
Patel of Bradford, L.
Pendry, L.
Pilkington of Oxenford, L.
Plant of Highfield, L.
Prosser, B.
Prys-Davies, L.
Quin, B.
Radice, L.
Ramsay of Cartvale, B.
Rendell of Babergh, B.
Richard, L.
Rogan, L.
Rosser, L.
Rowlands, L.
Royall of Blaisdon, B.
Sawyer, L.
Sewel, L.
Sheldon, L.
Simon, V.
Snape, L.
Soley, L.
Stern, B.
Stoddart of Swindon, L.
Stone of Blackheath, L.
Symons of Vernham Dean, B.
Taylor of Blackburn, L.
Taylor of Bolton, B.
Thornton, B.
Triesman, L.
Tunnicliffe, L.
Turnberg, L.
Turner of Camden, B.
Wall of New Barnet, B.
Warner, L.
Warwick of Undercliffe, B.
Watson of Invergowrie, L.
West of Spithead, L.
Whitaker, B.
Woolmer of Leeds, L.
Resolved in the negative, and amendment disagreed to accordingly.
6.05 pm
Lord Fowler moved Amendment No. 75:
75: Before Clause 123, insert the following new Clause—
“Parliamentary pension scheme member-nominated trustees
(1) After section 241 of the Pensions Act 2004 (c. 35) (requirement for member-nominated trustees) insert—
“241A Parliamentary pension scheme: member-nominated trustees
(1) This section applies to a scheme which is set up under section 2 of the Parliamentary and other Pensions Act 1987 (power to provide for pensions for Members of the House of Commons etc).
(2) The requirements of section 241 shall apply to the trustees of such a scheme subject to the following modifications.
(3) Section 241(2) shall be read as if for paragraph (b) there were substituted—
“(b) are selected as a result of a ballot in which all the eligible scheme members are given the opportunity to vote.””
(2) Regulation 2(i) of the Occupational Pension Schemes (Member-nominated Trustees and Directors) Regulations 2006 (S.I. 2006/714) is revoked.”
The noble Lord said: My Lords, I will be brief as I believe that the proposed new clause will give the Minister the opportunity to say where government thinking has progressed on this point. As I explained
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As this Bill and other pensions measures show, we are very eager to set down requirements for occupational schemes generally, but when it comes to the parliamentary pension scheme—of which, to declare an interest, I am a member—there is a statutory exclusion from those requirements. The prime example is in the election of some trustees. My amendment would mean that at least a third of the trustees were elected—as is the case outside—rather than appointed, as is the case at present. Currently, eight out of 10 trustees of the parliamentary scheme are serving MPs, appointed by the Whips. One is a Member of this House but he is appointed; recently one member has been nominated by the association representing former MPs but, again, he is appointed.
The proposed new clause is not an attack on those appointed members; even less is it an attack on Sir John Butterfill, the chairman of the pension trustees, who has carried out some very valuable work trying to modernise the governance arrangements of the fund. But the fact remains that all the trustees are appointed, which is an unsatisfactory position. It is, and was, unsatisfactory for other occupational schemes and it is unsatisfactory here. In my view, contributing members to the scheme and retirement members should both have the right to elect some of the trustees—in my view, about a third.
In Committee, the Minister responded helpfully to this case and suggested that I meet with the Leader of the House of Commons. I received an encouraging reply from Harriet Harman, and earlier this month I met with her then deputy, Helen Goodman. Again, that meeting was encouraging and useful. Among the points that have now become clearer are that, first, the parliamentary fund could move to a position of elected trustees without the need for legislation at all. The legislation does not exclude the possibility of making such a change. Obviously, I would like the Minister to confirm on the Floor of this House that that is the position. Secondly, one possible model would be to have two sets of elections. A college, made up of contributing MPs and Members of this House, would elect one part, while a college made up of retired MPs and Peers would make up the other. Again, I would like the Minister to confirm that such an arrangement would be possible. Thirdly, and most importantly, my impression is that the Government are sympathetic to this principle. All the words so far uttered and all the correspondence that I have had leads to that conclusion. In other words, they see the advantage and justice of having elected trustees. Obviously, I would like the Minister to confirm that and what they intend to do about it.
I very much hope that we can settle this in agreement. It is difficult to argue that all-appointed trustees are necessary for the parliamentary pension fund but not for any other scheme in the country. It would be ironic if this obvious extension of democracy were rejected for, of all schemes, the parliamentary scheme. Frankly—
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Lord Crickhowell: My Lords, perhaps I may be even briefer than the noble Lord. At an earlier stage, I strongly supported the case advanced by my noble friend. I would add one other good reason to those that he listed: when things go wrong, as they occasionally do—and they have gone wrong in the case of the parliamentary scheme—and corrections and adjustments have had to be made to people’s pensions, there is a great deal more confidence in those who are managing the scheme if it is known that they are elected and that the pensioners have had the opportunity to elect and know exactly who represents them, and that there are adequate means of communication between the trustees and those who represent them and pensioners. That was not exactly the case in the past. I hope that the discussions that my noble friend has described will lead to a satisfactory outcome to this problem.
