I beg to move,
That this House reasserts its view that the salaries, pensions and expenses scheme for hon. Members ought to be determined independently of this House; accordingly invites the Leader of the House to make an order commencing those provisions of the Constitutional Reform and Governance Act 2010 which transfer responsibility for the pensions of hon. Members to the Independent Parliamentary Standards Authority (IPSA); supports the approach to public service pension reform set out in the Final Report of the Independent Public Service Pensions Commission chaired by Lord Hutton of Furness; believes that IPSA should introduce, by 2015, a new pension scheme for hon. Members which is informed by the Commission’s findings and their subsequent application to other public service pension schemes; recognises the case for an increase in pension contributions made in Lord Hutton’s interim report; and accordingly invites IPSA to increase contribution rates for hon. Members from 1 April 2012 in line with changes in pension contribution rates for other public service schemes.
I should inform the House that I have selected the amendment in the name of the hon. Member for Christchurch (Mr Chope).
Should the House agree to this motion, we will have completed the transition to a wholly independent system for setting and administering MPs’ remuneration. The first and most pressing task was to establish a transparent new expenses scheme in time for the beginning of this Parliament. That was achieved, albeit not without some issues about the operation of the scheme, which have been aired on other occasions. Since May this year, responsibility for setting MPs’ pay has also rested with the Independent Parliamentary Standards Authority; under the relevant legislation, MPs will not vote on their own pay again. Today’s debate on MPs’ pensions represents the final piece of the jigsaw. Once the powers in relation to pensions have been transferred to IPSA, it will have responsibility for looking in the round at the whole remuneration package for Members of Parliament.
The motion before us should not come as a surprise to the House.
The right hon. Gentleman says this is the last piece of the IPSA jigsaw. Is he satisfied that all the other pieces of the jigsaw are perfectly placed?
I know that my hon. Friend is not so satisfied. He will know that a Committee of the House is looking into the legislation and that there is a committee that liaises between this House and IPSA. I think that the latter is aware of his views on the improvements that need to be made to the scheme. This motion relates not to the allowances that, I believe, are his preoccupation but to pensions.
Before we rose for the summer recess, I set out the Government’s approach to hon. Members’ pensions in a written ministerial statement, and I also published the motion we are debating. Should the House agree to support the motion, we will have protected the principle that MPs’ remuneration should be independently assessed and determined and demonstrated to our constituents that we understand that Parliament must not be insulated from the fiscal circumstances affecting the rest of the country.
The Leader of the House said that we will never vote again on these matters. Does that mean that the House will not vote the money needed to pay these salaries? What will be done about the overall budget for the costs of government and Parliament, which I thought was of interest to the Government?
The position is exactly as I said: under legislation passed by the House we will not vote on our own pay, which IPSA will determine independently. It will have the authority to do that and, without primary legislation, which the House would have to agree, its determination will be the last word.
May we get this clear? Some of us will be rather surprised to hear that we will never again vote on our salaries, because Ministers have told us that before but we have always been persuaded to vote again on them.
Primary legislation precludes that. Were the Government to be minded to change that, they would have to persuade the House to reintroduce primary legislation overturning the Parliamentary Standards Act 2009, which deals with IPSA, and the Constitutional Reform and Governance Act 2010, which have taken the matter out of our control, so there is no longer a parallel with the previous position.
I understand the narrow point about rates of pay, but my question is rather different: are the coalition Government still interested in the overall costs of Parliament and of MPs? Will we vote through the money, or will somebody else do that?
It would be quite wrong to say that, in principle, our pay should be determined by IPSA but to try, by the back door, to circumscribe that decision by voting down the money it had determined should be paid as our salaries. That would not be an independent determination of our salaries.
I will give way to the chairman of the trustees.
May I ask why the motion does exactly what the right hon. Gentleman is saying?
I am not sure that I follow the hon. Gentleman. The motion transfers responsibility for determining MPs’ pensions to IPSA and delivers a commitment made in the Parliamentary Standards Act and the CRAG Act, which I believe were passed without dissent in the previous Parliament.
The second part of the motion does the exact opposite. The Leader of the House is trying to suggest that the independent IPSA should take on board what he proposes in the motion, which is that the contributions made by Members of Parliament should increase in line with those of people in the public sector.
I am grateful to the hon. Gentleman for clarifying his point. If he looks at the legislation, he will see that he and the House are statutory consultees for IPSA: if it wishes to make any changes to the scheme, it is obliged to consult the trustees, the Senior Salaries Review Body and anyone who might be affected, which includes all of us in this Chamber. We therefore have some locus in the consultation. The second part of the motion expresses a view on behalf of the House, which we are entitled to do under the legislation. It is right that Members make it clear to their constituents that they expect to be treated no differently from others in the public sector in the determination of their pension contributions.
I would like to make a bit of progress before I give way.
It is accepted by Members on both sides of the House that the UK faces an unsustainable structural deficit that must be brought down. The Government have been forced, as any Government would be, to take difficult decisions across the public sector that have consequences for hon. Members. In March, the House agreed that Members’ salaries should be frozen this year in line with the two-year pay freeze on public sector workers earning more than £21,000. After that debate, I commenced the relevant parts of the CRAG Act, formally transferring power to IPSA. I am sure that the chairman of the trustees and the House will recognise the comparison of that procedure and the one we are debating this afternoon—we are transferring responsibility while at the same time expressing a view.
Before the election, all parties publicly agreed that the current final salary terms of the parliamentary pension scheme should be brought to an end. However, as with other public service pension reform, changes will not be made retrospectively, nor will they have an impact on past benefits—an assurance that is as important to Members of the House as it is to those in other public sector schemes.
Looking ahead to a future scheme, the coalition agreement committed us to consult IPSA on moving from the final salary arrangements. In June last year, the Government established the independent public service pensions commission, chaired by Lord Hutton of Furness, to make recommendations on how to put public service pensions on a sustainable footing. Although the Hutton report did not include hon. Members within its scope of inquiry, it was immediately apparent that reform of the parliamentary pension scheme must be tackled in the light of the commission’s findings and their subsequent application to other public service schemes. I do not believe that there is any case for our scheme being treated differently from other public service schemes. Indeed, there would be justifiable disbelief if it were.
I accept that there is much to be said about our needing to set the public an example, particularly given the reforms we are trying to make to public sector schemes, but unlike many public sector schemes the parliamentary scheme is—or is near to being—fully funded and the contributions are rather larger. Will the Leader of the House go into more detail on the nature of the parliamentary scheme, which is slightly misunderstood in much of the press coverage?
The contributions for those subscribing at one fortieth are indeed higher than those for many elsewhere in the public sector, but so are the benefits. The Exchequer contribution, at some 28%, is also substantially higher than for other public sector schemes. One needs to consider it in the round when one comes to a judgment about the appropriate treatment of the scheme.
Today’s motion supports the approach to public service pension reform set out in the final report of the independent public service pensions commission.
Some of us strongly support the principle behind my right hon. Friend’s motion, but our dilemma is that once again IPSA is acting as administrator and as the body that sets the rates—an arrangement that one does not often find anywhere else. If the committee chaired by my hon. Friend the Member for Windsor (Adam Afriyie) finds that there should be some division between the administration of our pay, pensions, allowances and so on and the setting of their rates, will my right hon. Friend reassure us that the motion, if passed, will not be the final word on the matter?
The administration will be performed by the trustees; there is no change in that. The contribution rates and ultimately the shape of the scheme will be determined by IPSA, which will set the rules. The trustees will continue to administer the scheme, with some slight change in their membership to reflect IPSA’s new involvement.
Will the Leader of the House give way?
If I may, I will make a little more progress, and then I will give way.
The amendment tabled by my hon. Friend the Member for Christchurch (Mr Chope) suggests that the parts of the motion relating to the Hutton review should be removed. Its implication is that our scheme should not be treated the same as other public sector schemes, and I do not think our constituents would welcome such an interpretation.
On what basis does my right hon. Friend think that is a fair assessment of my amendment, which seeks to put in the motion the fact that IPSA is independent and should reach its own judgment? That is the effect of my amendment and I am sorry that my right hon. Friend seeks to misrepresent its purpose.
My hon. Friend’s amendment would delete the following words:
“and accordingly invites IPSA to increase contribution rates for hon. Members from 1 April 2012 in line with changes in pension contribution rates for other public service schemes.”
It is perfectly legitimate to say that one can deduce that he does not want Members’ pension schemes to reflect other public service schemes.
On that point, will the right hon. Gentleman give way?
Let me make a bit more progress and then I will give way.
The motion also states that
“IPSA should introduce…a new pension scheme for hon. Members which is informed by the Commission’s findings”
by 2015. That is a similar timetable to that for the rest of the public service. However, as with other public service pension reform, changes should neither be retrospectively made nor have an impact on past benefits.
In his final report, Lord Hutton spoke warmly about the continuation of defined benefit schemes in the public sector. Is the Leader of the House fully aware of that, and does he support that recommendation?
