Public Service Pensions Bill

Public Bill Committee, 13 November 2012.

Clause 15 - Regulatory oversight

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

With this it will be convenient to discuss new clause 3—Review of standards of administration—

‘(1) Within six months of the day on which this Act is passed, the Treasury shall commission an independent review into the standards of administration in public service pension schemes and how those standards could be improved.

(2) The Treasury shall lay before Parliament the report produced by the review as soon as reasonably practical after the report has been published.’.

Sajid Javid (Conservative, Bromsgrove)

On a point of order, Mrs Brooke. May I seek your advice? Are we not going to consider the new clause first?

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

We are going to consider both new clause 3 and clause stand part. The new clause will be discussed as part of this debate.

Sajid Javid (Conservative, Bromsgrove)

Further to that point of order, Mrs Brooke. I am sorry to seek your advice again, but would it not be appropriate—I may be mistaken—for the Opposition spokesman to speak to new clause 3 first?

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

If you wish and it is more convenient, you may deal with the new clause in your summing up at the end of this debate.

Chris Leslie (Labour, Nottingham East)

Further to that point of order, Mrs Brooke. This might be useful to the Committee. The stand part debate and new clause 3 have been grouped together, but I have not yet talked about the virtues of the new clause, so for the purposes of this debate, perhaps—at your discretion—the Minister might outline the general purpose of clause 15 and we could then get into the debate proper.

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

That is exactly what I have suggested. If the Minister does not want to comment on new clause 3 now, he will have ample time to do so when he sums up at the end of this debate. However, it is for the Minister to speak to the clause at this point.

Sajid Javid (Conservative, Bromsgrove)

Thank you, Mrs Brooke.

The clause introduces schedule 4, which significantly extends the Pensions Regulator’s role in relation to public service pensions schemes. We will discuss schedule 4 in more detail later. The provision reflects Lord Hutton’s recommendation that the scrutiny of public service schemes should be independent of interested parties.

For public service pension schemes in Great Britain, the clause will provide a power to enable the Secretary of State for Work and Pensions to make changes that are consequential on schedule 4 by order. That is a standard power that allows for the rectification of unforeseen problems that could otherwise hinder the legislation or prevent it from operating as intended. The clause will also provide a power to make further or connected provisions for the regulation of public service pension schemes in case unforeseen interactions are identified during the detailed design work.

If an order under the clause is to amend primary legislation, it will be subject to the automatic scrutiny of the House through the affirmative resolution procedure. In all other cases, orders will be subject to the negative procedure. That strikes the correct balance between the need for Parliament to consider and scrutinise such orders, and the demands on its resources. The clause will provide corresponding powers in respect of Northern Ireland.

The Pensions Regulator will be responsible for setting standards of administration and governance in public service pensions schemes, and will have powers to enforce those standards, as required. A key part of that new role is for it to issue codes of practice to enable schemes to know what is expected of them and how to meet the standards. Codes of practice will set out in more detail the legal requirements on schemes and how schemes can fulfil them. Therefore, once the Bill is passed, an independent body will set standards and consider how schemes can best meet them. The Bill also makes it clear that the Pensions Regulator will have to include, in its annual report to Parliament, specific mention of how it has exercised its functions in respect of public service schemes.

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

May I clarify that new clause 3 will be debated and can obviously be spoken to now, but that it cannot be moved until we reach the new clauses at the end of the amendment paper?

Chris Leslie (Labour, Nottingham East)

Thank you for your helpful clarification, Mrs Brooke. I hope Committee members are looking forward to a fun day of debate on the Bill. I can barely wait for the moment when we have to decide whether to press new clause 3 to a Division, but sadly, given the archaic nature of the procedure, that will not be until the end of the process. For the time being, it is sensible to debate new clause 3 now, grouped as it is with clause 15 on the regulatory oversight of new schemes.

New clause 3 was prompted by Lord Hutton, specifically recommendation 22 on page 17 of the independent public service pensions commission’s final report:

“Government should set what good standards of administration should consist of in the public service pension schemes based on independent expert advice. The Pensions Regulator might have a role, building on its objective to promote good administration. A benchmarking exercise should then be conducted across all the schemes to assist in the raising of standards where appropriate.”

We are taken with that recommendation, which seems sensible. New clause 3, therefore, seeks to implement that concept by ensuring that the Government receive independent advice on improving standards of administration in public service schemes. New clause 3 would also ensure that the independent review is publicly accessible so that its implementation can be scrutinised and its recommendations can be accessed and implemented by schemes that wish to do so.

Clause 15 triggers schedule 4, which we will debate at another point. Paragraph 14 of schedule 4 makes provision for the regulator to issue codes of practice, but clause 15 does not require the regulator or another independent expert to carry out a review first and then to set out clear principles for good administration in public service pension schemes, which could inform the codes.

From our point of view, there are a number of factors in favour of an independent review. First, an independent review would identify areas of improvement in the national drive for better administration, as well as identifying best practice that can be emulated by other schemes. Given the number of schemes we are talking about and given the need to improve trust and confidence in those schemes, it is important that we take this moment, which is perhaps one of the few moments in a generation when we legislate to make such improvements, to consider how best to set that standard for scheme administration.

Enshrining an independent review in legislation may also inform future codes of practice by considering the possibility of streamlining and combining scheme administrative functions. Lord Hutton’s report states:

“The Commission has received suggestions and evidence from a number of commentators that public service pension schemes offer scope for streamlining and combining of their administration functions.”

That is important because, obviously, if we are talking about ensuring that schemes have efficient administration and are run cost-effectively, good advice needs to be available to ensure that some of those administrative approaches can be pooled where necessary, but not to the extent that they jeopardise good practice in the operation of those schemes.

An independent review is also worth while because, given the vast number of smaller schemes, it could examine ways in which the local government pension scheme in particular might benefit from economies of scale. The findings of an independent review could make sharing administrative services or contracts more possible. That is the logic behind new clause 3, which springs from the recommendations and conclusions of the Hutton report. It would help to strengthen the Bill and clause 15 by moving in harmony with the provisions that the Minister has already set out.

We do not massively disagree with clause 15, but given the importance of the schemes’ regulation, the regulator should be required to play a more active role than clause 15 and schedule 4 currently require. I think we will debate some of those matters later with regard to schedule 4.

Sajid Javid (Conservative, Bromsgrove)

The new clause appears to be concerned with Lord Hutton’s recommendation that the Government should set good standards of administration in all public service schemes. He recommended that once those standards are set, benchmarking should be undertaken to improve performance where needed. While we agree with both parts of that recommendation, the new clause is unnecessary, even though the hon. Gentleman made some forceful points. Allow me to explain why.

Through the Bill we are extending the administration and governance requirements placed on pension schemes by the Pensions Act 2004. We are setting the administration standards required of public service schemes, which has not been done before. Up until now they have been exempt from most of the provisions that apply to the governance and administration of schemes. We have carefully examined those exemptions and we could see no basis for those standards to continue not to apply. Schedule 4 therefore sets out the governance and administration requirements on public service pension schemes.

We worked closely with the Pensions Regulator in preparing the Bill. Lord Hutton’s recommendation suggested that it could have a role to play in advising the Government. We agreed, because the Pensions Regulator is an independent, risk-based regulator with considerable expertise in the area. Schedule 4 extends its role in regulating the administration and governance of public service schemes, bringing it into line with its role in all other occupational pension schemes.

For completeness, I should mention that in parallel to the changes in the Bill, we also intend to do more to strengthen transparency of scheme governance and administration.

Clause 13, which we have already discussed, allows for information on those matters to be published by schemes or collated centrally by Government. We intend to use that to monitor and drive improvement in scheme administration. The new clause does not appear to offer anything on that aspect of Lord Hutton’s recommendation, but it is helpful for the Committee to understand the various components of our response.

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

I will invite Chris Leslie, if he wishes, to press the new clause at a later point. He may just like to confirm that.

Chris Leslie (Labour, Nottingham East)

I suppose that I do not need to decide at this moment whether to press new clause 3 to a Division. I will listen to the Minister’s further comments on schedule 4, but I am not yet satisfied that we have dealt properly with the issues behind my arguments on new clause 3. If it is okay with you, Mrs Brooke, I will hold my fire for the time being.

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

Yes, I was not expecting you to speak at this point.

Schedule 4 - Regulatory oversight

Chris Leslie (Labour, Nottingham East)

I beg to move amendment 76, in schedule 4, page 28, line 36, leave out ‘may’ and insert ‘shall’.

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

With this it will be convenient to discuss amendment 77, in schedule 14, page 35, line 10, leave out ‘may’ and insert ‘shall’.

Chris Leslie (Labour, Nottingham East)

I apologise to the Committee that we are dotting about a little on some of the same array of issues. That is in the nature of how the legislation is laid out.

Schedule 4 is one of the most considerable in the Bill, relating to a number of schemes of governance and oversight arrangements. The Minister is right that this is a good opportunity to improve the oversight of public sector schemes under the provisions started in the Pensions Act 2004.

The two amendments are similar. Amendment 77 makes the same point in respect of Northern Ireland as amendment 76 does for the rest of the UK. Amendment 76 refers to line 36 on page 28 of the Bill. Members of the Committee will see that the Government are seeking to insert, after section 90 of the 2004 Act, provisions for codes of practice for public service pension schemes, which state:

“The Regulator may, in relation to public service pension schemes, issue codes of practice…containing practical guidance in relation to the exercise of functions”

and

“regarding the standards of conduct”

and so on and so forth. That is good as far as it goes, but we are surprised and disappointed that the Government are not making that a requirement, and we have therefore suggested that the permissive tone of the schedule should be strengthened by leaving out the word “may” and inserting the word “shall”.

We think the codes of practice concerned would undoubtedly help to ensure higher standards of scheme governance and administration. In our view there should therefore be a clear requirement that the codes be produced by the Pensions Regulator, rather than a permissive approach, which could risk situations where no such guidance is produced. Under schedule 4, the codes of practice will, in theory, look at the exercise of functions under relevant pensions legislation—the standards of conduct and practice expected from those who exercise such functions. It would be a great pity were it not a requirement on the regulator to draw up those particular codes of practice and ensure that they are issued.

It may well be that the Minister, voluntarily, has had conversations with the regulator on this issue, and it said, “Okay, well, yes, we will do what we can,” but I do not think that is good enough for legislation. I therefore hope that the Minister can see that the amendment would be a tweak to the drafting of the legislation before us, and would be, hopefully, a helpful one. I would be grateful to hear from him the rationale for not accepting the amendment.

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman has already presupposed that I am not going to accept his amendment, and he has done well in that. Schedule 4 sets out the new role for the Pensions Regulator in providing regulatory oversight of the administration and governance of public sector schemes. A part of that new role is for the regulator to issue codes of practice to enable schemes to know what is expected of them and how to meet the standards. Codes of practice set out in more detail the legal requirements on schemes and how to fulfil them. The regulator already issues codes of practice for private schemes and these clauses mirror that drafting.

Amendments 76 and 77 would make the overarching power for the regulator to issue codes of practice into a duty. The first amendment is in respect of Great Britain, and the second is in respect of Northern Ireland, but the effect of the amendments is the same for each. Therefore I will speak to the first of the amendments. Paragraph 14 of schedule 4 inserts proposed new section 90A into the Pensions Act 2004. Proposed new section 90A(2) sets out the list of matters in respect of which the regulator must issue codes of practice. That sits under the broader power in proposed new section 90A(1) to issue codes of practice in relation to the exercise of functions under pensions legislation and the standards of conduct of those exercising those functions. The result is that, as currently drafted, the regulator will already be under an obligation to issue codes in relation to certain areas of pensions regulation, as well as having a power to issue codes in relation to other areas.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

The Minister is giving an explanation of the powers of the regulator and what is expected of it. During one of the evidence sessions, a number of questions were put to the chief executive of the regulator around the issue of appropriate funding. He gave the very specific response that the regulator wished to focus

“on education and enablement as much as enforcement.”––[Official Report, Public Service Pensions Public Bill Committee, 6 November 2012; c. 199, Q108.]

There was an indication that there had been some discussions about additional resources to assist the Pensions Regulator in carrying out its task. Can the Minister say how that fits with what he is now telling us? Will there be additional resources, and if so how will the amount be decided?

Sajid Javid (Conservative, Bromsgrove)

The hon. Lady makes a good point. Clearly, this provision asks the regulator to do more than it does currently. Although I have not been involved in any discussions directly with the regulator on this, any request that the regulator makes for additional resources to take on this extra responsibility will be considered very carefully by the Government because there is no point asking it to take on these responsibilities if we do not ensure that it has the resources.

Proposed new section 90A(2)(j) provides, as with the existing section 90 of the Pensions Act 2004 on which this provision is based, for the Secretary of State to add to the list of matters in relation to which codes of practice are required to be issued. Therefore I can reassure the hon. Gentleman that the regulator will issue codes of practice and that these are a key part of implementing the independent oversight and regulation of public service schemes recommended by Lord Hutton.

Chris Leslie (Labour, Nottingham East)

I am grateful for that clarification but I am perplexed by the drafting of the schedule. Proposed new section 90A(1) has the permissive arrangement whereby the regulator may issue codes of practice. The Minister is correct that subsection (2) states:

“The Regulator must issue one or more such codes of practice relating to the following matters”.

Is that not strange drafting? There is a “must” requirement in that subordinate subsection (2), which seems to clash with the permissive arrangement in subsection (1), perhaps the primary subsection. Might that be a drafting error? Can the Minister explain why those two subsections seem to cut across one another?

Sajid Javid (Conservative, Bromsgrove)

I can see why the hon. Gentleman has that perception. First, I hope he will accept that the Bill is necessarily complex because of the number of schemes and different areas it is trying to deal with. The drafting he refers to mirrors the Pensions Act 2004. We had to make a decision about exactly the approach to follow but we thought that mirroring what is already there was the correct approach. I hope that reassures him. It is clear from our discussions with the Pensions Regulator that it understood that it must issue codes of practice. He is right to raise the issue and I can see where his concern came from. I hope that I have reassured him enough that he will withdraw his amendment.

Chris Leslie (Labour, Nottingham East)

The Minister’s word is his bond and it would be churlish of me not to accept his assurance that the codes of practice will be issued. We have probed how the legislation is set out and having had that reassurance, I beg to ask leave to withdraw the amendment.

Sajid Javid (Conservative, Bromsgrove)

I beg to move amendment 28, in schedule 4, page 35, line 26, leave out

‘section 113 of the Pension Schemes Act 1993’

and insert

‘section 109 of the Pension Schemes (Northern Ireland) Act 1993’.

The amendment makes a minor change to part 2 of schedule 4 to correct an erroneous reference to the Pension Schemes Act 1993. It inserts the appropriate reference to the Northern Ireland provisions in its place. It ensures that the regulator can issue codes of conduct based on the disclosure of information requirements that apply to pension schemes in Northern Ireland, and I commend it to the Committee.

Clause 7 - Types of scheme

Chris Leslie (Labour, Nottingham East)

I beg to move amendment 50, in clause 7, page 4, line 20, at end insert—

‘(3A) A scheme under section 1 which replaces a defined benefit scheme may only be established as a defined benefits scheme.’.

We skip back to clause 7 after having had a little foray further into the Bill to discuss clause 15 and schedule 4. We will now examine the provisions relating to the design and type of the new public service pension schemes. Clause 7 has several subsections, the first of which, rather interestingly, states:

“Scheme regulations may establish a scheme under section 1 as—

(a) a defined benefits scheme,

(b) a defined contributions scheme, or

(c) a scheme of any other description.”

That is a peculiar way of drafting the legislation, because the Government promised to provide public service workers with defined benefit pension schemes in the form of career average pensions. However, the Bill does not seem to honour that particular commitment, providing as it does in subsection (1) that schemes created under the Bill can be defined benefit, defined contribution, or any other scheme that the Minister may see fit. The only restriction on the type of scheme, which is set out later in the legislation, is that it cannot be a final salary scheme. The Government have enshrined that side of the agreement in legislation, which is obviously to the benefit of the Treasury. However, they fail to include the corresponding side of the issue, which was the promise that it made to public service workers.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Does my hon. Friend share my concern about the comments made during the evidence sessions by, in particular, the TUC that the inclusion of such a provision in the Bill leads to worries about undermining confidence in the negotiations and discussions that are taking place with the Government around the Bill?

Chris Leslie (Labour, Nottingham East)

Indeed, and we have had this debate before. It is important to try to shore up the trust and confidence that public sector employees might have in the Government’s approach, given that there are so many suspicions and the fact that the Government recently unilaterally implemented the 3% change and the change in the valuation arrangements totally without negotiation or consultation. Yet Ministers somehow expect no suspicions or question marks to be placed over the Government’s motives when they draft legislation in such a way and state in the Bill that schemes cannot be final salary, but do not enshrine that such schemes must be defined benefit. That is why we have tabled the obvious amendment 50, which adds a requirement that:

“A scheme under section 1 which replaces a defined benefit scheme may only be established as a defined benefits scheme.”

That should be accepted by Ministers, and it simply seeks to enshrine in legislation the promise that Ministers sought to make.

Sheila Gilmore (Labour, Edinburgh East)

One reason why such suspicions exist is that the debate is often still couched in terms of how much better public sector pensions are than private sector pensions, and rather than trying to raise private sector standards, there still seems to be the implication that public sector provision is still too much and it should come down to the level that many in the private sector have been forced into.

Chris Leslie (Labour, Nottingham East)

Indeed that is the case; it can be seen in some of the amendments tabled to the Bill by Conservative Back Benchers, and there are others who suggested that, somehow, this is a deal that they might wish to unpick. Therefore, if this is the deal—the final settlement—for the next 25 years, at least, please let us enshrine it in the Bill in the way in which it is intended. The lingering suspicion that the Government are about to renege on the promises they made to replace the final salary scheme with a career average scheme is there in the back of people’s minds. That undermines the trust that public service workers have in the Government, and in the pension reforms more broadly.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

Is my hon. Friend aware of any impact assessment undertaken on the Bill that reveals the implications for low-paid public sector workers?

Chris Leslie (Labour, Nottingham East)

We need to go through those impact assessments. I am not sure that I have seen the impact assessment behind the scheme. Perhaps the Minister will give us an undertaking that he will write to the Committee and copy us in on the Treasury’s impact assessments of the new scheme arrangements? That would be very helpful.

