My Lords, these amendments raise some issues that relate back to the previous Pensions Bill and, at least as far as I was concerned, some not very clearly answered questions about the potential size that the cash-flow deficit would grow to with regard to pay-as-you-go pensions.
First, my understanding is that, whether it is a pay-as-you-go public sector scheme or a funded public sector scheme, with the ending of contracted-out contributions, the money that the schemes will no longer receive will go towards financing part of the new state pension. Therefore, it has gone off to one box for that purpose. So we are left with pay-as-you-go public sector schemes and the impact that there is on them, and financed public sector schemes, such as local government schemes. My understanding is that, with pay-as-you-go public sector schemes, the money is no longer going to come in from contracting out and therefore the impact will be on the extent of cash-flow deficit going forward relating to public sector schemes. I should be interested to know the aggregate amount that pay-as-you-go public sector schemes will lose per annum as a result of no longer receiving the contracted-out contributions.
I think that there was some discussion during the passage of the Public Service Pensions Bill about the extent of the potential cash-flow deficit. Mr Michael Johnson and I calculated that it could be as large as £25 billion on the basis of including an estimate of the loss of contracted-out contributions. I think that the Government argued that it was not going to be as large as that but I could never quite get my head round the figures.
With regard to contributory public sector schemes, such as local government schemes—which is what these amendments are particularly concerned with—it will automatically become the financial liability of local government to make up the loss of the contracted-out contributions. How is that going to be financed? Not just in terms of what it might mean for a particular local authority, what is the extent of the aggregate cost to public sector schemes which are financed, and what is the average proportion that local government schemes, in particular, will have to make good as a result of the loss of contracting out?
I do not expect the Minister to be able to answer those questions with figures off the cuff, but it is desirable that they should be known and understood. Indeed, the impact on funded local government schemes may be very substantial, implying either significant increases in local council tax or the need for yet further substantial reductions in local government expenditure to finance the loss of contracting out.