Indeed; the Government welcomed Lord Hutton’s report, including the interim report, the final report and the budget. He made it clear that he wanted to retain a defined benefit scheme, and on that basis negotiations are continuing. IPSA will be mindful of that recommendation by Hutton—and, indeed, of the hon. Gentleman’s views.
The Constitutional Reform and Governance Act already provides full protection for pension benefits already earned, including a link to the salary on leaving the scheme, so any new scheme would apply only to future service. Furthermore, the legislation includes comprehensive provisions requiring IPSA to consult widely before making any changes to parliamentary pensions.
I think I had better give way first to the hon. Member for Blaydon (Mr Anderson).
I was pleased to sign amendment (a), but I want to make it clear that my case is very different from what the Leader of the House described. I believe that we are in exactly the same boat as every other public sector worker in the country and that we should be treated the same. We should be allowed, with our trustees, to negotiate with IPSA as local government pension schemes are being negotiated with their trustees and their employers. It should not be the Government who set the standard for the pensions—it should be the pension schemes.
The hon. Gentleman will know that paragraph 15 of schedule 6 to the CRAG Act states:
“Before making a scheme under paragraph 12 the IPSA must consult…the trustees of the Fund,”
so there is that opportunity for dialogue.
I should make it clear that I will support the motion, but something is causing alarm bells to ring. The Leader of the House rightly says that the motion means that the parliamentary scheme will not be better than those for other public sector workers, but will he make it quite clear that nothing in the motion has any implications for the negotiations that are taking place with other public sector schemes?
The motion is purely declaratory, so the hon. Gentleman is quite right. The second half of it expresses a view, on behalf of the House, that we believe we should be treated no better or worse than those in other public sector schemes. It is important that our constituents know that that is our view and that we do not expect to be treated any differently from others in the public sector.
A further development is the increase in pension contribution rates for public service schemes, as already announced by my right hon. Friend the Chief Secretary to the Treasury. The case for public service employees to pay more into their pensions and therefore reduce the burden on the taxpayer was made clearly in Lord Hutton’s interim report, which was published last autumn. The report states:
“In the short term, however, I consider there is also a strong case for looking at some increase in pension contributions for public service employees, to better meet the real costs of providing these pensions, the value of which has risen in recent years with most of these extra costs falling to taxpayers”.
The subsequent statement made by the Chief Secretary made it clear that each scheme would be required to find savings equivalent to a 3.2 percentage point increase, phased in over three years, with scheme-specific discussions to make proposals on how the savings were to be achieved.
If the House accepts the principle that hon. Members should not be out of step with changes that affect other public service schemes, we should also accept that our contributions should rise at the same time. I can therefore confirm that the Government propose to increase contributions to the ministerial scheme, with increases being applied from 1 April next year on a staged basis, and we will consult on that proposal as required by the Constitutional Reform and Governance Act.
Finally, I shall end where I began: the most important development of which account needs to be taken is the acceptance that MPs’ remuneration should be assessed, determined and administered independently.
Does my right hon. Friend agree that, although there might be concerns over IPSA’s role, we should not make the perfect the enemy of the good and that this debate is long overdue? We must all look our public sector constituents in the face every day and justify changing their pensions schemes.
I am grateful to my hon. Friend for her support and for the views she expresses.
There were constraints on IPSA taking over absolutely everything right at the beginning of this Parliament. The priority was allowances, so that was its first commitment, followed by pay. As I have said, this is the final piece in the jigsaw puzzle. We will have then passed over responsibility for the total package by 1 April next year.
Let me make it clear that I support the motion and the thinking that lies behind it, but what will be the role of the trustees between now and 2015, and what will it be after 2015? Will they have any fiduciary responsibility for the new scheme, or will their responsibility be limited to the current scheme?
The trustees will continue to administer the scheme. The chairman of the trustees might want to catch your eye, Mr Speaker. Under our changes, the rules that govern the scheme will no longer be made by the Government or the House; they will be made independently by IPSA. After the process of transfer on 1 April next year, the scheme will continue to be administered by the trustees until such time as IPSA makes any change. If it wants to make changes, it must consult the trustees. The motion indicates that the first change should be an increase in the contribution rate. It then suggests that, along with other public sector schemes, a new scheme, perhaps moving from final salary, should be introduced by 2015, but the scheme will continue to be administered by the trustees, and I pay tribute to the work they do.
Will the right hon. Gentleman confirm my understanding that the arrangements being put in place for the trustees, some of which come from the Constitutional Reform and Governance Act, are in line with best practice for other pension schemes?
Yes; I believe that to be so. There has been no representation on the issue the hon. Lady raises. There are some changes in the composition of the trustees to reflect IPSA’s responsibility, as part of the 2010 Act.
Will the right hon. Gentleman give way?
I propose to conclude.
Independence is a crucial part of the process of restoring trust in Parliament. Any decision to defer the transfer to independence would result in MPs continuing to determine their own remuneration, which the House has firmly rejected. It is not incompatible—this goes back to some of our discussions during the debate—to argue that responsibility for our pensions should be made independent and, by agreeing to the motion today, to send a strong signal about the direction we feel the scheme should take in the light of the application of the Hutton recommendations to other public service schemes.
Subject to today’s debate, I will move as quickly as possible to commence the relevant sections of the CRAG Act, transferring all responsibility for MPs’ pensions to IPSA. Once responsibility for MPs’ pensions has been handed to IPSA, the House will have finally relinquished the power to set the terms of its own remuneration. I hope that that will represent a significant further step in drawing a line under the problems of the past and in helping to rebuild public confidence. I commend the motion to the House.
As the Leader of the House says, the motion seeks to deal with some unfinished business from the previous Parliament. The order that we are debating is necessary to commence the provisions of section 40 and schedule 6 of the Constitutional Reform and Governance Act 2010. Those parts of the Act transfer responsibility for hon. Members’ pensions to the Independent Parliamentary Standards Authority. That legislation was passed, with all-party agreement, by the previous Government. It gained Royal Assent in April last year, just before the general election, and there was a general feeling that it was wrong for existing arrangements to be left unchanged, and that the independent determination of salaries should extend to cover pay and pensions. Having voted for the primary legislation that brings about that switch of responsibilities, we Labour Members will not oppose the motion today.
The order will change the current arrangements, under which the Leader of the House—in effect, the Government —determines MPs’ pension arrangements through regulations. Following the 2009 report by the Committee on Standards in Public Life, the previous Government accepted in principle that the independent regulator should be given statutory responsibility for MPs’ pay and pensions. While that change was being legislated for, there was, quite properly, input from the trustees of the parliamentary contributory pension fund, which ensured that Members’ accrued rights had protection consistent with that provided to members of other occupational pension schemes. There was also agreement to amendments that ensured that the parliamentary contributory pension fund would continue to be a trustee-based scheme with appropriate member representation, and that required IPSA to obtain trustees’ consent before making changes in the administration of the scheme.
The hon. Lady rightly draws attention to the history that has led to our discussing the motion today, and to what happened in the previous Parliament. After 18 months’ experience of IPSA, does she have total confidence in that organisation’s ability to deliver our pensions?
We all have our IPSA stories, and we could probably dine out on them—with each other, and we would not claim it back. We all have stories about some of the absurdities of the scheme, especially at the beginning, when it was bedding in. There has been considerable progress, and I would like further progress to be made. There are ongoing ways in which we in this House can bring to light any remaining absurdities, and I hope that we can continue to iron them out. The principle of independent determination is right. IPSA seems as good a body as any—not withstanding the chaos at its beginning—to undertake all that responsibility. Clearly, we will have to wait and see whether my confidence will be rewarded, but I am willing to give IPSA a try. I know that the hon. Gentleman is somewhat more sceptical about the authority than I am.
When the Leader of the House spoke, he was justifying, on behalf of the Government, what is happening to public servants across the country, including many of our constituents who are on relatively low pay, and justifying the attack on their pensions. I certainly do not agree with what is happening, and I am sure that my hon. Friend the Member for Wallasey (Ms Eagle) does not.
I will come on to make a few short, in-order remarks about that aspect of our debate, but I think that most Members of the House would agree that we cannot expect to be treated differently from other public sector workers; that is a principle that most of us would share.
I was talking about appropriate Member representation on the trustee board, and the fact that IPSA, under the primary legislation and the order, will have to obtain the trustees’ consent before making changes to the administration of the scheme or the management of the scheme’s assets. Again—this is an important principle—it is entirely in keeping with the usual practice of other funded schemes. It is important that we maintain that parallel.
The order will change the legal structure of the parliamentary contributory pension fund. It will become an IPSA scheme and the power to amend it will be vested in IPSA rather than in the Government via regulations tabled by the Leader of the House, so the Leader of the House is giving away powers in the order. He seems to be quite happy about that. IPSA will acquire the duty to do all this, rather than the current Leader of the House.
