House of Commons
Wednesday 2 November 2011
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
business before questions
London Local Authorities Bill [Lords] (By Order)
Consideration of Bill, as amended, opposed and deferred until Tuesday 8 November (Standing Order No. 20).
Oral Answers to Questions
The Minister for the Cabinet Office was asked—
1. What steps he is taking to encourage individuals and organisations to engage in projects that benefit their local community. (77750)
Encouraging more social action is a key strand of the big society vision, so we are looking at ways to cut some of the red tape that gets in the way and are busy delivering programmes such as Community Organisers, Community First, the national citizen service and the social action fund.
I thank my hon. Friend for his positive reaction. I am aware that at least three wards, I think, in his constituency are eligible for the Community First grant programme. This is a fund designed to put money into the hands of neighbourhood groups to help them implement their own plans. It is focused on wards that blend high levels of deprivation with low levels of social capital, and I very much hope that he will engage personally in supporting constituents in those wards to maximise those particular opportunities.
I declare an interest as a trustee of Community Service Volunteers, which had its Make a Difference day on Saturday last week, encouraging people to volunteer and make a difference in their community. What steps will the Government take to ensure that organisations such as Community Service Volunteers can reach out and encourage volunteers like Abbie, who is unemployed, to make a difference by working in her local Marie Curie shop?
Community Service Volunteers is a great organisation and it had a spectacularly successful day. The answer lies in trying to reduce some of the barriers, such as the red tape that I mentioned, that stop people getting involved. It is also important to try to inspire people to step up and get more involved. That is why we believe that programmes such as Community Organisers and Community First, which are about bringing communities together to identify what they want to change and inspiring them to work together to make that change happen, can be a very powerful intervention.
The Minister will be aware that this is national trustees week. Will he address two particular concerns of that campaign? The first is that the number of young people being attracted to become trustees is very small indeed, and the other is the fact that more than half of charities have at least one vacancy on their board of trustees.
The hon. Gentleman raises an extremely important point. We all know the value and importance of the work of trustees and the ability of a really good set of trustees to transform the capability of a charity or voluntary organisation. It is important that the Government will announce some steps to promote wider awareness of the opportunity to take part in being a trustee.
I refer the hon. Members for Manchester Central (Tony Lloyd) and for Dumfries and Galloway (Mr Brown) to the open letter to the voluntary sector, which was sent to all MPs and published on the Cabinet Office website; it sets out our strategy for encouraging more social action and supporting civil society.
The Greater Manchester centre for voluntary organisation estimates that a quarter of those employed by voluntary organisations are losing their jobs in this two-year period. Can the Minister honestly tell the voluntary sector through the House that with that level of cutbacks there really is a role for that sector? Volunteers need a structure in which to work.
I understand the hon. Gentleman’s point. We all have to recognise that there is less money around so some difficult choices have to be made. I simply refer him to the statement made by his own leader to the BBC on Valentine’s day this year to the effect that he could not have protected the voluntary sector from local authority cuts. There is awareness of the challenge that we all face. I know that the sector in Manchester has benefited from the transition fund and that a bid has been put in to the infrastructure fund from the organisations that support front-line organisations. Eighteen wards in the city of Manchester and 69 in Greater Manchester are eligible for the Community First grant programme.
People in my constituency who are living with cancer and other long-term conditions desperately need benefits advice. It is currently provided by Macmillan Cancer Support, Citizens Advice, Welfare Rights and the Princess Royal Trust for Carers. I attended a meeting with these groups on Monday morning. Let me tell the Minister that they are under real pressure to find the financial wherewithal to go forward. Surely now is the time to make sure that these organisations have the financial support that is required to provide quality benefits advice.
I could not agree more. When I visited my local advice centre on Friday, I had a real sense of the strain and stress that its staff were experiencing. We have set aside a further £20 million of special funding for advice centres. There is also to be a short review to investigate what the Government can do to manage levels of demand on those working in that vital sector, and how we can make life easier for them.
Does the Minister agree that voluntary groups set up by people who do what they do because they want to, and because they have a lifetime of experience in the field—one example is Home-Start in my constituency—often fulfil their roles not only in a more cost-effective way, but better than others?
The latest survey of charity leaders by the National Council for Voluntary Organisations shows that 30% of them expect to cut jobs in the next three months, and that some 60% expect the economic situation, as it affects such organisations, to deteriorate over the next 12 months. Given that voluntary sector capacity is being reduced, is not the truth about the big society that, on the Minister’s watch, it is about to get smaller?
I dispute that. I remind the hon. Gentleman that the leader of his party told the BBC in February that he would not make councils protect cash for voluntary groups. There is a hard economic reality here: a sector that receives £13 billion of taxpayers’ money cannot be immune to the requirement to contribute to a reduction in Government borrowing. The challenge now is for us to find a way of working together to mitigate the damage done to the voluntary sector in the short term, while preparing it for the real opportunities down the track to deliver more public services.
Open Government Partnership
Transparency is an idea whose time has come. It makes choice possible, it encourages accountability, and it can change lives. The United Kingdom Government are already the world leader in transparency, and the open government partnership will enable those huge benefits to be promoted to many other countries around the world.
All the principles underlying the partnership reflect things that we have already introduced: openness about Government spending, openness about salaries, openness about the internal workings of government, and an increase in the publication of outcome data about the way in which public services operate. We have said that commitment to and implementation of the principles of the open government partnership will increasingly be a material factor in decisions by the Department for International Development about where to place direct budget support for developing country Governments.
It is good to hear the right hon. Gentleman being so enthusiastic about transparency. We have already published Government payment card data covering transactions between April and August this year, and we will continue to do so. We will publish the data for 2010 and 2011, and Departments will also have the option of publishing data for the previous year, when the last Government were in office. I look forward to enthusiastic support from the Labour party when the transactions made when it was in office are made public.
I thank the Minister for that response, and in particular for what he said about the last Government. I believe that the limit should be zero rather than £500, because we would not have known about the expenditure of the NHS on finger puppets if a higher limit had applied.
My hon. Friend makes the purist case for the disclosure of absolutely everything, but we have gone infinitely further than any Government have ever gone before in exposing the spending of Departments. Of course we will keep that under review, but the first thing we need to do is complete the publication of the data on transactions below £500, including some that took place under the last Government.
Given the pride the Minister obviously takes in transparency, is it not slightly odd that his Department, which leads on these matters for the whole Government, has the worst record in responding to freedom of information requests? Indeed, some people might think that is almost fishy. Since coming into office, the number of FOI requests answered on time by his Department has nosedived from 90% in March 2010 to only 42% in March this year. What do they have to hide? Will the Minister now tell us when he intends to get his house in order on FOI?
First, I welcome the hon. Gentleman to his post and congratulate him on his elevation to the shadow Cabinet.
The Cabinet Office deals with FOI requests in respect of Cabinet papers under the last Government, and that takes some time to deal with because we need to consult former Ministers in that Government. Any FOI requests relating to the royal family also need to be dealt with sensitively, with a lot of consultation. I notice that the hon. Gentleman does not raise the issue of Government procurement cards, and does not echo the response of his colleague, the hon. Member for Barnsley East (Michael Dugher), who said, when we published these data, that we had gone on a spending spree, when, in fact, we had cut spending under Government procurement cards by 10% compared with the record of his party.
Trade Union Facility Time
Total spend on trade union facility time across the civil service is estimated to be around £30 million a year, while in the public sector as a whole the estimate is £225 million. ACAS guidance suggests this system should be regularly reviewed. Strangely, we have not been able to find any evidence that it was reviewed under the last Government.
I thank my right hon. Friend for that very revealing answer. He will be aware of the current scandal of public sector employees spending 100% of their time on union activities while still drawing their publicly funded salary. My constituents in Lincoln expect their thousands of pounds in taxes to be used to pay for public services, not union activities. This situation clearly does not—
As I have said, we are going to consult on this. We will want to look very carefully at the phenomenon whereby large numbers of civil servants and other public servants are engaged full time as union officials at the taxpayers’ expense. There may be a case for some of this continuing, but certainly not on the scale we inherited from the Labour party.
But is there not also a point to be made about how much money is saved to the public purse by having good industrial relations? Instead of going backwards, should not the Minister be going forward and talking about how he could improve industrial relations?
If the hon. Gentleman wishes to make the case for why more and more taxpayers’ money should be spent on subsidising union officials, let him do so, and let him explain to his constituents why that is good value when what they want is taxpayers’ money to be spent on front-line public services, on which the most vulnerable people in our society depend.
Third Sector Contracts
Since May 2010 there have been 702 purchase orders for third sector services by the Department of Health alone. There have also been 94 contracts with third sector organisations from five different Departments: four from the Department for Culture, Media and Sport, 21 from the Ministry of Justice, 15 from the Department for Environment, Food and Rural Affairs, 47 from the Department for Work and Pensions and seven from the Department for Transport. Those contracts have a total value of more than £488 million. Unfortunately, I cannot say how that compares with the previous Government’s record as records were not kept at that time.
