With this it will be convenient to discuss the following:
Amendment 29, page 5, line 21,after ‘section 1’, insert
‘(other than a Scottish scheme)’.
Amendment 2, page 5, leave out lines 22 and 23 and insert
‘65, or current pension scheme age if lower’.
Amendment 1, page 5, line 27, at end insert—
‘(d) prison officers and psychiatric nurses.’.
Amendment 14, page 5, line 28, after ‘age’, insert ‘or deferred pension age’.
Amendment 30, page 5, line 28, after ‘section 1’, insert
‘(other than a Scottish scheme)’.
Amendment 9, page 5, line 28, leave out ‘must be 60’ and insert ‘shall be set out in scheme regulations but must be no more than 60’.
Amendment 16, page 5, line 29, at end insert—
‘(2A) Subsections (1) and (2) shall not apply in relation to any category of public service worker as the Secretary of State may by order specify following the publication of a scheme specific capability review.’.
Amendment 15, page 5, line 30, leave out subsection (3).
Amendment 31, page 5, line 30, after ‘section 1’, insert
‘(other than a Scottish scheme)’.
Amendment 33, page 19, line 25, clause 33, at end insert—
‘“Scottish scheme” means a scheme for the payment of pensions to persons specified in paragraphs (c) to (g) of section 1(2) in respect of service in Scotland;’.
We turn now to the part of the Bill relating to pension age. Let me first deal with what we think are drafting anomalies, with which we deal in amendments 13 to 15. Following our further scrutiny of the Bill after the Committee stage, we have noticed a potential anomaly on which we hope the Minister can reflect. There are to be some exemptions in the link between the retirement ages set out in public sector pension schemes and the state pension age arrangements. They are set out in clause 9(2) on page 5 of the Bill—I know that hon. Members are following this avidly—and relate to a person’s normal pension age under the scheme. The clause does not refer, however, to their deferred pension age, which means that the exemptions apply only to active members of pension schemes and not to those who have moved on from their occupation and are classified as deferred members.
The Bill will introduce increased pension ages, but clause 9 as drafted could lead to significant unfairness for some members of the fire brigade, the police and the armed forces, because, under the state pension age arrangement, those specified protected occupations will not be tied to the normal pension age. For example, a firefighter might decide to leave the fire brigade at the age of 58 because he or she feels physically unable to continue until 60, not necessarily due to any specific health problem, but simply due to their increasing age. They will then become a deferred member of the pension scheme, so they will not be entitled to receive the full pension until they reach the state pension age. That is a significant gap, so we think that the amendments are necessary to prevent unintended unfairness. Any extra costs resulting from such changes would need to be fully managed as part of the cost-cap mechanism. Our proposal would not add a burden to the Exchequer, but it would address a potential anomaly in the Bill. The Minister will, therefore, understand why we have tabled amendments 13, 14 and 15. I hope that this is a drafting error and I invite him to reflect further on it.
The Minister will not be surprised to learn that it is amendment 16 that most represents our ongoing anxieties about clause 9 and the problems with the link between the state pension age and an array of public sector employees whom we are asking to work for a considerable length of time. It needs to be said that, with life expectancies increasing, it is right to ask public sector employees to work longer before drawing their pensions. We do not disagree with that. Reforms to the age at which public sector workers retire are necessary if pension schemes are to remain sustainable, which, of course, is in everybody’s best interests. As such, we broadly agree that the normal retirement age for public sector workers should be linked to the state pension age. However, we have serious concerns about the inflexible way in which the Bill has been drafted and how it deals with exemptions to the state pension age.
The Government have understood that certain workers in physically demanding professions are not able to work past a certain age, regardless of their increasing life expectancy. As such, the Bill fixes the retirement age at 60 for fire and rescue workers and for members of the police force and the armed services. So far, so good, but my point is that those are not the only public sector workers with physically demanding jobs, and that is where the debate now takes us.
To press the hon. Gentleman on his point, he has made the assertion—it may be a fact—that the sole criterion for the exemption of these professions from the normal retirement age is the physicality of the job, but does he accept that there are other differences between those types of public sector workers and others and that that might be why they have been given a different retirement age?
