This has been a thorough debate, and I welcome the contributions made by Members from both sides of the Chamber.
We need reforms that enhance the sustainability of pension schemes. In an era of significant demographic change, it is right to reform the pension system to ensure affordability for both employees and employers—which in the case of the public sector is the taxpayer. The sustainability of a decent pension scheme was the focus of several tough decisions made by the previous Labour Administration. The changes made to public service provision when we were in office included raising the pension age from 60 to 65, introducing a “cap and share” approach that would protect Exchequer revenues and share costs between employees and employers, and reforming contribution levels, which rose by 0.4% for teachers and up to 2.5% for NHS staff. The Public Accounts Committee says that those changes would save the taxpayer £67 billion over a 50-year period, so considerable reform took place under the previous Administration.
However, the Government have mishandled subsequent reform. As we have heard from some of my hon. Friends, when the Government were formed in 2012 by the Conservatives with their good friends the Liberal Democrats, instead of building on the changes that we made, they decided to rip them up, thus causing major problems. Their incompetent and shambolic handling of the reform process has also made it much harder to build a consensus on some of the many sensible long-term reforms proposed in my noble Friend Lord Hutton’s report, as my hon. Friend the Member for Blaydon (Mr Anderson) said. We have to find better ways of rebuilding trust and achieving consensus on these vital matters.
The Government are compelling major changes without negotiation in a way that is both crude and unfair. In particular, by unilaterally imposing a steep 3% rise in contributions prior to any negotiations or even the completion of Lord Hutton’s review, and by making a permanent switch in the indexation of future pension income from RPI to CPI, the Government provoked strike action, at a cost to the country and the users of public services. They also provoked deep cynicism among public service workers. These changes were not recommended by Lord Hutton, but were unilaterally introduced, in an unfair and provocative way. The Government’s aggressive approach to this serious and sensitive issue resulted in months of stalemated negotiations. It is a matter of deep regret that the Government have lost the confidence and damaged the morale of hundreds of thousands of public service workers, whose engagement is vital at a time when they are being asked to accept ongoing pay restraint.
Many hon. Members have noted that Lord Hutton produced a thoughtful and comprehensive report on the way forward, using a number of the changes made by the previous Administration as a starting point for
negotiations. The document was very useful. He was right to suggest that career average schemes could be fairer than final salary schemes—several hon. Members have made that point—and to say that we should be asking people to work for longer, given the increase in life expectancy. He was also right to stress the need to approach these issues in a careful, balanced way, and to avoid a race to the bottom on pension provision. It is those aspects of Lord Hutton’s report that I wish the Government had looked at more carefully and taken to heart. The Bill is only part of the story, as the unfair increases in contributions and the changes in indexation that have already been imposed do not appear in it.
The Bill contains a series of proposals that we need to consider on their merits. As it consists mainly of enabling legislation that is designed to put new schemes on a clear and equal footing, we will not oppose its Second Reading, but we will hope to address a number of serious concerns in Committee. My hon. Friend the Member for Hayes and Harlington (John McDonnell) has very strong opinions on these matters, which I respect, but I want us to try to find opportunities to improve the Bill in Committee.
All too often when Opposition amendments are tabled in Committee, we see brand new Ministers, with the advice of their officials, opening up their briefing books to find the word “resist” in block capitals, and then simply parroting the notes that have been put into their folders. However, I am sure that that will not be the case with the Economic Secretary to the Treasury, for whom I have great hopes. Let us pray that the Bill’s Committee stage will involve a genuine exchange of views, and give us the opportunity to look into the detail and dig into some of the Bill’s anomalies and, indeed, failures.
Several hon. Members referred to key aspects of the Bill that contain glaring deficiencies. For example, my hon. Friend the Member for Dumfries and Galloway (Mr Brown) and my right hon. Friend the Member for Wentworth and Dearne (John Healey) referred to the retrospectivity involved in the changes to scheme regulations. By allowing scheme regulations to make retrospective changes, the Bill gives the Government the power to reduce benefits that have already been accrued. Many hon. Members will be surprised by that, because most assume that such things are sacrosanct.
My right hon. Friend the Member for Wentworth and Dearne was right to point out that the proposal comes into conflict with the European convention on human rights. It also goes against the central tenet of pension provision, which is that what has been accrued cannot be reduced, because it has already been earned. That is an important principle, because how can public service workers have any security about their future retirement if they know that the Government can retrospectively reduce the benefits that they have already earned at any point? This should not be a partisan matter, but the contract between the employer and employee is important, so I urge the Minister to listen to the genuine concerns that have been raised in the debate.