It would be an important step if the Minister would assure us that he will, at least, think about tightening up clause 7 to address, essentially, the point that his colleague, the Chief Secretary to the Treasury made in a statement on 20 June 2011. He said:

“Lord Hutton said himself that ‘how people are treated in this process will be as important as the changes to pension schemes themselves’. I wholeheartedly agree with him that establishing a relationship of trust and confidence between the Government and public service workers is critical to the success of these reforms.”

Amen to that. We hope that, therefore, the Minister understands why there might be suspicions about the clause as it is drafted.

Our amendment is carefully drafted to pre-empt some of the Minister’s comments. We understand that, currently, there may be a small number of defined contribution public service schemes. Our amendment—we hope—does not affect those. The amendment is designed to ensure that, as the Government promised, final salary schemes, which are set to be closed by the Bill, will be replaced only by defined benefit schemes. The amendment merely puts that promise on a statutory footing. The only reason that the Government could have for rejecting the amendment is that they might have their fingers crossed and, at some point, be intent on possibly breaking that promise. Otherwise, I cannot see why they would reject the amendment.

As we have said before, often, Ministers come to this Committee with ring binders filled with beautifully written civil service speeches with big words, emboldened, at the top saying, “Resist this awful Opposition amendment”, and the poor old Minister has to do his best to make that case. On this amendment, however, I urge him to set aside the advice that his officials might be giving him to keep the Bill beautifully clean and pristine. I urge him to listen to the anxieties that public service workers have expressed about the nature of clause 7 and to take a look at the constructive, helpful way in which we have drafted amendment 50. We want to enshrine the Government’s promise; we are trying to put the Government’s own words in the Bill. We are not going further than that, and I hope he will accept the wisdom of the amendment.

Sheila Gilmore (Labour, Edinburgh East)

In some ways, this comes to the crux of the debate on public sector pensions that has been ongoing for some considerable time. At times, it has exploded into bitter debate and industrial action. A lot of progress seems to have been made in painstaking negotiation over the past couple of years, particularly in recent months. As we heard in the evidence sessions, many, although not all, of the trade union and staff groups that were involved in the discussions felt that genuine progress had been made. They felt that issues they had raised had been listened to, and that there had been a willingness to change some of the original proposals and come up with something that they could recommend to their members. The fact that that stage has been reached is significant.

Some groups have outstanding concerns that may have to be addressed, and a further compromise may be required, but once that has happened and we can move forward it is important that people have the confidence that we are reaching a public sector settlement that will last for a considerable time. Hopefully this will not be the case, but it might be necessary to reconsider the scheme in future. Much of our discussion has been about longevity, and we may or may not have reached the limits of the improvements that have been achieved, largely as a result of better general health, better standards of living and better housing, which mean that people now entering retirement can expect to live substantially longer than their parents and certainly their grandparents. If we have not yet reached that barrier—I think it has been stated that many babies born this year can expect routinely to live to 100, and perhaps that will be exceeded—people might, in perhaps 10 or 15 years, raise similar issues and ask again how the scheme could be made affordable and whether it was necessary to look at a different way of providing pensions.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

As always, my hon. Friend makes a valuable contribution to the debate. Does she agree that trust and confidence are the crux of the matter? The amendment would insert into the Bill a provision that was supposed to have been agreed, to ensure that progress made in the negotiations with public service workers will be held in good stead.

Sheila Gilmore (Labour, Edinburgh East)

I could not have put it better; that is exactly the point. I was trying to suggest that if it were thought necessary in future to reconsider the scheme, changes should be made through primary legislation. The issue is so important that it should not be possible for a future Government, of whatever nature, to return to the legislation and say, “Ah, but we can do this, because subsection (1) allows us to change the scheme from a defined benefits scheme to a defined contributions scheme without further primary legislation, so that is what we will do.” That would destroy trust, and it would be regrettable because it is important that any such changes be debated and negotiated openly. We must not allow them to slip through because we did not make the matter clear in the Bill.

The Government have spoken warm words, but I am anxious because many Government Back Benchers do not appear to support them. The fact that the governing party is not of one mind on the matter makes people uneasy. If those warm words are to mean something, the Bill must make it clear that there is no back-door route by which pension schemes, which have already been greatly altered, can be changed to defined contribution schemes. I have serious concerns about defined contribution schemes and how they have worked in the private sector. Anyone who has taken part in one will be well aware of that. We would have to be cautious before going down that route. I would like us to consider why defined contribution schemes often seem to give us very little more than was put in; I certainly got to the point with one of mine where I thought that I should just put the money under the bed, as it would not be worth any less.

Sajid Javid (Conservative, Bromsgrove)

The hon. Member for Nottingham East mentioned the Chief Secretary, and so will I. I thank him and the hon. Member for Edinburgh East for their comments. As the Chief Secretary and I have asserted repeatedly, the Government are fully committed to implementing the defined benefit schemes that have been negotiated. I am confident that the reforms are sustainable and will last a generation. I assure the Committee that the Government have no intention of replacing the defined benefit schemes with different scheme designs.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

But is that not the point? The Minister—I do not want to impugn his reputation, or what he is saying—talks about this Government. It is about future Governments, taking into account the points made by my hon. Friends the Members for Nottingham East and for Edinburgh East. If the language in the Bill is not just right, it could be open to misuse.

Sajid Javid (Conservative, Bromsgrove)

I thank the hon. Lady for her input. I will explain why I do not think that that is a risk or should be of concern, and will point out the Government’s reassurance to those rightfully concerned. There is no ill intention behind the clause; the flexibility embedded in it could be helpful to scheme members in future. It would be bizarre for the Government to have invested so much resource in developing and legislating for cost cap and valuation methodologies if we intended to do anything other than retain the defined benefit schemes.

Notwithstanding that commitment, it is important to note that as mentioned by the CBI during the oral evidence session on 6 November, the defined benefit or defined contribution nature of a scheme does not inherently make that scheme good or generous. It may be considered in the context of the terms of the scheme and the needs of that particular work force. For example, many civil servants have chosen to be members of a partnership defined contribution scheme, and such schemes are widely adopted in the private sector too. That shows that some public service workers already have a desire to be part of such schemes, albeit as an alternative rather than as the main form of pension provision for that particular work force.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Will the Minister respond to the point made by Alice Hood during the oral evidence session when she said:

“Seeing the potential for a move to defined contributions schemes there on the face of the Bill is quite concerning, and damaging to member confidence.”

Sajid Javid (Conservative, Bromsgrove)

I understand that, but I also understand from our negotiations with trade unions and others in the schemes that they understand why the Government have included the clause. As long as it is well explained in debates such as this one, along with the reassurances that I am clearly providing, no one should look at the clause and think that it involves any hidden agenda. I hope that Alice Hood will read this debate and gather further reassurance.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

I thank the Minister for his comments, although I am not entirely sure that it gives reassurance. It was not only Alice Hood who was concerned but Brian Strutton, who said:

“Clause 7 gives the Treasury far too wide-ranging powers to introduce any other type of pension provision, and crucially, without proper parliamentary scrutiny.”––[Official Report, Public Service Pensions Public Bill Committee, 6 November 2012; c. 159, Q43.]

He thought that there ought to be an affirmative procedure. More than one person expressed concern during the evidence sessions, which the Minister listened to and was present at.

Sajid Javid (Conservative, Bromsgrove)

The hon. Lady is quite right that I listened and that is why I want to make the clause’s intention absolutely clear. I also want to point out why it is in the public interest and the interests of taxpayers and future Governments to have such flexibility.

While I see no prospect of the Government wanting to move away from the defined benefit schemes that we have worked so hard to implement, it would not be appropriate for this Government to tie the hands of future generations and pension scheme members who might decide that, subject to the protection offered by the enhanced consultation and reporting obligations of clause 20, defined benefit schemes were no longer the most appropriate for public service workers.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

I find it ironic that the Opposition are concerned about the possibility of a move away from defined benefit schemes when, as a consequence of their policy in the 1997 Budget, defined benefit scheme members in the private sector went down from 5.8 million to less than 1 million. If they do not agree that that is a direct consequence of that policy, I refer them to confidential internal advice from Treasury civil servants titled “Paper Four” obtained under the Freedom of Information Act, which states:

“The present shift towards defined contribution schemes might accelerate”

as a consequence of the decision to end the tax credit on dividends. I therefore listen with some bemusement when Opposition Members complain about ending defined benefit schemes.

Sajid Javid (Conservative, Bromsgrove)

I thank my hon. Friend for that comment, which shows his experience in this area. The information that he has provided is of great use—[ Interruption. ]

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

Order. May I remind hon. Members that they are perfectly entitled to seek to intervene rather than calling out across the room?

Sajid Javid (Conservative, Bromsgrove)

You are quite right, Mrs Brooke.

Clause 20 provides a high hurdle against changes to defined benefit pension schemes, which provides very good protection to public servants for a generation. It is not for us to speculate on how the world of work in either the private or the public sector might look in 25 years’ time and what type of remuneration will be needed or wanted at that time. However, I wish to reiterate that a move away from defined benefit schemes in the public service is not the Government’s intention.

Chris Leslie (Labour, Nottingham East)

Perhaps the Minister’s Liberal Democrat colleagues will say that their participation in this Government is the only reason why the Minister is sticking to the defined benefit scheme. As my hon. Friend the Member for Oldham East and Saddleworth said, however, a future Government—heaven forfend that it be a majority Conservative Government, if you can imagine such a prospect, Mrs Brooke—is clearly intent on ripping up the defined benefit schemes. We heard the hon. Member for Bognor Regis and Littlehampton, who is a former Minister, almost licking his lips at the prospect of moving towards defined contribution schemes across the public sector, so we need more than the words of the coalition Minister. I want to hear from him as a Conservative. Is he committed, as a Conservative, to retaining the defined benefit schemes as agreed in his own negotiations and his own promises?

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman is getting a bit carried away. The Chief Secretary to the Treasury could not have made the Government’s commitment any clearer. I could not have made it any clearer. This is a settlement for a generation. We believe in defined benefit schemes, which are at the heart of the reforms. We want to ensure that those who work hard in the public sector have access to a generous defined benefit scheme. That is the legislation’s intention. The hon. Gentleman knows that, and I ask him to withdraw his amendment.

Chris Leslie (Labour, Nottingham East)

It is typical of the impression that we sometimes get of the Government’s Janus-headed approach that they seek to look both ways on the issue. With one utterance the Minister says there is every intention to stick with a defined benefit scheme—perhaps he had his coalition hat on for that—but then, as a Conservative, he says it would not be appropriate to tie the hands of future Governments.

That is not a 25-year commitment; that might be only a couple of months’ commitment, the way things are going for relationships in this tattered Administration. Let us hope that their internal dysfunctions bring them down as soon as possible.

Mr Gibb rose—

Chris Leslie (Labour, Nottingham East)

Speaking of bringing them down, I give way to the hon. Gentleman.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

I believe the hon. Gentleman’s earlier intervention was out of order. Lord Hutton made it clear in his final report that the public could not be certain of the sustainability of defined contribution schemes unless reform happened. The Government, led by Conservative Ministers in various Departments, are committed to defined contribution schemes. The point I made in my earlier intervention is that it is ironic that the Labour Opposition are trying to defend defined contribution schemes when it was they who led to the decline of defined benefit schemes in the private sector, which has put pressure on those schemes in the state sector.

However, this Government, whether Conservative or Liberal Democrat Ministers, are committed to maintaining the public sector pension schemes as defined contribution schemes as a standard that the private sector now needs to meet. Before Labour came to power in 1997 it was the other way round. The hon. Gentleman’s party is responsible for the state of pensions at the moment.

Chris Leslie (Labour, Nottingham East)

The hon. Gentleman’s comments are supported by “Hear, hear” from the hon. Members around him. However, during that intervention, on four occasions he incorrectly said that the Government are committed to defending defined contribution schemes. I think that on those four occasions he meant defined benefit schemes. We will put that oft-repeated error to one side.

The hon. Gentleman must surely see some suspicion on the employee side when faced with a supposed deal, signed up to by the Liberal Democrat Chief Secretary to the Treasury, that these will be defined benefit schemes. There is a realistic suspicion that the commitment to replacing those existing defined benefit schemes with new ones might have a jolly big question mark over it. That is not least because the Minister has sought to enshrine only one side of the agreement in statute. He is not against putting certain things in the Bill; they must not be final salary schemes. However, there is no symmetrical corresponding commitment the other way in the Bill.

Andrea Leadsom (Conservative, South Northamptonshire)

Does the hon. Gentleman accept that his Government destroyed one of the best private sector pension arrangements in Europe, by abolishing advanced corporation tax relief on pension funds and thereby removing more than £100 billion within a few short years out of private sector pensions? Does he further accept that as a result of that there is now an extraordinary difference in the terms that public sector retirees are able to enjoy over those in the private sector? While this Government have no desire to have a race to the bottom, does the hon. Gentleman accept his Government’s responsibility for that unfairness?

Chris Leslie (Labour, Nottingham East)

Does the hon. Lady not understand that while I would be more than happy to debate private sector pension schemes, we are not able to do so under this Bill? By her comments she seeks to give the impression that defined benefit schemes under the agreement signed up to by this Government are not wholehearted and firm. She is almost indicating that defined benefit schemes are too generous and not the right thing to do, when all we are seeking is to enshrine in the Bill the very negotiation and agreement that her own Government have made. That is the anxiety that we have.

Andrea Leadsom (Conservative, South Northamptonshire)

The hon. Gentleman completely misrepresents me. As I made clear, the Government have no desire for a race to the bottom. My point was to ask him a question: does he accept that his party’s Government were responsible for the unfairness that we are entirely determined to end? Does he accept their responsibility for destroying the private sector pensions that used to be the envy of the world?

Chris Leslie (Labour, Nottingham East)

Absolutely not, but as I have said, we cannot debate the state of private sector pensions under a Public Service Pensions Bill. Does the hon. Lady not accept that, by raising the prospect that, somehow, defined benefit schemes are eroded and unsustainable, all she is doing is fuelling the suspicion that, as we see in clause 7—debating which is in order—this transitory, ad hoc and temporary Government, and the Conservatives in particular, are not committed to the deal to which they signed up?

Sheila Gilmore (Labour, Edinburgh East)

Whatever the reasons for the decline of defined contribution schemes in the private sector, I recently had meetings in my city with both Scottish Widows and Standard Life in which I asked them a specific question, and they both said that, in their view, there are a wide range of reasons for the decline of defined contribution schemes, rather than simply because of a legislative change. In what sense, as has been suggested, does that put pressure on the public sector to change its schemes? During the period in which defined contribution schemes were being introduced in the private sector, we saw soaring wage inequality and hugely increased profits among those companies. Many people wonder whether it is quite so necessary to race to the bottom of the private sector.

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

I call Chris Leslie, who I am sure will focus on the amendment.

Chris Leslie (Labour, Nottingham East)

Indeed.

That is the point of the debate—the amendment would ensure that, if the Government were to get rid of a defined benefit scheme, they would replace it with another defined benefit scheme. Those are not our words, but the Government’s own commitment. I think the Minister said something to the effect that it would be bizarre to do otherwise and that there is no prospect of that scenario happening. Yet every intervention from Government Members suggests, “Defined benefit schemes are risky and unsustainable. That is why we have to keep our fingers crossed and keep open the option of getting rid of them and moving to defined contribution schemes.” We have addressed existing defined contribution schemes moving towards—

Andrea Leadsom (Conservative, South Northamptonshire)

On a point of order, Mrs Brooke. Is the hon. Gentleman allowed to make blatantly untrue assertions about what Government Members think and say?

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

That is not a point of order, but it might be a well made observation.

I call Chris Leslie, who will focus on the amendment.

Chris Leslie (Labour, Nottingham East)

I am shocked by the unnecessary point of order raised by the hon. Member for South Northamptonshire. You are right to dismiss her in the way that you did, Mrs Brooke.

All we are trying to do is to keep the Government to their word, which is an important job for the Opposition. If Government Members think that is by the bye, and that we should trust them absolutely when they say that there is no problem whatever in the Bill’s drafting, they need to listen to the evidence we heard in our oral evidence sessions.

The Bill enshrines certain aspects of the protections for the employer side by stating, “Thou shall not have final salary schemes.” That is fine as far as it goes, but the symmetrical promise to stick with a career average defined benefit scheme does not appear in the Bill. It is not unreasonable for us to ask why that has not been included, nor is it unreasonable for members of schemes who have experienced unilateral impositions, rather than negotiated changes—pension schemes are, after all, deferred wages—to ask that. We are talking about the terms and conditions of hundreds of thousands of hard-working public service workers across the country. I am not going to apologise for attempting to insert the Government’s own guarantees into the Bill. There is no good reason for Ministers to reject the amendment, which we have not drafted in a way that would drive a coach and horses through clause 7. We have been careful to ensure that it would allow existing defined contribution schemes to be replaced by new defined contribution schemes; the amendment focuses on the commitment to new career average defined benefit schemes. I am in despair at the fact that the Government cannot find a way to make that commitment.

Perhaps the Minister gave the game away when he said that it was not appropriate to tie the hands of future Governments. People will leave this debate thinking that a future Conservative Government might want to get rid of the new defined benefit schemes. That is the logic of what we have heard from Members on the Government Benches. Instead of standing up and arguing in favour of the deal that was reached in the last period of negotiations, and reached after careful consideration of the Hutton report, instead we have seen them in every intervention—

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

Will the hon. Gentleman give way?

Chris Leslie (Labour, Nottingham East)

Perhaps this intervention will be a break from the tradition of Government Members seeking to say that defined benefit schemes are somehow for the birds, when the schemes should be enshrined in this legislation. I give way.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

Can I make it clear that throughout the whole of the negotiations the purpose has been to put defined benefit pension schemes on a sustainable, long-term basis? That was the whole essence of the Hutton report and of Government policy. The plan was, and remains, that these provisions should last for at least 25 years. That is the plan: it is what has been promised and what will be delivered by a Conservative Government of the future.

