What a splendid idea. If that were the Minister’s purpose, I agree that there would be no reason not to specify it in the Bill. That would normally happen in the case of incidental, supplementary or consequential issues but, of course, many people suspect that that is not what is involved.
I also want to talk about the employer cost cap, which can unilaterally result in staff benefits decreasing or their contributions increasing. What is particularly pernicious is the fact that the Bill exempts such changes from even the meagre protections for consultation with staff under clause 20. That clause deals with the consultations and discussions that should be held with staff, but it explicitly excludes the arrangements for the employer cost cap. Clause 11 provides for the cost cap to be determined entirely by the Treasury with no requirement for parliamentary scrutiny, which means that the Treasury can set the cap at an unreasonable level, or use it to reduce pension benefits unchecked, thereby further undermining the security of schemes for retirement provision.
Other hon. Members raised issues under the assumption that the Government’s commitment to a new defined benefit scheme was enshrined in the Bill. It turns out that the Bill does not, in fact, honour such provision. In fact, clause 7 says that a scheme that may be created is “a defined benefits scheme”, “a defined contributions scheme” or a scheme “of any other description.” The only restriction is that a scheme cannot be a final salary scheme. In other words, the Government are enshrining in the Bill the side of the agreement that benefits the Treasury, but they have left out the corresponding promises that they made to public sector workers.
My right hon. Friend the Member for Wentworth and Dearne talked about the fair deal, as it was known, for public service workers who might be outsourced to a private provider. Following the transfer of employment, they should be entitled to accrue pension benefits that are broadly comparable to those that they would have accrued if they had remained in the public sector scheme. The Government’s promise does not extend beyond the civil service, however. We shall press for a commitment for the benefit of other public sector workers, as there is an anomaly in the Bill that such a commitment is provided only to employees of central Government and not to other public service workers.
I have further anxieties about the Bill. It will tie pension arrangements to the state pension age, but of course that can be changed, with no protection for those approaching retirement. The pegging of the Bill to the state pension age erodes security and certainty about the age at which members of various schemes might receive their pensions. In 2011, the Government gave only eight years’ notice of the state pension age changes, which caused great concern at the time. While we accept that actuarial changes to reflect demographics might need to be made from time to time, the Bill ought to prevent any changes from being made to the normal or deferred pension age for those with 10 or fewer years to go before they are due to retire. It is incredibly important to help people to plan ahead with their pension provision, and the Government should be able to offer a concession to ensure that such planning is possible.
Once upon a time, the Government talked about the Hutton report as something to welcome and take forward, but they have ignored Lord Hutton’s recommendation
that the link between the state pension age and the age at which members of public service schemes receive their pensions should be regularly and independently reviewed. I am told that the Government agreed in negotiations that such reviews would take place, but that is not enshrined in the Bill. I will be more than happy to give way to the Chief Secretary so that he can clarify whether he is going to make a concession by providing for such a review in the Bill—[Interruption.] If he does not wish to clarify that, it will be for us to press that point by tabling amendments in Committee. I know that Ministers will keep an open mind on many of these points.
There are serious problems with questions of governance. Lord Hutton made a number of important recommendations about scheme governance, such as on the implementation of the pension policy group to consider major changes to scheme rules, on the inclusion of nominated members and independent members of pension boards, on ensuring that pension boards are responsible for the oversight of financial management, and on the commissioning of a review into how standards of administration in public service pension schemes can be improved. Such governance measures would improve the efficiency of schemes’ administration and would follow some of the best practice for scheme governance in the private sector, but the Government have not enshrined many of these recommendations in the Bill. Those omissions are important, so I hope that Ministers will look at them.
My hon. Friend the Member for North Ayrshire and Arran (Katy Clark) talked about the importance of local government pension schemes—they are indeed schemes apart. We welcome the fact that the LGPS is funded, but as I said in an intervention, if Ministers are closing the LGPS in 2014, albeit opening new ones going forward, they must explain what will happen to the obligations under section 75 rules relating to the crystallisation of some of those debts? Hon. Members may not realise that academies and third sector organisations such as charities are part of the local government pension scheme. Forcing them to crystallise some of those deficit arrangements at the point at which the existing schemes end and the 2014 schemes begin could be financially crippling and cause major crises. The Bill also centralises a great deal of control and makes a great many anti-localist changes. Changes to the local government pension scheme will transfer power from local authorities to Ministers.
The Bill is enabling, but it is only part of a story and it needs significant amendment. We will not oppose its Second Reading, but I hope that the Economic Secretary will genuinely engage himself in the Committee stage, will keep an open mind, and will work with us on improving protections for public service workers as well as the taxpayer.
9.45 pm