The primary legislation ensures that there is a requirement, though, for IPSA to consult interested parties prior to determining benefits or contributions in future. In the primary legislation interested parties include the Speaker, the trustees of the scheme, the Senior Salaries Review Body, the Government, and in many ways the most important organisation in all pension deliberations—the Government Actuary’s Department. This is all entirely sensible, and I look forward to IPSA undertaking this work in due course.
It is incapable.
Time will tell. If IPSA proves incapable, which I doubt, I suspect we will be back here quite quickly, dealing with the consequences. I do not anticipate that we will be in that position.
The hon. Lady is making an important contribution. May I see if I have understood what she is saying? She is saying that the order does not suspend normal trustee law, so are the trustees under a duty to give their consent or to seek to modify the scheme that IPSA brings forward? I do not know whether this is a normal scheme or not.
This will be an IPSA scheme. My understanding of it, in my reading of the primary legislation which we all supported prior to the last election, is that the trustees would have the normal legal requirements and fiduciary duties in the new scheme that trustees of other schemes have. That is my understanding. I am looking at the Leader of the House, who does not seem to be shaking his head. I assume that if the Government had a different interpretation, we would have heard about it by now.
The right hon. Gentleman is rising, so there may be a different interpretation. I am happy to give way.
The hon. Lady is right. Paragraph 12 of schedule 6, which deals with the MPs’ pension scheme, makes it absolutely clear that it is up to IPSA to devise the scheme. There are rights of consultation, but it is an independent scheme set out by IPSA.
The question from the right hon. Member for Wokingham (Mr Redwood) that I was answering was about the duties of the trustees. My understanding, from reading the primary legislation, is that it does not impact in any differential way on the legal duties of trustees.
On a point of order, Mr Speaker. If those on the two Front Benches cannot agree on a matter of such fundamental importance as this, how on earth can we proceed?
That is definitively not a point of order. It is a point of obvious and intense frustration.
I do not want to use the word “frustrated” in the Chamber because it is rather a difficult one to use. I did not think we were disagreeing. I thought I was answering slightly more accurately the point that the right hon. Member for Wokingham had made about trustees’ duties in law. The Leader of the House was answering a slightly different question about the fact that IPSA would be in charge of the scheme. Again, that does not undermine our existing understanding of trustee law and the fiduciary duties of pension trustees.
I suspect that a lawyer is going to help us with this point of debate.
I am grateful to the hon. Lady for giving way. I do not know the answer, but can she, and in due course the Leader of the House, confirm the position as I expect it to be, which is that the trustees will continue to administer the scheme for the benefit of the beneficiaries, and the terms of the scheme for existing entrants but not for their accrued contributions will be set by IPSA, as indeed will the terms of the scheme for new entrants in due course? The trustees will retain the duties that I understand them to have under the relevant legislation.
That is also my understanding, although I am not a trained lawyer, unlike the hon. and learned Gentleman. However, I did a stint as Pensions Minister so have some understanding of these matters.
Other aspects of the motion have proved more controversial, if the presence of the amendment, which proposes deleting everything from line 6, is anything to go by. The wording of the motion was not decided by cross-party agreement, unlike the decision in principle to transfer responsibility for pension arrangements to IPSA. It is the Government’s wording and appears to reflect their position on public sector pensions more generally.
When Lord Hutton produced his final report on public sector pensions, it fell to me, as shadow Chief Secretary to the Treasury at the time, to respond to it on behalf of the Opposition. We certainly welcomed Lord Hutton’s commitment to the ongoing provision of pay-as-you-go pensions in the public sector—our own included—as a matter of principle. We also noted his view that the pensions currently provided were not—to use the phrase that is bandied about—gold-plated. It is easy to forget in the welter of propaganda about the generosity of public sector pension provision that the majority of public sector pensioners receive less than £5,600 a year. Indeed, many beneficiaries are part-time women workers who take home considerably less than that after a lifetime of service. Both the Prime Minister and the Deputy Prime Minister have been guilty of using that alarmist phrase. We may have a far better and more measured debate about these important matters if they would accept what Lord Hutton has said and stop using that highly misleading and derogatory phrase about public sector pension provision.
Although Lord Hutton made the case for an increase in contributions, which is mentioned in the motion, he did not specify what it should be. He stated on page 119 of his interim report that the Government
“should have regard to protecting the low paid and to the possibility of significant increases in the number of employees opting out of schemes and should consider staging increases in contributions where appropriate, to minimise this risk.”
After the Hutton report was published, the Opposition recognised the merit of considering a move to career average benefits, rather than final salary schemes. We also recognised the pressure generated in all pension schemes—again, ours is no different—by increasing life expectancy. We had acknowledged this in government by negotiating changes to existing schemes involving increases in contributions, later retirement ages and “cap and share” arrangements. These agreements will save £1 billion a year.
Clearly, MPs’ pensions cannot be immune from such changes, and I am sure that IPSA will consider that in due course when it looks at what our future contributions and benefits should be. I am also sure that it will take into account the 1.9% increase in contributions that was agreed in 2009 as a cost-saving measure in our scheme, which takes Members’ contributions to 11.9%, 7.9% or 5.9% of salary depending on the chosen accrual rate. Likewise, I expect IPSA to take into account the fact that the average time a Member serves in the House is 15 years.
I know that some right hon. and hon. Members have suspicions about the timing of today’s motion, which is ahead of any outcome of the so-called negotiations on the pension provision for millions of public sector workers. The motion might be read in a certain way, as if it is pre-empting those negotiations, because it states that IPSA should increase Members’ pension contributions
“in line with changes in pension contribution rates for other public services schemes.”
The fact is that the talks are ongoing. If they are to have any meaning whatsoever, rather than being exposed as a charade, we cannot know in advance what their results will be.
I understand some of the hon. Lady’s concerns about pre-emption, but does she not also think that at this juncture we need to take a lead on this, despite all the concerns I have—I hope that she will be able to say a little more on the relatively generous rates for parliamentary contributions, compared with others—given the difficulties we will face throughout the public pensions sphere?
It is certainly important that we are not seen to exempt ourselves from the required changes, and in this debate so far that sense has been put across by speakers on both sides of the House.
The Government have to show understanding and good will if they are to make progress on public sector pensions.
My hon. Friend is making an excellent speech, as ever, and the point that she makes is the real one: nothing in today’s vote in the House should be seen to pre-empt the legitimate negotiating process that is taking place with millions of public sector workers. If something should not be pre-empted in particular, it is the opportunity for the Government to say that, somehow, the motion before us gives them legitimacy in refusing to negotiate in good faith with public sector unions.
I agree. I certainly hope that the Government want to negotiate in good faith with public sector unions, and I understand that sector-specific talks have been going on. In education there were meetings last Wednesday, in health there are meetings tomorrow, and the civil service has had a few meetings, because on public sector pensions it is hard to generalise. The schemes are quite different, and the local government scheme is funded completely differently.
I understand also that a meeting is due a week today between the Chief Secretary to the Treasury and the Cabinet Office Minister with responsibility for the central talks, and I certainly hope that all sides show flexibility so that there can be a negotiated settlement.
Does my hon. Friend agree that, after a lifetime working in public service, and with the expectation of a pension somewhere in the region of £5,000, many of our constituents will not accept a reduction because the House has today decided that its pension scheme is going to be different? They would be daft to be so persuaded, and they will not be.
I do not think that I was making that argument, and I hope that the negotiations will be meaningful and successful.
It is quite clear from my discussions with people in the negotiations that the Government are not negotiating seriously: they have made the point that they want a 3% reduction no matter what. All they are talking about is how they should do it, not whether they should do it, and no evidence has come forward—there are no actuarial reports and there is no cognisance—of the impact that the number of people dropping out, which could be in the hundreds of thousands, will have not just on those schemes, but on the investment potential of those schemes.
My hon. Friend makes a perfectly good point, and I hope that the Government are listening. They have to show understanding and good will if they are to make appropriate progress on public sector pensions, especially at a time of pay freezes and the most ferocious squeeze on living standards since the great depression.
The Government should not play politics with this issue, and they cannot take our support for the motion as any endorsement of the way in which they have so far chosen to pre-empt meaningful negotiations with public sector trade unions to resolve the outstanding issues on pensions caused by the announcement of an across-the-board 3.2% increase in contributions, a shift from RPI to CPI for indexation—
Will the hon. Lady give way?
Yes, of course.
The shadow Leader of the House is making quite a powerful argument. I think that she is arguing for the amendment, because it would remove all the talk that she is particularly concerned about. Is she arguing for the amendment?
The trouble with the amendment, as the hon. Gentleman would probably admit if he sat down and thought about it, is that, the amended motion would look like we wanted our public sector pension to be treated differently from the generality of public sector pensions, and that would be an unfortunate impression. I hope that he reflects on that meaning of the amendment, to which he has put his name, and thinks better of it when it comes to the debate.
I was in the middle of saying that the outstanding issues caused by the announcement of an across-the-board 3.2% increase in contributions, a shift from RPI to CPI for indexation and speeding up the increase of retirement ages, the latter of which hits women particularly hard, are real issues that I hope the Government will address with good will in the negotiations, rather than regard as a complete fait accompli.