Chris Leslie (Labour, Nottingham East)

Those were in part the words I wanted to hear from the Minister—but did not—about a future Conservative Administration, should there ever be such a thing. In that case, the hon. Member for Bognor Regis and Littlehampton will be supporting the amendment, because all we are trying to do is put that issue beyond doubt. Nothing he just said would cut across his support for the amendment, if we have a Division, as that is all we are trying to achieve. Government Members sometimes look at these proceedings with such suspicion, through their blue-tinted spectacles, thinking, “We must never touch an Opposition amendment; they are always trying to trick us and pull the wool over our eyes, those evil Labour people.” That is how they might want to characterise us, but that is incorrect; we are simply trying to enshrine on the face of the Bill the Government’s own words, as uttered by the hon. Gentleman.

I therefore think it is important that we test the will of the Committee. This is a key moment for the Bill.

Sajid Javid (Conservative, Bromsgrove)

This clause is concerned with the most fundamental design elements of the new schemes. The Government have been clear that the new schemes being created under the Bill should not be final salary schemes. As Lord Hutton set out in his final report, a final salary design is not appropriate for future public service schemes. In particular, final salary schemes unfairly benefit high flyers, who can receive up to twice as much in pension payments per £100 of contributions.

The Government have announced that they intend to put schemes in place which are of a career average revalued earnings, or CARE, design. That design will minimise the impact on lower earners, while rebalancing risk between the taxpayer and scheme members. The Institute for Fiscal Studies pointed out last week the

“really quite significant distributional changes”

brought about by the reform, which are very positive for lower earners.

As both I and the Chief Secretary have repeatedly asserted, the Government are fully committed to implementing the schemes that have been negotiated. The Government have spent a large amount of time and effort on the CARE schemes and they intend to deliver them. It would not be appropriate, however, for this or any Government to use primary legislation to tie the hands of future generations. To that end, clause 7 allows for other pension scheme designs if, and only if, future public authorities and pension scheme members decide that, subject to the high hurdle of protection offered by clause 20, CARE schemes are no longer the most appropriate pension design for public service workers. That might seem unlikely, but more than 7,000 civil servants have chosen of their own accord to use the civil service partnership scheme, which is a defined contribution scheme. It is impossible for the Government to predict what public servants will expect from their pension arrangements in more than 25 years’ time.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

It seems, unfortunately, that the Minister is trying to sell the case for DC. As in the debate on amendment 50, the Government are trying to make the case for DC rather than stating, as they have done previously, that they support DB schemes.

Sajid Javid (Conservative, Bromsgrove)

If that is what the hon. Lady thinks, she has misunderstood. The Government have made a very strong case for DB schemes, and that is clearly the intention of the schemes that are relevant to the Bill. It would not be appropriate to discuss amendment 50 again, but I hope that what I have had to say has provided some reassurance.

Chris Leslie (Labour, Nottingham East)

I have a specific question about clause 7. Subsection (5) states:

“Treasury regulations under this section are subject to the negative Commons procedure.”

In other words, we do not get the chance to debate such regulations; they simply go through on the nod. If the Minister’s commitment to replacing old defined benefits schemes with new defined benefits schemes is genuine, he might give a commitment—we might return to the matter on Report—that if he replaced a defined benefit scheme with a different type of scheme, he would do so under the affirmative resolution procedure. That would be one way of improving the protections so that defined benefits schemes are not replaced with non-defined benefits schemes. Will the Minister consider that suggestion?

Sajid Javid (Conservative, Bromsgrove)

What I and my right hon. Friend the Chief Secretary have said on numerous occasions about the Government’s commitment to the matter should count for something. All schemes covered by subsection (5) will be DB schemes. I mentioned earlier that clause 20 makes it harder to move away from CARE schemes, because it requires consultation with a view to reaching an agreement and it requires a report to be laid before Parliament. Those are high hurdles, which is as it should be. Most importantly, the Government’s commitment to providing a settlement for a generation with those types of schemes is absolutely clear.

Chris Leslie (Labour, Nottingham East)

A lot of this comes down to the notion that we cannot put protections in the Bill because that would bind the hands of future generations. Nothing would prevent a future Government from introducing primary legislation to amend provisions if circumstances allow, except for the fact that such legislation would be made under the public spotlight. The public would notice if a change was made to the agreement that was reached in 2012 to move from one defined benefits scheme to another defined benefits scheme. Primary legislation is one way to ensure that public service workers have some protections. The notion that protections cannot be included in the Bill must be taken with a pinch of salt.

Graham Evans (Conservative, Weaver Vale)

The hon. Gentleman said that the general public would look at the Bill. What about the 13 million private sector workers who do not have a pension? They will look at these discussions and read what the hon. Gentleman says about defined benefits. They would love to have defined benefits schemes in the private sector, as my hon. Friend the Minister ably pointed out. The general public need to realise that public sector pensions are still the very best on the market.

Chris Leslie (Labour, Nottingham East)

I look forward to the Government bringing forward a private sector pensions Bill. I am really keen that they do that because there are ways in which we think private sector pension schemes could be improved. But I do not think there is anything in the Queen’s Speech on that. Perhaps the Minister would like to intervene to confirm that the Government have proposals to improve private sector schemes. Yet again, we are left with this sword of Damocles: public sector workers should keep their eyes peeled and glance over their shoulders every now and again, because these defined benefit schemes might not be quite so enshrined as was suggested in the agreement for the coming period. Government Members do not seem to grasp the point we are making in saying that we have to put in the Bill the protections that were agreed in the negotiations. That is all we are saying.

I intervened on the Minister earlier to say that if existing defined benefit schemes are to be replaced by schemes that are not defined benefit, at least that should be by the affirmative resolution procedure so that Ministers cannot do it unnoticed by the back door. We did not even get that rather scant commitment from the Minister. We have tried to get it on a number of occasions. First, we tried to make that change in the Bill through amendment 50. We lost that Division, but we may want to come back to the matter on Report. There might be other ways of doing it, such as ensuring that there is an affirmative procedure. Some protections need to be put in place. Some sort of safeguards are needed, even those related to scrutiny, to ensure that we can at least debate the possibility that the Government will renege on the agreement. That is the lingering suspicion that people will have.

The hon. Member for Bognor Regis and Littlehampton said that a future Conservative Government would be committed to defined benefit schemes under the agreement for a period of 25 years, but I did not hear that from the Minister. I would be happy to give way to him if that is a firm and clear commitment of a Conservative Minister. We have heard that from Liberal Democrats—the Chief Secretary and others—but we have not heard it from Conservatives in the Committee. That is why we are suspicious about clause 7.

There are aspects of the clause that we agree with. It is right to move away from final salary arrangements to career average revalued earnings schemes. We also accept that there are certain existing defined contribution schemes within the public sector. As the Minister said, 7,000 civil servants and others have gone into them already. However, I cannot get away from the fact that the clause seems inadequate and does not reflect the commitments that were made in the agreement. We need to put down a marker that it is deficient and should not stand part of the Bill.

Sheila Gilmore (Labour, Edinburgh East)

It is particularly important to remember that we are looking at the public sector here. The constant references to relativity are making people anxious. Many people currently employed in the public sector who are in these schemes cannot help but hear the matter being considered in this way, and the suggestion that because defined benefit schemes have almost, but not quite, been eliminated in the private sector, it per se puts pressure on public sector pensions. I am not clear what that is about. Surely we should look at the financial viability of the public sector schemes, as Hutton has, to see how affordable they are now and in the future in their own right. Indeed, there should be aspiration, and it is deeply disappointing that we have got to a stage where public sector pensions are so different from private sector pensions.

Many years ago, I started some research about women in pensions—I confess I did not finish it—whereby I looked at various companies’ pension provisions in my own city of Edinburgh. Many—even quite small companies, such as printing firms—offered defined benefit schemes, and some offered final salary schemes to their workers. We have to look at the many and variable reasons why that has declined. We must consider some of the reasons given, but also look at ways in which we can improve the situation.

I do not know the details of the 7,000 public sector workers who have opted in to a defined contribution scheme, but I know that, in the past, some public sector employees were encouraged, or thought it was a good idea, to take up additional voluntary contributions to add to their provision. One such group was nurses who were encouraged to do that with Equitable Life, and we know where that took them. I do not know if this is a top-up or a stand-alone scheme, but we have to ask, now and in future, whether those schemes, as now negotiated, are affordable. If things substantially change in the future, even then we may not want to change the scheme because, presumably, the alternative route would be to continue to raise the retirement age. Alternatively, if we had more growth in the economy, we could, indeed, afford many of these schemes.

I hope that we will talk purely about whether we can afford the public pension schemes, and not constantly measure against the private sector because things have become so poor in the private sector, pensions-wise. We could argue for a long time about why it is that, even in times when companies were successful and making large profits, they still saw fit to end many of their employee pension schemes.

Clause 8 - Revaluation

Chris Leslie (Labour, Nottingham East)

I beg to move amendment 51, in clause 8, page 5, line 1, after ‘Treasury’, insert ‘reasonably’.

Clause 8 relates to the revaluation of new schemes that are set out under clause 1. The clause requires a revaluation of pensionable earnings until the person leaves pensionable service, and that such a revaluation be by reference to a change in prices or earnings or both in a given period. It has a number of provisions under which the Treasury can determine the change in prices or earnings in any period by reference to the general level of prices or earnings estimated in such manner as the Treasury considers appropriate.

Amendment 51 would not negate that approach; it simply seeks to include the word “reasonably” after “Treasury” in line 1 on page 5, so that the Treasury would need reasonably to consider those things appropriate. It is a small amendment, but it matters because the principle of reasonableness has been established clearly in common law over the years.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

What would the hon. Gentleman regard as reasonable in the revaluation agreed in the various final settlements? The civil service revaluation for the career average scheme is the consumer prices index, whereas for the NHS it is CPI plus 1.5% and for teachers it is CPI plus 1.6%. Which of those does he regard as reasonable?

Chris Leslie (Labour, Nottingham East)

They may all be reasonable, but we are not debating those decisions today; we are debating decisions that may be made in future. My point is that clause 8 deals with the governance arrangements for revaluation processes of pensionable earnings accrued by active members of public service pension schemes, going forward year after year. It is perfectly reasonable in certain circumstances for some measures of inflation in prices or earnings to be chosen, but as he can imagine, unreasonable indices or benchmarks might be dreamed up in future, given that the Bill simply specifies, in the broadest possible terms, a measure of prices or earnings.

As we know, there are lots of different indices for prices and earnings. There was some controversy when the retail prices index was replaced with the consumer prices index. Many people questioned the logic of removing mortgage and housing price arrangements from some of those indices. That may or may not have been a reasonable thing to do; it was probably reasonable.

Mike Freer (Conservative, Finchley and Golders Green)

The hon. Gentleman will know the respect in which I hold him, because we have worked together in the past, but I must say that I think that the amendment is completely tautologous. Would the Treasury actually stand up and say, “We are proposing a wholly unreasonable method of calculation”? I do not see the point of inserting “reasonable” when the people defining “reasonable” will be in the Treasury, which will not stand up and say that it is proposing something unreasonable. I do not see the point of inserting the word.

Chris Leslie (Labour, Nottingham East)

If it were for the Treasury itself to define “reasonable”, I would accept the hon. Gentleman’s point, but our amendment is not in that vein. Our point is to enshrine the concept of reasonableness on the face of the Bill so that such measures can be tested justiciably. He will know, having a strong local government background, that the Wednesbury reasonableness test was established in common law in the 19th century, during a famous case in which Wednesbury borough council made a particular administrative decision. It was established in common law at that point that there is a certain set of actions in public administration that it is or is not reasonable to take. For example, a decision that is quixotic, lacking an evidential basis or taken in a way not based on logic, rationality or fairness, in the general understanding of those concepts, may not be regarded as reasonable, and it would be open to persons affected by such decisions to challenge them and seek judicial review, to ensure that good, well-established principles of public administration can be brought to bear on the actions of Ministers and the Treasury. That is why we seek to include the word “reasonable”.

The Minister could well say, “This is a moot point. All actions of the Treasury are subject to the reasonableness test.” I will be interested to hear whether he is going to say that. If he does, it would be useful to know whether the appropriateness of the Treasury’s choice would be open to scrutiny by judicial review if the circumstances arose. As currently drafted, clause 8 leaves that question lingering.

The Bill will change public service schemes from final salary to career average revalued earnings schemes. As the name suggests, revaluation is a critical element of career average schemes. Members’ benefits are determined by taking an average of their pensionable earnings for each year of service. Past earnings are revalued to take account of inflation, and earnings relating to early years of pensionable service will be subject to revaluation year on year over a considerable time frame. If such revaluation is inappropriate, the negative effect will be compounded year on year.

As it stands, the Bill allows the Treasury such wide discretion in selecting the measure of inflation that it could pick and choose different measures to best suit its purposes. The Bill does not provide for the use of an objective and accepted measure of inflation. We appreciate that different public service schemes have agreed different methods of uprating pensionable earnings, as the hon. Member for Bognor Regis and Littlehampton has said, so we understand that the Bill cannot prescribe a measure of inflation for all schemes. However, the Bill could and should ensure that the Treasury is reasonable when determining the relevant change in price or earnings in a given period.

Once again, we return to the question of trust. By unilaterally increasing pension contributions by an average of 3% and imposing a change in indexation from RPI to CPI, the Government have already damaged their relationship with millions of public service workers. Clause 8 will undermine that trust further, given the unacceptably wide and unchecked powers that it confers on the Treasury. I do not believe that the Government can legitimately object to amendment 51, because surely the Treasury intends to act reasonably. If so, the amendment has no downside for the Treasury, but it has a significant upside for millions of public sector workers who might take some comfort from the fact that the Treasury accepts an obligation to estimate a measure of inflation in a reasonable manner.

I am sure that the Government intend to act reasonably but, as we know, Governments come and go and the amendment would protect against any future unreasonable actions by the Treasury. I hope that I have explained the concept behind the amendment. It may seem to be a small point, but it would give some assurances to the hundreds, thousands or perhaps millions of public service workers who have a lingering suspicion that the Treasury is loading the Bill in favour of one side of the agreement, which will be unpicked at a future date.

Sajid Javid (Conservative, Bromsgrove)

The annual orders made under clause 8(3) will set out the general changes in prices and earnings. Scheme regulations will point to these figures when setting out how active members’ benefits should be revalued to ensure a consistent approach to revaluation across all schemes. That centralised approach will ensure fairness and transparency. The current intention is that the orders will refer to CPI for changes in the general level of prices and to the average weekly earnings index for changes in the general level of earnings. As it is not appropriate for legislation to refer to specific growth measures, which may change or be discontinued, they do not appear in the Bill. Instead, the Treasury is given a limited amount of discretion, as the hon. Gentleman has recognised. He makes, if I may say so, a reasonable point. In providing that discretion, the wording of the clause is consistent with that of other pension indexation legislation, and it makes it clear that the estimates must be made in an appropriate manner. We have tried to follow existing legislation where possible. We are trying to simplify the statutes, not make them any more complex.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

The Minister seems to be making the case that inserting the word “reasonable” would be appropriate. Will he confirm that?

Sajid Javid (Conservative, Bromsgrove)

The case I am making is that the amendment is unnecessary, although it raises a fair point, and I hope that our discussion will give some comfort to those who have concerns.

Any attempt to exercise this discretion for any aim other than producing accurate and appropriate estimates with reference to a reasonable index of prices or earnings could be challenged by scheme members. For example, the Treasury could not simply make up a number. When the Treasury exercises the power, any decision that was not reasonable could be challenged by judicial review in any event, so the amendment would not provide any additional protection to scheme members.

I believe that the discretion that the clause gives the Treasury is appropriate, justified and necessary to ensure that revaluation can take place each and every year. I remind the Committee that Members may, if they wish, spark a debate on an order. I urge the hon. Member for Nottingham East to withdraw the amendment.

Chris Leslie (Labour, Nottingham East)

I am grateful to the Minister for his words. In a way, our intention was to get him to say on record that the Treasury will always act in a reasonable way, and that seemed to be what he said. A pattern is emerging in our amendments, in that they essentially seek to bolster the deal that has been made while also ensuring that there are protections on both sides. Sometimes such protection is for the employer and the Treasury—we have discussed responsibilities of the Office for Budget Responsibility—and, in this case, it is protection for employees when there are revaluations. Sometimes we suggest that protections should be in the Bill, while sometimes we suggest they should be put in place through addressing order-making powers.

We wanted a commitment that it would be possible to seek judicial review of the Treasury’s choice of revaluation instrument. The Minister has given such a commitment—it will be enshrined in Hansard—and should the Treasury take any decision that is then challenged on the grounds of reasonableness, the Minister’s words can be cited in support of that claim. We have made the point that we wanted to make, and given that the Treasury’s concession on reasonable decision making, I beg to ask leave to withdraw the amendment.

Chris Leslie (Labour, Nottingham East)

I beg to move amendment 52, in clause 8, page 5, line 6, leave out ‘negative’ and insert ‘affirmative’.

This simple amendment addresses a point that the Minister raised a moment ago. Subsection (5) states that an order made under clause 8 will be subject to the “negative Commons procedure.” The Minister indicated that it would be up to Members to spark a debate on an order subject to the negative procedure. I do not know how many other members of the Committee were first elected in 1997, but I think that the hon. Member for Bognor Regis and Littlehampton has been around the block as long as I have—[Interruption.] Longer, indeed, as he did not have a minor interregnum.

The hon. Gentleman will know from his time in opposition how often Back Benchers really manage to trigger a debate on a statutory instrument subject to the negative procedure—it is very rare. This business of praying against statutory instruments involves not physically praying, but lodging a form of petition through which Members can say, “Please can we have a debate on this particular negative resolution?” It is then essentially up to the relevant Minister—it is up to the usual channels but, from the Government Whips’ perspective, it is up to the Minister—to decide whether sufficient concern has been expressed that they will allow a debate. That does not happen frequently. In fact, I challenge—or even dare—hon. Members to speak to the Journal Office about how to pray against a statutory instrument.