I am grateful to the Minister for that answer. In the last week, I met a voluntary third sector organisation in my constituency called Tolsam, which does a lot of valuable work with the young unemployed and those not in education, employment or training. Given the scale of the youth unemployment problem our country now faces, will Ministers consider introducing a requirement that third sector organisations that work with NEETs and the young employed are favoured when awarding contracts?
The hon. Gentleman, who I have discovered has a very honourable record of visiting social enterprises in his constituency, makes a good point. We do believe that there is great merit in including in public sector contracting provisions that reflect social value and social outcomes. We are working on that and we intend to proceed with it.
The Government have launched the Contracts Finder website, which enables third sector companies to find Government contracts. How does the Minister intend to assess how successful that has been and will he publish figures to demonstrate whether or not it has worked?
My hon. Friend makes a good point. We have indeed launched the Contracts Finder website, and I did a bit of mystery shopping to check whether it was possible to use it. I am glad to be able to tell the House that it is a very useful thing. We have already received some feedback from businesses and third sector organisations that have been on the website, and where we have had that feedback we have responded to it. We will be looking at the overall effectiveness of the website in due course and reporting back to the House.
First, we now have Big Society Capital established—the initial investment was made in the summer. Secondly, we are moving ahead with the establishment of mutuals, with a new mutuals support programme; 45,000 staff are already in social enterprises in health care alone. Thirdly, we have promoted social enterprise in the Work programme, with two social enterprises as prime providers and about 500 more voluntary sector organisations as subcontractors.
I thank the Minister for that answer. Does he believe that the Government and local authorities should be developing strategies to promote social enterprises? If so, why has he axed the clauses that would have made Departments do that from the private Member’s Bill of the hon. Member for Warwick and Leamington (Chris White)?
We do not feel that it is necessary to legislate for strategies at a national and local level. The previous Government specialised in having lots of strategies and fulfilling none of them. By contrast, we are in favour of taking action, which is why we are working with my hon. Friend the Member for Warwick and Leamington (Chris White) to ensure, as I mentioned in answer to the previous question, that there is provision for social outcomes and social value to be measured in contracts. That is, of course, part of his Bill. [Interruption.]
Allia and Future Business are promoting social bonds to support social enterprises, such as the future business centre in my constituency. There has been a very good uptake by individuals and companies, but not by the banks. Will the Minister have discussions with the banks to encourage them to invest in these bonds, which provide a secure social investment asset?
We believe that social impact bonds have an enormous role to play. The Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd), who has responsibility for the civil society, and I recently had a round table meeting with a group of social entrepreneurs and investors who are interested in investing in social enterprise. We are encouraging that and we are taking further steps through Big Society Capital to promote the use of social impact bonds. Of course our payment-by-results systems also make use of social impact bonds.
Head of the Civil Service
The roles of Cabinet Secretary and head of the civil service are very different and were indeed separate roles until 1981. Following the announcement of the retirement of Sir Gus O’Donnell, the role of head of the civil service will, once again, be separated from the Cabinet Secretary role. The two individual roles will be more focused, and people can be appointed to each on the basis of the skills match to each role. An internal competition is under way to recruit the post holder from among existing permanent secretaries.
Change is the watchword of the Prime Minister and change in government is a vital ingredient of the Government’s reform programme. How will the head of the civil service be able to lead and implement change if he does not have equal authority and equal access to the centre of government as he does now?
Is the Minister satisfied that with the split of the new roles, the various questions of probity, propriety and procedure that were aired in the O’Donnell report on the Werritty affair will be clearly brought to a known figure in the future, or will there be confusion?
My responsibilities as Minister for the Cabinet Office are for the public sector efficiency and reform group, civil service issues, industrial relations strategy in the public sector, Government transparency, civil contingencies, civil society and cyber-security.
The average pension for a woman retiring from the NHS is £3,000 and the average local government pension is £4,000. Does the Minister accept that if we increase the contributions for a worse pension, more people will simply opt out and we will end up paying more through the state benefits system?
It is in no one’s interest that public sector workers should opt out of pension schemes. The numbers to which the hon. Lady refers do not in any way reflect the pension that people retire on after a full career. That is the average, including many people who serve relatively short times in the public service. At the end of these reforms public sector pensions will still be among the very best available, much better than those available to most people in the private sector, who have no chance of enjoying such pensions. [Interruption.]
We have made progress and my right hon. Friend the Chief Secretary and I met the TUC again this morning. My right hon. Friend will make a statement to the House later. As I said, our intention is that public sector pensions will continue to be among the very best available, but fair both to public sector staff and to the general taxpayer, who has had to bear an increasing burden of the cost of paying for these pensions in recent years.
During last week’s debate on the Public Bodies Bill, the Government voted to scrap the role of the chief coroner, despite opposition from Opposition Members and from Back-Bench Conservative Members as well. Responding, the Royal British Legion said that it was
“saddened that this opportunity to do the right thing by bereaved Service families was not taken”
by the Government. As we approach Remembrance Sunday, is it not time that the Government did the right thing and listened to the Royal British Legion?
The procurement practice that we inherited from the previous Government militates heavily against the interests of UK suppliers and UK jobs, especially when it comes to very large contracts. Both France and Germany, which do not operate protectionist regimes and which obey the rules, give away fewer jobs to other countries. We are looking at this to see how we can support UK suppliers in a way that the previous Government signally failed to do.
T2. Speaking of fewer jobs, the Public Bodies Bill scrapped regional development agencies. My constituent Mark Davenport invested £6,000 setting up a business installing solar panels. At six weeks’ notice, the investment made by thousands of businesses was wiped out by a dramatic cut in the feed-in tariff scheme. Can the Minister explain to Mr Davenport how the abolition of the RDAs and now the cut in feed-in tariffs is helping jobs and growth? (77766)
What the hon. Gentleman needs to deal with is the fact that the regional development agencies in their time never managed to achieve what they set out to achieve and acquired vast liabilities—an astonishing achievement for development agencies. The solar tariffs had to be reduced because they were a disgrace and would have cast ill-repute on the whole of the very important programme that we have for supporting renewables and feed-in tariffs in this country.
T5. People in Edgworth in my constituency found out that their bus service is being scrapped for want of £10,000, although the local authority can still find almost £100,000 to support trade union activity. What action will the Government take to end taxpayer-funded activity within the public sector? (77771)
I have already said what we are planning to do in relation to the civil service. Obviously, local authorities must answer for their own affairs, but the guidance is that those arrangements should be reviewed regularly. I urge my hon. Friend to put pressure on his local authority to explain how it justifies spending money that should be spent on front-line public services supporting vulnerable people on subsidising trade union activity instead.
What discussions has the Minister had with colleagues who are responsible for the Work programme about openness and transparency? They are yet to publish any performance data on the programme. Moreover, they have banned Work programme providers from publishing their own performance data, as many of them would like to do.
All the indications are that the Work programme is a successful move, and I will make those representations to my right hon. Friend the Secretary of State for Work and Pensions. We are generally the most open Government ever. We lead the world in transparency and have gone much further than the Government of whom the right hon. Gentleman was a distinguished member ever dreamt of going.
T6. Having heard the excellent news this week on the increase in apprenticeship places, which are up 50% to 442,000, does my hon. Friend agree that the national citizen service can also play a key role in helping our young people into work? (77773)
Yes, because it helps them to develop the skills that employers need.
The Prime Minister was asked—
My hon. Friend makes an important point, and the Chief Secretary to the Treasury will be making a full statement to the House. It seems to me to be absolutely vital that we do something that is fair to both taxpayers and public sector workers. The cost of our public sector pensions system is up by a third in the last decade. It is not fair to go on as we are, but the new arrangements must be fair to people who work hard in the public sector and on whom we all rely. I can tell the House that low and middle-income earners will actually get more from their public sector pensions, everyone will keep what they have built up so far, anyone within 10 years of retirement will see no change to their pension arrangements and, at the end of all this, people in the public sector will still get far better pensions than people in the private sector. I really think it is time that the Labour party was clear that it does not support strikes later this month.
Obviously, everybody wants the British economy to grow faster—that is what everybody wants. Yesterday’s figure of 0.5% was better than many people expected and is it not noticeable that the right hon. Gentleman cannot even bring himself to welcome news like that? The key issue we all have to address is this: there is a global storm in the world economy today and it is in our interests to help others to confront that global storm, but we must also keep the British economy safe. We will not keep it safe if we add to our deficit, add to our debt and put interest rates at risk.
First the right hon. Gentleman blamed the Labour Government, then he blamed Europe, and yesterday he apparently blamed his Cabinet colleagues for the lack of growth in our economy. The truth about this Prime Minister is that when things go wrong it is never anything to do with him.
Let me ask about another of his flagship policies, the business growth fund, which was launched nine months ago with the banks. Can he tell us the number of businesses the fund has invested in?
First, the problem with pre-scripted questions is that the right hon. Gentleman does not listen to the first answer. I did not actually in my first answer blame the last Labour Government, but if he would like me to do so I can start right now, because it was the last Labour Government who left us the record debts and the record deficit, and it is this Government who are having to deal with that.