Does not the hon. Lady recognise that one reason for what she would regard as this breakneck speed of reform of the age of retirement and pension arrangements is that so little was done, and not just in the past 13 years, since one could argue, given the actuarial evidence about life expectancy, that the inaction goes back well before 1997? The force of necessity has meant that the Government have had to act relatively quickly to make up for very slothful action from past Governments.
I do not agree with the hon. Gentleman’s interpretation at all. We sometimes agree on things; we do not happen to agree on this. We made some good reforms and we saved considerable amounts of money through the negotiations that we had on public sector pensions, which came to an agreement. I am arguing that MPs’ pensions should not be exempt from changes, regardless of whether they are independently provided for and decided on.
I hope that the Government show determination and good will in having meaningful negotiations with the representatives of millions of public sector workers whom they are meeting, and that they recognise the real challenges and dangers, as Lord Hutton pointed out, of going too far and too fast on contribution rates and driving people to leave schemes at a time when there is a ferocious squeeze on living standards. There is a balance to be negotiated, and I am not at all certain that the Government are getting that balance right. If they get it wrong, many hundreds of thousands, even millions, of people will leave schemes and will then look forward to a life on means-tested benefits when they retire, which, paradoxically, will cost the country more than if we can keep them paying into schemes. There is a delicate balance that has not often been reflected in the rhetoric—the bellicose rhetoric, in some cases—from Government Members as these negotiations proceed.
I hope that there will be a new and constructive approach from the Government in the ongoing negotiations on public sector pensions. In the meantime, we will support the motion.
My amendment effectively separates the two distinct issues in the motion and says that the first of those—whether the issue of pensions should be referred to the Independent Parliamentary Standards Authority—is something that we should support today. Indeed, it might not have been necessary to have a debate, because the Government could have dealt with it, and done so earlier, by laying an order under subordinate legislation.
The second part of the motion was described by my right hon. Friend the Leader of the House as declaratory, in that we do not expect to be treated any better or any worse than other public sector employees. If that is what it actually said, I am sure that there would not be any dispute. Certainly, I would not have tabled an amendment, and I do not think that the hon. Member for Blaydon (Mr Anderson) would have been as troubled as he, too, is about this issue.
My right hon. Friend said that the essence is that we are handing over to IPSA the responsibility for looking at our whole remuneration package, including salary, allowances and pensions, and ensuring that it should be able to do that independently. As he and the hon. Member for Wallasey (Ms Eagle) said, once IPSA has that responsibility, it will make proposals or issue a consultation paper and invite comments from you, Mr Speaker, from the Government, from Members of Parliament, from members of the public, and from other so-called stakeholders. The Government seem to be pre-empting that consultation process by saying, “Irrespective of whether IPSA asks us any questions, we’re going to volunteer some answers before we’ve been asked the questions.”
The hon. Member for Wallasey raised a number of key issues that she thinks IPSA should take into account when it considers parliamentary pensions. It was not an exhaustive list, but it contained a number of points that are not included in the second part of the motion. The second part of the motion therefore invites colleagues to sign up to a selective list of propositions, including that there should be an increase in contribution rates from 1 April next year
“in line with changes in pension contribution rates for other public service schemes.”
However, no standard formula affects all other public service schemes, which vary from one to another. The Government have said that any increases in contributions should be made in progressively and in stages. That is not included in the motion.
The motion states that the House
“supports the approach to public service pension reform”.
I do not think that is a controversial issue, but it is important that we do nothing to undermine our commitment to the belief that this is now the responsibility of the Independent Parliamentary Standards Authority. We should not give it authority with one hand while putting constraints on it with the other. That is where the Government have got it wrong; they are seeking to interfere in the process.
I see no discrepancy in the Government seeking to apply the principles of public sector reform to the decisions that IPSA will ultimately take, as is stated in the motion. That does not preclude IPSA from consulting on the finer details, as my hon. Friend said. It is important that it is explicit in the motion that the principles of the wider public sector reforms should be applicable to MPs’ pensions. It is imperative that the message goes out that that is what we are voting for.
Order. I am extremely grateful to the hon. Lady. That may well be imperative, but it is also imperative that interventions from now on are brief, because a number of people wish to speak. I remind the House that a debate of exceptional importance is to take place under the auspices of the Backbench Business Committee. I do not think that I am alone in hoping that that debate will not be delayed unduly.
I will make a brief response to my hon. Friend the Member for Stourbridge (Margot James), Mr Speaker. What she says about perceptions is important. That is why it is essential that the Government do not bring forward motions that seem to be designed to appeal to an outside audience, while at the same time leaving things rather vague and open to the accusation that they are trying to tie the hands of the Independent Parliamentary Standards Authority.
Surely all that the second part of the motion does is establish that we should be treated in precisely the same way as other public servants.
It does not say that, actually, because if it did, it would be worded in that way. That is how it is being interpreted. If nothing else comes from this debate, something will have been achieved if that is how the Independent Parliamentary Standards Authority interprets the motion. My concern and the concern of many colleagues is that it seems as though the Government have picked a few items and put them in the motion.
To take one public service scheme as an example, the Government have made it quite clear that they do not think that the principles we are talking about today should apply to the armed forces scheme. I support the Government in that, but it is a completely separate issue from trying to tie the hands of IPSA at this stage. IPSA will come forward with its proposals and they will go out to consultation, at which point the Government will have a chance to express a view, as will everybody else.
Am I right in remembering that the idea of the Hutton proposals was that they should be negotiated between the representatives of the employees and the employers? Does my hon. Friend think that that is the idea in this case as well?
My right hon. Friend is, as almost always, absolutely right. The hon. Member for Blaydon made the point that in the public sector, proper negotiations are going on based upon information about specific schemes and about employment issues overall. It seems that for some reason, the Government are trying to pre-empt that negotiation, although we have a strong and independent group of trustees for our pension scheme.
As you know, Mr Deputy Speaker, I tried to negotiate with the Government a slightly longer debate on this issue, believing that we should take it up to 7 o’clock. I lost out in that negotiation, so now I feel it is incumbent on me to reduce my remarks pro rata to give others the chance to participate. I have tabled the amendment as a probing amendment, and I have been quite interested in the reaction that it has engendered. Since I tabled it I have heard colleagues say that they think I am on to a good thing, and that they would support it if the House were to divide. However, I will wait and see the view of others before making a final decision on that.
As the chairman of the pension fund, I have had many meetings with the Leader of the House and with the chairman of IPSA. As a consequence of my concerns and those that other trustees had expressed, I wrote to every Member of Parliament. They should have received the letter on Thursday by e-mail and over the weekend by post. I presume that, as a consequence, much that I would have said does not need to be said, but I can assure all Members and former Members that I and the trustees will take on board any observations and questions that they may have.
I would argue that we are where we are today as a consequence of successive Governments, since time immemorial, interfering with MPs’ conditions of service. That is the whole reason for this debate today and why IPSA was introduced. On that basis, it seems strange that even at this late stage, the Government continue to think they can interfere with our conditions of service by putting motions such as this before the House. I reject their position and do not think it is right.
I believe that, having been given its new responsibility, IPSA should be fully independent. It is proving itself to be so in the discussions that I have with it. It has assured the board of trustees that it will operate free of Government interference on this subject and on conditions of service across the board.
Will the hon. Gentleman clarify precisely what he has been promised and who promised it to him? Is it in writing?
What has been suggested is in the minutes of the board of trustees, and it is open to the hon. Gentleman to ask for a copy of them. He will see the discussions that have taken place.
I do not have time to give way again, because I am conscious of the fact that so many Members want to intervene or make speeches. Rather than reading out the minutes of meetings, if the hon. Gentleman writes to me I will furnish him with that information.
Will the hon. Gentleman give way?
I will give way to the right hon. Gentleman if I get to a point at which I have some leeway, but I have some important things to outline before I take any further interventions.
The trustees of the time had no choice about the move to IPSA, which was agreed by a motion of the House. However, they fought for and won significant concessions within the Bill that made the change. There is absolutely no doubt that the protection of Members’ pensions was at the forefront of their discussion, and I have to praise the staff and advisers of the pension unit and its previous chairman, Sir John Butterfill. They are to be congratulated on the protection that they got for the pensions of Members and retired Members.
The legislation necessary to transfer the Leader of the House’s powers to IPSA was in place before my appointment as chairman of the board of trustees, but as I continue I shall tell the House that the trustees will have important powers that they did not have previously. The transfer of powers was agreed, as all hon. Members will know, in the wake of the expenses scandal, following the recommendations of the Kelly report. One recommendation was that IPSA should have statutory responsibility for setting Members’ pay, which of course includes pensions, and other conditions of service. It is important to understand that that must be done in consultation with the House. IPSA also has the responsibility of oversight for the administration of Members’ pensions.
Therefore, amendments to schedule 6 to the Constitutional Reform and Governance Act 2010 were made to give effect to the decision to transfer powers over pensions. That is what the Act was all about, and that is what it achieves. However, Members who read the Act will find that aspects of it clearly transfer more powers to the board of trustees.
