I thank everyone who participated in the debate. Like the noble Lord, Lord Skelmersdale, I do not believe that there is a need for a commission, but not necessarily for the reasons that he gave. I am not sure that I understood what he meant by taking the bull by the horns and where that would lead us. Perhaps that will be clarified at some stage.
I make it clear that all major public service pension schemes have been under review since the 2002 pensions Green Paper. As a result of that review, reforms in these schemes are now well under way. These reforms fully ensure the long-term sustainability of the schemes. Agreement on the teachers’ pension scheme was reached with the teaching unions in May 2006 on a set of reform proposals, and a new scheme has been operating since January 2007. Cost sharing with employees and capping of employer contribution rates form a part of the scheme’s regulatory framework.
NHS employers expect to implement new arrangements by 2008. As we heard, the Cabinet Office has announced that the new Civil Service scheme will be implemented from July 2007. Reforms in the NHS, teachers and Civil Service pension schemes will also introduce mechanisms that will ensure that any future increases in costs will be shared fairly between employers and employees. In addition, there will be an upper limit on the cost to the taxpayer, should costs increase.
Reform is also well under way or has been completed in other public service schemes. The local government pension scheme announced a series of reforms in November last year, and new arrangements for that scheme are expected to be in place in 2008. New schemes for the Armed Forces, police officers and firefighters have already been introduced. Establishing an independent commission to report on public sector pension schemes would change the context of negotiations currently under way and in doing so—I think that the noble Lord, Lord Skelmersdale, made this point—could delay the benefits resulting from the reforms. Public sector pension schemes are monitored regularly through built-in mechanisms such as the annual resource accounts as well as scheme valuation reports. These reports are prepared by professional actuaries and are based on long-term assumptions that are reviewed and updated periodically.
Alongside these reviews the Government annually evaluate the financial sustainability of spending on public service pensions in the long-term public finance report—we heard about that from the noble Lord, Lord Turner—published by the Treasury.The latest report, published in December 2006, and the previous report in 2005 make it clear that the long-term spending on public service pensions is entirely affordable and sustainable. The increase has gone from 1.5 to 2 per cent. I think that the noble Lord, Lord Turner, mentioned that figure. The Government actuary’s projections on staff withdrawal rates are well within sensible assumptions.
The noble Lord, Lord Oakeshott, said that the provision was not affordable. I contest that; I believe that it is. The judges were mentioned, of course, but we should focus on the fact that average public sector pensions are just over £6,000 a year. That is not such huge largesse that people in the public sector can retire to a life of luxury. I very much agree with my noble friend Lady Turner that they are seen as part of deferred pay arrangements. Nobody was shouting how unfair it was when public sector pay was not insignificantly below private sector equivalents and was made up with pension arrangements. We did not hear cries of unfairness and unsustainability in those circumstances.
The noble Lord, Lord Turner, said that the Government should take these matters seriously. Of course, we should, and we do. As regards what is reasonable, the long-term projections show that we can meet the cost of the revised arrangements that have been entered into. It is right that what has happened to some of the public sector schemes mirrors exactly what has happened in the private sector. You cannot wipe away everything that has gone before and build a system from scratch that you say is equitable from now on in.
I do not believe that a commission would serveany good purpose. It would hold up the residual negotiations that are still under way. They are serious negotiations, looking not only at the change of the date of pension age of members of those schemes but at cost capping, cost sharing and putting limits onthe extent to which the employer will have to fund future increases. It is the right way to proceed. The Government have focused on it, and we are tackling it. A commission would only muddy the waters and hold things up. There is a risk that it would become a forum in which a rather pejorative debate would take place with attempts to say that public sector employees were not entitled to decent pensions. We should want Government employees, whether they be doctors, nurses, policemen or whatever, to have decent pay arrangements and decent pension arrangements, subject to affordability, and that is the deal under way.
Pensions Bill
Proceeding contribution from
Lord McKenzie of Luton
(Labour)
in the House of Lords on Monday, 11 June 2007.
It occurred during Committee of the Whole House (HL)
and
Debate on bills on Pensions Bill.
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2006-07Chamber / Committee
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