The right hon. Gentleman asks about the business growth fund. This is one of the schemes to ensure that banks are lending, alongside the Merlin scheme, which is actually seeing an increase in lending to small businesses. That is the record we can be proud of—and something he did not achieve.
We all know by now with this Prime Minister that when he blusters like that at the Dispatch Box he is either too embarrassed to answer or he does not know the answer, so let me help him. The business growth fund was announced nine months ago, it has five offices and 50 staff. How many investments? A grand total of two. It is becoming a pattern with this Prime Minister: fanfare announcement then radio silence. He said in March:
“I’m going to watch those banks like a hawk and make sure they deliver”.
So what is he going to do to get the business growth fund moving?
Order. The House is getting—[Interruption.] Order. Mr Ronnie Campbell, calm yourself. The House is getting far too excited. It is only six minutes past—[Interruption.] Order. Let me say it at the outset: both the Prime Minister and the Leader of the Opposition must be heard. It is called democracy and free expression.
Let me just give the right hon. Gentleman the figures for what has happened under the bank lending schemes of this Government. We have £190 billion of new credit this year, up from £179 billion last year. That is a huge increase. There is £76 billion for small and medium-sized enterprises, up 15% on last year. We are seeing more bank lending under this Government, but we are seeing also the bank levy, so people in the banks are helping to pay to deal with the deficit that his Government created.
A totally hopeless answer. One of his own schemes, the business growth fund—they trumpeted the announcements, and they have not got a clue what is happening to their own scheme.
Businesses are struggling, but one group in our economy is doing very well, indeed. Over the past year, when many people have seen their wages frozen, directors’ pay has risen by 49%. The Prime Minister expressed concern about that last Friday, but the public want to know: what is he going to do about it?
Let me tell you exactly what we are doing about it, and will do about it. It is this Government who introduced the bank levy—more raised in one year than the bonus tax that the previous Government created; it is this Government who have increased the fees that non-doms have to pay; it is this Government who have had an agreement with Switzerland and Liechtenstein to get hold of people who put money overseas; and it is this Government who have actually seen lower bank bonuses. But, where I agree with the right hon. Gentleman is that I think the Archbishop of Canterbury speaks, frankly, for the whole country when he says that it is unacceptable in a time of difficulty when people at the top of our society are not showing signs of responsibility. It is this Government who are consulting on proper measures to make sure we get transparency in terms of boardroom pay, proper accountability and more power for shareholders. All those things we are doing, and I have to ask the right hon. Gentleman, if he is so keen on this agenda, what did he do for the past 13 years?
I will tell you what we did, Mr Speaker. We introduced the 50p rate of income tax that the Prime Minister and his Chancellor want to abolish, but I am glad that we agree that something needs to be done about top pay. Now, last—[Interruption.] Conservative Members should just calm down. Follow the Prime Minister’s advice: just calm down. Last March, his fair pay review, which he set up, recommended that the Government require by January 2012—so January next year—that every top company publish how much the highest earners get paid compared with the average earner. That type of transparency is the least we should expect. Can he confirm that this will happen from January 2012? Yes or no?
What the right hon. Gentleman will know is that unlike the previous Government, who did absolutely nothing, we are consulting on a whole series of steps to bring responsibility to the boardroom. I have to say that we are a little wary about accepting lectures from a party that told us it was intensely relaxed about everyone getting filthy rich—a party that had a capital gains tax system so that people in the City paid less tax than their cleaner. I know he has forgotten all these things but we remember them and we have done something about it.
Another report to Government; another failure to act. The truth is that the Prime Minister has sat on Will Hutton’s review for the past nine months and has done nothing about it. That is why the recommendation is not going to be implemented. That is the truth about this Prime Minister: he says we are all in it together but he lets the top 1% get away with it while the other 99% see their living standards squeezed and lose their jobs. That is why people are increasingly saying that this is a Prime Minister who is totally out of touch with their lives.
I have to say that in the week when the Labour party has hired a former tax exile to run their election campaign, the right hon. Gentleman has got a bit of nerve to come and lecture us on that. Labour had 13 years to regulate the banks but did nothing. It had 13 years to deal with bank bonuses but did nothing. Now it is in opposition, its message to business is, “Give us some money—you can run our election.”
Q2. Cable theft has cost the rail industry £43 million in the past three years and Gurkhas have even been drafted in to patrol the network. Meanwhile, homes and churches are having their lead and copper pilfered and, in the past month, one churchyard in Huddersfield has had 169 memorial plaques stolen for their metal. Will the Prime Minister join me in saying that now is the time to legislate to stop those stolen metals going to merchants? (77736)
My hon. Friend makes an extremely important point. The theft of metal, particularly from war memorials, is an absolutely sickening and disgusting crime. We are working with the Association of Chief Police Officers to put in place an action plan to deal with this, which will involve looking again at the whole regulation of scrap metal dealers. We are determined to do that to put a stop to this appalling crime.
People in my constituency and right across the country are desperately worried about the increasing cost of gas, electricity and home heating oil and about how they are going to keep their home warm this winter. What more can the Prime Minister tell the country he is going to do to help people in that situation? In particular, will he reverse the cuts to winter fuel allowance that hit senior citizens? Surely, it is not good enough simply to say that he is following the Opposition’s plans—he has done so many things differently from the Opposition, so why does he not do something different on the winter fuel allowance?
On the winter fuel allowance we have kept the plans that were set out by the previous Government and I think that is the right thing to do. On the cold weather payments, we have taken the increase that was meant for one year and maintained it, so if there is a particularly cold winter, people will be getting that help. The other step we are taking is making sure that energy companies give people proper information about the lowest tariffs they can get and that we have proper reform of the energy market—something that the Labour party has now suddenly started to talk about but did absolutely nothing about in government.
Q3. Public sector pension reform should be achieved through negotiation and compromise. Does the Prime Minister agree that it is wholly irresponsible and downright destructive for senior politicians of any political party to support strike action while negotiations are ongoing? (77737)
I think my hon. Friend is entirely right. It is a very fair offer to hard-working public servants to say, “This is a strong set of pension reforms that will give you pensions that are still better than anything available in the private sector.” Frankly, to have a Labour Front-Bench team who are silent on this issue, with their education spokesman actually encouraging teachers to strike, is the height of irresponsibility.
Q4. My constituents Alan and Linda Eastwood have a son who has been serving in our nation’s armed forces in Afghanistan. In common with the Royal British Legion, Mr and Mrs Eastwood regard the Prime Minister’s decision to abolish the post of chief coroner as a betrayal. Will the Prime Minister tell us why he thinks he is right on this issue and the Royal British Legion is wrong? (77738)
This is a very important issue, and I have had discussions with the Royal British Legion about it, as has my right hon. and learned Friend the Lord Chancellor. The point about it is that the current proposal for the office of chief coroner to be established would involve something like £10 million of spending, and we think the money would be better spent on improving all coroners’ services across the country. We are listening very carefully to the concerns expressed in both Houses of Parliament about this issue, but what really matters is: are we going to improve the performance of our coroners? That is what service families want; that is what I want; and that is what we will deliver.
Q5. Public sector workers in my constituency work extremely hard to deliver essential public services, and I know that my right hon. Friend agrees that we value those services tremendously. Will he reassure those workers and confirm that the Government’s reforms—very necessary reforms that they are—will ensure that those services are sustainable and remain among the very best? (77739)
I will certainly do that. My hon. Friend makes an important point. The cost of supporting public sector pensions has gone up by one third in the last decade, and we are now spending something like £32 billion. They are a major item of public spending, and obviously we are taking taxes off people, including those in the private sector who have less good pensions, to pay for that pension provision.
I believe that our scheme is fair. For example, a teacher retiring on a salary of £37,000 after a full career would retire on a pension of £25,000 in future. That is more than the £19,000 that they would currently get. This is a fair set of changes. The less well-off are really protected, and the low paid in the public sector will not have to pay the increased contributions. Frankly, I think the whole House of Commons should get behind them instead of playing with strike action like the Labour party.
When the Prime Minister goes to the G20 meeting over the next couple of days, will he try to persuade his colleagues of the urgency of coming up with some detail on the eurozone settlement reached last week? It is not at all clear how on earth Greece will get out of its difficulties, even if the referendum passes. European banks will need shoring up well before next summer, and as for the new rescue fund, which may be needed sooner than we think, it does not actually exist. Will he accept that the G20 now needs to show the same urgency and sense of purpose that it showed two years ago when it met in London? Otherwise, far from getting ahead of events, Governments will be condemned to being dragged along in their wake.
The right hon. Gentleman is absolutely right in what he says about the urgency of the G20 meeting, and the necessity of its agenda. I think some progress was made at the European Council meeting a week ago when, for the first time, it accepted a proper write-down of Greek debt, which must be part of the solution, and a proper recapitalisation of Europe’s banks done to a credible test, rather than the incredible test we have had in months gone by.