Will the hon. Gentleman make that clear, because I do not quite understand him? Is he saying that the trustees have the power and the duty either to consent to IPSA proposals or to withhold their consent? If they have that power, how might they use it?
The trustees do not have that power. Given IPSA’s independence, which is enshrined in legislation, at the end of the day, it makes the ultimate decision, but it must do so after meaningful consultation with the trustees. Any changes that IPSA wishes to make to the pension fund must be reported to the Speaker and laid before the House. That is the power within the Act.
The trustees at the time were presented with the proposals to amend the 2010 Act. They asked for and got a number of amendments, but they had no power to overturn the Government’s proposals, which were eventually agreed. I can tell the House that the trustees made an exceptional effort and fought extremely hard in that period, and they won numerous and significant protections for Members’ pension benefits. By way of an example, accrued benefits will be fully protected after the transfer. Because the benefits have been built up, they obviously must be protected, but they are not currently protected and they could be interfered with. That is a clear indication of what the trustees were able to implement—that protection will be enshrined in legislation following the transfer. I do not have time to give more examples, but I can give them to hon. Members after the debate if they want me to.
IPSA can make changes to MPs’ future pension benefits and contributions only after formal consultation with the trustees, the majority of whom, following the transfer of the power, which will happen whenever the Leader of the House gets round to signing the order, will be Members of Parliament or former Members of Parliament. That is an enhancement of the trustees’ powers, because there is currently no such requirement.
Currently, there are 10 trustees—eight are Members of Parliament and two are former Members, but when the order is signed, one trustee will be appointed by the board of IPSA and one will come from the Government. The Ministry for the civil service, the head of which is the Prime Minister, will appoint the latter. I do not suppose the Prime Minister wants to become the trustee of the Members’ pension fund, but who knows?
I do not understand why we have suddenly created a post for the Government in the running of Members’ pensions.
I will explain. That individual would be responsible only for representing the Ministers’ section of the pension fund. A former Minister would have a different contribution rate. I see the Leader of the House agreeing with me on this. The pension fund administers that at present and will continue to do so, but by virtue of the contribution, it will come from the Department that the person was in or from the civil service. The Government are not going to start playing a part in the Members’ pension fund. I hope that that answers the hon. Gentleman’s question.
There was originally a proposal in the Bill that members of the board of trustees could be removed by IPSA. That has now been forgotten, and the eight members of the board will continue to be appointed by this House and no one else. They will continue to be elected or selected from this place or from among former Members. At our trustees’ meeting on Thursday, we thought it sensible to determine that we would lose two members at this stage so that this whole process could be carried out smoothly. Otherwise, all sorts of complications could have arisen. As a consequence, I would like to put on record my appreciation—and that of the other members of the board—for my hon. Friend the Member for Lewisham West and Penge (Jim Dowd) and the hon. Member for Watford (Richard Harrington), both of whom have now withdrawn as trustees.
The increase in contributions is the main point of any argument on this matter. I have already argued, and I want to reinforce the point, that IPSA must be seen in every respect as independent. I see no reason why the House should indicate that it would like our pension contributions to be treated in the same way as those of other public service workers. IPSA has a statutory duty to act independently of Parliament, and by giving such an indication, the House is putting undue pressure on IPSA. It should not be influencing IPSA in that way. IPSA must undertake its role as laid down in statute, and in no other way.
Surely it is important, however, for the House to make it clear that MPs should not be treated differently from other public sector workers. In particular, we should try to avoid a repeat of the bizarre situation earlier this year in which we had to take back powers to set our own pay because the Senior Salaries Review Body had recommended a pay rise for MPs in a year when the rest of the public sector faced a pay freeze. Any such pay rise would have been entirely inappropriate.
I have to disagree with the hon. Lady, and I will tell her why. If we put things out to independent arbiters such as the Senior Salaries Review Body, and they make recommendations after consultation with all sorts of bodies, I would argue that the Government should not intervene. In that case in particular, we should not have overturned that decision. This is where we have gone wrong so many times in the past. In the great number of years that I have been a Member of Parliament, I have seen this happen time and again, and my research leads me to believe that every Prime Minister since 1945 with the exception of John Major has interfered in the conditions of service of Members of Parliament to the detriment of those conditions.
I feel strongly about this—so strongly that, as the arch-enemy of IPSA, I argue on the basis of what I have seen that it is far better for it to have that independence, which is clearly documented in legislation, than to have this constant interference in the conditions of service of Members of Parliament. There has not been a great understanding by the Government of some of the elements of the arguments with IPSA.
Given that pay and pensions are linked, it is only sensible for IPSA to take stock not only of all elements of conditions of service, but of the whole question of pensions, which I have always believed to be deferred income for any individual in employment who has a pension fund.
Other considerations relating to IPSA in consultation with trustees include the fact that it has to wait for a valuation. Here, as I say, the Government have not fully understood the position on Members’ pensions or the calculations of where they should go in respect of any increase in contributions, any increase in the age of retirement or any other element affecting those pensions. Clearly, the results of the 2011 valuation of the scheme will shortly be finalised, which I take as a very strong argument for leaving the decision about increases in contributions, if there are to be increases, to IPSA itself. As far as we are concerned, we are in a cost-sharing scheme, as a result of which we must see what the actuary says about any changes to contribution rates before taking a decision that puts us in line with anybody else. As Members will know, there have been increases to pension contributions over a relatively recent period, which I do not think any other members of the public sector have had to face. I suggest that it is important to take that into account, as we are told it will be by IPSA.
I suggest that trustees would also recommend giving further thought to other cost-saving measures in the scheme to make it simpler and to make the benefits clear in a way that everybody understands. From the discussions I have had with Members of Parliament over the last few weeks, I believe that there has been a misunderstanding of many aspects of the scheme. That needs to be taken into account. We also need to consider, if possible, as a means of getting away from increases in contributions, the whole question of increasing the pension or retirement age. It could be part of the answer to some of the problems we face.
Another misunderstanding is the view that this scheme is expensively funded in itself. Schemes like this should be treated differently from unfunded or notionally funded schemes, as assessing changes to member contribution rates should take into account any excess returns generated by funded schemes from the investment strategy. I understand that the London Pension Fund Authority scheme, which is a funded scheme, might not be subject to the general contribution increase that the Government hope to implement. If there are exceptions there, they can be made anywhere else. I am convinced that an awful lot of negotiations are still to take place, and these will bring to the fore some of the elements of the pension fund that are not best understood.
Is there not a big problem with this whole debate in that we talk about these things as if they are a matter of negotiation, but in fact what we are really talking about is the fact that the Government are imposing a stealth tax on all public sector workers? They are not having negotiations about that, and they are not taking actuarial advice or the effect of the schemes into account. All they are saying is, “There will be an increase on public sector workers’ pensions” as a matter of fact—without allowing negotiations about any scheme to be taken into account.
I am not in a position to answer that, as it is for the Leader of the House to do so, although I certainly have some sympathy with what my hon. Friend says.
Some of the closest comparators to Members are senior civil servants. Members of the civil service pension scheme and other schemes such as the scheme for staff of the House of Commons and the House of Lords pay either 3.5% or 1.5% contributions, depending on when they joined the civil service. For that contribution, they either build up a pension at the rate of one sixtieth, or one eightieth plus tax-free cash sum—which equates to one sixty-fourth—with a retirement age of 60, or they build up a pension at the rate of one forty-third with a retirement age of 65. That must be taken into account along with everything else in which we will be involved between now and 2015. It is clear from the discussions that have taken place that consideration must be given to all elements of Members’ contributions.
People may think that I only represent the House in this regard, but I have constituents who are aggrieved by what is happening to their pension funds, and I have every sympathy with them. However, I am here almost as a shop steward—I am not sure that that expression is much liked on the Government Benches—to represent Members in the context of their conditions of service. People describe this as a gold-plated scheme, but although it is a good scheme—indeed, I would argue that it is a brilliant scheme—what is not understood is that only a few Members of Parliament retire from this place with a full pension. Of the 650 serving Members of Parliament, only 35 would leave with one today. Another thing that is not understood is that most Members pay for the rate of one fortieth, which means paying 11.9%. So the scheme cannot really be described as gold-plated.
Does the hon. Gentleman accept that Members may have already contributed to pension schemes before being elected to the House? They do not generally come here at the age of 21.
The regulations restrict the level of pension that can be paid on retirement. The limit is generally two thirds of pay inclusive of pensions that people have built up before becoming Members of Parliament. I think that that answers the hon. Lady’s question. As most MPs have other pension entitlements, the restriction means that a number of them are not paid the pension of one fortieth for each year of their parliamentary service. Worse, a small number of MPs who have not transferred their pensions to the fund end up subsidising the Exchequer by continuing to make contributions for a period for which they will receive no pension. That, too, is not best understood by those who criticise us.
