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Employers' Contributions Towards Cost Of Pensions Increase For Teachers And Persons Engaged In The Health Services Etc

Volume 165: debated on Wednesday 17 January 1990

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I beg to move amendment No. 3 in page 4, line 1, leave out subsection (1)

The amendment seeks to delete subsection (1) which gives powers to make regulations placing the cost of teachers' pension increases on their employers or
"such other persons or classes of persons (apart from teachers) as the Secretary of State may consider appropriate".
Perhaps the Economic Secretary can explain who those other persons or classes of persons are.

By pressing for the removal of subsection (1), the amendment does not imply that we approve of subsection (2) which applies similar powers to Health Service staff. We want to concentrate on subsection (1) for two reasons, although we have many misgivings about the Health Service. I understand that a couple of telephone calls to health authorities revealed a sublime ignorance about the existence of the Bill.

We seek to remove subsection (1) because the teachers' unions are concerned that the Government are pre-empting the results of negotiations that have been taking place on the funding and other aspects of the teachers' superannuation scheme. Given the present state of local government finance, any threat to impose additional charges on local authorities must be a matter of deep concern. Firm assurances are needed that, if the powers are to be used, an appropriate transfer of resources will take place at the same time.

The calculation of the teachers' superannuation fund is weird and wonderful. It works in rather a similar manner to the pools panel that used to meet when we had severe winters, when experts would get together and guess the results of football matches that had not been played. Apparently a committee of experts decides what investments which would have been made, but had not been made, by the teachers' superannuation fund would have yielded. Unfortunately, the possible investments that they consider are only Government funds. No occupational pension scheme would have a portfolio which consisted only of Government funds.

There is much concern that for many years teachers' superannuation payments have been seriously understated, but I understand that the teachers' unions and the appropriate body are negotiating on that.

Clause 4 has wider implications. The principle of inflation-proofing public service pensions may be threatened if it became a matter for negotiation between occupational groups and employers rather than a nationally recognised obligation. We debated that at length on Second Reading. Clause 4 could be the first stage in the dismantling of the Pensions (Increase) Act, of which the Prime Minister strongly disapproves.

If such fundamental changes are to be made to the financing of public service pensions, it should not be done by an enabling provision such as clause 4, followed by regulations that cannot be amended. If and when the Government decide what they want to do, they should incorporate their detailed proposals in a Bill that can be properly debated and amended.

The financial memorandum to the Bill says:
"Regulations made under the amendments to the Superannuation Act 1972 made by this Bill may in future have some financial effect."
What does that mean? The Minister may say that he cannot predict what will happen in the future, but the worry is the effect that the Bill is likely to have on health authorities and, in particular, local government. We are aware of the financial problems experienced by both those bodies, but it is a particular threat to local government, because the gearing effect of the poll tax means that for every extra penny of expense shouldered by local authorities they must charge many times as much to local poll tax payers. We should like the Minister at least to tell the House what would be the maximum increased burden on employers if the total cost of pension increases were placed on local authorities and local bodies, which clearly is what the Government have in mind.

Labour Members recognise that there is merit in that proposal and that those sums should be paid by those bodies rather than by the Treasury, but the Minister must assure us that it will be fully and appropriately funded. Will he explain how employers will find the money to pay what will be required?

The Department of Education and Science has sent a letter to the National Union of Teachers. Last year, the NUT held a meeting on the root-and-branch reform of the teachers superannuation fund. It intends to reconvene that meeting, but it fears that legislation may pre-empt negotiations. The reply from the Department states that the Bill will not pre-empt future negotiations. We should like the Minister to confirm that that is not the purpose of the Bill.

The hon. Member for Newport, West (Mr. Flynn) mentioned the pools panel. I must reveal that I have always wanted to sit on the pools panel on a Saturday morning when matches are snowed off and to deliberate over the fortunes of Newport County, Norwich City or Ipswich Town. Alas, the pools panel has had a pretty thin time over recent seasons. I hope for its own sake that it is not paid according to the number of times that it meets.

I must reject amendment No. 3. The purpose of clause 4 is to allow the Secretaries of State responsible for the National Health Service and teachers' superannuation schemes in England, Wales and Scotland to make regulations, which would be subject to negative resolution, to permit the cost of pensions increase to be taken into account in determining employers' contributions to the schemes. At the moment, those costs are met by the Departments that administer the schemes, rather than by employing authorities.

The teachers' and National Health Service schemes are unfunded. The Government Actuary advises the Secretaries of State on the appropriate levels of employers' contributions on the basis of quinquennial valuations of the schemes' assets and liabilities. For that purpose, he makes various actuarial assumptions and works on the basis that the schemes are funded.

Union interests, particularly in teaching, have in the past argued strongly that some of the assumptions that the Government Actuary uses are unrealistic. They believe, for example, that different assumptions about investment returns would lead to a surplus on the notional funds, which might then permit lower contribution rates or improvements in benefits. I understand that employees' and employers' representatives in the teachers superannuation working party have just agreed on a report endorsing that. It will be impossible to take this further without clause 4.

The Amendment No. 3 would restrict the change made in clause 4 to the National Health Service superannuation schemes and would deny a worthwhile opportunity to take similar powers for the teachers' schemes.