The final element that the right hon. Gentleman rightly refers to—and which needs to have more detail and substance added—is to make sure there is a proper firewall to stop contagion in the eurozone. The need has become even greater. Frankly, of course we cannot involve ourselves in Greek domestic politics, but it has become even more urgent to put meat on the bones of these plans to show that we are removing one of the key obstacles to global growth, which is the failure to agree a proper plan to deal with problems in the eurozone.
Q6. According to the Government’s own projections, Britain’s population is set to increase from 62 million today to 70 million by 2027, with two thirds of that increase being driven by immigration. Will the Prime Minister give a commitment to stem that increase by breaking the almost automatic link between foreign nationals who come to work here subsequently being granted citizenship? (77740)
We are committed to doing exactly that, and my hon. Friend is right to raise this issue. I think that proper immigration control and welfare reform are two sides of the same coin, and this Government are committed to controlling immigration properly, but also to putting British people back to work. The two work together.
Today, we have announced that, in terms of the illegal immigration that comes through the student route, more than 450 colleges will no longer be able to sponsor new international students, because they were not properly established to do that. Those colleges could have brought in more than 11,000 students to the UK to study each year. That is just one example of how this Government are living up to their promise to get a grip on immigration.
Q7. Does the Prime Minister agree with the vast majority of people that smoking should be banned in vehicles when children are present, and will he encourage the Government to adopt the contents of my ten-minute rule Bill, which aims to put an end to it? (77741)
I do think the smoking ban is right. I have to admit, as a former smoker, and someone who believes strongly in liberties and who did not support it at the time, that the smoking ban has worked, and I think it is successful. I am much more nervous about going into what people do inside a vehicle. I will look carefully at what the hon. Gentleman says, but we have to have a serious think before we take that step.
The Prime Minister will be aware of Citigroup’s report, issued yesterday, on green energy investment in Scotland. Does he agree that this report very ably demonstrates that the benefits of green energy in the UK are unlocked only by combining Scotland’s renewable potential with the large-scale investment made possible by the UK; and does he agree that a drawn-out independence referendum is a serious distraction from that?
My hon. Friend makes an important point. In fact, a major financial institution warned yesterday of the dangers of investing in Scotland while there is this uncertainty about the future of the constitution under way. I think it is very important that we keep our United Kingdom together and we stress that when it comes to vital industries like green technology, the combination of a green investment bank sponsored by the United Kingdom Government and the many natural advantages that there are in Scotland can make this a great industry for people in Scotland—but we will do that only if we keep our country together.
Q8. Just after the election, the Prime Minister said that his Government would be the greenest ever. Does he still take that statement seriously? If he does, will he personally intervene to sort out the appalling chaos that is resulting from the slashing, in six weeks’ time, of feed-in tariffs for solar PV, leading to substantial job losses, chaos in the solar PV industry, and devastation for hundreds of community renewables projects? (77742)
It is this Government who set aside £3 billion for a green investment bank, much talked about in the past but never done. It is this Government who have put in place a carbon price floor—one of the first Governments anywhere in the world to do so. It is we who put aside £1 billion for carbon capture and storage. So this is a very green Government living up to our promises—absolutely right.
Q9. Will the Prime Minister join me in congratulating the pupils and staff at Whitchurch high school, a foundation-status comprehensive school in my constituency? It is the former school of Sam Warburton, the outstanding Welsh rugby captain; Gareth Bale, the impressive footballer at Spurs and Wales; and Geraint Thomas, the gold medallist. It will be receiving the award for state school of the year for sports— (77743)
I have to say that that is a very impressive list of sports personalities who have attended this school; I do not know what they put in the water, but I think we would probably all like to have some. I certainly join my hon. Friend in congratulating such an excellent school.
In the past four years, six children and two adults have been killed in dog attacks, and some 6,000 postal workers are attacked each year. There is cross-party agreement that we need to tighten up the law in this area. Will the Prime Minister take a personal interest and make sure that legislation is brought forward as soon as possible?
The hon. Lady makes an important point. Legislative attempts at this in the past have not always been successful and have not always captured the breeds that need to be captured, so I will certainly take a personal interest, and perhaps I can write to the hon. Lady and set out what the Government intend to do.
Q10. Following the Prime Minister’s answers a moment ago, and given the huge anger about the pay for the top 100 directors, can he give me a personal assurance that he is committed to the transfer of power over pay from the boardroom to the shareholders of our companies? (77744)
I do want to see that happen. The answer to this is much more transparency about the levels of pay, much more accountability, and strengthening the hand of shareholders. There is something else we need to do, which is to make sure that non-executive directors on boards are not the usual sort of rotating list of men patting each other’s backs and increasing the level of remuneration. I want to see more women in Britain’s boardrooms, which I think would have a thoroughly good influence.
The Prime Minister has described his Work programme as the biggest back-to-work programme since the 1930s, but he knows that it does not create jobs—it merely links people to vacancies. In Tottenham, there are 6,500 people unemployed, 28,000 people on out-of-work benefits, and only 150 vacancies. What is his Work programme going to do about that?
As the right hon. Gentleman says, the Work programme plays a key role in helping to prepare people for work. That is absolutely vital. It also brings employers in, so that they can offer jobs to those people. I have looked specifically at the issue of Tottenham, because I know from when I visited his constituency with him that, yes of course, there is a shortage of vacancies in the borough of Tottenham itself, but we have to encourage people who live in London to be prepared to travel more widely to look for work. That is absolutely vital, and part of the Work programme should be aimed at addressing exactly that.
Rural fire services attend more primary fires and more road traffic accidents than do those in urban areas, yet they receive less funding. This is typical of rural services across the piece, with residents paying more and receiving less. Will the Prime Minister meet me and a group of other MPs from across the House who represent rural areas, to discuss getting a fairer deal for those in rural areas, particularly the rural poor?
Q12. The Prime Minister knows, thanks to the Leader of the Opposition, that in nine months, the Government’s business growth fund has invested in precisely two companies. At a time when the economy is flatlining, is that good enough? (77746)
What this Government have done is cut corporation tax for every business in the country. We have introduced enterprise zones to help employment, and increased the number of apprenticeships by 250,000 over the life of this Parliament. The Opposition criticise the regional growth fund, but there was no regional growth fund under Labour. That is the point. Let me just remind them that we inherited an economy with the biggest budget deficit in Europe, and it is this Government who are helping our economy through the international storms to ensure that we remain safe in the UK.
My hon. Friend makes an extremely important point. In national adoption week, we really need more parents to come forward as potential adopters and potential foster carers, because there is a huge build-up of children in the care system who will not get that help unless people come forward. It is also important that the Government pledge that we will make the process of adoption and fostering simpler. It has become too bureaucratic and difficult, and the result is that it is putting people off. I am absolutely determined that we crack this. It is a matter of national shame that, while there are 3,660 children under the age of one in the care system, there were only 60 adoptions last year. We are now publishing information on every single council, so that people can see how we are doing in terms of driving this vital agenda.
Q13. This week, yet another military academic has called for the reopening of the defence review, and a leading military think-tank has said: “Britain is now cutting military equipment that might prove vital in future.”Will the Prime Minister finally listen to the voices of the defence community and reopen his deeply flawed defence review? (77747)
We had no defence review for 10 years, and now the Opposition want two in one go. That is absolutely typical of the opportunism of the Labour party. This is a day, as hostilities in Libya are coming to an end, on which we should be praising our armed services and all that they have done.
Q14. Schools in rural Northumberland were largely ignored by the previous Government. With the schools budget rising from £35 billion to £39 billion in 2015, will the Prime Minister welcome the finance bid put forward by Prudhoe community high school in my constituency? (77748)
I will certainly welcome that bid. It is important to note that, because we are protecting the per-pupil funding, even at a difficult time for the economy and public spending, the education budget will be rising and not falling—[Interruption.] As ever, the shadow Chancellor is wrong, even when he is sitting down. He talks even more rubbish when he stands up. I digress. As well as the extra investment in the schools budget, there is also the opportunity for free schools, which I think are going to be a major reform in our country, to bring in more good school places. Perhaps when a future shadow Chancellor attends one of those schools, he will learn a few manners. [Interruption.]
Will the Prime Minister listen to both the campaigners outside Parliament today and the 80,000 people who have written to him in recent weeks, and commit to becoming a leading advocate for the introduction of a Robin Hood tax at the G20 summit later this week? Will he ensure that the revenue is earmarked to tackle sustainable development and the growing climate crisis?
As the hon. Lady knows, there is widespread support for the principles behind such a tax, but it must be adopted on a global basis. Let me say this as quite an important warning to those who are pushing so hard for such a tax: we must be careful that we do not allow other countries, including some European countries, to use a campaign for the tax, which they know is unlikely to be adopted in the short term, as an excuse for getting out of their aid commitments. The House and the country can be proud of the fact that we are meeting our aid commitments. Do not let others use the tax as a way getting out of things that they promised.