Lord MacGregor of Pulham Market: My Lords, I support the amendment, and do so as a former chairman of the Parliamentary Contributory Pension Fund up to my retirement from the other place in 2001. Perhaps I may make one comment about the parliamentary scheme, which is frequently misunderstood in the media. The parliamentary pension scheme gets wrapped up with all public sector pension schemes, which are unfunded so frequently are non-contributory, as though it were exactly the same as them. The parliamentary pension scheme is like any other private sector pension scheme in that it is contributed—indeed, at one point, for much of my career in the other place, the members’ contribution was 9 per cent of salary, and I discovered that only 4 per cent of all occupational pension schemes had a members’ contribution as high as that—and it is funded. There is a Treasury contribution, but it is usually negotiated quite tightly and simply represents the contribution that a company would make in the private sector. The parliamentary pension scheme is very similar to all the private sector occupational pension schemes, which have other legislation applied to them.
As chairman of the parliamentary pension fund, I got the first pensioner trustee nominated, the noble Lord, Lord Stewartby, but as my noble friend Lord Fowler said, he had to be appointed. He was a very good trustee, but it was an appointed arrangement.
If I had looked at this proposal during my time as chairman, I would have been a little hidebound by the fact that, as I understood it then, it would have required a small legislative amendment, and small amendments of this kind do not command high priority in any government programme. However, if, as my noble friend has just said, this is not necessary, that objection disappears.
The Pensions Act 2004 considerably increased the responsibility of trustees and the methods by which they became trustees, and that, too, has changed very much since my time. I have always supported the Association of Former MPs in seeking for a pensioner trustee or trustees, as have occupational pension schemes in the private sector.
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I have since become chairman of three pension funds, one of them very large. The contribution of the pensioner trustees is extremely valuable because they raise points that those who are still employees would not raise. As my noble friend said, it is peculiar that we have not yet been prepared to bring the legislative requirements for the parliamentary fund into line with those which we impose on all pension funds.
There is a lot of expertise in pensions in the other place. Elections for the member-nominated trustees would bring about much additional expertise and be valuable to the pension fund. For all these reasons, I hope that we can make progress and get this proposal implemented whether by legislation or otherwise.
6.15 pm
Lord Oakeshott of Seagrove Bay: My Lords, I speak with some trepidation as the only non-member of the parliamentary pension scheme to contribute to this debate. The noble Lord, Lord Fowler, makes a strong case, and, as he knows, we on these Benches are always in favour of election rather than appointment.
Lord McKenzie of Luton: My Lords, I thank the noble Lord, Lord Fowler, for the chance to update the House on the Government’s position. I fear that I may disappoint him for the second time today on the substance of his case, but I am happy to update him on the process and the way forward.
I say to the noble Lord, Lord MacGregor, who made reference to the parliamentary pension scheme, that the Senior Salaries Review Body is undertaking a major review of the arrangements, although it is not expected to report until later in 2009. As the noble Lord, Lord Fowler, indicated, I have previously committed to facilitate engagement with ministerial colleagues so that the issues raised by him could be considered further. I am pleased to say that this consideration has taken place, and I understand that the noble Lord met the former Deputy Leader of the other place on 1 October to discuss his proposals. I understand, as the noble Lord suggested, that the meeting was helpful to both sides, and although a new Deputy Leader, my honourable friend Chris Bryant MP, was appointed in the recent reshuffle, I can assure the House that he is already engaged on this matter and is very happy to continue the dialogue with the noble Lord and others with an interest. Indeed, I am aware that a number of representations from other parties have been made since the noble Lord, Lord Fowler, tabled his amendments in Committee.
The noble Lord has raised a number of concerns. He has, however, acknowledged that the position relating to the ability to draw on professional pensions expertise in the running of the parliamentary scheme has changed in recent years. This is an important point that is worth reiterating, as there has been considerable work undertaken.
I have been given assurances that the secretariat to the trustees is now staffed by suitably qualified pensions experts, and that the day-to-day administration has been outsourced to a reputable third party. I understand that the current trustees have the broad range of skills and experience that a body of this type looks for, and
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Member involvement is the other issue which the Deputy Leader is looking at. As the noble Lord knows, there is already involvement in the running of the parliamentary pension scheme by members of the scheme. The scheme regulations require all the trustees to be either Members of the other place or former Members who are entitled to a pension from the scheme.
However, it is essential that noble Lords have confidence in the running of the scheme and it is clear that changes might be necessary to the appointment process to instil a sense of ownership. The Deputy Leader will continue to explore ways of doing this with the noble Lord, Lord Fowler, and other stakeholders.
I must admit that we do not believe that the major changes that the noble Lord proposes are appropriate at this stage, particularly in advance of the major review of the parliamentary pension arrangements announced by the Leader of the other place in a Written Ministerial Statement on 17 June. The interaction between the various pieces of legislation is complex and we do not yet have a consensus on exactly what should be done. As such it is right that we continue to look at and talk about this issue.
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