I shall try to keep within the 12 minutes: it is my intention to make only a short contribution.
First, I wish to establish some general principles for why reform is needed. They can be grouped into two areas. The first is the general societal changes that have taken place that necessitate reform and to which the Government must respond, such as the increase in life expectancy and the changes in employment practices over recent decades. The second is the changing balance over time between the sharing of the cost of public sector pensions between the taxpayers, through the Government acting as employer, and the employees who receive the pensions.
It is important to establish that the reforms in the Bill would be needed with or without the current cost pressures that the Government face. We hope to bring public sector borrowing under control by 2017, but these reforms are intended to last for a generation. They are not driven by the short-term need to recover costs: they are driven by a long-term desire to ensure that public sector pensions survive into the future in a sustainable way.
Any reform should be done fairly and, as far as I and my Liberal Democrat colleagues are concerned, protect those in the public sector on the lowest earnings. The overriding principle should be that the public sector should continue to act as an exemplar to other employers. There should not be a race to the bottom: the public sector should set the gold standard for affordable and attractive public sector pensions that attract the very best people into the public sector, who are paid in a fair way and guaranteed a secure and attractive income into retirement.
The first principle is that of life expectancy. We all know that we would hope for ourselves and people in our families to live longer. Indeed, people retiring now at age 60 can expect to spend 40% of their adult life in retirement—so only 60% of their adult life would have been spent in work. The state pension age has been changed relatively infrequently over the 103 years of its existence. If it had been uplifted in line with life expectancies, people would now be drawing their state pensions at age 75. Several other countries, in particular Scandinavian countries, have ongoing commissions that examine life expectancy and uplift pension ages according to that evidence. That might be a good approach in the future for this country.
The biggest societal change driving the need for reform is the difference that has arisen over time between private sector and public sector remuneration. It always used to be much quoted that pay in the private sector was more attractive than in the public sector and that part of the balancing factor to make public sector employment attractive was a good pension, and perhaps other good terms and conditions. In recent decades, that maxim does not hold. Indeed, the Institute for Fiscal Studies said that in 2011 people in the public sector doing a broadly similar job to people in the private sector were likely to be paid about 8.3% more. But pension provision in the public sector continues to be much more attractive and offered on a much wider scale than to people in the private sector.