Q15. The world population passed 7 billion this week. That is an awful lot of mouths to feed. In addition, the UN predicts that over the next 40 years, world demand for food will increase by 70%. That ought to be good news for farmers, but sadly, since 1990, Britain’s capacity to feed itself has fallen by a fifth. Does the Prime Minister agree that that is a disastrous situation, and will he urgently introduce a credible strategy to grow Britain’s farming industry to feed us all in future? (77749)
My hon. Friend makes an important point. It is true that we have seen our food security decline and our food production severely challenged over the past 10 years. It is important to remember that farmers are businesses. They need things done like other businesses do on deregulation, predictable income and all those things. This Government are committed to making that happen, which will benefit particularly people in my hon. Friend’s constituency.
On 13 September 2010 at the Select Committee on Communities and Local Government, when asked whether success for this Government will mean building more homes per year than were being built prior to the recession, the Minister for Housing and Local Government replied:
“Yes. Building more homes is the gold standard upon which we shall be judged.”
In which year or years of this Parliament does the Prime Minister expect that gold standard to be achieved?
What we have said is that we are going to expand the building of homes for social rent by increasing and reintroducing the right to buy, which the previous Government so scandalously ran down. That will help. We will also make available Government land, so that builders can get on and build without having to buy that land. They will have to pay only when they have actually delivered the house. We want to see an extra 200,000 homes built in that way, which will give us a far better record than that of the Government whom the hon. Gentleman represented.
Notwithstanding the increasingly maniacal gesticulations of the shadow Chancellor, is it not remarkable that in the middle of the world’s biggest crisis, Britain is able to borrow at lower rates of interest than almost any other country in the world?
As ever, it takes the Father of the House to bring the wisdom to the table, which is that if we did not have a proper plan for getting on top of our debts and our deficit, we would not have 2.5% interest rates, which are the greatest stimulus our economy could have. Instead, we would have interest rates like those of the Greeks, the Spanish and the Italians, and our economy would be hit. Do you know how you get interest rates like that? You get them if you adopt the plans of the Labour party. Its plan is for an extra £87 billion of borrowing over this Parliament. You do not solve a debt crisis by adding to your debts—[Interruption.] The shadow Chancellor can go on making his rather questionable salutes, but it is time for him to take a primer.
Public Service Pensions
I wish to update the House on progress in the reform of public service pensions and to set out the new offer that we have made as we seek to bring this issue to a conclusion by the end of the year. Our objective is to put in place new schemes that are affordable and fair for taxpayers and public service workers, and that can be sustained for decades to come. That is not easy, but it is the right thing to do and I recognise that this is a contentious area.
Public service workers deserve a good pension in retirement as a fair reward for a lifetime spent serving the public. That is why in June last year, the Chancellor commissioned Lord Hutton, the Secretary of State for Work and Pensions in the previous Government, to take an impartial, dispassionate look at this issue and to bring forward proposals for reform. His landmark report has set the terms of the debate and I am sure that the whole House will share my gratitude for his work.
Lord Hutton’s interim report found that there was a clear justification, based on the past cost increases borne by the taxpayer, for an increase in member contributions. We accepted that recommendation, and increases in member contributions will take place starting next year, although next year’s increase merely reflects the increase already planned by the previous Government. In his final report, he set out a blueprint for a new landscape of public service pensions based on retaining defined benefit schemes, but moving to a fairer career average basis, and increasing the retirement age in line with the state pension age to protect the taxpayer against future increases in life expectancy.
We accepted Lord Hutton’s recommendations in full as a basis for consultation and we have been discussing the recommendations with the trade unions. Those discussions started in February and are still going on. Despite some of the public comment, significant progress has been made. I pay tribute to the Minister for the Cabinet Office and the general secretary of the TUC for their tireless work to reach common ground on reform.
The trade unions have welcomed many of the commitments that we made at the start of this process, including that public sector schemes will remain as defined benefit schemes, with a guaranteed amount provided in retirement, and that all accrued rights will be protected. Everything that public servants have earned until the point of change, they will keep, and those things will be paid out in the terms expected and at the retirement age expected. Final salary means just that: a person’s accrued rights will be based on their final salary not at the point of change, but when their career ends or they choose to leave the scheme. No public sector worker needs to have anything to fear for the entitlements that they have already built up.
We have also reached agreement on the importance of transparency, equality impacts, participation rates and opt-outs, scheme governance, and high level principles to inform consultations on scheme-level pensions. However, the central issue of the value of new schemes remains to be agreed. I believe that two aims need to be met. First, for most low and middle income workers, the new schemes should generate an income at retirement that is at least as good as the amount that they receive now. Secondly, the taxpayer needs to be properly protected from the risks associated with further increases in life expectancy, by linking the scheme normal pension age to state pension age.
In early October, we set cost ceilings to meet those tests. Those cost ceilings are based on Lord Hutton’s recommendations and generate an accrual rate of 1/65th for the new schemes. Scheme-by-scheme discussions have been taking place on that basis since the beginning of October. Although the talks have been productive, trade unions and Ministers have given consistent feedback about what they think needs to change. Last week, the Minister for the Cabinet Office and I met the TUC negotiating team, who pressed for a more generous cost ceiling and explicit protections for those workers nearest to retirement. I have received similar feedback from the Secretary of State for Education and the Secretary of State for Health.
Having listened to those views, I have decided to revise the Government’s offer. Cabinet discussed these matters yesterday, and I met the TUC this morning to set out the terms of our new offer. The offer increases the cost ceiling and provides for generous transitional arrangements for those closest to retirement. I have made available to Members today a document that sets out the detail. This generous offer should be more than sufficient to allow agreement to be reached with the unions, but it is conditional upon agreement being reached. I hope that on the basis of this offer, the trade unions will devote their energy to reaching agreement and not to unnecessary and damaging strike action. In that way, the offer can inform the scheme-by-scheme talks that will continue until the end of the year. Of course, if agreement cannot be reached, we may need to revisit our proposals and consider whether the enhancements remain appropriate.
I can announce today that I have decided to offer an increase to the cost ceiling. Future schemes will now be based on a pension to the value of l/60th of average salary, accruing for each year worked. That is an 8% increase on the previous offer. I will give the House some examples of what that means. A teacher with a lifetime in public service and a salary at retirement of £37,800 would receive £25,200 each year under these proposals, rather than the £19,100 that they would currently earn in the final salary teachers’ pension scheme. A nurse with a lifetime in public service and a salary at retirement of £34,200 would receive £22,800 of pension each year if these reforms were introduced, whereas under the current 1995 NHS pension scheme arrangements they would only get £17,300.
Pensions would remain considerably better than those available in the private sector. To earn the equivalent pension in the private sector, the teacher retiring on £37,000 would need a pension pot of around £675,000, and the nurse retiring on £34,200, a pot of £600,000. Both would require an annual contribution of around a third of salary.
In addition, I have listened to the argument that those closest to retirement should not have to face any change at all. That is the approach that has been taken over the years in relation to increases to the state pension age, and I think it is fair to apply that here too. I can also announce that scheme negotiations will be given the flexibility, outside the cost ceiling, to deliver protection so that no one within 10 years of retirement will see any change in when they can retire or any decrease in the amount of pension they receive. Anyone 10 years or less from retirement age on 1 April 2012 can be assured that there will be no detriment to their retirement income.
We need to be clear about the backdrop against which this offer is made. I fully understand that families across the country are feeling financial pressure right now. These are unprecedented and tough economic times. But reform is essential because the costs of public service pensions have risen dramatically over the last few decades. The bottom line is that we are all living longer. The average 60-year-old today is living 10 years longer now than they did in the 1970s. That is a remarkable and welcome achievement, but it also means that people are living in retirement longer and claiming their pension for longer. As a result, the costs of public service pensions have risen to £32 billion a year, an increase of a third in the last 10 years. While they accounted for just under 1% of GDP in 1970, they account for around 2% of GDP today—more than we spend in total on police, prisons and the courts. And for the most part, it has not been the public service workers footing the bill, but the general taxpayer. We have to reform to ensure that the costs of pensions are sustainable in the long term and to ensure that costs and risks are fairly shared between employees and employers.
I believe this package is affordable. I believe it is also fair to public service workers, and delivers significant long-term savings to taxpayers who will continue to make a significant contribution to these pensions. If reform along these lines is agreed, I believe that we will have a deal that can endure for at least 25 years and hopefully longer. People are living longer, so public service pension reform is inevitable. But we have listened to the concerns of public sector workers and come up with a deal that is fair and affordable. The lowest paid and people 10 years from retirement will be protected, and public service pensions will still be among the very best available.
If reform of this sort is agreed, then no party in this House will need to seek further reform of the overall package. This sustainability is an important prize. I hope that the trade unions will now grasp the opportunity that this new offer represents. I also hope that the Labour party will do the right thing, put party politics aside, and support the proposals, which—after all—came from John Hutton, in the interests of securing a long term consensus on the future of public service pensions. It is the chance of a lifetime to secure good, high quality, and fair public service pensions.