I wonder what the hon. Gentleman is alluding to; perhaps he should elaborate. The Minister has not said that there are considerations other than the physically demanding nature of being a firefighter, a police officer or a member of the armed forces. Is the hon. Gentleman suggesting that there are different categories of public sector workers beyond some of those physical issues?
I will clarify my view, although I cannot speak for the Government. One criterion that differentiates these workers, other than physicality, is that they put themselves in danger in their public service, perhaps not routinely, but as an important aspect of their work. A firefighter will run into a burning building to rescue someone, a member of the police force will stop altercations and put themselves in physical danger, and members of our armed forces routinely put their lives on the line for our country. Does the hon. Gentleman not accept that that is an important point of differentiation and that it is not just to do with physicality, which is the basis for amendment 16?
While I do not disagree about the bravery of those in the professions listed in the Bill, I counsel the hon. Gentleman against taking the prescriptive view that only those categories of employee are engaged in brave acts or in risky professions. I accept that there are risks that go beyond the question of physicality, but there are other professions where the distinction is not as black and white as the Bill makes out. Mental health workers often take significant risks in the course of their duties, for example if they have to restrain patients. Prison officers are often in dangerous situations. Paramedics, hospital porters and others also have very physically demanding duties. There are gradations of physicality and risk.
My point is that there is an anomaly in the legislation, because one cannot be quite as prescriptive as to set out in the Bill particular classes of job and suddenly regard all others as not involving the same level of physicality or risk. I will not say that there are 50 shades of grey, but there are certainly gradations.
Perhaps I may help the hon. Gentleman to address the conundrum with which he is challenging himself by referring him to the Hutton report, which the Bill is implementing. I refer him to one of the shaded boxes that I know he is very keen on. Recommendation 14 states that the exception to linking the normal pension age to the state pension age should be
“in the case of the uniformed services where the Normal Pension Age should be set to reflect the unique characteristics of the work involved.”
Hutton also states that the uniformed services are in a different position because their current pension age is 55 or less. That is another key reason why there is a different normal pension age for the uniformed services, which Hutton specifically lists as
“the armed forces, police and firefighters”.
I do not deny the important role that is played by the professions listed in the Bill. What I am saying is that it is not as simple as saying that all other professions should therefore be exempt from considerations about the physicality of their endeavours. One could argue that prison officers, being a sort of uniformed service, have cause to have such protections. My point is that it is inconsistent and unfair to make exceptions for some workers in physical roles and not others. It is by no means clear that 60 is the appropriate age for all firefighters, police and Army personnel, when some of them undertake such demanding physical activity. There is no room in the Bill to make further exceptions to the state pension age link or to respond to any review that makes recommendations about the appropriate retirement age for firefighters, the police or Army personnel. Members who served on the Committee will recall that we cited the working longer review in the national health service, which was set up by Government Members. There is also an ongoing review of the working age in the fire service.
Is the hon. Gentleman’s argument on the basis of physicality collapsing? As my hon. Friend Richard Fuller said, three professions routinely place themselves in danger much more significantly than other professions. They currently have significantly lower pension ages, so it would be hugely unfair, a cliff edge and very disproportionate, to seek to increase their pension age to 65 or 68 as in other professions.
That is why amendment 16, which I urge the hon. Gentleman to look at, does not prescribe different pension ages for different categories of worker. We are looking only to give power to the Secretary of State, who
“may by order specify following the publication of a scheme specific capability review”,
to allow disapplication in relation to categories of public service worker for provisions in clause 9(1).
If reviews are ongoing—the Government have undertaken the working longer review in the national health service, and the fire service review—we must ensure almost as an issue of drafting that any conclusions of those reviews can be enacted and reflected in legislation, if the Secretary of State agrees. That is the extent of the amendment; it would simply ensure that if there are technical reviews into the capability of certain classes of employee, the Government will be able to create exemptions from any arrangement. That is why the amendment is narrowly defined. I accept there is a theoretical or philosophical argument about risk and physicality, but to return to the practicalities of our arrangements, we must look at how the legislation is drafted. That is our duty as a loyal Opposition.
