Pensions (Scott Report)

Part of the debate – in the House of Commons at 10:03 am on 22nd October 1982.

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Photo of Alan Williams Alan Williams , Swansea West 10:03 am, 22nd October 1982

I shall come to that in time. I should like to develop my arguments in my own way. I have said that we intend to retain indexation. The Labour Party stands by that. Indeed, I have the authority of the shadow Chancellor of the Exchequer to make that commitment on behalf of the Opposition.

The Prime Minister helped to stimulate the false concept that civil servants received index-linked pensions on a non-contributory basis. As Scott, Megaw, the Government Actuary and the 1981 National Association of Pension Funds report say, far from being privileged, recipients of a concession, civil servants pay twice as much for their pensions as workers in the private sector. I accept that Civil Service pensions cost more, but civil servants pay between 45 per cent. and 50 per cent. of the cost of their pensions whereas employees in the private sector pay only one third of the cost. The Prime Minister has never brought that to the public's attention.

In addition to the direct deduction of 1·5 per cent. for dependants' allowances, the civil servant pays 7 per cent. in reductions in pay. The upshot is that civil servants are paying about 8·5 per cent., not 7·9 per cent., of their salaries in pension contributions. That is well within the Scott range of what is appropriate for the benefits received.

The question of the contribution versus the notional reduction in pay is important. We must face that issue to avoid the cheap, petty propaganda campaign that the Prime Minister mounted against civil servants two years ago. I am inclined to agree with Megaw that it is difficult for the public to understand the concept of a notional reduction in pay. The fact that we have moved away from comparability with the private sector is irrelevant. Because the public do not understand it, it would be better to give civil servants their full pay and make the full cash deduction so that it is transparently clear that they pay fully for their pensions.

The Minister of State emphasised that there should be no gratuitous gain to civil servants, but there is another side to the coin. There should be no extra cost to civil servants as a result of the decision to change. There should certainly be no accrual to the Government from the change.

The confusion in the public mind raises a more important aspect. One can appreciate that the public would not understand the notional reduction in pay, but what about the Prime Minister? After all, she was a member of the Government who introduced indexation in 1972. Why was she unaware of how the system worked? Why was she unaware that it was not a non-contributory scheme? The Prime Minister constitutionally is the head of the Civil Service. I should have thought that she would have at least a limited awareness of how the system worked. Was she not briefed by officials in the Cabinet Office and the Treasury? They were aware of how the system worked because they managed to produce a lengthy and detailed answer during the week as part of the Minister's softening up operation for his Back Benchers. One must conclude that the Prime Minister was incredibly ill-informed and ill-briefed, although she prides herself on her mastery of technical detail. Alternatively, she must have made a deliberate attempt to whip up public feeling against civil servants for her own political objectives.

The only other conclusion that one can reach is that the right hon. Lady listened to the Conservative Party Centre for Policy Studies. That is more than likely. What did Scott say about the centre? Scott hammered it because it got its figures wrong. It said that it would take 50 per cent. of salaries to pay for index-linked pensions. The centre has had to keep its head down ever since.

I expect that there was added spice for the Prime Minister, because by kicking something set up in 1971–72 she could make a side kick at the right hon. Member for Sidcup (Mr. Heath) who was primarily responsible for introducing the scheme. That might have added spice to the pleasure that the Prime Minister gained from turning civil servants into whipping boys. The Prime Minister played a destructive and misleading role in the public debate prior to the publication of the Scott report.

The Prime Minister's hatred of the Civil Service is well known. [Interruption.] Tory Members obviously do not like my saying that. They have kicked civil servants round Whitehall for the past three years but no one must mention it. It was the Prime Minister who tore up the 25-year-old agreement on pay research to ensure comparability. That agreement was also introduced by a Conservative Administration.

I am not surprised that the Minister of State went out of his way to pay respect to the Government Actuary. He should have gone on his knees and apologised to the man because he has been pilloried indirectly by the Prime Minister. She would not accept his recommendations on pensions and contribution levels, so she set up the Scott committee. Scott vindicated the Actuary and even Megaw was allowed to have a go in the hope that he would do what the Scott committee failed to do, despite its members being hand-picked by the Prime Minister. The Prime Minister wanted her own preconceived prejudices to be substantiated.

Such is the Prime Minister's love of the Civil Service and her fear for her own political survival that even now she is trying to blame Foreign Office officials for the fact that she did not do her job properly during the Falklands crisis.

The Prime Minister's pay struggle with the civil servants—eventually settled for the same amount; it could have been settled at the outset—cost us over £500 million in interest on uncollected taxes. Her errors are dear—£500 million in her clash with the civil servants, and over £1,000 million for her ineptitude in failing to recognise the signs in the South Atlantic. It is hard to believe what most Conservative candidates said in reply to questionnaires that they received from the Civil Service unions in the last election. Overwhelmingly they supported the idea of indexation. On the eve of the election, in a programme called "Election Call", the Chancellor of the Exchequer—at that time, he was a shadow Chancellor with hopes—went out of his way to emphasise that an incoming Conservative Government would preserve indexation of Civil Service pensions. Nevertheless, within 12 months of coming to office, the Prime Minister singled out this issue as one of the prime targets for her malevolence and for whipping up a public campaign.

Why is the issue raised now? Might it not have been better for the Prime Minister to bury it? She tried to bury the Scott report. Might it not have been better to leave it buried, gathering even more dust on the Treasury shelves? The hon. Gentleman said that facts have become better known. They have indeed. Certain facts have become better known to the Prime Minister as a result of a paper submitted by Baroness Young to her Cabinet colleagues, pointing out that there were certain minor political disadvantages in taking on the civil servants on this issue because there happened to be 5½ million people in the public sector with index-linked pensions, all of whom would be affected, and there happened to be 2¼ million existing pensioners on index-linked pensions. So, 7¾ million people, together with their families, would be affected by the Government's decision on Scott.

As my hon. Friend the Member for Batley and Morley said, an election year is coming up. Today, we have heard a desperate attempt by a frightened Government to buy back the Civil Service votes that they lost in their campaign over the past years against the civil servants. The Government know very well that they could not leave the matter buried, because the same civil servants who sent questionnaires last time would send questionnaires this time, and having been deceived last time, the civil servants do not intend to be deceived this time. So the Government had to try to defuse the issue in advance of the election.

So we saw the softening up of the Back Benchers with the enormous bludgeon of the PQ the other day. I think that one of the papers called it an eight-page press release. The Government are still dodging the basic issue. They still will not answer the basic question. The hon. Gentleman tried to fudge the fundamental issue on which the representatives of the Civil Service unions and the other public sector unions want answers. They describe it as tentative and therefore open to discussion. What is to be the new contribution? That is what the unions want to know. The hon. Gentleman used the words "tentative" and "not at this time." He wants to consult and consider. He will study till the cows come home—or, certainly, until the boats come home. Certainly, the Government will not make a statement, if they can avoid it, about contributions. Their decision on what the split should be— one-third or one-half—will determine whether those people currently receiving index-linked pensions lose as a result of the change that the Government intend to make. So the Government have fudged and will continue to fudge the basic question of contributions.

Nevertheless—this should not be misunderstood outside—we have witnessed today a major U-turn by the Prime Minister. It is easy to understand why she waited 20 months before she allowed this debate to take place.