I understand that the legislation allows Members to opt out. If there were an increase in the level of the contribution and if I were 45, I should find things very difficult. Given domestic circumstances, not every Member of Parliament is rich, and those who are not would find it difficult to continue to make their contributions. I understand that that also applies to many members of the fire service, for instance. There will be a drift, and if that gathers pace—as it could—the pension fund will suffer and the Exchequer will eventually have to fund more than it does at present. That must be factored into the equation before any change is made.
Our discussions with IPSA suggest—and Sir Ian Kennedy himself has stated—that it has determined that MPs’ conditions of service will be dealt with fairly, that it will work closely with the trustees once the powers are transferred, and that it would welcome proposals from the trustees on how the relationship should work. I have put that on record because it was said. At the trustee meeting Sir Ian attended, he went on to say that IPSA’s statutory independent role will be maintained. Importantly, that includes independence in respect of public perception. I think the public realise that, and I know the trustees will hold them to that point.
My perception of IPSA over the past 18 months is such that I have zero confidence in it. Although the amendment’s wording is not perfect, it offers me the only opportunity I will have to put that perception on the record, which I can do by voting against the motion. I fear that in the fullness of time Members will rue the day they handed their pensions to IPSA.
However, if it were not for my experience of the last 18 months, which the vast majority of Members share, I would be voting for the motion, as I recognise the importance of our pension scheme and salaries being independent. My reason for not voting for the motion is purely lack of faith in the competence of IPSA. I want to stress, however, that I am not talking about its hard-working staff. They are up the same creek as us; they are in a different canoe, as it were, but, in common with us, they have no paddle.
My criticism is entirely of the IPSA board. One only has to read the minutes of its meetings to realise that it has in mind not user-friendliness in respect of Members of Parliament but, rather, hostility. I serve on the Speaker’s Committee for the Independent Parliamentary Standards Authority and, interestingly, in the 18 months since it was established we have yet to meet the full IPSA board. That is astonishing.
I have concerns about the part of the motion that the amendment would delete. The motion says that following on from the work of the Independent Public Service Pensions Commission, IPSA will draw up a new scheme
“which is informed by the Commission’s findings and their subsequent application to other public service pension schemes”.
I venture that we could latch on to some such schemes without IPSA being involved in any shape or form.
I appreciate that many other Members wish to speak. I have put my concerns on the record and stressed that I am not criticising IPSA staff. My criticisms are purely of the policies of the IPSA board. I conclude by noting that the National Audit Office has issued a report that is not exactly flattering to IPSA. It says it does not represent value for money and that it has brought in a scheme in which 38% of all claims cost more to administer than the claim itself. It has also found that 91% of Members of this House are now subsidising their work and that a large part of the reason for that is the systems introduced by IPSA.
It would be hard to argue with what the hon. Member for Colchester (Bob Russell) has just said if we had not already agreed to do this. We are halfway down the line, and we have been since before the last general election when we said we would give IPSA this responsibility. The debate should have stopped then. We should have said, “Right, we agree today that we’re going to do something we should have been doing over the last 16 months. We’re going to tell IPSA to get on with it by sitting down with our trustees and negotiating a settlement based on the way pension schemes across the world operate.”
Why are we having this debate tonight on a lengthy motion that pulls in public sector pensions? I take the Leader of the House at his word of course, but I am convinced that other people will use this debate as a stick to beat public sector workers over the head with. They will say, “MPs have agreed to have their pensions changed, so why don’t you?” That is the wrong way to deal with something as integral to someone’s terms and conditions as their pension. The terms and conditions of public sector workers, or of any other worker in this country, should be based on a genuine debate between the employer representative for the pension scheme—IPSA in our case—and the trustees. They should come together to weigh up the evidence about what the scheme does, what it is there for, whether it is sustainable and whether there is evidence to back changes.
This country faces a situation in which the Treasury is telling us that a levy must be imposed on those in the public sector, which in some cases will be 3% and for us could well be 5%, without any account having been taken of whether it is legitimate, whether it makes schemes affordable or whether, as has been said, it makes them less sustainable. A survey carried out by YouGov for the Fire Brigades Union suggested that 27% of its members could opt out and 12% would be very likely to opt out of their scheme if these changes go through. Unison has suggested that 350,000 people could opt out of these schemes. These schemes are good for the people in them. They are not gold-plated, but they are probably as good as most people in work can get. If people opt out, that will affect not just those individuals but will have a huge effect on the investment potential of this country, because those pension schemes invest heavily in the stock market.
The hon. Gentleman is putting his point fairly. I might well agree with the Government’s approach to pension reforms, but I am surprised that the motion states that “this House” supports it. This is the wrong debate in which to make that statement.
I could not agree more with the hon. Gentleman. This debate should be about the processes of this House—House business is about that, not the politics of this House. It should be about whether we agree that this is the right way for Members of this House, and whoever comes after us, to be treated. This should not be about whether this suits someone’s political agenda and allows them to go outside and say, “Look, MPs think it’s legitimate to have a 5% or 3% levy. Why won’t you do the same?”, but my worry is that that is what this is about.
Let us not forget that we had a debate that concluded three years ago about public sector pensions, including our own. That resulted in big changes to public sector pensions. As has been suggested by our trustee colleague, my hon. Friend the Member for Central Ayrshire (Mr Donohoe), a cut-off was introduced: people would retain the benefits if they joined before a certain date, but for those who joined after and for new members the pension contributions would be more and their benefits would be less. Public sector workers agreed to that three years ago on the basis that it would make their pensions sustainable for the future. Nothing has changed since then, except for the fact that the Government want to impose a levy on public sector workers to try to dig themselves out of the hole created by the collapse of the global financial system. That approach is clearly wrong. Public sector workers should not have to carry the can for the failure of the banks, and that is clearly the message being given throughout the world.
My worry is that if we tell people that they should start paying 50% more for their pensions at a time when they face pay freezes, freezes of increments, a tax on shift payments, potential redundancies and so on, they will walk away from these pension schemes, as I said earlier. That will be to the detriment of the schemes, investment and the welfare system, because as people reach retirement age there will be a bigger drain on the welfare state than there would have been had they been able to provide for themselves.
This approach is a con trick. It is not about pensions’ stabilisation; it is about taking money out of the pockets of nurses, firefighters, street cleaners, social workers and home care workers to pay for the failures of capitalism. The truth is that we should stand together with those workers, as public sector workers, in a debate that is about our terms and conditions. They have a similar debate about their terms and conditions and we should say, “We stand in solidarity with you. It’s wrong that the Government are robbing you for your pension and taking money out of your pockets.”
I thank the hon. Gentleman for giving way and I should declare an interest as the chairman of the all-party group on occupational pensions. I am puzzled by where the hon. Gentleman is going on this, because the motion is surely all about the parliamentary pension fund rather than about those of trade union members in general.
If the hon. Gentleman had been here from the start of the debate, he would realise that it has expanded into a discussion about public sector pensions because they are included in the motion, in which the Leader of the House has clearly linked this scheme with other applicable schemes. Some of us who signed the amendment want to remove that link so that we can have a debate about when and whether we will give IPSA the right that it should have had since last May. If we had had that debate, we would not be sitting here now and we could have talked about the issue that most people in the House today want to talk about.
Ultimately, we are showing support for other public sector workers and we are not saying that we are a special case. We are saying that the Government should not make any public sector worker a special case by making them pay a levy to subsidise the failure of the banking system.
I rise to support the motion, and although I appreciate the sentiments expressed by my hon. Friend the Member for Christchurch (Mr Chope), I think his amendment is unnecessary.
I must admit that I never thought I would be talking about my pension. Perhaps because I do not have dependants, I did not immediately rush to the pension scheme booklet to have a look at what I should or should not do, but just went for the default—as most new Members probably did—of 11.9% of my pay. However, I want to ask a few questions that I would like IPSA to bear in mind, and perhaps the Government might respond to them later.
Will the scheme to which we contribute be wound up or frozen? There is a difference, in that the Government might be expected to continue with contributions for the closed scheme in the future depending on its status. As regards any deficit or surplus—I do not know the latest on that—will the Government confirm that any future contributions will not be used to top up any deficit, but that the Treasury will make good the scheme as and when it is closed to new members and fresh contributions from members?
I encourage IPSA to consider schemes that are permanently funded, not unfunded, as it were; what other quasi-public organisations have done; and whether they have used salary sacrifice or similar schemes to ensure—how can I put this?—that the scheme still represents good value for us all. I hope that IPSA will also consider how Members can vary their contribution. I was interested to hear what the hon. Member for Central Ayrshire (Mr Donohoe), the chairman of the trustees, said about how people might unwittingly end up subsidising other Members or, indeed, the Treasury. Some education on that would be helpful. Will the Government also make a statement about bringing forward proposals on the ministerial pension fund and whether any changes will be made to that on the basis of career average earnings or salary at the time of being a Minister? Some parity would be helpful.