Hon. Members will, of course, be familiar with where to find the listings of all the statutory instruments subject to the negative procedure that Governments churn out daily when the House is sitting. Perhaps certain Members develop a specialised skill in looking through that, but many do not necessarily spot such things, which is why the amendment suggests that we should use the affirmative procedure. That would put in place a more formalised mechanism meaning that if the Government wanted to uprate pension earnings in career average revalued earnings schemes in a way that did not follow a measure of inflation that we are used to, any order would be subject to the affirmative procedure. Given the broad powers that the Treasury are taking through the clause to pick and choose whatever measure of inflation they reasonably see fit, we do not think that it would be unreasonable to ask that changes should be subject to the affirmative procedure. Oppositions have made such requests before, and I think that hon. Members will understand why we are making such an argument.

Sajid Javid (Conservative, Bromsgrove)

As we have discussed, Treasury orders to be made under clause 8 will set out the changes in prices and earnings to which scheme regulations should refer when revaluing accruals of active members. It is intended that the orders will simply set out the relevant consumer prices index and average weekly earnings figures each year. These national statistics, which are compiled by the Office for National Statistics, are the Government’s preferred measures of changes in prices and earnings for the purpose of indexing pension benefits.

The amendment would require the Treasury orders to be subject to the affirmative, rather than the negative, Commons procedure, but that would go against the current approach to indexing public service pensions in payment and deferral. At present, the annual pensions increase review orders made by the Treasury under powers in the Social Security Pensions Act 1975 provide the relevant CPI figure for indexing pensions in payment and deferral. Those orders are subject to the negative procedure. As such orders are routine and simply reflect stated Government policy on their preferred earnings and prices measure, holding a debate on them each year would be an inefficient use of parliamentary time. Of course, Members may call for a debate on an order subject to the negative procedure, if they wish.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

My hon. Friend the Member for Nottingham East talked about the importance of the affirmative procedure to this process. I am new to the House, so these procedures are unfamiliar with me, but given what the Minister said about his support for reasonableness, it seems counter-intuitive that he favours using the negative Commons procedure. In addition, it is wholly undemocratic not to allow open debate on such matters, because I understand that the negative procedure requires Members to spot an issue—or for it to be brought to their attention—so that they can raise their particular concerns in a debate.

Sajid Javid (Conservative, Bromsgrove)

I am just as new to Parliament as the hon. Lady, although perhaps I have been here for a few more months than her—[ Interruption. ] I do not think those few months made all the difference.

The hon. Lady makes a fair point because we want to ensure that there is adequate scrutiny of such changes. Importantly, the procedure that the Government are following is no different from what has been done for many years. I referred to the Social Security Pensions Act 1975, and even during the 13 years that her party was in government, orders making such changes were subject to the negative procedure.

The key point is that the Government have set out a procedure, which they will always follow, that is completely transparent and based on statistics that are set independently. The Government have no desire to deviate from that approach. After the orders are laid, discussion can be requested by Parliament, if that is required. It is important to note that there are many demands on parliamentary time, as was the case under the previous Government, and it would be an inefficient use of that time if there was a guaranteed debate when the orders were submitted each year.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

As an old hand in the House—rather shockingly, as I am someone of tender age—may I refute the point made by the hon. Member for Oldham East and Saddleworth that the negative procedure is somehow undemocratic? This is long-standing procedural practice in the House. It is perfectly possible for any Member to table a prayer against a statutory instrument, and I have done so on several occasions. The Opposition are under a duty to monitor these things as part of their role of scrutinising legislation. If they wish to pray against a statutory instrument, it is perfectly possible for them to do so, and I am sure that the usual channels would agree to a debate.

Sajid Javid (Conservative, Bromsgrove)

My hon. Friend’s years of experience are valuable to the Committee. The current procedure and the negative procedure provided for in the Bill represent the best balance between the need for parliamentary scrutiny and the efficient use of parliamentary time.

Chris Leslie (Labour, Nottingham East)

Perhaps we can forge a compromise between the Benches to try to find the best way forward. If, year on year, the revaluation process will be the same as that which is being established, the Minister’s point about the negative procedure is fair. However, if I accept the Minister’s argument that debating all these orders each year under the affirmative procedure could create a heavy administrative work load for the Commons, will he at least consider giving a commitment that, should a revaluation order involve significant change, the Government will find a way of enabling a debate to be held as if it were subject to the affirmative procedure? Can we agree on that compromise?

Sajid Javid (Conservative, Bromsgrove)

I think I am right in saying that the hon. Gentleman used to be a Minister in the Department for Constitutional Affairs, so he more than anyone will understand the way in which our constitution and democracy work—I am sure he has not forgotten. Although the amendment has led to an important and necessary debate—people who are listening to or who read this debate will take comfort from what we have discussed—I do not think that any further changes, or the compromise that he suggests, are necessary. We should keep in mind what my hon. Friend the Member for Bognor Regis and Littlehampton said: if the House wants to debate an order that makes a change that might be described as significant, there are procedures in place to allow for that. I ask the hon. Member for Nottingham East to consider withdrawing the amendment.

Chris Leslie (Labour, Nottingham East)

I have been rebuffed again in my attempt to try to get a scintilla of a sliver of a concession from the Government. I had hoped that the Minister would agree to think about the amendment before Report, and even if he then found a reason for not agreeing to it, perhaps it would have been sufficient for him to concede that we could use the affirmative procedure for a significant change and the negative procedure in other cases. It is a shame we do not seem able to make progress.

Sheila Gilmore (Labour, Edinburgh East)

Does my hon. Friend agree—he might not, given his greater parliamentary experience—that when Government Members somehow say, “Because this is how it has always been done in this place, we should not change it,” that is exactly the sort of view that often makes members of the public think that Parliament is not speaking for them?

Chris Leslie (Labour, Nottingham East)

That is the fundamental argument underlying the whole debate. I do not want to cast aspersions on our great parliamentary procedures—I do not in any way wish to undermine the democratic veracity of the work that we do in the mother of Parliaments—but there is always room for improvement. It would be perfectly possible for the Minister at least to say, “If we are going to move to a significantly different revaluation arrangement and hon. Members pray against the order, we will be more likely to grant a debate in a Delegated Legislation Committee than might usually be the case when Members pray against an order.” The Government sometimes decide not to have a debate when prayers are tabled. Members cannot just spark a debate by putting their name down; it is in the hands of Ministers to grant such debates. If the Minister had said, “Should we move to a more significant revaluation scheme, we will be predisposed to having a debate,” that would have been reasonable.

I do not want to labour the point, because we have had an ample discussion about the amendment. The Minister knows what I am asking for. If we get a chance to return to this point in future, perhaps he will find a form of words that will give us a crumb of comfort. We are looking for a pretty small crumb of comfort that would not be impossible for him to concede. We have made our point, however, so I beg to ask leave to withdraw the amendment.

Sajid Javid (Conservative, Bromsgrove)

The clause addresses the revaluation of earned benefits in new career average pension schemes introduced by the Bill. The clause allows for a revaluation linked to changes in earnings or prices in line with the proposed final scheme designs. The exact mechanisms will vary from scheme to scheme. For example, the NHS scheme regulations will set out that the accruals will be revalued by the change in prices determined by Treasury order plus 1.5 percentage points. Conversely, the firefighters’ scheme regulations will set out that accruals will be revalued simply by a change in earnings, again determined by Treasury order. That centralised approach, which mimics the current arrangements for the indexation of public service pensions in payment, will ensure consistency across schemes.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

May I draw the Minister’s attention to the memorandum submitted by the National Union of Teachers? Will he comment on the revaluation of pensions in payment and deferred benefits, which is governed by the Pensions (Increase) Act 1971? The memorandum states:

“That Act…although recently controversial…does not provide for reductions in pensions entitlement should the formula yield a negative figure. The NUT believes that this possibility should be removed from the revaluation provisions of this Bill as well.”

What would the Minister say to the National Union of Teachers?

Sajid Javid (Conservative, Bromsgrove)

Is the hon. Lady referring to the revaluation of the accrual of pensions, or is she referring to pensions in payment?

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

I am referring to the evidence submitted by the National Union of Teachers, which specifically addresses pensions in payment and deferred benefits and how revaluation is currently governed by the 1971 Act.

Sajid Javid (Conservative, Bromsgrove)

I thank the hon. Lady for that clarification. Clause 8 is about revaluation of pensions as they accrue, not pensions in payment. I have not seen the piece of information from the NUT to which the hon. Lady refers, but I think that our consideration of later clauses might help answer part of her question.

It is important to note that the clause theoretically allows for negative revaluations. It is extremely rare for negative growth to occur. For example, CPI, the Government’s preferred measure of prices, has never been negative. None the less, it would be unfair for members to benefit from the upside risk of revaluation but be shielded from the downside risk. Brief periods of negative growth are unlikely to affect the total value of the pension significantly. If negative growth were overlooked, scheme costs would rise and accordingly eat into the cost cap set out in clause 11, which we will discuss later, designed to control scheme costs. It might lead to a breach of the cap and subsequent measures to increase contributions or reduce the rate at which pension rights can be accrued, because scheme valuations based on standard long-term growth assumptions would essentially underestimate the cost of future accruals. Breaching the cap would therefore be unfair to anyone reaching pension age when positive growth returns, as their benefits may have been reduced to pay for those benefiting from any overlooking. Such intergenerational unfairness is exactly the sort of feature of schemes that the provisions were designed to eradicate.

We should also remember that the Bill maintains defined benefit pensions for public servants that most in the private sector do not have. Those private sector counterparts’ pensions are based mostly on investment returns, which can go up or down. It is only right that public servants receive their defined benefit pensions so that they can plan properly and receive the pensions that their hard work deserves, but we cannot and should not go beyond that by protecting their accruing benefits from brief periods of deflation before their pensions come into payment. Lord Hutton called that an asymmetric sharing of risk, and it is not one that we wish to bring to the fore.

The Government’s preferred approach, therefore, is for revaluations to track changes to prices and earnings directly. That is consistent with the indexation assumptions used in the calculation of the cost ceilings and during discussions on scheme designs, and it is what we assume in scheme valuations. I commend the clause to the Committee.

Chris Leslie (Labour, Nottingham East)

The Minister has set out the purpose behind clause 8. A revaluations process is obviously needed in statute, but if public service workers are to have confidence in the wide-ranging reforms to their pensions, a fair method of revaluing the new career average schemes is essential. Under the schemes, members’ pension earnings will be revalued year on year, and unfair or inaccurate revaluations could significantly reduce pension values. That is the rationale behind some of the questions that we have asked and the safeguards that we have sought. As the clause stands, it allows the Government to choose any method of revaluation that they like without reference to an objective standard or an accepted practice of revaluation. Those unchecked powers could undermine further scheme members trust in the Government when it comes to public service pension schemes.

We have serious concerns about the clause—not necessarily about what is on the face of it but about the protections missing from it. Sometimes when we talk about pension revaluations, one can see a grey mist descend as people think about the complexity of schemes. They think, “What on earth is all this language about?” It feels slightly removed from accessibility by ordinary people in the street, but it is about their wages. They may be deferred wages, but we are talking about their income in retirement. Those tricky little calculations in the formula process can spit out at the end something that is good for them, or may be disadvantageous. That is what we have been discussing in the clause.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Does my hon. Friend agree that the point about how people in the real world are affected was put well by Alison Hamilton during the evidence session? She said:

“If, in times of negative inflation, your CPI plus something means that your teacher gets a small increase in their pension, yet the local government worker gets a decrease in what they have saved for, that will cause a bit of concern and confusing messages when encouraging people to save”––[Official Report, Public Service Pensions Public Bill Committee, 6 November 2012; c. 174-175, Q67.]

Chris Leslie (Labour, Nottingham East)

Absolutely. That point is fundamental to the arrangement. People need vaguely to have a sense that they can grasp how their final pension sums are calculated. Ultimately, a pension scheme is a savings scheme. So many people these days, particularly the younger generations, have turned their backs on pensions generally, because there is so much complexity and opacity. The more there is this sense that somebody will be changing a little element of the formula to their disadvantage, the less likely people are to want to invest. After all, we want people to stay in these schemes and to opt in to them. We do not want people walking away from public service schemes. That would undermine even more the state of public finances.

Even more than that, we want people to have the right level of income in the future. If people are in poverty in retirement and if they do not have the right assets and income, because they had suspicions when they should have been investing in a pension scheme, that will harm our economy more broadly. Getting such arrangements right has ramifications that are about not only defending the public purse and giving confidence to scheme members, but ensuring that people have confidence in the earnings that they will have in retirement, which will ripple across into the economy at large.

Clause 8 may seem like a small clause with much complexity hiding many issues, but it is important. At this stage, part of me wants to vote against it, because of what is missing, but perhaps I should give the Government the opportunity to make improvements on Report or in the other place. Part of me wants to see them come forward on Report with assurances. We have already asked the Minister to provide those extra levels of confidence—those crumbs of comfort that we have been looking for—on the revaluation process, so I will try to give him the benefit of the doubt in the short term. I will not vote against clause 8 at this point, but we genuinely hope that the Minister will come back at a future stage having listened to hon. Members’ earnest concerns about the need for further protections to be embedded in it.

Sajid Javid (Conservative, Bromsgrove)

I thank the hon. Gentleman for his comments, particularly when he said that he was willing to give the Government the benefit of the doubt, which is the most that I could expect of him. He referred to the Treasury’s having unchecked powers, which is grossly unfair and does not represent the situation at all, and we discussed that matter at some length when dealing with his previous amendments. I assume that he accepts Lord Hutton’s key point that, when it comes to revaluations, the risk sharing must go both ways—positive and negative revaluations.

The hon. Member for Kilmarnock and Loudoun mentioned different methods of revaluation and whether it is earnings or prices, but that links to one of the Bill’s key principles as a piece of enabling legislation in that it is designed to give a large degree of flexibility in design to each scheme. It is up to the people who run the scheme, working with their respective work forces, to come up with certain key factors. In the past, the Government have been criticised for being too prescriptive. This is an example of the Government trying to provide flexibility in scheme design.

Clause 9 - Pension age

Chris Leslie (Labour, Nottingham East)

I beg to move amendment 80, in clause 9, page 5, line 17, at end insert—

‘(d) those members of public service pension schemes to be exempted from the operation of subsection (1) as a result of scheme specific capability reviews.’.

Clause 9 is also a considerable provision. It relates to pension age and the fact that under these new schemes the normal pension age of a person will be the same as the person’s state pension age or 65 if that is higher. There are several exclusions from that: fire and rescue workers who are firefighters, members of a police force and members of the armed forces. The normal pension age of such persons under these new schemes will be 60. A number of deferred pension age arrangements are also set out in the clause.

We propose a couple of amendments to the clause. Again, we are seeking to improve the Bill. We do not want to rip up the Government’s proposals, many of which are perfectly laudable because they are largely based on the recommendations in the Hutton report, but there are deficiencies in this clause. I hope that amendment 80 points out one of those deficiencies. At line 17 on page 5, we want to introduce a fourth caveat to subsection (1), so that in addition to the normal pension age arrangements not applying to firefighters, police officers and members of the armed forces, they would not apply to those members of public service pension schemes who should be exempted from the operation of subsection (1) as a result of scheme-specific capability reviews. Those reviews are ongoing, and I shall explain what they are, but the whole point of a review is to check people’s capability to work until that particular age.

Obviously, with life expectancies increasing, it is reasonable to ask people to work for longer before retiring. No one disagrees with that. Without such adjustments, public sector pension schemes would become unsustainable. That is why we support many of the changes that Hutton recommended. However, there are some categories of workers for whom longer careers are not a realistic option due to the physically demanding nature of their professions. Even with life expectancy increasing, there are some jobs that a 67 or 68-year-old will struggle to do.

The Bill acknowledges that by fixing the normal pension age at 60 for firefighters, police officers and members of the armed forces. However, those are not the only public sector workers who carry out physically demanding work. Other examples include mental health nurses, who have to restrain patients physically, paramedics, cleaners and care workers. There are others who are involved in very physically demanding forms of work. It is inconsistent to make exceptions for some categories of workers in physically demanding professions and, potentially, not for others.

The amendment would allow for further categories of workers to be exempt from the state pension age link under clause 9(1) if scheme-specific reviews found that they were physically unable to carry out their roles after the age of 65. We hope that we are giving some flexibility to the provisions so that those review findings can come to fruition.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

Amendment 80 is an excellent provision. The Government have included these different occupational groups and made the clause far too blunt an instrument. I think that they will seriously regret the terms of the clause if they do not adopt the amendment, because within the occupations that they have included there may be workers who will potentially be fit and able to do their job at 60 and 65. As I say, the clause as it stands is much too blunt an instrument, so introducing capability reviews would make it much more sensitive to the difficulties and the physical constraints that many workers have to deal with.

Chris Leslie (Labour, Nottingham East)

I am grateful to my hon. Friend; she might want to intervene later to offer her health service experience, because it is precisely the NHS provisions that prompted us to think about how the clause is drafted. We are not dreaming up the concept of scheme-specific capability reviews; such reviews are already go on. The Department of Health, NHS employers and health unions are jointly undertaking the working longer review, for example. It will make recommendations about the appropriateness of certain NHS staff working beyond the age of 65. That is the crux of the matter, and my hon. Friend has experience within the NHS. The Bill does not exempt any NHS workers from the state pension age link, nor does it provide for the findings of the working longer review to inform further exemptions to clause 9(2). In effect, the Bill makes the review totally redundant, and therefore ends the process before the findings are published. That is an astonishing way for the Government to conduct themselves.

Richard Fuller (Conservative, Bedford)

Does the hon. Gentleman accept that the phrase “scheme specific capability review” is somewhat nebulous? Has he calculated the implications in terms of the unfunded liability of public sector pensions? Does he see it applying to the normal retirement age of those who work in the private sector?

Chris Leslie (Labour, Nottingham East)

We are talking about the specific capability reviews that the Government are conducting. The notion of a scheme-specific capability review is well accepted in the Hutton report and Government policy, and the working longer review is the example I have given.

My point is simple: as it stands, the Bill does not allow for any findings of the NHS review to alter the retirement age of those who might find some of their work at 67 or 68 too physically demanding. I am not even saying that we should definitely accept the findings of the working longer review in the NHS; I simply hope that if the Government so choose in the future, they will be able to use clause 9 to implement any recommendations from that review that they see fit to accept under that provision. My amendment is specifically about ensuring that the Bill does not shoot the Government in the foot and unnecessarily binds them from accepting future changes that arise from scheme capability reviews.