Yes, we are asking public service workers to contribute more. Yes, we are asking them to work longer, along with the rest of society, but we are offering the chance of a significantly better pension at the end of it for many low and middle income earners. It will be a fairer pension, so that low income workers stop subsidising pensions for the highest earners. It will be a sustainable deal that will endure for at least 25 years, and an affordable deal that will ensure that taxpayers are asked to make a sensible contribution, but will keep costs sustainable and under proper control. That is the new offer I am putting on the table today; it is an offer that the Opposition should support and the unions should agree to and I commend this statement to the House.
I thank the Chief Secretary for his statement and for advance notice of it. I welcome today’s signal that the Government are now willing to enter into proper discussions. That is a welcome change from the months of Treasury and Cabinet Office intransigence that came before.
Too often in recent months it has appeared that the Government have not understood that strikes are a sign of failure on both sides. Let us be clear: it was this Government’s decision to rip up the framework established by the last Labour Government and to go much further much faster. In particular, it was the Chancellor’s decision to pre-empt Lord Hutton and impose a 3% surcharge for all employees announced in the spending review last year, before negotiations had even begun. That decision suggested that rather than negotiating in good faith, the Government were intent on acting unilaterally and so provoking confrontation. It is good news, therefore, that the Government have at last made a constructive move to begin proper discussions.
Let me be clear: no one wants strike action. The Government and the unions have a duty to show that they have exhausted every possible avenue. Our focus is on those who rely on services that would be affected by strikes—from parents who will have to take a day off work to those who rely on home help. However, public sector workers—nurses, teachers and dinner ladies—also care too much about the people they serve day in, day out to consider action as anything other than a last resort, yet those who work in front-line public services are also desperately worried about their future and about whether they will be able to afford retirement. It is for the Government to ensure, therefore, that change is agreed and delivered in a way that brings with them the nurses, teachers, home helps and dinner ladies affected by the changes.
It is welcome that the Government have now recognised that announcing tactical offers on the airwaves, rather than constructive proposals in proper negotiations, is not the right way to proceed. However, I would suggest three key tests for a fair agreement. First, on affordability, do the changes deliver a fair deal for taxpayers when times are tough, taxes are rising and spending is being cut? Secondly, on fairness, do they deliver a fair deal for public sector workers on low and middle incomes, whose pensions are far from gold-plated and who have given so much to the services in which they work? Thirdly, on sustainability, do the changes deliver a workable settlement for the long term that does not undermine the sustainability of existing schemes and which can be flexible in the face of rising life expectancy? That is how we will judge the outcome of the negotiations.
To meet those tests, it has always been clear that public sector workers will need to accept higher contributions on average and, given that people are living longer, an increase in the retirement age, too. That was fundamental to the arrangements put in place by the previous Government for capping the Government’s contributions and then, as costs rose, negotiating how to increase workers’ contributions or change entitlements. Equally, however, the Government have to accept that for many low-paid staff, their pension is the only means of security in retirement. In a time of pay freezes, sharp increases in contributions risk hardship today and increased levels of opt-out, pushing up pensioner poverty in the future, which is why we have been critical of the confrontational stance taken by the Government and of the rush to early industrial action in June.
We will see in the coming days whether these moves are sufficient to restore the much-needed trust in these discussions that could ensure that, even at this late stage, there is still time for both sides to step back from the brink. We must all study the detail of what is now on the table, but on affordability will the Chief Secretary set out the cost of these concessions to the public purse? As he rightly sets out the transitional protections for workers in their 50s and tapering arrangements for those in their late-40s, can he say whether both these additional costs will have to be made by savings elsewhere in the system? On fairness, can he confirm that the proposed increase in contributions, if applied across the board, would still mean an increase in contributions for low-paid and part-time workers earning less than £15,000 a year? Have the Government assessed the impact of the pay freeze on opt-out rates from public sector pension schemes to date?
On sustainability, has an assessment been made of the impact of the 3% increase in contributions proposed from April and of whether increased drop-out rates could affect the viability of funded schemes, such as the local government scheme? Is it the Chief Secretary’s intention that those affected as a result of the settlement will have the certainty of knowing that there will be no further changes for 25 years? How will he deliver on that commitment? Will he give the House a timetable for discussions over the next eight weeks, given his aim to secure agreement by the end of the year? I hope that he can reassure taxpayers and public sector workers—teachers, the police, home helps and others—on those points. The Government must leave no stone unturned in their negotiations to seek a genuinely sustainable agreement that is fair for public sector workers and taxpayers, and avoids a strike this autumn.
I am grateful to the hon. Lady for her response, although she left a few questions unanswered herself, which I shall come to.
On proper discussions, I reject what she said about the Government’s stance. Talks have been going on constructively for the last eight months. The Minister for the Cabinet Office and I have spent many, many hours in those discussions, and if the hon. Lady talked to the trade unions, she would discover that they, too, see them as constructive. She also referred to the previous Government’s cap and share arrangement. Let me tell her what Lord Hutton said about it in his report:
“Cap and share cannot take account of the increases in cost of pensions over recent decades because people have been living longer. Also, untested, complex cap and share arrangements cannot of themselves, address the underlying issue of structural reforms, nor significantly reduce current costs to taxpayers.”
In other words, the previous Government’s arrangements were simply not good enough at controlling the costs in the way we need to.
The hon. Lady asked me several questions; let me address them directly. As I said in my statement, transitional protections and tapering are outside the cost ceiling, so they will not be met at the expense of other arrangements, which may be negotiated on a scheme-by-scheme basis. On contributions, there was an assumption, audited by the Office for Budget Responsibility, about the impact that 1% of pay bill would have on opt-out rates, which I accept. We are engaged in a separate track of negotiations with the local government pension scheme—which the hon. Lady also mentioned—precisely in recognition of the fact that it is a funded scheme and that therefore different considerations apply.
On affordability—the first of the hon. Lady’s three tests—let me tell her that, yes, the changes are affordable. Her test is met. This test ensures—[Interruption.] Opposition Front Benchers are saying, “Part-time workers?” The contributions increase has been set out. We have ensured, on a scheme-by-scheme basis, that the contributions will be tiered according to income. Those earning less than £15,000 a year on a full-time equivalent basis will have zero—[Interruption.] The right hon. Member for Morley and Outwood (Ed Balls) likes to hector from a sedentary position. Instead of being the shadow chunterer, perhaps he will sit there and listen. We have made it clear that those earning up to £21,000 on a full-time equivalent basis will have a reduction. The full-time equivalent basis for pension reform is the basis—[Interruption.]
Order. There was quite a lot of chuntering earlier when the shadow Chief Secretary was speaking, and that should not happen. Those on the Opposition Front Bench have had their go, and I am afraid that they cannot pursue the debate again from a sedentary position. Let us hear the Chief Secretary. The House knows that I will allow plenty of time for questions, so we need not get aerated about it.
The full-time equivalent basis for pension reform is being approached in exactly the same way that the previous Government treated it. The hon. Lady’s tests for affordability, fairness and a workable settlement are all met. She did not say, in the end, whether she supported the deal on the table to date. It is incumbent on the Opposition to understand the deal and support it. It is also incumbent on them to make clear their position on strike action. I hope that she agrees with me that, in light of the new offer and the constructive approach taken to the negotiations, she should not support trade unions going ahead with strike action later this month.
I welcome the extensive work that has gone into these proposals and would like to ask a question specific to my constituency and many others. Many teachers in my constituency work in the state sector, but over their careers they will often spend periods in the independent sector too. Will the proposals continue to allow inter-changeability between the two sectors?
I look forward to studying the proposals, because with pensions the devil is always in the detail. I have spoken to public sector workers, and the two things that they are most concerned about—and which might have encouraged them to vote for strike action at the end of November—are the large increase in individual contributions, on top of what they already contribute, and the move from the retail prices index to the consumer prices index. I did not hear from the Chief Secretary’s statement whether those two things remain in place, which would be a disappointment to public sector workers.
Those two things do remain in place. I understood from a previous debate that the Opposition supported the switch from RPI to CPI. We are going ahead with the increase in member contributions, which, as Lord Hutton said in his interim report, is necessary to rebalance the substantial increase in costs over the past few decades, which have been borne almost entirely by the taxpayer. Around the table with the trade union negotiators, the main issues raised in recent weeks have been the accrual rate, the transitional arrangements and the guarantee that we are reaching a long-term settlement.
I welcome the Chief Secretary’s statement. On many occasions in Bracknell and Finchampstead, I have met people in their 30s and 40s employed in the private sector—the majority of people in my constituency are employed in the private sector. Can he confirm that many in the public sector would have to contribute a third of their salary and pension contributions in order to get similar pensions in the private sector?
The hon. Gentleman is absolutely right: I can confirm that that would be the case. In some cases the figure would be more, depending on how the scheme-by-scheme talks that will go forward resolve the issue. In order to acquire a pension of the sort that we are rightly talking about for public sector workers, people in the private sector would need to acquire a pension pot of £500,000 or more, which would require a substantial salary contribution, of the order of a third.