I would say to the hon. Member for Blaydon (Mr Anderson) that I do not see the motion as one that beats up public sector workers. I understand his honourable perspective, which leads him to say that we should not accept this if we are not prepared to accept it for the people we represent. I, like other Members on both sides of the House, believe that we cannot make proposals, which were suggested by Lord Hutton, if we are not prepared to follow them ourselves. If we are asking other people to make a sacrifice—I recognise that the hon. Gentleman is not, but those on the Front Benches agree in this instance—it is paramount that we should be prepared to, too.
I appreciate that other Members wish to speak and that there is a very important debate to come, so my final point is that nobody should be surprised by this, either on the Government Benches or elsewhere. If I heard correctly, the Treasury is contributing 28% and our contributions are roughly 12%, and a 40% contribution towards a pension scheme is not sustainable for any organisation. My former employer used to offer contributions into the high 30s and took the decision to close the scheme. We need to ensure that what we do acts as a role model for companies and for the public sector.
It is a great pleasure to follow my hon. Friend the Member for Suffolk Coastal (Dr Coffey) who, as usual, made a number of good points. I think it would be wrong if I did not mention the speech of the hon. Member for Central Ayrshire (Mr Donohoe), which I thought was the most reasoned and sensible speech of the whole debate. Uncharacteristically, the Leader of the House was not on his best form and did not show his usual charitable nature. I think that when he reads Hansard tomorrow, he will regret the remarks he made about the implied position of Members who signed the amendment, which was quite wrong. I really think that, on reflection, he will regret saying that.
The emoluments of Members should be a matter for the House and Members should have a free vote and be allowed to make their own minds up—this should not be party whipped. That is where a lot of the problems with our pensions and salaries have occurred in the past, with every party leader trying to bid lower to attract what they thought was the best press coverage on the issue. I do not think that a single Member has said that our pension scheme should not go to IPSA. What I am concerned about is our sending it to IPSA, and then the Executive—the very Government who say they want there to be an independent look at how our pensions are run—telling that independent scheme what to do. That is the whole problem.
The amendment is very simple. It simply takes out all the garbage, goes to the heart of the matter and transfers our pension scheme to IPSA for IPSA to make up its own mind. I am quite sure that Sir Ian Kennedy will ignore the rest of the motion anyway, saying that it is just a representation and that IPSA will make its own mind up. It seems to me that the Government can quite properly make their own submission but that they cannot tie it to the House. Members should be able to make their own submissions and it is wrong to try to force this through. This is what every single Executive have done since I have been here. I say to the Government, “You really have to butt out; you have to leave the pay, conditions and expenses to IPSA.” With all due respect to the Leader of the House, I will have a 10p bet with him that we will be back here again voting on our salaries, because the Government at some stage will not like something that IPSA has recommended.
Let me address the comments of the shadow Leader of the House. I am amazed that the Opposition are going to vote for a motion that states that the House
“supports the approach to public service pension reform set out in the Final Report of the Independent Public Service Pensions Commission chaired by Lord Hutton of Furness”.
I might think that is a good idea, but I did not think that was the Opposition’s view. If they vote for this motion, they are voting for that. They cannot argue about it because it is on the Order Paper.
I spent a little time talking about some aspects of the Hutton report that we did support, and I also made observations on some aspects of the Hutton report to which I thought the Government should pay more attention. I think my speech was entirely in keeping with our response to the Hutton report to date—as the hon. Gentleman will see if he reads it in Hansard tomorrow.
I listened very carefully to the hon. Lady. If this motion goes through, the Government will quite rightly be able to say that the official Opposition support the wording because they voted for it in the House of Commons. That may well be her position—I am happy to accept that—but this is not the right place to be debating this issue.
Does my hon. Friend share my disappointment at the obvious lack of intellectual rigour being applied to this issue by those on the Opposition Front Bench?
That is tempting, but I do not think it is that. I think that the Opposition are between a rock and a hard place. They do not want to support that particular point, but, equally, they do not want to be spun against by the Government who will say, “There we are, the official Opposition didn’t want to restrict our pensions.” That is what they are really scared of. They have decided that they would rather put the perception in the papers above taking a principled stand. Time and again we do that in the House, and I think it is a huge mistake.
How would my hon. Friend answer his constituents in the public services whose pensions are about to be significantly downgraded when they ask him why the parliamentary pension scheme remains the most generous of all and whether he missed the opportunity to amend it?
That is simple to answer in the way that I hope that my hon. Friend would answer it: the House believes that our pensions, expenses and salaries must be determined independently, so they should be determined by the independent body, not by him or me. That is how we got into this mess in the first place. I hope that he and all other Members would make that point.
I came to the House expecting the amendment tabled by my hon. Friend the Member for Christchurch (Mr Chope) to be a probing amendment, because we thought that the Government would say that this was up to IPSA, that this was just their view and that it was an independent matter. Unfortunately, the remarks of the Leader of the House have so incensed me that, if my hon. Friend wishes to put the amendment to the vote, I shall support him.
Although I do not agree with the final few words of my hon. Friend the Member for Wellingborough (Mr Bone), I agree with much of the rest of what he said. If this was genuinely the last time that the House would ever consider these issues, I would be rejoicing and might even be entirely persuaded by what the Leader of the House said. He knows as well as I do that, if IPSA recommends a significant salary increase in advance of April 2013, the Government—perhaps even a Government with him still as Leader of the House—will introduce a two-line Bill to ensure that we do not vote on the proposal.
This is a crying shame: we got into this mess, going back 25 or 30 years, because Executives repeatedly interfered with salaries, general remuneration, pensions and expenses, and there seems to be no end in sight. I have not been reassured by what has been said. I have quite a lot of sympathy with what the Government are trying to achieve, but I would have even more sympathy if they had said, “This is IPSA’s responsibility. Let IPSA get on with it.” That was the position as we understood it when the bomb went off less than three years ago over the expenses row.
At the beginning of 2009—a somewhat different time—I wrote an article for the Daily Mail arguing that the disparity between public sector and private sector funded pensions had the makings of an enormous political controversy. I recognised that MPs would have to take a lead and that the public sector, which includes us, had to wake up to the reality of higher life expectancy and the unchallenged cost of unfunded pensions.
We must place on record some commonly misunderstood facts about our so-called brilliant pension scheme. We have quite a generous pension scheme, about which the hon. Members for Central Ayrshire (Mr Donohoe) and for Blaydon (Mr Anderson) made important contributions. Compared with many other pension schemes, ours is well funded, but those who are on the one fortieth scheme already pay a 11.9% contribution, which is considerably higher than the norm for other public sector pensions. Those facts never seem to be mentioned by hon. Members or the press when the issues are discussed.
I very much agree with my hon. Friend the Member for Wellingborough about the lesson to be learned from recent months: we might have hoped that the Executive would stop trying to pander to every whim of the press. Unfortunately, the motion seems to be a little more governed by tomorrow’s headlines than by the justice of the case. I say that with some regret, because I broadly agree that Members of Parliament should take a lead on the issue but should not pre-empt other discussions—that would be wrong, too, given the great difficulties the country will face.
I regret that, once again, the Government, like so many before them, have failed to grasp the nettle on MPs’ remuneration and to consider our salaries, expenses and pensions in the round, rather than disjointedly holding a debate every six or nine months and reducing our total remuneration at the margins.
Above all, the lesson that we ought to have learned from recent times is that we should leave this to an independent body. IPSA now, rightly, sets our rules. I understand some of the concerns about IPSA’s operation expressed by the hon. Member for Colchester (Bob Russell). I have had some of my own concerns about it, as I am sure many hon. Members have, but it would be far better to leave IPSA to recommend an appropriate contribution, rather than have the sense of interference.
I go along with the motion. I understand from my hon. Friend the Member for Christchurch (Mr Chope) that the amendment will not necessarily be pressed to a vote. We have a very important debate to follow, so I am glad to hear that, and I praise the Leader of the House for ensuring that we have a fairly full debate on Hillsborough. That debate is not just for Members of Parliament from Merseyside or south Yorkshire, where the terrible events took place; as a keen football fan, and the vice-chairman of the all-party football group, I think it very important that we hold that debate, and I sincerely hope that, after quick winding-up speeches, we can move on to it and put the issue we are discussing to one side. I hope—I speak more in hope than in expectation—that I shall never again have to speak in the House on any matters to do with MPs’ pensions, pay or expenses.
I will be brief because, as the hon. Member for Cities of London and Westminster (Mr Field) pointed out, we are due to start a debate that is 22 years overdue, and many family members of those who died are here to listen to it.
Three basic principles underlie the topic under discussion. The first and most important is that Members should never again vote on pay and pensions issues. Independent determination of our remuneration and expenses is critical to the integrity of the House. I have always believed that it is invidious that Members are asked to determine their pay and pensions. The same rules should apply to local government and the devolved Assemblies. I absolutely, wholeheartedly agree with the motion, in the sense that it should stop, once and for all, any votes on such issues, although I understand that on at least three occasions we determined never again to vote on them yet have always ended up coming back to them. Let us hope that this is the last time.