Ian Paisley Jnr (DUP, North Antrim)

The amendment would add considerably to the Bill, in that it gives the Government the necessary flexibility to allow the review—it is like the egg before chicken. What comes first? It would allow proper cognisance to be given to the reviews as they are produced, and as they will be produced over the years ahead. Such flexibility would give significant meaning to the Bill, allow it to acknowledge the needs of people and allow ongoing scheme-specific reviews.

Some reviews might indicate that a person should retire before 60—I am particularly thinking of firefighters, who currently retire in their mid-50s. If, for example, the amendment went further and applied up to the age of 60, it would not do violence to the Government’s provisions or the reviews as they come out, but would introduce flexibility to the Bill. If a review indicated that someone had to retire before 60, that would be taken care of in the Bill. It might never happen, but there should be that flexibility.

Chris Leslie (Labour, Nottingham East)

I understand the hon. Gentleman’s point about firefighters. Indeed, a lot of representations have been made on that by the Fire Brigades Union and others. The amendment might need to be supplemented elsewhere, because we are simply seeking to include in subsection (2) a provision that would disapply subsection (1) for those findings of scheme-specific capability reviews. Obviously, the normal pension age of 60 would still apply in respect of our amendment. Certainly, there are other amendments that could be proposed. We wanted to propose something that is palatable to the Government in this circumstance. We are asking not for the moon on a stick but that the Government’s capability reviews are capable of then finding their way into effect should Ministers so want. This is one of those non-partisan opportunities for the Government to reflect on the amendment. It would not be responsible for the House to make legislation before the findings of a NHS working longer review are published, as we need to consider whether the legislation should accommodate some or all of the review’s recommendations. It would also be unfair—some might even see it as an underhanded approach—if the Government were to nullify the results of the working longer review in that particular way, given all the effort that has been put into it. It was a key component of the negotiations between employees and the Government in the period preceding this legislation.

This amendment is helpful. It is about asking for some flexibility that will, we hope, help Ministers should they want the scheme-specific capability review recommendations to come into effect.

Sheila Gilmore (Labour, Edinburgh East)

The problem with the clause is its inflexibility. It creates a situation in which it would be difficult to vary the normal pension age, other than for the three named groups. In earlier debates and in the questions that were asked of witnesses, it was said that the clause does not stop people retiring at an earlier age. This is a normal pension age, but people are free to negotiate or leave work at an earlier age, but that has a significant impact on their income should they do so. A normal pension age will be the age at which we get a non-actuarially reduced pension. Another issue was raised by the hon. Member for Bedford, who asked whether it opened the door to unfunded commitments that might be unaffordable in the short, medium or long term. If we are considering that, and I agree that we must, we must look at the potential costs to Government and to public spending. If people are leaving employment before they are able to secure their full pension—they may secure only a much reduced pension—they will then be eligible to make other claims for financial support, and that might be over a considerable period. Such a commitment has to be factored into the costs of this measure.

Graham Evans (Conservative, Weaver Vale)

Does not the hon. Lady agree that if an employee is not physically capable of doing a job that he or she might have done for 30 or 40 years—hon. Members used the example of various NHS workers—no reasonable manager or management team would insist on their continuing to do the same physical work, but is it not possible for those employees to take up more sedentary positions in clerical and back-office jobs rather than to retire early?

Sheila Gilmore (Labour, Edinburgh East)

We would have to consider the scope for doing that, but the Government have said that many back-office jobs should be cut in order to concentrate on front-line work. It is also true that in both the private and the public sectors technology has removed some routine administrative jobs, and we now have other ways of doing them. Typing pools, for example, with people sitting typing in rows, are no longer necessary because technology has enabled many professionals to do much of that work themselves.

Graham Evans (Conservative, Weaver Vale)

I do not disagree with the hon. Lady, but if we look at the police service, for example, many police officers retire in their early 50s and are re-employed in the police service in exactly such back-office roles in a police station. The evidence is there for anybody to see. Those are the sorts of positions that may or may not be available in various public sector organisations.

Sheila Gilmore (Labour, Edinburgh East)

Surely, whether such jobs are available is one of the things we should look for in a review such as that suggested in the amendment. Such a review should take account not only of someone’s physical capability to continue doing a job, but of the other options and their availability.

From work that has been done on whether people are in work at various points before retirement age in taking the state retirement pension, we know that substantial numbers of people in many walks of life—particularly men aged between 60 and 65—are already outwith the work force for several reasons, many of which relate to health. That is a significant issue and it must be looked at in as much detail as possible. We must not assume from the outset that people will be able to do certain types of jobs until they are 65, 66 or 67; that is specific to the proposed rise in the state pension age. If someone is not capable of continuing in their original job, we must look at whether there are sufficient jobs for them to do. I would have thought that the last thing we would want to do is to create or continue with unnecessary jobs. A criticism often levelled at local government is that rather than make people redundant, jobs are sometimes found. That is not necessarily helpful, because it still costs money.

The inflexibility of the clause gives rise to concern from a number of groups. Anyone who is a member of the police force will be able to retire at 60, but no one who is employed in the health service—even in physically demanding jobs, or jobs where staff have to be at the peak of their ability—will be able to. Much of the evidence that we have heard about intensive care unit staff, for example—

Debbie Abrahams (Labour, Oldham East and Saddleworth)

My hon. Friend is again making a valuable contribution to the debate. If the amendment is not agreed to, is there not a risk that people will retire in a worse physical condition and shorten their retirement life because they have to continue working under physical duress? Not only that, but the Bill risks widening the gap in society around certain occupations, in which people retire in ill-health and live a shorter life as a consequence. The provision may exacerbate the situation. I would be interested to hear from the Minister what assessment has been made of the effect that the provision might have on different occupational groups. I made the point last week about people in low-income groups not only dying earlier but living in poorer health, and the measure may well make that problem worse.

Sheila Gilmore (Labour, Edinburgh East)

My hon. Friend illustrates the need to look in depth at the jobs people are doing and the health situations they find themselves, as well as the costs to them, their families and, ultimately, the state, if it has to pick up the pieces. If people leave work on lower pensions, for example, they are more likely to become entitled to greater state support, and we have to factor in that cost.

Perhaps the Minister can explain whether, under the clause, it will be easy for people to reduce their hours. At the moment, it is quite often possible for people—before, and sometimes after, normal pension age—to reduce their hours or days of work. That opens up the possibility, for example, of a job share, which can be helpful at other points on the age spectrum. We have all the issues, which have been much debated of late, and which will continue to be debated, about how we encourage women into the work force or how people can balance child care responsibilities with employment. The ability to match people—one may be at the end of their career, and the other may be at an earlier stage in their career—has always seemed to me to be a win-win situation for both of them, because one can continue with their child care responsibilities and employment, while the other can start the step-down process towards retirement so that it is not quite so abrupt.

One factor that makes it possible for people to afford to do such things is the ability to take part of their pension at that point. That is often good for them, and it can be good for the organisation they work in, because their expertise can be passed on at a point when they are able to work towards their ultimate retirement and to enjoy doing so. Traditionally, it has been suggested that women find retirement easier than men, although I do not know whether that is altogether true. However, the opportunity to work towards retirement is important for people’s mental well-being and their ability to cope with retirement.

Will the Minister therefore explain whether it will be possible for people to make such a compromise under the proposals? The amendment would allow different schemes to look at someone’s work. As my hon. Friend the Member for Nottingham East said in moving the amendment, they might conclude that there is absolutely no need for any changes in the scheme or in relation to a particular type of work, but they might conclude otherwise . If we are inflexible, we may come to regret it, and we may incur additional costs in public spending.

Ian Paisley Jnr (DUP, North Antrim)

I like the amendment, which would add something to the Bill, as I said in an intervention. It would give the Government flexibility and the right to use the review to the advantage of the people who matter. It would allow the evidence gathered in the review to shape policy, rather than the policy to shape the evidence, which is important.

Last week, I was particularly taken by the representations and evidence we received from Dr Porter of the British Medical Association, who told of his personal experience as a senior medical practitioner. He said he did not mind rushing around the wards, putting in lines and dealing with emergency cases while he was in his mid-40s, late 40s and early 50s, but he did not look forward to doing that when he was 67 or 68. There may be people who are fitter, stronger, braver and tougher, who could do that at that age, but he was strongly making the point that flexibility is necessary to get the best out of people. The evidence we have heard from the people who have come to the Committee has been about how the public can give their best, especially in the public sector.

Adding an amendment that would provide flexibility for front-line medical workers, nursing staff with physical demands on them and some care workers would enable the Government to make the Bill much better and stronger, by recognising the needs of certain people. I spoke to the BMA last week and received a letter from Dr Paul Darragh, the chair of the BMA in Northern Ireland, in response to my specific point. He replied:

“The Working Longer Review of the planned increase in the normal pension age for staff in the NHS pension scheme to 68 is currently being undertaken jointly by the UK Government, employers and health unions.”

The BMA believes that we should defer to it. Dr Darragh continued:

“The review should be allowed to make genuinely evidence-based recommendations as to whether all or some front-line NHS staff have roles that are particularly physically, mentally and/or emotionally demanding and so should have their normal pension age capped at a lower age.”

The amendment would allow that to be taken on board. It would allow us to improve a Bill based on evidence, not to have legislation that creates the evidence, which is the wrong way round.

I was less taken by the evidence we received from the National Union of Teachers. I would be quite happy to see my children taught by someone in their mid-60s. Their wealth of experience can be drawn on and is very much part of the classroom. I would be reluctant see my house in flames and my children rescued by a fire officer in their late 60s. That would not be tolerable. There is a balance to be struck.

Sheila Gilmore (Labour, Edinburgh East)

The hon. Gentleman’s point about teachers and their experience is important. However, a physical education teacher might be in a very different position from some others.

Ian Paisley Jnr (DUP, North Antrim)

My comments are not intended to be prescriptive. The amendment would allow for that wider interpretation. If there is an element of physicality that would prevent someone from doing the job—as is part of the Government review—it would allow that to be recognised in the legislation. I am not being prescriptive; I just said I was less taken, when comparing the evidence of fire workers and teachers.

In response to the point made about police officers, I served on the Northern Ireland Policing Board for eight years. We tried to get police officers behind desks out on to the street. I do not like to think of a police officer—trained, skilled and wanting to get out there, catch criminals and deter people from committing crime—coming back to do a desk job at the end of their career. We should recognise there are opportunities for clerical staff, for people less trained and with different skill sets, to do that job until they are 68, rather than a police officer who has a bit of limp, is carrying too much weight or is too old.

Andrea Leadsom (Conservative, South Northamptonshire)

It is rather a shame that the hon. Gentleman should say that people with experience on the front line should not bring that to bear in the final part of their career. We would lose a great deal by saying that as soon as someone had finished on the front line they should just clear off. Does he not agree that there is enormous value in those years of experience at the sharp end being brought to bear in a more advisory desk role towards the end of a career?

Ian Paisley Jnr (DUP, North Antrim)

The hon. Lady is being rather harsh in her interpretation of what I am saying. I said my experience in our own police authority was that those jobs did not always exist for police officers, and the last place a police officer wants to be is pen pushing or doing clerical work because he or she is no longer deemed to be capable to be out on the street deterring people from crime and addressing community needs. There are frankly not the jobs for them to be revolved from one part of policing into the clerical aspect. We want the clerical work to be done by people who are trained and have a given skill set, rather than by police officers who have a very different skill set. I like the amendment; it does not do any violence to the Government’s position, in fact it strengthens it.

Sajid Javid (Conservative, Bromsgrove)

On a point of order, Mrs Brooke. Is it in order for me to point out quickly to the Committee that the Treasury has published online this morning the Treasury’s policy towards clauses we will discuss later? It includes further information on clauses 10 and 11 and how schemes may handle them. Copies will be made available to the Committee as we finish now.

Ian Paisley Jnr (DUP, North Antrim)

I just want to round up the comments I was making on the police service because they are relevant and important. The option of suggesting that police officers should move from front-line duty to backroom office duty towards the twilight years of his or her career is, actually, the most expensive option available. That is because at that stage a police officer is probably at the higher end of his salary grade, and that salary reflects the duties that he or she would perform on the streets. If the suggestion is made that an officer moving into a clerical office must have a pay cut to reflect the change in duties, it would be an even more controversial proposal—one that I would not make.

If the figures were to show that police officers should retire from their duties early, that would not prevent them from applying for jobs at a clerical level in the police service and, perhaps, even obtaining those jobs because of their wealth of experience as a police officer and therefore continuing to work on beyond their years served on the front line. That is not unique; it happens frequently in Northern Ireland. It is not without controversy, in some cases, but it does happen, and it saves the public purse a considerable amount of money to pay the different salary of a regular police officer who is summoned to do back-office duties. The pension contributions are also different, so we should consider the salary that an officer is paid.

The final point I want to make is on firefighters. The Government currently propose that all firefighters continue to attend fires in factories, homes and so on, and attend at serious terrorist incidents and road traffic accidents. We need to consider whether it is appropriate that a person in their 60s continues to do that job. At present, 24,000 firefighters—two thirds of them—are members of the firefighters pension scheme. For those firefighters, 55 is the age at which most will retire. As we know, firefighters perform a number of duties that include running, crawling, climbing, lifting, carrying ladders, wearing breathing apparatus and all sorts of other things, and it is not credible to suggest that we should have an arbitrary date set at 60 if, after the review, there is evidence that shows that they should retire before that age.

The Fire Brigades Union made a point to me on the question of medical evidence. In a briefing paper that is available to Members, it said:

“The Government has provided no evidence that firefighters can work in an operational role—which means going out daily on a fire appliance to intervene in emergencies—until they are 60. Less than 1% of wholetime firefighters currently work beyond 55.”

The evidence to date shows that most firefighters retire well in advance of 60, but this amendment allows us to consider firefighters retiring before the age of 60 if there is proof in the review’s evidence. Of course, if evidence emerges that they are perfectly fit to retire at 60 or beyond, we have to accept that also, but the amendment gives the Government an option and flexibility. That is why it is a good amendment.

Richard Fuller (Conservative, Bedford)

It is a pleasure to follow the hon. Gentleman. If I may, I will make some points in response to what he said, and also address the amendment. He rightly pointed out the contribution of firefighters to public safety. To me, that is the core of what clause 9(2) is intended to do. I do not read the professions listed in it as necessarily being highlighted because of the physicality of the job, but because of the public service enshrined within those particular occupations. Such occupations are beyond public service and put people at risk in order to protect the public. Firefighters are the ones who run into burning buildings to rescue people. I heard on the news this week that many firefighters rescue cats up trees, which may well be true, but the core of what a firefighter is asked to do is to run into a building to save someone who is trapped and potentially to put their life at risk in doing so.

Similarly with the police force, they are the ones whom we ask to go into altercations between individuals or groups of individuals and put themselves at risk, as we have seen only too graphically in recent weeks. Finally, there are our armed forces, the very spirit of which is that the country is served first and the person second. That is the reason why successive Governments of different types and colours have recognised the different contribution that those three groups of public service workers make and why they are due additional recognition above and beyond other public sector workers.

Chris Leslie (Labour, Nottingham East)

The hon. Gentleman says that those groups deserve recognition “above and beyond” that of others. Can I ask him about paramedics? Does he agree that paramedics often put themselves in the line of danger? How would he distinguish between paramedics and other such professions?

Richard Fuller (Conservative, Bedford)

I would distinguish between them. I am drawing on the fact that the hon. Gentleman’s party when it was in office, previous Conservative Administrations and the coalition Government have all recognised that there are workers who, perhaps not routinely but certainly as a greater proportion of their service, will put themselves in physical danger and potentially put their life at risk in their day-to-day work. I am not sure whether the statistics for paramedics would stack up, but my judgment is that they probably would not.

That really gets to the heart of why the amendment is not sensible. “Scheme specific capability reviews” seem vague. They may be somewhat defined in the working longer review within the NHS, but I am unaware of similar specific reviews in other areas. Including such a measure would set up expectations that neither this Government nor any future one would be in a position to fulfil. The reason why we are undertaking this whole review is because of not only fairness between public and private sectors but the affordability of public sector pension obligations. There is a significant question around the Government’s ability to pay their own debts, let alone to meet their pension obligations, which stand on top of that.

Although Opposition Members suggest that the amendment may provide some flexibility, it will actually reduce certainty. We will go through another turn of the circle on public sector pensions, another review of what particular jobs should be taken account of for a particular retirement age, and another period of uncertainty for the public sector finance obligations, all of which is unwise.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

Is this not one of the issues that we have discussed already? I totally agree about what the lack of assessment will do to those who may be affected by the Bill. However, we have data from, for example, the annual assessments of sickness at work and the different occupations affected by that, so assessment of such matters could be undertaken but has not been. The Opposition are just trying to say that such assessment should take into account the occupations within the public sector that will be detrimentally affected by virtue of their physicality.

Richard Fuller (Conservative, Bedford)

I am grateful to the hon. Lady for that point. Perhaps we disagree, but there is an asymmetry in her approach to the public and private sectors.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

No, there is not.

Richard Fuller (Conservative, Bedford)

I am happy to take another intervention, but let me make my point first. If it is appropriate for us to assume that we should consider sickness days and other issues about physicality of work in the public sector, what would be the answer in the private sector? What would be the consequence of that for the normal retirement age? Does the hon. Lady suggest that we should have a normal retirement age that is subject to the same assessments of physicality and sick days?

Debbie Abrahams (Labour, Oldham East and Saddleworth)

The argument is against dumbing down, and that is what the Bill does. We would look forward to the Government bringing forward a pensions Bill that would ensure that the physicality of the work of private sector workers was also taken into account. We would look forward to debating that, but we are talking now about public service workers.

Richard Fuller (Conservative, Bedford)

I appreciate that. I hope the hon. Lady will forgive me for saying this, but Opposition Members forget that there is no public money left. We know that is the case, and it is as important as the Budget in how we determine our finances. Opposition Members must understand that the public finances were left in a parlous state. They can blame the bankers, but I think most rational people would also place blame on the previous Labour Government. However, that is a debating point.