I think the hon. Lady may have been trying to welcome the protection of accrued rights, in which case I am grateful for her comments. She is right that the switch from RPI is a change to public service pensions that will reduce the benefits over the long term, although that will depend on the scheme and the individual involved. However, it is the right thing to do, because we are talking about the measure of inflation used by the Bank of England to set rates. The answer to the hon. Lady’s question will depend on the individual scheme and the individual person.
Both the Liberal Democrat manifesto, which my right hon. Friend authored, and the coalition agreement committed the Government to an independent review of pensions, and one cannot get more independent than the former Labour Secretary of State, Lord Hutton. Will my right hon. Friend confirm that what he has set out today is more generous to future pensioners and current employees than Lord Hutton recommended, while maintaining fairness for the taxpayer?
My hon. Friend is absolutely right to celebrate Lord Hutton’s independence in this matter. It is a measure of the Opposition’s lack of interest in the subject that they have not even asked for the statement to be repeated in the House of Lords, so that Members there can hear directly from Lord Hutton. He did not recommend a level of adequacy, but he did say that the floor threshold should be the adequacy rates set out by Adair Turner. The offer that I am announcing today is 40% more generous than those floor adequacy rates.
Is it not true that the vast majority of public servants will still be paying more and working longer, and that a significant number will still lose out? The protections for the lower-paid will not affect trained firefighters, trained teachers or trained doctors, or many other public servants. The accrued rights that the right hon. Gentleman has offered are actually a legal duty, and he will exacerbate the industrial relations climate by making an offer, but at the same time threatening to take it off the table.
I know that the hon. Gentleman has taken a long interest in these matters, but he is wrong in his characterisation. He is of course right that we are asking public sector workers to work longer, to set the normal pension age in line with the state pension age, but frankly that is happening to every single person in this country. Public sector workers cannot be immune from that trend any more than anyone else. He mentioned firefighters. Let me say that good discussions are taking place on the firefighters’ pension scheme. We have delayed setting a cost ceiling to take account of all the factors in the firefighters’ pension scheme, particularly the double accrual.
May I welcome today’s statement and pass on the comments made to me by teachers in South Derbyshire in both the private sector and the public sector? It is important that accrued rights remain and that it is easy to move between the two areas, because the private sector is very strong indeed in Derbyshire.
I am grateful for those comments. It is important that teachers, health workers and civil servants study for themselves what the Government are offering. There has been a great deal of misinformation around this debate. We are setting out a document today that describes the position in detail. A new website, too, will be available for public sector workers to see precisely what it might mean for them. I hope those people will seek to form their own opinion of what the Government are offering.
Will the Chief Secretary clarify one comment he made in his statement, when he said that the offer is conditional upon reaching agreement? Does that imply that any industrial action taken anywhere by any trade union member will mean the offer being withdrawn?
No, this is not conditional on industrial action. Some unions are saying that they are planning strikes on 30 November. Talks on a scheme-by-scheme basis will still be going on at that time. I hope that those unions will feel that, on the basis of this offer, they no longer need to go ahead with that action. I think that would be a constructive response to what I have set out today. The offer is conditional upon an agreement being reached—an agreement by the end of the year on the heads of terms on a scheme-by-scheme basis. It is appropriate that we set out a good offer; as a Government, we want to reach agreement, but at the end of the day the trade unions need to want that, too.
May I commend my right hon. Friend for his statement and for the tone in which he has delivered it—and, indeed, commend my right hon. Friend the Minister for the Cabinet Office and Paymaster General? Will the Chief Secretary welcome the notes of conciliation in the response by Her Majesty’s official Opposition? Although our politics does not lend itself to consensus, is this not a subject on which we wish to reach a broad consensus both for the well-being of public sector pensions and for the country and economy as a whole?
I am grateful to my hon. Friend for his welcome and I agree wholeheartedly with his comments. It is precisely the sort of subject on which there should be a cross-party consensus. I think a consensus could be formed around the proposals we have made today. The shadow Chief Secretary says that she wishes to study our proposals. That is fair enough, but I hope that she will see on reflection that the proposals we are putting forward are the right way to go forward on public service pensions both for public sector workers, who are fully entitled to a proper and decent pension, and for the taxpayer as a whole.
Does the Minister agree that the statement consisted of sacrificing long-term pension rights to pay for a short-term failure to stimulate economic growth? What we are seeing, after 13 years of industrial peace, is the return of mass strike action due to Tory economic failure and a threatening, macho approach to negotiation. [Interruption.]
Order. It would be more seemly if the hon. Gentleman were not standing with his hand in his pocket, but I must say to the Education Secretary that he really should not keep on expostulating noisily from a sedentary position. If he were to do that in one of the nation’s classrooms, he would be in detention by now.
The Education Secretary’s noisy expostulations have been thoroughly in support of what the Government are doing; as such, I welcome them. I think that the tone struck by the hon. Member for Swansea West (Geraint Davies) is entirely out of keeping with the tone of the debate so far. For all the reasons I have given, reform of public sector pensions is necessary. It is important that we get it right and that we do so by agreement if we can. That is this Government’s objective.
I share the disappointment at the rather lukewarm response on the Labour Benches. May I ask my right hon. Friend to stress to the unions that this is not the opening salvo in further negotiations, so they really should take this as a realistic opportunity to come up with a long-term solution for the 25-year period that would be best for the taxpayer? I sincerely hope that the unions take that in the spirit in which it is intended so that we do not have industrial action over the winter.
I am grateful to the hon. Lady for her comments. I sensed from our earlier discussions that the trade unions recognised that this was a constructive step by the Government. It is the best offer that is going to be on the table; I think it is important that it is understood in that sense.
Neither the Chancellor yesterday nor the Chief Secretary today answered the question about part-time workers—specifically about those earning less than £15,000 whose wages would be above that if they were working full time. Will the Minister tell us clearly whether those people will end up paying the 3% contribution? If so, he must understand why there cannot be an easy consensus on the issue.
As I said in answer to the shadow Chief Secretary, the proposals are on a full-time equivalent basis, which is exactly the way pension reform was carried out under the previous Government. Of course, the matter was open for discussion in the consultations about the first year’s contribution increases. We look forward to hearing the results of those consultations.
I welcome the statement and congratulate the Front-Bench team on the work they have done to go as far as they can to help the low-paid. Is it not the truth that we are facing a crisis of spiralling costs from an irresponsible boom in the public sector under the last Government—with unfunded pension liabilities, bankrupt public finances and debt interest set to rise to £76 billion? Is it not the truth that it is always the poorest that pick up the bills for Labour and that a responsible—
The hon. Gentleman is right that the poorest in society end up paying the price for the loss of financial control that we saw in this country under the previous Government. He referred to the liabilities in public service pensions. Those liabilities are, on the latest figures, more than £1.1 trillion. That is the entire education budget for more than 20 years.
I welcome the flexibility that the Government are showing today in moving this whole issue forward. Where the statement dealt with the Government’s revised offer, the Chief Secretary provided some examples of the benefits that will accrue to some workers. Will he outline some examples of where people will be worse off? To press him on the point about the consumer prices index, he must surely have the facts and figures, but by how much on average will people be worse off as a result of the switch from RPI?
The right hon. Gentleman asks who will be worse off, which is a fair question. One flaw with the current final salary arrangements in the public sector is that the contributions of low-paid workers go towards subsidising the pensions of the highest earners. That is one reason why we want to move to a career average basis. Some of the losers from that would be the highest paid, particularly those such as chief executives of local authorities, who receive a large jump in salary at the end of their career and then get a pension as if that were their salary for their whole lifetime.
There has been much concern over the last few years about a race to the bottom with pensions, particularly given the parlous state of pensions in much of the private sector. Can the Minister reassure us that the proposals currently on the table will remain a gold standard and will ensure generous but sustainable pensions in the public sector in the long run?
My hon. Friend is right to remind us of the context in which 13 million workers in the private sector have no pension provision at all. That is something that will be taken care of as the NEST—National Employment Savings Trust—scheme is introduced. These will remain gold standard pensions. It is quite right that public sector workers who make a lifetime of contribution to serving this country should get the best pensions available, but the proposal will ensure that the costs are brought under control and that it is affordable to the taxpayer—not just now, but in the decades to come.
I am grateful for the hon. Gentleman’s welcome of the tone we have taken. I hope that, in due course, he will welcome the substance as well. As to valuation information, it is being provided in the context of the scheme-by-scheme discussions. The trade unions have put forward many requests for information to be provided so that alternatives can be costed. All that work is going on in the context of the scheme-by-scheme discussions, but the valuation that was going to take place has been suspended on the basis that changes have been made, not least to the discount rate, which make that work invalid. It is best to wait until a new scheme is in place before we carry that work forward.
I very much welcome the transitional arrangements outlined by my right hon. Friend for people 10 years away from retirement. It is particularly important for groups that would have joined the public services at a time when, unlike now, public sector pay was less than private sector pay. Will he outline roughly how many people will be affected?
