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Public Sector Pensions

Volume 468: debated on Thursday 29 November 2007

6. What the liability is for the pensions of public sector employees; and if he will make a statement. (169068)

The latest published estimate of the total liability for the UK’s unfunded public service pension schemes is £530 billion as at 31 March 2005. As we stated in the pre-Budget report, updated estimates will be published alongside the next long-term public finances report.

Despite being repeatedly pressed by the Opposition, why has it taken the Government so long to address the anomaly whereby the discount rate applied to the public sector pensions liability calculation has not for years reflected the Government’s cost of borrowing, which is what private sector companies are required to do?

The hon. Gentleman will know that those are complex calculations. The Government makes updated assessments of the discount rate. Indeed, we are applying new figures released from the Office for National Statistics in October and will come back soon with an updated assessment of the long-term liability. We will publish that in the context of the long-term report on the health of the public finances, which will be published in the new year.

The Minister has just admitted that the last Government assessment of public sector pension liability is well over two and a half years old. I am sure that the hon. Member for Bolsover (Mr. Skinner) will be interested, because he no doubt represents a large part of that liability.

Actuaries Watson Wyatt estimate that the liability today could be as high as £960 billion. Perhaps the Minister can confirm whether the two-and-a-half to three-year cycle between forecasting public sector pension liability is a new approach to Government policy, or did Ministers not get round to doing it earlier merely because of incompetence?

I shall let my hon. Friend speak for himself.

The Conservative party has to be a bit careful with the figures. Let us be clear about what the estimates are. They are notional figures that relate to all future payments that will have to be made over eight decades. The hon. Lady’s colleague, the shadow Chief Secretary, told the Sunday Mirror last week that that will mean that

“Every family in Britain will pay £33,000 to fund the pension promises he has made to public sector workers.”

Yes, he says. That is an alarming and misleading statement to make to the families of this country. They will not have to find £33,000 to fund those commitments.

As for my hon. Friend the Member for Bolsover (Mr. Skinner), with age comes a certain maturity and wisdom that are sadly lacking among those on the Conservative Front Bench.

Is it not worth remembering that pensions are deferred salaries? The work that we get from our public sector, on low pay and working long hours, means that the liabilities of the public sector pension are value for money.

I endorse my hon. Friend’s comments. We have been looking at public sector schemes, which—especially the teachers’ scheme, the civil service scheme and the NHS scheme—have been subject to reform in recent years. Let us remember that those reforms, which we debated, were difficult, but, as my hon. Friend rightly says, they are sustainable as they go forward now, and give a fair return to those valuable public sector workers who provide services on which we all depend. The implication of the quote of the shadow Chief Secretary that I read out is that the Opposition would not fund those schemes in the way in which we propose. They need to explain to public sector workers exactly what they would do to those pension schemes.

The Chief Secretary has just referred to the public sector pension liabilities, which pay the pensions of millions of public sector workers who have retired over many years, as though they were some rough estimate that the Government can choose to publish when they like. They are already nearly a year behind their original schedule for publishing the figures. Surely he should take the matter far more seriously.

I take it extremely seriously. As I explained to the hon. Member for East Devon (Mr. Swire), it is a complex calculation and we will therefore take our time to get it right. It is a complex figure which should not be grossly simplified and misrepresented. The previous long-term public finance report, which was published last December—nearly but not quite a year ago—stated that public sector pension schemes were sustainable over 50 years. That is a fair judgment which we made and put into the public domain. When we have new figures, we will put them in the public domain so that a balanced judgment can made on them rather than the alarmist and misleading debate that the hon. Gentleman and his colleagues are trying to get going.