The Government are trying to achieve certainty for public sector pensions. That is a noble objective which Members on both sides of the Committee seek to achieve. My concern about the hon. Lady’s suggestion is that it layers uncertainty on top of uncertainty: uncertainty about the public sector obligation and now, potentially, uncertainty about the normal retirement age. The country’s finances are not in a state where it is possible to have a serious debate about changing the normal retirement age to take various factors into account.

Chris Leslie (Labour, Nottingham East)

I am grateful to the hon. Gentleman for those comments. They clarify his view of the working longer review in the NHS. Under his Government it is meeting on a monthly basis. Lots of important people are getting together to think about how to approach the question of NHS staff. If the Bill will not reflect any outcomes of that review, not least for the resource reasons he has given, should the Government not just scrap the review now? What was the point? Does he oppose the working longer review? What is the point of continuing it if he opposes the amendment?

Richard Fuller (Conservative, Bedford)

I appreciate that. I am not aware of the intimate details of the working longer review, but my assessment would be that it would say that as we move to a later retirement age we should identify which jobs within the NHS require a particular level of physical commitment. If those jobs are being performed by older people then we should find other jobs within the NHS family of responsibilities to which we can migrate them. That approach has been considered for firefighters, given the way in which the fire service works, and for other public service obligations. As my hon. Friend the Minister said earlier, any reasonable, rational employer will always look to maintain their most senior and experienced staff, because they are their most valued staff. They not only understand the job they do but have wide experience. Those are the reasons why it makes sense for the working longer review to go ahead.

Mike Freer (Conservative, Finchley and Golders Green)

I have just checked, and the working longer review met for the first time on 28 October and is not due to report for another 11 months. So is it not putting the cart before the horse if we change the Bill to reflect what the Opposition suggest the review will say? We should press ahead with the Bill and then reflect when we have had a review.

Richard Fuller (Conservative, Bedford)

I am never really sure whether the cart goes before the horse or the horse goes before the cart in this type of case. As responsible holders of office, we need to look after the public finances, scrutinise what the Government do and push ourselves to an extreme of looking for flexibility and conditionality, as we try to resolve what is the largest bill that we will pass on to future generations. The amendment would push us too far into uncertainty about the way in which the public finances and public sector pensions are being run.

In the evidence session, we heard from the teachers— I am not sure whether you were chairing that session, Mrs Brooke, but it is delightful that you are chairing this one now—who said how terrible the shift was for them, having to move from retiring at the age of 65 to retiring at the age of 67 or 68. I think they called themselves “strong union negotiators” on that point, and, as we know, there have regrettably been strikes by teachers on the issue of pensions. Do we really want to open up ourselves to those sorts of disputes, with all the implications for the well-being of the public, by keeping open the uncertainty? I think not, so I hope that the hon. Member for Nottingham East will withdraw his amendment.

Iain McKenzie (Labour, Inverclyde)

It is a pleasure to serve under your chairmanship, Mrs Brooke. I rise to speak on a matter that has not yet been discussed in this debate. Given all the talk of working longer and retiring late, we all seem to be of the opinion that we will live until a ripe old age of 100-plus. Although I wish that for everyone in this room, it is not the case across the country. I am talking about life expectancy and its relevance to a capability review that enables a person to continue the profession that they were engaged in when they were young, and about the length of their career.

Of course, life expectancy differs across the UK, from one end to the other. It comes as no surprise that Scotland is, sadly, at the low end of the table. On average, a male in Scotland lives to 75 and a female to 79. Pushing the retirement age out to 68 will not give them a good length of retirement. If they reach that average age, they can look at five years of retirement. In my constituency of Inverclyde, the figures are even worse. The average is 73 years for a male and 79 years for a female. Under the Government’s proposals, my constituents will get even less of a retirement. The truth is that many will not retire; they will die before they reach that age.

Graham Evans (Conservative, Weaver Vale)

I am listening with interest to the hon. Gentleman’s remarks about life expectancy in his constituency. Is not it a known statistical fact that people who are in work, and who have motivation, people skills and a need to get up in the morning to do a good day’s work, will live longer? Unfortunately, that is not necessarily the case if someone is out of work. What we are talking about here is people who are in well-paid, good quality jobs and who have a good standard of living. We are not talking about unemployed people, who do not live as long.

Iain McKenzie (Labour, Inverclyde)

The hon. Gentleman misses the fact that life expectancy depends on a number of issues, including how and where we live. Let me give a prime example of that. From one side of my constituency to the other, there is 10 years’ difference in life expectancy, which is based on the job that a person does, the life that they lead and where they live. Because someone is in employment, it is not necessarily true to say that they can expect to live longer.

Graham Evans (Conservative, Weaver Vale)

I agree with the hon. Gentleman. We all have similar comparisons in our constituencies. Is the hon. Gentleman saying that a teacher, NHS worker or other public service worker in London or in my constituency has a 10-year difference in life span compared with one in the hon. Gentleman’s constituency? Is there a 10-year gap between workers in the south of England and those in the hon. Gentleman’s constituency?

Iain McKenzie (Labour, Inverclyde)

Again, I can only point to the statistics that say that that is genuinely the case. It depends on how someone lives and where they live. Obviously, the average across the country is very varied. From north to south, there is probably about 10 to 15 years’ difference in life expectancy. To put it into perspective, that 10-year difference in life expectancy means that some of my constituents who are in the public sector will never pull their pensions—quite simply, they will never retire. To retire at 68 will, if they are fortunate and live to 73, give them five years of that pension. A capability review would ensure that those in certain occupations would at least get the opportunity of a few extra years of retirement. We cannot stand up today and say that someone will be longer retired than they have ever worked, because that is clearly not the case up and down the country.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

Considering some of the jobs in my hon. Friend’s constituency, has he received any representations from the Prison Officers Association, given the lack of reference in the Bill to prison officers as part of the uniformed services? I know they are very concerned about their ability to continue at fitness levels.

Iain McKenzie (Labour, Inverclyde)

My hon. Friend makes a good point. I have been contacted by prison officers as I have a prison in my constituency. Theirs is a very demanding job and they are alarmed that they have not been included among the uniformed organisations to be considered for exclusion from the retirement age of 68.

It is not only reasonable to include the capability review in the Bill, but it is a requirement if we wish our constituents to enjoy the length of retirement they deserve, or to get any retirement at all.

Sajid Javid (Conservative, Bromsgrove)

I thank the shadow Minister for his earlier comments. I also thank the hon. Members for Edinburgh East, for North Antrim and for Inverclyde, and my hon. Friend the Member for Bedford. I will try to respond to the issues that they raised.

I shall briefly remind the Committee of the reasoning behind the link that clause 9 establishes between a member’s normal pension age or deferred pension age and their state pension age. Linking the new pension ages to the member’s state pension age will manage the financial uncertainties associated with longevity changes over the long term, and was a key recommendation of Lord Hutton’s report. It is put into stark context by the fact that the average 60-year-old is now living 10 years longer than in the 1970s. While that is to be celebrated, it would be irresponsible not to react accordingly to ensure that pension provision is sustainable for the long term.

The amendment would appear to allow largely undefined capability reviews to define groups of members whose pension ages will not be linked to the state pension age. As drafted, it would instead set their pension age at 60. The independent commission was clear that the work of police, firefighters and the armed forces is unique and that that should be reflected in their normal pension ages. That is why the Bill would allow members of those work forces to retain the pension age of 60 that was implemented by the previous Administration’s pension reforms.

However, the uniqueness of those work forces is not just about physical demands or their duties. Pension schemes provide other benefits for those who are physically unable to continue working, such as ill health provisions. Importantly, nobody is being forced to work for longer. Members can choose to retire before their new normal pension age, and they will receive an actuarially adjusted pension to reflect the fact that their retirement benefits will be paid for a longer period.

The Government commend the work and commitment of all of the diverse work forces that make up the public service, but it is important to aim for consistency and commonality, unless there is a compelling reason to the contrary. The Government are confident that the pension age provisions are correct and, therefore, do not see the need to exempt any further members from the state age link as a result of future undefined capability reviews.

It is not clear from the amendment what the capability reviews are to involve, who will perform them or when they will take place. An unintended consequence of the amendment could be confusion and uncertainty about pension ages.

Alison McGovern (Labour, Wirral South)

I am listening to the Minister’s argument, but I want to go back to its foundations and ask a simple, straightforward question. He says that the average age is increasing, but what questions did he ask his officials about what kind of average that is? Is it merely an arithmetic mean, or is it another kind of average?

Sajid Javid (Conservative, Bromsgrove)

When the hon. Lady refers to average age, is she talking about life expectancy?

Alison McGovern indicated assent.

Sajid Javid (Conservative, Bromsgrove)

I do not know what type of mean has been used, but if the hon. Lady believes that such information will help with her analysis, I can find out whether it is a modal or arithmetic mean, or a median, and I will let her know.

Many hon. Members mentioned the working longer review, which is being undertaken jointly by the UK Government, employers and health unions. The review is considering the implications of working longer for NHS staff, not the state pension age link itself. That is clearly explained in the review’s terms of reference, and it is misleading to imply otherwise. As I have said, the link is one of Lord Hutton’s key recommendations, and it is set out clearly in the NHS proposed final agreement, which the majority of trade unions have signed up to. The agreement explains that if

“a member’s SPA rises, then NPA will do so too for all post 2015 service”,

and the Bill provisions simply reflect that position.

Chris Leslie (Labour, Nottingham East)

That is rather confusing. If the working longer review, which is being undertaken for health service staff, recommends that there should be a different retirement age for certain categories of health service staff, and thus a differing from the link to state pension age, will there be the legislative means to fulfil such a recommendation? It is important that we are clear about that.

Sajid Javid (Conservative, Bromsgrove)

To be clear—this is important—let me restate that the review is considering the implications of working longer for NHS staff; it is not in any way looking at the link between the normal pension age and the state one. When the review was established, that was clearly set out in its terms of reference, from which I quoted earlier. The Bill does not prejudge or undermine the review. As the Government have said, whenever the state pension age changes, there will be regular reviews of the link. The link will already be established, but as the state pension age changes, meaning that the normal pension age should change as well, the Government will always ensure that the link is working as intended, including by taking into account any new information at that time.

Chris Leslie (Labour, Nottingham East)

The Minister is being generous in giving way, but it really is important that we understand this. If the working longer review recommends changes to the retirement age—perhaps an earlier retirement age for paramedics or another class of health service staff—by what legislative means can that recommendation be fulfilled? Under the Bill, those ages are all pegged to the state pension age, are they not?

Sajid Javid (Conservative, Bromsgrove)

The Government’s intentions regarding the normal pension age for NHS workers and the link to the state pension age are clear. The working longer review is not looking at the link, so that link, which the Government have established, will not change. The working longer review is looking at a broad range of consequences of people working longer in the NHS, but it is specifically not looking at the link between the NPA and the SPA. If the hon. Gentleman would like a detailed copy of the review’s terms of reference, I can supply him with one. I ask him to consider withdrawing the amendment.

Chris Leslie (Labour, Nottingham East)

It was probably helpful that the Minister sent out a signal that those involved with the NHS working longer review will not be able to make recommendations about changes to the retirement age—as I understand it, that was essentially what he said. He characterised this in terms of the link to the state pension age but, whether there is a link or not, it does not sound as though it will be possible to change the pension age. I am not sure that the parties involved in the working longer review are aware of that arrangement—that was not my understanding—so his statement might have a profound effect on that review’s discussions.

The aim of amendment 80 was not to split the link between the state pension and public sector scheme ages, but to allow us to look specifically at capability reviews, including the working longer review. It might have been helpful if the Minister had clarified whether the Government were considering carrying out others—it does not sound as though that is very likely—so that their findings could come to fruition through legislation.

When the hon. Member for Finchley and Golders Green intervened on the hon. Member for Bedford, he said that the amendment pre-empted any findings of the working longer review by stating that all those recommendations would have to come into effect.

Mike Freer (Conservative, Finchley and Golders Green)

Will the hon. Gentleman give way?

Chris Leslie (Labour, Nottingham East)

Let me clarify this and then I will happily give way.

The amendment would simply pave the way for Ministers to put into effect any recommendations that arose within the ambit of the working longer review, including changes to the retirement age. It turns out, however, that the cart has been put before the horse, as the Minister says that we will not have any pension age changes through the working longer review and that is that. In a sense, the capability reviews seem to have been closed down.

Mike Freer (Conservative, Finchley and Golders Green)

I said that Opposition Members were of the belief that the working party would recommend scheme capability assessments. If it is helpful to the hon. Gentleman, the remit specifically does not mention any recommendations to do with SCAs. It is concerned with evidence of the impact of working beyond 60, with good employment practice, and with the links between scheme flexibilities and the concept of total reward. That, not SCAs, was the remit of the working party.

Chris Leslie (Labour, Nottingham East)

I beg to differ from the hon. Gentleman’s point of view. Most people would assume that a “working longer” review would be able to take account of the retirement age of those concerned. If it is the Government’s view that the working longer review will do lots of things but it will not be able to affect the pension age, that is interesting, because it clarifies the picture for the participants. Perhaps their meetings will be a lot shorter than they would have been because that has been taken off the table. That is a shame, however, because hon. Members have mentioned circumstances, such as for paramedics or prison officers, when there might be good grounds for having capability reviews. Incidentally, if such capability reviews resulted in changes to the retirement age, that would not necessarily be more expensive to the public purse, because we heard in evidence that deals might have been done on the employee side in such a way as to ensure that they came within the Treasury’s acceptable cost envelope. This is not in any way about expending more taxpayers’ money—far from it. We are trying to tailor pension schemes that are appropriate to the circumstances and challenges of particular professions, some of which are more physical than others.

I do not believe that this crude approach is the right way to legislate. It is perfectly reasonable to table an amendment suggesting that we should leave the door open for reviews that are able to nuance retirement age provisions.

If the Minister had said he would accept the amendment but only with the caveat that it would cost the taxpayer nothing more, that would have been fine as, through the iteration of debate, we could have reached a flexible approach while keeping control on implications for the taxpayer. I urge the Minister to think seriously before Report about whether we want to close down employee-specific capability reviews, because I do not think that that is good for healthy negotiations and relationships with employees. We would be happy to look at different ways of wording an amendment.

The debate has included contributions from my hon. Friend the Member for Edinburgh East and the hon. Member for North Antrim, who has had to depart for debates elsewhere. My hon. Friend the Member for Oldham East and Saddleworth has also made several points about NHS staff. I believe that there is sufficient strength of feeling to test the view of the Committee on amendment 80.

Chris Leslie (Labour, Nottingham East)

I beg to move amendment 53, in clause 9, page 5, line 31, at end insert—

‘(4A) A person’s normal or deferred pension age under a scheme under section 1 will not change by operation of this section unless 10 years’ or more notice of the change has been given.’.

Amendment 53 looks further through clause 9 at whether we need to ensure that sufficient notice is given of changes to the retirement age. It is important to ensure that the age at which scheme members can draw an unreduced pension will not change unless they are given at least 10 years’ notice of that change. The amendment is necessary because the Bill links a person’s normal or deferred pension age in public service pension schemes to their state pension age, but if that is changed in law, there is no protection for those approaching retirement and there are no safeguards regarding the notice that must be given of changes.

The Government recently imposed changes to the state pension age in a fairly arbitrary manner, when they gave women in their 50s only six years’ notice of the change to the pension age from 65 to 66 in 2020. Members of public service pension schemes therefore have little security or certainty over the age at which they will receive their pensions. We cannot prevent the Government from acting in such an unfair way again in relation to the state pension age, but amendment 53 would ensure that even if they were to repeat that pattern of behaviour, and unjustly and unfairly increase the state pension age at such short notice again, public sector pension schemes would not suffer a similar knock-on effect.

We made that suggestion because when Lord Adair Turner carried out a review of state pensions for the previous Government, he recommended that there should be a 15-year notice period before changes were made to the state pension age. The Pensions Policy Institute, which gave evidence to the Committee, recommended a 10-year notice period. There was even some confusion among hon. Members on Second Reading, because the hon. Member for Gloucester (Richard Graham) said:

“The Bill…protects everybody who is within 10 years of retirement,”—[Official Report, 29 October 2012; Vol. 552, c. 114.]

He was wrong; there is no protection in the Bill for those within 10 years of retirement. It is not clear whether that omission is deliberate or merely an oversight, or whether the Government are determined not to commit themselves.

It is important to ensure that people can provide for changing circumstances in the long term. It may be perfectly right to change the state pension age to reflect changing life expectancy, and it may be that that should naturally follow for public sector schemes, but is it necessary to make those changes with such short notice that members of such schemes—or, in the case of the state pension age, members of the public—might not have the opportunity to change their spending behaviour and the profile of their savings to prepare for what might be a drastically reduced income in retirement?

Debbie Abrahams (Labour, Oldham East and Saddleworth)

During the passage of the Bill that became the Pensions Act 2011, many women wrote to me in absolute desperation wanting to know how on earth they would be able to prepare for the future with so little warning. I cannot believe that we are creating a similar situation by not providing even the guarantees that the Government eventually gave about the state pension age—I was grateful that they had a change of heart. I find it difficult to understand why the Government are not putting protections in the Bill to ensure that similar alarm and upset does not occur.

Chris Leslie (Labour, Nottingham East)

My hon. Friend highlights the lost opportunity in the Bill. Such legislation does not come forward frequently, and we now have an opportunity to ensure that best practice is followed in future. It should not be beyond the wit of Government actuaries and others to ensure that if they make changes, they give sufficient notice. That would allow people to say, “I am 55 years old and I will be retiring at 68,”—or whatever age it will be—and then to work out what income they will need when they get to that age. It is good practice to give people 10 years in which to plan; in our view, that should be the minimum.

As we have seen with the state pension age, a six-year notice period causes tremendous problems. Women in their 50s suddenly found that the new pension age was coming into effect. Government Members might say that it was only a one-year difference, and that people would have to work only one extra year—retiring not at 65, but 66—but someone who is given only six years’ notice that they will have to work an extra year will find their deferred wages and income in retirement affected considerably.

Graham Evans (Conservative, Weaver Vale)

Will the hon. Gentleman give us an idea of the difference in cost between 10 years’ notice and six years’ notice?