I am grateful for those comments. The transitional protection is a very important part of this new offer. It is right that people who are within 10 years of retirement should have certainty about their planning for retirement. That principle has been observed on both sides in respect of the state pension age. I estimate that the transitional provision will protect more than 1 million public sector workers from any impact at all as a result of the changes.
As the hon. Gentleman should know, in unfunded schemes there is no such thing as a pension pot. The money is not gathered together and invested. The contributions made today do not in any way meet the costs of the pensions being paid out today. What we are offering is what might be called a new deal for public service pensions, whereby additional contributions and longer working will help to ensure that public sector workers can still have the best pensions available. Many low-income workers will actually receive better pensions in retirement.
I welcome the statement, because I think it demonstrates that the Government are listening to the concerns expressed by nurses, teachers and firefighters in my constituency. During the scheme-by-scheme discussions, will the Chief Secretary bear in mind those with physically demanding jobs, such as firefighters? Will they retain the right to retire before reaching the state pension age, while still benefiting from their pensions?
That is a very good question. We are, of course, listening carefully to representations. As I have said, we have delayed setting a cost ceiling for the firefighters’ pension scheme, particularly in the light of some of the issues that my hon. Friend has mentioned, but what we are discussing now is the normal pension age for schemes; early retirement arrangements on an actuarily reduced basis will remain in place.
Most of the examples given by the Chief Secretary have involved well-paid public sector workers who have been in continuous employment, but many of my constituents do not fall into that category. Can he tell us how a low-paid part-time worker earning, say, £8,000 a year and working 15 hours a week would fare?
I cannot give a specific example, because I do not have the necessary figures to hand, but I can say that I expect the lowest-paid people to benefit most from these arrangements. At present, those on the lowest salaries and with the flattest career paths contribute most to the pensions of the highest earners. The change to a career-average basis will ensure that many workers, particularly of the sort whom the hon. Lady has described, end up with more rather than less income in retirement. I consider that to be a right and proper reward for those people’s commitment to public service.
I too welcome the statement, but given that economic growth, economic development and job creation in my constituency depend on the small business community, can the Chief Secretary advise owners of small businesses how they should go about amassing a pension pot of half a million pounds before they retire?
It is true that in the private sector an enormous volume of contributions would be necessary to build up the pension pot that is required to fund the pensions that we are discussing today. The equivalent would be a pension pot of £600,000 or £700,000 a year. That is a measure of the Government’s recognition of the commitment that public service workers make.
The Chief Secretary said earlier that the general taxpayer rather than public service workers had been footing the bill. May I point out to him that public service workers are also taxpayers, and that it has not helped that some people have been able to use the high pensions of the best-paid in the public sector as a typical example of those in the rest of the sector? We all know that pensions in the rest of the sector are very low.
Will the Chief Secretary place in the House of Commons Library some typical examples of the way in which the change from RPI to CPI has affected different sectors? Perhaps he could include examples involving part-time workers such as those cited by my hon. Friend the Member for North West Durham (Pat Glass).
As I said earlier, that depends on a variety of circumstances, but today we are publishing a document that the hon. Gentleman can obtain from the Vote Office, entitled “Public sector pensions: good pensions that last”, and I am sure that it will provide much of the information that he requires.
I welcome my right hon. Friend’s improved offer on public sector pensions, which shows that the Government are serious about meaningful negotiations. Will he challenge the rather misleading claims from some quarters that people will have to pay more, work longer and get less? Surely the truth is that—although people will indeed have to pay more and work longer—far from getting less, they will get much more, not least because on average they will receive 10 years’ more pension payments than the previous generation.
My hon. Friend is absolutely right, and she is also right to warn people against some of the misleading propaganda that is circulating. I think it important for public sector workers—teachers, nurses and civil servants—to take time to study the offer that we are making for themselves. The document that we are publishing will be available on a website, so they can check out the new arrangements. As my hon. Friend says, yes, we are asking people to work longer and yes, we are asking them to contribute more, but many people will receive a significantly better pension on retirement than they would receive now.
I was grateful to the Chief Secretary yesterday for answering my question about public sector workers who will no longer contribute to their pensions. He told me then that he expected 1% of the pay bill to cease to contribute, but added that he did not know who that 1% were. Given that they are very likely to be low-paid part-time workers rather than the highly paid chief executives to whom he has referred, will he make the figures available to the House?
It is true that I gave the figure of 1% of the pay bill. That is an assumption that was audited by the Office for Budget Responsibility and published in the relevant fiscal forecast that it presented. It is precisely for the reason given by the hon. Lady that we have chosen to tier the pension contribution increases according to income, so that no one earning less than £15,000 a year will experience any contribution increase. Those earning between £15,000 and £21,000 a year will experience a much reduced increase, while the heaviest burden of increases will be borne by the highest earners. That is the right and proper way in which to ensure that there are no opt-outs.
While it is true that all taxpayers pay for the pensions that we are discussing, it is low-paid private sector workers working beyond retirement age—such as my dad—who are subsidising public sector pensions while receiving none of the benefits. I therefore welcome the proposed changes, and hope that my former colleagues in the teaching profession will accept them.
Firefighters’ pensions were mentioned earlier. Firefighters from my constituency whom I met yesterday were worried less about change than about whether they would be fit to do their job after the age of 55. Are the Government still prepared to discuss that issue with the union?
Yes, and John Hutton said in his report that he thought it appropriate to retain a lower retirement age for firefighters, the armed forces and the police. It is precisely because of the importance of such issues that the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Bromley and Chislehurst (Robert Neill)—who is leading the negotiations—is taking longer than expected to set the cost ceiling. That will enable us to ensure that the arrangements for firefighters are appropriate and will allow them to continue to receive a very decent pension in return for what is a very important contribution to our society.
Like many other Members, I received a delegation of teachers last week, and they told me that their current scheme was fair and sustainable. They will be less than delighted by the Chief Secretary’s earlier answer relating to a valuation of that scheme, for which they have been calling for some time. Does the Chief Secretary recognise that he must come clean about the costs to both taxpayers and employees if he is to win the battle to change hearts and minds?
Of course I recognise that we must win that battle for hearts and minds. That is why I am providing so much information today, and urging public sector workers to look at the Government’s deal directly rather than necessarily relying on the information that they receive from their trade unions.
I do not think it right to suggest that the current teachers’ pension scheme is fair and sustainable. Let us consider the relevant contribution rates. When the scheme was introduced many decades ago, employer and employee each contributed 5%. Now the employer contributes 16%, while the employee contributes about 6%. There has been a big change in the affordability of the scheme, and so far all the cost has fallen on the taxpayer.
Does my right hon. Friend agree that the public sector should examine very carefully the generous revised terms that he has announced before considering strike action? Such action would merely serve to hurt millions in the private sector who pay their taxes in order to produce public sector pensions that they themselves can only dream of.
I do indeed hope that the trade unions will examine the proposals carefully. I was encouraged when they said that they would at our meeting this morning. Of course trade unions need to take time to understand the impact of the changes, but I hope that on reflection they will accept that the new offer constitutes a generous enhancement from the Government, and a fair and reasonable basis on which to reach agreement in the scheme-by-scheme talks that will take place during the next couple of months.
The Chief Secretary said he believed that pension changes should be sustainable and fair. Will he confirm that he intends additional contributions to the local government pension scheme—which is a funded scheme—by scheme members to go straight to the Treasury rather than into their pension fund?
According to reports in today’s press, only 40% of private sector workers receive pension contributions, while 85% of public sector servants receive not only a pension, but a more generous one. Does my right hon. Friend agree that it is time to address these differences, rather than engage in irresponsible strike action?
I wholeheartedly agree that it is time to address these differences, but not by trying to get public sector involvement in pensions down to the level in the private sector. What we need to do is what we have done today: set out an offer that combines affordability for the general taxpayer with proper pensions as a reward for a career in the public service, along with steps to encourage more private sector workers to involve themselves in pensions. That is precisely the basis of the new NEST scheme, which the Minister of State, Department for Work and Pensions, my hon. Friend the Member for Thornbury and Yate (Steve Webb), is taking forward.
Does the Chief Secretary regret the way negotiations have been conducted so far, with him practising megaphone diplomacy, not providing information requested by the trade unions, and causing a great deal of distress and upset to my constituents who are public sector workers?
I think what the hon. Lady has said is total nonsense; that is not an appropriate characterisation of what we have done. I do not regret the way the talks have progressed for the past eight months, and I look forward to reaching agreement on this issue, with or without the support of the Opposition.
Will my right hon. Friend outline how he thinks the unions should respond to the proposals he has set out today? Does he agree with most Members on the Government Benches, who think the unions should respond by today calling off any planned industrial action?
It is for the unions to reflect and decide on their response. I am not standing here at the Dispatch Box to respond for them; it is strange enough to respond for the Liberal Democrats and the Conservative party. I hope that the trade unions will, on reflection, realise that this offer provides a justification for putting renewed effort and vigour into the scheme-by-scheme discussions and much less effort and vigour into any possible strike action.