The second principle is related and is very much about public confidence in Parliament and its Members. Labour Front Benchers believe that taking the matters we are discussing out of the hands of Members will do a great deal to help restore that confidence, as outlined in the 2009 report of the Committee on Standards in Public Life. We voted on that principle in the previous Parliament, and it would be absolutely consistent with that vote to support the motion on passing responsibility for our pension scheme to IPSA.
The third principle is that of parity. It is absolutely critical that Members understand that we are no different from other public sector workers and that we should be no better or worse off than public sector workers when it comes to our pension scheme. The hon. Member for Wellingborough (Mr Bone) referred to that point.
We will support the motion and oppose the amendment, because we believe that the principle of parity with public sector workers is of the utmost importance, but it must be understood that we may not entirely support the Government’s approach to implementation of the Hutton report. We believe that some of the statements made in the Hutton report are absolutely right, but we do not necessarily support everything the Government are doing to implement it. That is an important distinction to make.
It is also important to re-emphasise the point made by my hon. Friend the shadow Leader of the House: there has already been a 1.9% increase in Members’ contributions, which was agreed in 2009 as a cost-saving measure. IPSA should also take account of the fact that a Member serves for an average of just 15 years.
I reiterate the importance of consultation. The motion correctly secures the ongoing involvement of the trustees in consultations on changes to the operation of the scheme.
The shadow Leader of the House successfully deconstructed the myth of public sector gold-plated pensions. She restated the often overlooked fact that the average public sector pension is less than £5,600 a year and reminded us of the importance of the Government committing to meaningful negotiations with public sector unions, not going to the negotiating table with predetermined outcomes. I re-emphasise my hon. Friend’s point about the Government’s use of language, which sometimes seems designed to inflame the situation rather than to resolve the outstanding issues.
Our support for the motion does not in any way stand as an endorsement of the Government’s approach to public sector pensions, but because of the principles it outlines we believe that it deserves the support of the House.
I thank the hon. Member for Penistone and Stocksbridge (Angela Smith) for what she said in support of the motion. She set out the Opposition’s position clearly and we are grateful for her comments.
The hon. Lady is right. We ought to emphasise very clearly, first, that MPs’ pay, remuneration and pensions should be determined independently—we should not vote on the money we get. I agree with her and with the principles of the legislation, the final part of which we are putting in place today. Secondly, we should say explicitly—this is the crux of the debate—that on pensions MPs should not be in a different position from others in the public sector. We should be treated no better or worse than those whose interests we will be considering and have considered in the past. The public will take a very dim view indeed if, as a parting shot, we try to claim that we are a special case, although there have been some indications, however well wrapped up, that some feel we are a special case.
Intrinsic to that is something that we need to understand across the public sector, which is that these prospective changes do not change accrued benefits: they are not retrospective. In the case of the Members’ pension scheme, they cannot be retrospective by statute.
I must pick up one point made by the hon. Lady, which was echoed elsewhere in the Chamber. She said that Members have a relatively limited period of employment in the House, about 15 years, which is reflected in pension contributions. We should recognise that that is slightly longer than the average length of service in the civil service, which is 13.5 years, so our tenure is not below average across the working population. However precarious we might think our position is, there are precarious positions out there as well.
The main argument that we have had this evening is on the amendment tabled by the hon. Member for Christchurch (Mr Chope) and supported by the hon. Members for Wellingborough (Mr Bone) and for Blaydon (Mr Anderson) and partially by the hon. Member for Cities of London and Westminster (Mr Field), who expressed some sympathy but felt he would support the motion.
The key point is that they do not wish us to express an opinion on the form in which the independent scheme will be worked out. They feel that that should be left alone entirely and that for the House to express an opinion on the matter pre-empts the decision. I do not think that it pre-empts the decision. I think that it is perfectly proper for the House to take a view. We are statutory consultees on the final schemes that will be independently worked out by IPSA if the motion is passed. Although I think that it is important that we have an opinion, that opinion, which must have some value, will not dictate the final result. I repeat that I do not believe that we should be in a different position from other people in the public sector. [Interruption.] The hon. Member for Blaydon nods in support of that contention.
Others fear that we are arguing for exceptionalism. The general secretary of Unite, Len McCluskey, today commented on the amendment:
“We’re not all in this together… While they bay for cuts to public sector pensions, they act to feather their own nests. This will appal ordinary people”.
I do not propose to base everything I say on the opinions of Len McCluskey, but I think that many people who do not take an extreme view would nevertheless be very concerned if it appeared that MPs, of their own volition, are to be treated differently from those in other public sector schemes. That is why I am particularly grateful for the support of the shadow Leader of the House for the basic contention.
Does the Minister trust IPSA? If so, why does he find it necessary to add other words to the motion?
I trust IPSA to carry out its statutory functions and give an independent assessment, but I think that there is no harm whatsoever in inviting the House to agree that we should not claim an exception for MPs. We claim no such thing and therefore expect IPSA to have regard to Lord Hutton’s review and the policy consequences that flow from it.
Will the Minister make it very clear for the House, the public and, in particular, Len McCluskey that no Member has argued that MPs should be a special case? Everyone has argued that all public sector workers should be treated equally—that they should also be treated properly.
I hope that no hon. Member believes that they are a special case and that, if the House divides this evening, they will bear that in mind when casting their votes. I am simply talking about the perceptions that those outside the Chamber might have. I am very clear about what the perceptions would be if Members supported the amendment, which is why I hope it will not be pressed to a Division. That would only divide the House on something on which we ought to be united.
The House seems pretty much united behind the principle of the motion, but a little concerned about the wording. That leads to the following question: if IPSA were significantly to improve the benefits to Members, would the Government step in to prevent that?
We would have no power to do so. It is an independent process. If there was any notion that should be done, it would require changes to primary legislation, which would be a matter for the House, not the Government. We can be assured that that is the case.
I wish to put on the record my appreciation of the work that the hon. Member for Central Ayrshire (Mr Donohoe), who chairs the trustees of the parliamentary pension scheme, and his colleagues have done. We are particularly grateful to the hon. Members for Lewisham West and Penge (Jim Dowd) and for Watford (Richard Harrington) for stepping down in order to facilitate the transfer. I know that the hon. Member for Central Ayrshire takes an active interest and has been engaged in discussions throughout the process. I am particularly grateful for his letter, rather than his comments today, in which he stated: “Overall the trustees are of the view that the transfer of powers to IPSA will give the trustees the opportunity to contribute to the review of your pension scheme that we all know is inevitable in a constructive way.” Hear, hear to that. Everyone needs to take account of the caveats he offered, but I do not think that that obstructs the thrust of the motion. My hon. Friend the Member for Colchester (Bob Russell) will not agree with that point, because he does not like IPSA, he does not like all its works and he does not believe that he can trust it. I understand his position, but I invite him to look back at the legislation, which we passed, and accept it.
One very important question has not been answered: when will the order be signed transferring to IPSA the powers to undertake the pension scheme?
First, we have to accept the result of any vote this evening, but if the motion goes through the order will be made shortly, and the hon. Gentleman should know that that really does mean shortly; it will be not one of those that lasts several months.
I reconfirm for the hon. Member for Suffolk Coastal (Dr Coffey) that the Government propose to increase contributions to the ministerial scheme, with staged increases being applied from 1 April 2012, and that we will consult on the proposal, as required by the Constitutional Reform and Governance Act. For the avoidance of doubt, I should point out that I do not receive a ministerial salary or pension, so I will not be affected—[Interruption.] As the hon. Member for Wallasey says, I do the job for nothing—for my love of the job. I am glad that that is appreciated—[Interruption.] She does, too.
On that note of happy consensus, I hope the House will agree the motion and pass the matter to the independent body with the very clear indication that, no, we do not expect to be treated differently simply because we are Members of this House and have the opportunity to express our opinions here in the Chamber.
Does Mr Chope wish to move his amendment?
With the leave of the House, I will not seek to move my amendment, because the Government have said that they agree with everything that I and the hon. Member for Blaydon (Mr Anderson) have said, so it seems sensible to move on to the next business as soon as possible.
The question is as on the Order Paper. As many as are of that opinion say Aye—[Hon. Members: “Aye”]—to the contrary No—
The Ayes have it, the Ayes have it.
That this House reasserts its view that the salaries, pensions and expenses scheme for hon. Members ought to be determined independently of this House; accordingly invites the Leader of the House to make an order commencing those provisions of the Constitutional Reform and Governance Act 2010 which transfer responsibility for the 5 pensions of hon. Members to the Independent Parliamentary Standards Authority (IPSA); supports the approach to public service pension reform set out in the Final Report of the Independent Public Service Pensions Commission chaired by Lord Hutton of Furness; believes that IPSA should introduce, by 2015, a new pension scheme for hon. Members which is informed by the Commission’s findings and their 10 subsequent application to other public service pension schemes; recognises the case for an increase in pension contributions made in Lord Hutton’s interim report; and accordingly invites IPSA to increase contribution rates for hon. Members from 1 April 2012 in line with changes in pension contribution rates for other public service schemes.
We now come to the important Back-Bench business on the Hillsborough disaster.