Chris Leslie (Labour, Nottingham East)

I do not think that it would cost anything. We are simply talking about information for those who are facing retirement. If it is possible to predict—of course, it is—what is happening to basic life expectancy arrangements, it would surely be better to help individuals to prepare for their future income profile so that they have the opportunity to plan, and perhaps to spend less each year, in the knowledge that they will have less money when they retire later. They will have to work that bit longer and perhaps make arrangements with their employers and so on.

Given the scope of the Bill, we cannot make amendments to state pension provisions and we cannot talk about private sector pensions. If we are to make changes because of longer life expectancy—we might have to do that because we are fortunate that people in our society are living longer—a commitment to give 10 years’ notice of a change is a basic principle of fairness. If the Minister tells us that the Treasury believes that best practice will be to give 10 years’ notice for such changes, I will be relatively pleased. Much as we would prefer a commitment in the Bill, that would be a satisfactory step forward arising from our labours in Committee.

Surely the Minister understands that we have seen this happen before. Are we going to go to a notice period of less than six years? Will it be five years’ notice or four years’ notice, or will people on the verge of retirement suddenly find—bam—that they have another two years to go? I can imagine scenarios, crazy though that might seem, in which that could happen. It is therefore important that the Minister appreciates where we are coming from on the amendment. If it is possible for him to give us a commitment—even an aspirational one saying simply that the amendment reflects what would be best practice in an ideal world—that would be a good benchmark for him to set down. These things matter, and giving people notice so that they may plan is surely what we need to do in a modern society.

Alison McGovern (Labour, Wirral South)

I rise to speak primarily about trust in government, of which this matter is a prime example. My hon. Friend the Member for Nottingham East rightly recalled the moving closer of the changes in women’s pension age, which caused great consternation and difficulty for many of my constituents. Some of them still speak to me today about how they are managing to resolve their financial arrangements. These women are not the wealthiest in our society. They have worked extremely hard throughout their lives and feel that they are part of a group who did not necessarily benefit, as I benefited, from the campaigns they led for women’s equality. They did not necessarily benefit, as I benefited, from more forward thinking about the position in the workplace of women who are also bringing up children. They certainly did not benefit, as I benefited, from the general improvement in equality in society that we saw after the generation of women who were born in the ’50s joined the workplace. It was of particular frustration and concern to these women that, at the end of their working lives, when they were planning for their retirement after many years of working hard and deciding how they could match whatever small personal or workplace pension they had managed to save with the state pension, the Government effectively moved the goalposts at the last minute.

My hon. Friend discussed Lord Hutton’s comments about the appropriate amount of time that someone may need to plan for retirement—some 15 years—and I believe that he made that statement because he has instructed us to consider the length of time that financial planning can take. Just one year more really makes a difference.

I encourage Ministers to consider the realities of people’s lives, and I do so because the women who spoke to me were, by and large, not the most senior or well-paid people in our society. They had worked hard all their lives in what used to be known, somewhat disparagingly, as women’s types of occupations, such as nursing and teaching.

Iain McKenzie (Labour, Inverclyde)

Does my hon. Friend agree that some, if not all, of the women who approached her on this subject would have taken time out from employment to bring up their families? They were naturally concerned that they were given less time to make up that pension deficit.

Alison McGovern (Labour, Wirral South)

My hon. Friend is quite right that that was often the case. A generation of women born in or around the ’50s feel that this is yet another thing that is holding them back. One of them said to me that they are the women who fought for others and yet have not been taken care of themselves, so I ask the Minister to think about that.

I was pleased when the Minister answered my earlier question about averages, although I was less pleased that he was not able to answer it fully. He said that he had not asked officials what average was used in calculations on life expectancy, although I think that somebody may now be trying to pass him a note.

Why do averages matter? It does not take the world’s greatest mathematical genius to work out that if some people at the top of the life expectancy distribution are living much longer, that could easily increase the average without improving the life expectancy of the vast majority of people in the middle of the distribution. I am not a Government Minister and I do not have officials to ask, so I do not know what the distributive effects are, but that gives us a sense of the importance of what we may be dealing with. It does not sit with natural justice to expect somebody who has not benefited from improvements in society to have to work longer because other people, whom they do not know and who do not live anywhere near them, are living longer.

We need to have a serious look at the question of averages, which has been at the heart of some of today’s amendments. Unfortunately, those amendments were not accepted and were discussed in unglowing terms— I might have invented a new word—but this issue really matters because of the impact on people’s lives. If we do not pay careful attention to some of the facts on the ground, we risk doing what the Government have already shown themselves capable of achieving: attacking people’s trust in government.

If the public do not believe that we have their best interests at heart or that we are acting in a way that respects their need to manage their financial affairs, it cuts to the heart of why people have less trust in government than we would want. Why does that matter? In the case of pensions, it matters extremely, because we are asking people to invest for the long term, and if they think, “Actually, I don’t want to get involved in that because I don’t believe I will be better off in the long term,” the whole system will fall down.

I encourage the Minister to think a lot more about trust in government. That matters more—or at least as much—in the world of pensions and the Government’s involvement in pensions as it does anywhere else. People need to feel that we are giving them ample time to plan for their future and that the Government are acting in a responsible, careful way and paying attention to the reality of the lives of normal people in their everyday workplaces.

Sajid Javid (Conservative, Bromsgrove)

I am grateful to the shadow Minister for raising this important issue and I thank the hon. Member for Wirral South for her comments.

This amendment would provide a 10-year minimum notice period for changes to normal and deferred pension ages under clause 9. As the Committee will be aware, the treatment of normal and deferred pension ages in the clause is one of the Bill’s key features. The clause links the normal and deferred pension ages in the new schemes to the state pension age. However, in recognition of the unique characteristics of their work, the normal pension ages for firefighters, police officers and members of the armed forces will be set at age 60, as we heard earlier.

As a result of improving life expectancy, the cost of providing average pension benefits for current employees is 40% greater than it was 50 years ago. The link to the state pension age is crucial to tracking and managing the longevity risk, and ensuring that costs do not spiral out of control again.

We agree that when normal and deferred pension ages change, there must be consideration of how such changes will impact on those who are most affected. Accordingly, we have done so in the new scheme designs, and in the Bill, by allowing for transitional protections. We set out that members who, on 1 April 2012, were within 10 years of their normal pension age will see no change in when they can retire or the benefits that they will receive. However, because of the intrinsic link to the state pension age, it would be inappropriate to provide for a minimum notice period for changes to the normal and deferred pension ages under the Bill. Members will be aware that the Government have committed to an automatic review of the state pension age to ensure it keeps up with increases in longevity.

A number of people who responded to the Department for Work and Pensions consultation on the single tier and state pension age highlighted the importance of giving people—specifically public servants under the Bill—enough time to prepare for future changes. My right hon. Friend the Secretary of State for Work and Pensions will bring forward details of the review of the state pension age in due course, but because we do not yet know how future changes to state pension age will be made, providing for a notice period in the Bill could undermine those considerations.

Let me be clear, however, that although the Bill does not provide for an explicit notice period, the Government place great importance on giving members of public service pension schemes time to accommodate change in their retirement planning. That plays a key role in increasing members’ certainty and trust in their schemes, which is what these reforms are designed to do.

Hon. Members will know that Lord Hutton looked at this specific, important issue. When he discussed the link between the NPA and SPA with stakeholders, he said that there should be a “sufficient notice period” for members, but he deliberately made no explicit recommendation as to what that notice period should be. It is fair to say that he understood that there needs to be a degree of flexibility for the Government of the day so that they can work for the best interests of all concerned, including those taxpayers who could be affected if there were an unnecessary restriction on the notice period.

Chris Leslie (Labour, Nottingham East)

The Minister says that the DWP will be bringing forward changes to state pension age arrangements in due course, which is very welcome. Notwithstanding the flexibilities that he wants to enshrine in the Bill, will he at least put on the record that a 10-year period would be an ideal if it were attainable? I do not mind if he wishes to add a condition by saying that in certain circumstances it might not be attainable, but it would help very much if he could stick his neck out a bit and say that, ideally, we want to aim for a 10-year notice period.

Sajid Javid (Conservative, Bromsgrove)

I genuinely meant what I said at the start, that this is a good debate to have; the amendment has initiated the debate, and I welcome that. As we have discussed before, this is a long-term, sustainable settlement, to last 25 years. Ideally, one would expect that the Government of the day would give as much notice is as practicable when the SPA link changes and there is a necessary change in the NPA. What we cannot do is bind a future Government completely to a specific time period. The Government are absolutely committed—as everyone would expect, but also as Lord Hutton said—to ensuring that there is a sufficient time period. However, I do not think it would be proper to say whether that should be 10 years, eight years or 12 years. It should be a sufficient period, but none of us in this room knows what the economic circumstances or other key factors may be many years from now. It would be inappropriate to have a fixed time period embedded and hard-wired into the Bill.

Chris Leslie (Labour, Nottingham East)

I accept the Minister’s points. I am not saying that the only way to achieve this aim is to enshrine it in the Bill, and I am not saying that there will not be some economic emergency that may mean that we have to break the goal of a 10-year period. All I am looking for is recognition that in best practice terms, in normal circumstances and with all else being equal, a 10-year period is desirable and so should be something that we are aiming for. Can the Minister give us that much?

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman has picked a good example. As he knows, when the Government came to power they made some changes to pension ages quite quickly—the hon. Member for Wirral South referred to that. That was because of an economic emergency. There was, then, a good reason: in that economic emergency, the Government had to make a change and do so quickly.

I would first say, again, that it would not be appropriate for me to set a time period, even if it is only an aspiration. However, I would ask the hon. Member for Nottingham East to look at the transitional arrangements that have been introduced for people moving from old schemes into new schemes as a sign of the Government’s commitment and intentions on this issue. I hope that will give him some kind of reassurance. In those arrangements, the Government have used a 10-year period, stating that they do not want to have a sudden impact on people who had made retirement plans and expected to retire at a particular date.

Iain McKenzie (Labour, Inverclyde)

Does the Minister agree that if he does not allow people the time to prepare for these changes, the Government will simply pick up the bill on the other side of retirement?

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman is quite right that there needs to be a reasonable and sensible time period. However, I think he would also agree that if a future Government were faced with an economic emergency, as this Government were, and needed to act quickly but were too constrained, that also could pass on an unnecessary burden to taxpayers. The flexibility works both ways.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

I listened carefully to the shadow Minister; does my hon. Friend share my concern that the hon. Gentleman and his colleagues appear to be content to tie the hands of Treasury Ministers in all kinds of ways? Combined with the rhetoric of shadow Treasury Ministers on other issues, that gives the impression that a future Labour Government would not take seriously the nervousness of the international capital markets about sovereign debt and the stewardship of the public finances. If there were ever the prospect of a Labour Government, we would run that risk. I do not sense that the Opposition take these issues as seriously as they ought.

Sajid Javid (Conservative, Bromsgrove)

My hon. Friend has a keen eye for such things and has been perceptive. He brings us back to why the Government are taking these reforms seriously. If some things had been done earlier, by the previous Government, maybe so many changes at one time would not have been necessary. Despite some of the rhetoric from the Opposition, there is a desire among all parties to work together to find a solution to this long-term problem. We all value public sector workers and want to find a long-term, sustainable solution. I hope we can continue in that spirit.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

The Minister has been very generous with his time. The Opposition recognise the constraints on including provisions in the Bill, but as a matter of principle could we not say that we want to give 10 years’ notice of changes? No party wants to have our public sector workers living in poverty, and that is the implication if we do not give them adequate notice.

Sajid Javid (Conservative, Bromsgrove)

I agree with the hon. Lady that no one wants anyone to live in poverty. As to whether we could commit to a 10-year notice period, it would be inappropriate for the Government to give a fixed time. I would also ask Members to look at the transitional arrangements that the Government have put in the Bill for people moving from old schemes into new ones. They include a 10-year period, and I hope the hon. Lady can take some comfort from that about the Government’s intention to have a substantial enough period for people to make preparations.

I ask the hon. Member for Nottingham East to consider withdrawing the amendment.

Chris Leslie (Labour, Nottingham East)

I think I am partially grateful to the Minister for his comments. He said that we should look at the 10-year period in the transitional arrangements and look at the Government’s words about how they place great importance on robust planning. We tried to coax him out of his ministerial hidey-hole to give us a sense that he understands that a 10-year period would be ideal. He does not need to put it in the Bill if he does not want to, and if certain exigencies come along that mean he has to vary that rule, fair enough. There could be such circumstances. All else being equal, could we at least try to stick to that best practice?

It is such a pity and such a great missed opportunity for the Minister. Treasury Ministers have a lot of responsibility, and it does not just touch on public service pensions. They are also the individuals to make decisions about the state pension age. Let us face it, the Department for Work and Pensions is probably less likely to be doing that. Most routes lead back to the Chancellor of the Exchequer. The amendment provided a good opportunity for the Government to say that a 10-year period is possible, because that is good practice. That would have been a fairly cost-free thing for the Minister to have said. It would not have shaken the market. The hon. Member for Bognor Regis and Littlehampton seemed to think that the stock market would plummet any minute and that international bond yields would to soar through the roof as a result of a commitment to a 10-year notice period on pension changes. [Interruption.] Honestly, if he wants to get wound up about public finances he should just take a look at the magic money tree that the Chancellor has just shaken to monetise the deficit with a £35 billion transfer. That is a far more concerning change, showing the smoke and mirrors nature of public finances. It is far more likely to undermine the confidence of the markets. But I digress, Mrs Brooke—it would be inappropriate to talk about the printing of money.

Richard Fuller (Conservative, Bedford)

Will the hon. Gentleman give way?

Chris Leslie (Labour, Nottingham East)

As long as it is on topic.

Richard Fuller (Conservative, Bedford)

As always, Mrs Brooke, I will attempt to be on topic and not stray too far. Has the hon. Gentleman looked at the impact of protecting members of a scheme who are within 10 years of retirement on the other members of the scheme? It is my understanding that a large proportion of the value of a pension is accrued later in one’s service. What would be the implication for those just starting in the scheme? What would have to happen to their contributions to make up for that protection?

Chris Leslie (Labour, Nottingham East)

I genuinely do not believe that there need be any extra cost, because we are talking about giving people notice of changes to their retirement age. That proposal cuts across to non-public sector schemes as well. It cannot be beyond the wit of Government actuaries or others to make predictions about life expectancy and to make normal arrangements to control costs to the taxpayer and give people a 10-year notice period. I just do not believe that all of a sudden Government officials are flicking through their methodology and saying, “Cripes! If we don’t make this change within four years, there will be major financial change”, and arguing that they need to give scheme members limited notice to plan ahead for their future capabilities. I just do not believe that is the best practice going forward.

In the past, the Treasury has taken decisions to give only six years’ notice. That has caused considerable difficulties for women in their 50s, as we have heard. But surely best practice would be to ensure that if we are to make changes, increase the pension age and so forth, we try to give 10 years’ notice. That is all we are asking for.

Richard Fuller (Conservative, Bedford)

I think we all would wish that the actuaries we employ in the public and private sectors had the 20:20 foresight that the hon. Gentleman wishes they had, making his amendment costless. I draw his attention to the public expenditure statistical analysis report, which looks each year at the accuracy of their predictions. It shows that between the Budget of June 2012 and the Budget of March 2011—so less than a year—there was a change in the cash flow cost of pension obligations of £600 million. So there is a cost to these measures, and it would be fair if the hon. Gentleman recognised that his amendment is not costless and that the cost would fall more heavily on those at the earlier stage of their careers.

Chris Leslie (Labour, Nottingham East)

With the greatest respect, the hon. Gentleman has got the wrong end of the stick about the purpose of our amendment. The Minister certainly made no such comments about the cost of aspiring to a 10-year notice period. We got him to say that it is important to be able to give scheme members as much advance notice as possible so that they can plan. That is the key thing the hon. Gentleman fails to grasp. It is important to help those ordinary members of the public who are public service employees and give them the ability to think ahead about their retirement.

I do not want to go around the houses too much on this amendment, as there are several others on the stocks. It is difficult to know what to do, but perhaps in the spirit of trying to work together and to persuade the Government to do the right thing, I will seek leave to withdraw the amendment. We may wish to return to this matter later to see whether we can get a little bit more of a commitment from the Minister, even just verbally, that Government policy would aspire to a longer notice period. I beg to ask leave to withdraw the amendment.

Chris Leslie (Labour, Nottingham East)

I beg to move amendment 54, in clause 9, page 5, line 31, at end insert—

‘(4B) The link between the state pension age and a person’s normal or deferred pension age shall be regularly and independently reviewed to ensure that the link remains appropriate in light of scheme members’ longevity.’.

The amendment has arisen from Lord Hutton’s recommendation on page 94 of his report. The recommendation—again, in a shaded box—states:

“The Government should increase the member’s normal pension age in most schemes so that it is in line with their state pension age. However, the link between the SPA and NPA should be regularly reviewed to make sure it is still appropriate, with a preference for keeping the two pension ages linked”.

This is something that we believe that Lord Hutton looked into with great care, and it is something that we should put in the Bill.

Of course, the Bill implements one half of Lord Hutton’s recommendation: the first half, in relation to linking the normal and deferred pension ages to the state pension age. However, it fails to provide for a regular review into the appropriateness of that link and it fails to implement the recommendation in full. As Lord Hutton said in his report,

“the Commission’s recommendation is that as well as the link to state pension age being put in place, normal pension age should also be regularly reviewed by an independent body, to see if the link is appropriately tracking changes in longevity. The body would then make recommendations to the Government (either for each scheme or for the public service as a whole) on whether linking the normal pension age for public service pension schemes to the state pension age was still appropriate, and if not, what the normal pension age should be.”

To be as clear as possible, a regular and independent review into the state pension age link would help to ensure that public service schemes remained sustainable if life expectancies were to rise, as well as allowing flexibility in scheme rules if life expectancy decreased and scheme costs reduced, which is not inconceivable. Without such a review, the viability of schemes could be undermined by the rigid adherence to a link that does not necessarily take account of changes in longevity.

Of course, although many may assume that public sector workers are demographically of the same ilk, there are some public sector pension schemes that relate to a particular class of public service worker; we talked earlier, for example, about the physicality involved in certain professions. That link may become disconnected over time, because longevity is not the same for certain classes of workers as it is for the population as a whole. The genesis of this amendment, therefore, was the desire have some sort of ability to review that link while, again, trying to put some flexibility into the Government’s plans and implement the Hutton recommendations in full. I thought that those were the Minister’s policies, given that the Government accepted the Hutton review, so I urge the Committee and Minister to agree to the amendment.