Without wishing to anticipate unduly the outcome of discussions following the teachers superannuation working party report, the Government would feel able to agree to changes in such matters as the investment assumptions, which might be seen as giving greater realism in building up the assets of the schemes, only if there were a corresponding realism in treating pensions increase as a liability of the schemes. I understand that employees' and employers' representatives in the teachers' superannuation working party recognise and accept that. Clause 4 provides the necessary power.

I cannot say when regulations will be made under clause 4. There would need to be much careful consultation with all the interests concerned before a change could be made. Indeed, sections 9(5) and 10(4) of the Superannuation Act 1972 would require that, and the statutory instruments containing the regulations would be subject to negative resolution. The Government would also want to be sure, so far as possible, that the net effect of any changes was not likely to add unacceptably to the costs of employing authorities.

I hope that the recognition that I have given to the need to contain the additional costs for employing authorities and the need for full consultation before any changes are made will allay any misgivings that Labour Members, or interests with which they have been in touch, may have had.

The hon. Member for Newport, West asked whether the Government plan to compensate health and education authorities for the higher contributions that they will have to make to finance pension increase. They will not necessarily have to pay increased contributions; the clause confers a power on Ministers only to make at an appropriate time regulations under which employers' contributions can be set to cover the costs of pensions increase. The effect on health and education authorities' finances will be considered if the need arises.

The Minister trod on private grief when he mentioned Newport County and the pools panel. The only game that Newport County could win was when the pools panel sat, but tragically the football team no longer exists.

We take little comfort from what the Minister said. I noticed how carefully he chose his words when talking about not adding unnecessarily to the costs of local authorities.

In the past, Opposition Members have been cynical about Government legislation, and we remain a little apprehensive. I note the Minister's points. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clauses 4 to 14 ordered to stand part of the Bill.

Bill reported, without amendment.

Order for Third Reading read.

8 pm

:I beg to move, That the Bill be now read the Third time.

I am grateful to hon. Members, particularly the hon. Members for Newport, West (Mr. Flynn) and for Roxburgh and Berwickshire (Mr. Kirkwood), for their prompt consideration of this modest, technical and useful Bill. Public service superannuation will never be the most exciting subject that hon. Members debate, but we owe an obligation to the electorate and to approximately 4 million members of public service pension schemes to give a fair hearing to Bills of this kind.

I recognise the strength of feeling on the subject of levelling up against levelling down, which we debated in Committee. I assure the House that the Government looked carefully at the issues and the merits and demerits of levelling up and levelling down before concluding that it was right to phase out a benefit which, in practice, has benefited and always will benefit a small number of women pensioners. We must do what is right for public service pensioners, what meets our European Community obligations and what is fair to the taxpayer. I am confident that the Bill strikes the proper balance.

In Committee, hon. Members noted that other measures in the Bill made small and, again, technical changes to the existing law. Opportunities to legislate on public service superannuation will always be rare events, but I am pleased that we have been able to produce a Bill to secure equal treatment in pensions increase to make such changes. I commend the Bill to the House.

8.2 pm

Opposition Members do not wish unnecessarily to delay legislation, but the Bill is proceeding at breakneck pace. It was introduced at an unusual time—a few days before the Christmas recess. The Second Reading debate was shortly before Christmas, and we are now concluding the remaining stages. Further submissions from representatives of many people affected by the Bill may be made when the Bill is in another place and when it returns to the House.

A great pensions minefield is ahead for the Government. There are many qualms about the Bill, some of which have been expressed tonight, particularly the implications for the Health Service and local government, and for equality of the sexes legislation. There will be repercussions throughout other Government pensions legislation and policies.

The fascinating history over the centuries of providing the elderly with comfort and security in retirement is continuing. It reached a high point of hope in the 1970s. The years since then have shown the growth of complexity of pension provision, without a growth in pension quality, and a certain guarantee of much future confusion. There is great indecision about the problem of equalising pension provision for men and women in the future. I am certainly not suggesting that pensions should be equalised down, but the implications are that the Government have little hope of equalising them other than by disadvantaging women. We will also see a continued undermining of the precious 10-year-old principle that pensioners should share in the country's growing prosperity.

The Bill is a product of yesterday's false, extinct ideas and, sadly, is not a product of the new hope for universal access to prosperous and fulfilling vintage years of retirement for everybody.

8.5 pm

The Bill is a useful addition to the body of statute law governing pensions. I almost stand accused of being boring about the need——

That may be true, but it is for others to judge.

I am concerned about the increasing complexity of the language used in pensions legislation. Earlier debates have suffered because of it, but the Minister coped commendably well. He should use his power to make the parliamentary draftsmen to do their best. I understand that it is a complex subject, but we are getting into the realms of the absurd in the language that is used in some statutes. That comment applies to this Bill in particular.

The Government were right on whether to level up or level down. I give the Minister clear notice that the Government must take no precedent from their judgment on the Bill. If they bring forward sex equality measures or any other legislation, they must not use this Bill as a basis on which to level down future provision. The facts and circumstances of each case must be carefully considered. On balance, the Minister was right, but he must not assume that he will have such a easy ride in the future.

Yes.

The Government must introduce legislation that takes advantage of the opportunity presented by legislation from Europe to level up social provision across the broad spectrum of social policy. He will be widely opposed if he seeks to use the Bill as a precedent for arguments in the future.

Question put and agreed to.

Bill read the Third time, and passed.