Sajid Javid (Conservative, Bromsgrove)

The amendment seeks to provide a review mechanism for the state pension age link, to ensure that the pension age provisions continue to track changes in their members’ longevity appropriately.

The Committee will be aware that Lord Hutton recommended, as the hon. Gentleman said, that the link be reviewed along with the normal pension age provisions for the fire, police and armed forces schemes, to which it does not apply. The Government accept the recommendation that these provisions should be reviewed, and we intend those reviews to be carried out as and when future changes to the state pension age are announced. The Government have already committed to an automatic review of the state pension age to ensure that it keeps pace with increases in longevity.

The automatic review should mean that the core principle of the amendment—to ensure the public service pension age provisions continue to track changes in members’ longevity appropriately—will happen automatically. More details on the state pension age reviews will be brought forward in due course. None the less, let me clarify why the Government have not put the reviews of public service pension age provisions in the Bill.

First, I firmly believe that the Bill’s provisions are correct. They are based on Lord Hutton’s recommendations, they are a vital step in protecting the taxpayer from escalating costs, and they are the basis on which agreements have been reached with the majority of trade unions. Secondly, as I have set out, the Government have already committed to reviewing the state pension age, which underpins the public service pension age provisions, to ensure that it keeps pace with increases in longevity.

In light of that, it is also sensible to wait for clarity on the timing and regularity of state pension age reviews before finalising the arrangements for reviewing public service pension age provisions. The state pension age reviews will apply to more than just the pensions established in the Bill, and it is important that the Bill does not restrict the flexibility to design such reviews. I therefore urge the hon. Gentleman to withdraw the amendment.

Chris Leslie (Labour, Nottingham East)

I think the Minister said that he did not want to put the suggested change in the Bill because the Government were going to make announcements in due course about how the review process would work, and because the Government accepted that reviews would take place. However, I cannot quite understand how, if a review found that the link was no longer appropriate, the link could be varied given the strictness with which it is set out. There is no caveat that says that such a thing can happen subject to ministerial discretion.

If the reviews come up with a particular recommendation at some point in the future—we know not when—that may mean a break between the state pension age and the pension age for certain public sector schemes. How would that happen? Would it really require fresh primary legislation? What if the recommendation affected only one category of public sector worker—perhaps the local government pension scheme or whatever? I do not quite understand how reviews can be accepted when there is an immutable, unchanging link set out in statute.

The Minister’s answer was a bit confusing, and I do not know whether he can offer any possible help. It seems that this is another occasion where Lord Hutton made a recommendation that it would be appropriate to put in the Bill, at least in part, to give the Minister some discretion so that he has the capability to make such a change. The Minister will understand our concern, which came up during the evidence sessions. If he is able to tell us how such a change might be made in future when the statute is as clear as it is, I would happy to give way to him.

Sajid Javid (Conservative, Bromsgrove)

The hon. Gentleman asks a good question. The Government are committed to a review whenever there is a change in the state pension age. The purpose of such a review is to ensure that the public pension schemes are working in the intended way and that the change in state pension age truly links the normal pension age to the longevity risks. How those reviews actually take place and how and by whom they are done will be set out, as we discussed, in the general review of state pension age by the Secretary of State for Work and Pensions. Any such change would have an effect beyond public service pensions, and it is important that it is looked at in totality.

The hon. Gentleman asked what would happen should some future review show that the link is not working in the intended way, thereby, as he said, requiring a change in the legislation. The Government do not anticipate that happening, but it would not be sensible for us to say that those reviews should not happen, and that, therefore, there is no need for any future changes, no matter what the outcome. If, for any reason, a future review suggested that the state pension age was not tracking longevity, as was intended in the Bill, it would require the Government of the day to make a change through legislation. That would require proper scrutiny and all the procedures that we would expect in Parliament.

Chris Leslie (Labour, Nottingham East)

I am grateful to the Minister for that. It seems a big step that any review changes, which might be for a small scheme, would require primary legislation. However, the more I think about it, although the amendment that I tabled would enshrine a review in the Bill, it could not affect that link to state pension age further along, as it simply states that a review would take place. There would need to be a provision in clause 9 to allow Ministers to break that link in such unforeseen circumstances.

I do not, therefore, want to push the amendment to a vote, because we need to think through properly the design of how that provision might need to work. It might be too much to suggest that we should have a whole new Bill to make one particular change. However, there must be some scope for a compromise that allows us to have a mechanism to work the disjuncture between the two into clause 9 somehow, for circumstances where a review—I accept that the Minister has given a commitment to those reviews, which is very welcome indeed—suggests a break between the SPA and the normal retirement age. At this stage, I am not clear how that might work, but this is one of those circumstances in which we want to give the Minister and the Government a bit of latitude and flexibility. We need to kept thinking about how the system will work. I therefore beg to ask leave to withdraw the amendment.

Sajid Javid (Conservative, Bromsgrove)

The clause establishes that a member’s normal pension age or deferred pension age in the new schemes will be equal to their state pension age—the SPA—or age 65, whichever is higher. As I have said, that was a key recommendation of Lord Hutton’s report and provides a vital protection against the costs of rising longevity. I should remind the Committee that recent increases in longevity have been significant, so it would be unsustainable not to seek to reflect that in pension provision. The Government have therefore committed to an automatic review of the state pension age to ensure that it keeps pace with increases in longevity. That review will be taken forward separately from the Bill. As a consequence, the state pension age link will protect the taxpayer from the increasing costs of public service pensions.

The clause also sets out that changes in the normal and deferred pension ages consequent on a change to the state pension age will be applied retrospectively to benefits accrued in the new schemes. That means that a change will affect the individual’s entire accrued benefits under the new scheme, not just benefits accrued after the state pension age change. The clause does not affect benefits in the existing schemes. Again, this measure is crucial to tracking and managing the longevity risk, and ensuring that costs do not spiral out of control.

However, the clause sets out some exceptions to the state pension age link: in recognition of the unique characteristics of the work involved in their roles, normal pension ages for firefighters, police officers and members of the armed forces will be set at 60. Across the board, it is important to note that this clause does not force people to work longer than they wish to. They may still draw their pensions, actuarially reduced, earlier than the new normal pension age. All their benefits from the current scheme will be available, unreduced, from their current normal pension age. Those benefits will also be based on their salary at retirement or on leaving the scheme, not on their salary in 2015, when the current schemes close.

As we have discussed, the pension age provisions set out in the clause will be reviewed when changes to state pension age are announced, to assess their ongoing suitability in the context of state-funded provision across the UK. The state pension age review mechanism is under consideration, as was set out by the Chancellor in the Budget. It is sensible to wait for clarity on the timing and regularity of the state pension age reviews, as we discussed, before finalising the arrangements for reviewing the public sector pension age. None the less, I believe that the provisions in the clause are correct, and they are vital to getting a firm grip on the long-term sustainability of public service pensions. They are a fundamental step towards ensuring that we do not again end up in the situation we face now, whereby, as Lord Hutton correctly stated,

“the status quo is not tenable.”

Chris Leslie (Labour, Nottingham East)

I have a short set of comments. We have had a long debate on the amendments to clause 9, and before I get into the other points that I want to make, I will ask the Minister my specific technical question so that he has time to consult his officials. Subsection (4) includes the words

“all the benefits (including benefits already accrued under the scheme)”.

It occurs to me that the Bill contains no definition of “accrued benefits”. That is a technical point, but it has caused some concern to other commentators who have spotted that the Bill provides no legal definition of accrued benefits. Is there such a definition elsewhere?

Pension age is one of the most important aspects of pension reform, but it can cause the most concern. Public service workers are right to be concerned about how the Bill reforms a member’s normal and deferred pension age, given the fairly arbitrary ways in which the Government have changed state pension ages in the past. The Bill represents a missed opportunity to give proper notice of changes in pension age, as we have discussed. There are several things missing from the clause, particularly regarding provisions that affect particular classes of public sector worker either because their longevity is not as long as the average, or because the physicality of their work causes them to want to retire earlier. The clause does not allow them sufficient flexibility.

That is a shame, because we all recognise that Lord Hutton was correct in wanting to put pension schemes on a sounder financial footing, and, broadly speaking, there is support for some of those findings. It would have been preferable if the Minister had been able to find a solution that accepted some of the concerns set out in the evidence sessions and during our deliberations on the Bill, as well as those expressed by Lord Hutton. I am not content that clause 9 is sufficient but I want to give the Minister the opportunity to return on Report with some of the improvements we have discussed, so I will not press the clause to a vote. I ask him to think carefully about those points, because they are some of our most serious concerns about the Bill. I hope that he will address them in the appropriate manner.

Debbie Abrahams (Labour, Oldham East and Saddleworth)

As my hon. Friend said, we recognise and have supported Lord Hutton’s recommendations. When he gave evidence, Lord Hutton also expressed his concern about the trust and confidence that needed to be re-established with the public and with public sector workers. The Government have argued that clause 9 provides important flexibility for them and for future Governments, but it seems to do so at the expense of public sector workers. I am disappointed that the Government were not able to do more—as I am sure that future Governments will have to do—to make scheme-specific capability reviews part of the process, because the proposals are too blunt an instrument. I am also disappointed that we could not even get on the record the importance in principle of 10 years’ notice of changes to pension age. That is so important. My hon. Friend the Member for Wirral South made a powerful speech on the issues experienced due to the change in state pension age.

We have heard that we will have an independent review of the link between the normal and state pension ages, but it will be set out later. The 25-year guarantee that it has been stated that we will have—we have been told about the importance of notice for markets—will change. That brings us back to the importance of the confidence that needs to be re-established on public sector pensions. I do not feel that the clause—in the absence of the amendments—will do that.

Sajid Javid (Conservative, Bromsgrove)

Let me start by addressing the comments of the hon. Member for Oldham East and Saddleworth. She has genuinely considered the clause carefully and raised some thoughtful points, which I welcome. I have tried to give as much reassurance as I can on the fixed defined notice period—she mentioned 10 years again, as discussed on amendment 53—and the way in which the review would work. I appreciate that it is not what she wanted to see. I can see that she is genuinely concerned. I hope that the debate has helped and that some of the things I have managed to put on the record may prove helpful. I welcome her comments.

The main point raised by the hon. Member for Nottingham East was on accrued rights. He referred to subsection (4). He is right that there is no definition of accrued rights in the Bill. I have looked at that and considered it. It has proved difficult to try to define accrued rights. There are already differences in the old individual schemes and occupations; there will no doubt be differences in new schemes. There is naturally a certain flexibility to give to each scheme. If one looks at the police scheme versus the civil service scheme, there would already be differences in those schemes in what they would recognise as accrued rights. One concern I have is that, if we try to define accrued rights in the Bill, there is a risk of coming up with a definition that acts as a minimum. Without intending to do so, one might end up taking out some accrued rights from one particular scheme because a minimum definition had been provided. That clearly would not be the intention of providing a definition of accrued rights.

However, the hon. Gentleman made a fair point about accrued rights. I have considered it and I am still looking at that issue. As he rightly said, it came up in the evidence session; a number of people mentioned it. It is a genuine issue and we would like to see if there is a way to allay those concerns. It is not our intention to play with accrued rights. Everyone accepts the general principle that those rights must be protected where it is clearly defined that they have protection. Whenever we talk about them, we must be clear about how we would handle that. It is important that, when we look at this, we consider whether there is a way to come up with a definition that does not run the risk of excluding rights that are already there in certain schemes.

Clause 10 - Valuations

Sajid Javid (Conservative, Bromsgrove)

I beg to move amendment 8, in clause 10, page 6, line 7, after ‘section 1’, insert

‘which is a defined benefits scheme’.

Annette Brooke (Liberal Democrat, Mid Dorset and North Poole)

With this it will be convenient to discuss Government amendments 9 and 10.

Sajid Javid (Conservative, Bromsgrove)

The amendments clarify the application of clauses 10 and 11 to certain types of scheme that may be created under the Bill that are not defined benefits pension schemes.

Clause 10 provides for actuarial valuations to be carried out for the schemes created under the Bill. As currently drafted, the clause will apply to all schemes created under the Bill. They may include schemes other than defined benefits pension schemes, for example schemes to provide injury benefits or compensation for loss of office, or defined contribution pension schemes.

Actuarial valuations are not usually required for any type of scheme other than a defined benefits pension scheme. That is because other types of scheme do not pose the same risks to the employer in respect of provisions of benefit in the future. Amendment 8 will limit the automatic application of the clause to defined benefits schemes, so that actuarial valuations will not be automatically required for other types of scheme.

While actuarial valuations will not usually be required for schemes other than defined benefits pension schemes, there may be instances where the Government will wish to value other schemes, either by themselves or alongside the defined benefits pension scheme. Amendment 9 will allow for that to happen if that is necessary. It provides that the scheme regulations of other types of scheme, such as injury or compensation schemes, may specify that those schemes should be valued with a connected pension scheme if required. They do not have to do so, unlike defined benefits schemes.

Together, amendments 8 and 9 will remove any unnecessary provision for valuations of schemes that do not require them, but will allow for the flexibility to value schemes other than defined benefits schemes in cases where valuations are needed.

Amendment 10 refers to clause 11, which provides for the operation of the employer cost cap, on to which we shall come later. The mechanism has been set up to control costs, so that the risk that arises in defined benefits schemes can be properly managed over time. The amendment will make it clear that the provisions of the Bill that establish the employer cost cap mechanism do not apply to schemes made under clause 1 that are not defined benefits schemes. The employer cost cap will ensure that the cost of providing defined benefits pensions to public service workers remains sustainable. That type of provision is not necessary for injury, compensation or defined contribution schemes, which do not lead to the same kind of cost risks.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

It is a pleasure to have the opportunity to speak to these particular clauses this afternoon. I do not want to take up the Committee’s time to any great extent with the amendments; amendment 10 is not particularly controversial, and I will not focus on it.

The Minister has explained to an extent why Government amendments 8 and 9 were tabled. It is, once again, important to have absolute clarity on the record, because the amendments anticipate schemes that are not defined benefits schemes either being created or being in existence under clause 1. I heard what he said about schemes for injury or compensation; that they will have to be dealt with alongside defined benefits schemes in some circumstances. Does he have in mind any particular schemes? Have examples been brought to his attention in his research and discussion with different organisations that have meant that the amendments are important to include in the Bill?

Sajid Javid (Conservative, Bromsgrove)

It is not about one or two particular schemes. There are certain professions, such as the police, firefighters and the armed forces, where, unfortunately, injury and compensation arrangements are more common. When the schemes kick in, if someone is getting a payment that is based on an injury scheme, there is no actuarial calculation involved in that. If they are injured and they meet the terms of the scheme, they will receive certain payouts and compensation. We simply wanted to ensure that the Bill worked as it was intended to, so that actuarial valuation would apply only to the defined benefit portion.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

For the purposes of clarification, I think that people reading our debate in Hansard who were not au fait with all the technicalities would be concerned about ensuring that the provision would not reduce members’ entitlements to payments under such schemes as the Minister has referred to. I think I hear correctly that that is not the intention, but it would be helpful to have that spelled out in plain language.

Sajid Javid (Conservative, Bromsgrove)

When the hon. Lady refers to “such schemes”, I believe that she is talking about injury and compensation schemes. Her understanding is correct.

Cathy Jamieson (Labour, Kilmarnock and Loudoun)

I beg to move amendment 55, in clause 10, page 6, line 21, at end insert—

‘(3A) Treasury directions under subsection (2) shall take into account the individual nature of each of the different funded schemes that make provision for local government workers.’.

I will explain why we felt that it was important to table amendment 55. Having looked quickly at lunchtime over the papers that have become available since this morning’s sitting, I believe I can anticipate the Minister’s response. I believe that he will try to explain—I am sure he will do a very good job of it—why the amendment is not necessary. We tabled it on the basis of what we knew at the time, and we believed it to be important because many people involved in the local government pension scheme were concerned that clause 10 did not take account of the individual nature of each of the 89 different funded local government pension funds. There was concern that clause 10 would allow the Treasury to issue a single set of directions covering the valuation of all 89 local government funds.

As we have heard in the evidence sessions and in our debates, each local government fund has its own assets and its own investment strategies. Different employers are involved and, crucially, the demographics of each fund are different. The members of each scheme have different characteristics, some of which affect life expectancy. If valuations are to be accurate for each of the local government pension funds, we believe that Treasury directions must ensure that the individual characteristics of each fund are taken into account in the valuation process.

Significant concern was expressed about clause 10 in the evidence that was given to the Committee. Alison Hamilton, the chair of the local government committee of the Association of Consulting Actuaries said:

“Clause 10 certainly gives me cause for concern…It is very important that the valuation takes account of the local demographics, and the local investment of the assets backing those pension funds. I attended a meeting where the Bill team tried to give some sort of reassurance that the valuation would be carried out as a one-size-fits-all under Treasury directions. That was not intended for the local government pension scheme. I would like the Committee to explore that and get something drafted.”

Similar views were expressed by the representative from the National Association of Pension Funds, who said that local pension funds should be valued individually in a way that takes account of their differing features, again specifically referring to demography. She pointed out:

“Life expectancy is very different in Glasgow from Kensington and Chelsea, for example, and we have to reflect that in valuation. We would be very concerned if there was a one-size-fits-all approach. We do not think that the Bill adequately addresses that.”––[Official Report, Public Service Pensions Public Bill Committee, 6 November 2012; c. 169, 170, Q60.]

Bob Summers of the Chartered Institute of Public Finance and Accountancy echoed those sentiments:

“As everyone knows, life expectancy patterns depend on where you live. It is important that those local factors are reflected in local valuations.”––[Official Report, Public Service Pensions Public Bill Committee, 6 November 2012; c. 133, Q4.]

Amendment 55 was designed to ensure that Treasury directions would be tailored to each local government fund, because we wanted to ensure that valuations in that context were more accurate. I look forward to hearing what the Minister has to say, particularly about the information provided to us during the course of the day and whether my understanding of what it means in relation to the clause is correct.

The rest of the debate is in Hansard.