The hon. Gentleman is being generous in giving way. He may regard the amendment as narrow, but I regard it as a broad generalisation that seeks to introduce uncertainty in an otherwise specific Bill. If his principle of physicality is an important test for public sector pensions, is it also an important test for private sector pensions or the state retirement age?
If a private sector scheme rules to make its own arrangements, it has the flexibility to do so. We are simply saying that in future, some degree of latitude and flexibility should be placed in statute to allow Secretaries of State to take account of the outcome of any reviews. We are not saying there should be a requirement for exemptions to be made; we want to give the Secretary of State the power to implement the findings of any reviews should that be deemed fit.
I sometimes feel as if I am on the wrong side of the Chamber for this Bill, but perhaps I may help regarding the intervention from my hon. Friend Richard Fuller. The private sector does recognise physicality for those such as steeplejacks, chimney sweeps and jockeys who have a significantly lower retirement age. I hope that is helpful to the shadow Minister.
If only we had been talking about jockeys when the Under-Secretary of State for Skills, Matthew Hancock was in the Chamber; he would have found that helpful intervention most interesting. My respect for Mike Freer grows by the minute and I am grateful for that interjection.
The key point is whether the reviews can find their course into effect. In Committee, the Minister repeatedly stressed that the working longer review for NHS staff was
“not in any way looking at the link between the normal pension age and the state one.”
Instead he said that it was,
“considering the implications of working longer for NHS staff,”––[Official Report, Public Service Pensions Public Bill Committee,
That seems a slightly contradictory statement. Linking the normal pension age to the state pension age means that people will work longer, and therefore the review will look at the effect on the state pension age link for NHS workers.
“Identify any categories of worker for whom an increase in Normal Pension Age would be a particular challenge in respect of safe and effective service delivery and consider how this may be addressed;
Identify any categories of worker for whom an increase in Normal Pension Age would be a particular challenge in respect of their health and wellbeing.”
If that NHS review concludes that a higher normal pension age is inappropriate for certain categories of worker, either because working longer would be physically damaging or because it could lead to unsafe practices in the NHS, the current Bill would not allow those workers to be exempt from the state pension age link in clause 9. I therefore contend that it is irresponsible to make legislation before the findings of the Government’s review are published, without allowing the legislation to accommodate some or all of that review’s recommendations.
Given that the working longer review was a key component of the agreement reached between health service workers and their employers, it is unfair to fetter the recommendations that the review can realistically make. It is similarly inappropriate and unfair to fix the retirement age for firefighters at 60 when the working longer review in the fire service is yet to report.
This is an incredibly important issue. I accept that we must note that the cost-cap mechanism in the Bill would ensure that any extra costs of the extra exemptions to the state pension age link will need to be met by the scheme—the Opposition are not saying that the additional costs should fall on the shoulders of the taxpayer—but bearing that in mind and the fact that the clause does not require the Secretary of State to make exemptions, the amendment simply allows flexibility. I cannot see how the Government can object to it.
Before hon. Members speak to other amendments in the group, may I refer the hon. Gentleman to the proposed final agreements? I have in front of me the one that applies to teachers pensions, but it is similar to other schemes. It states:
“Actuarially fair early/late retirement factors on a cost-neutral basis” will apply in the agreement. That means that teachers can take early retirement if they wish. If the normal pension age is above 65, they will have an early retirement factor of 3% per year for up to three years. People can therefore take early retirement with a small actuarial reduction in the pension. That deals with the problems the hon. Gentleman describes.
With the greatest respect, that does not deal with the problems, because there is a difference between the early retirement benefits to which an employee is entitled and those they can get at the normal pension age as defined in scheme regulations. The Government set up working groups and committees in the NHS, fire services and services throughout the country. Those groups have been given terms of reference, but now discover that they cannot implement their findings because of a drafting anomaly in this Bill. All the Opposition are asking is that the Government think again about how the scheme capability reviews come to fruition. This ought not to be a partisan point. I am simply seeking to ensure that we have flexibility in the legislation.
Others will want to speak to the amendments in the group that they have tabled, but I strongly urge the House to support amendment 16.
I said in an intervention that I had some interesting views on the Opposition’s stance. I have sympathy with the thrust of the amendments, but I assure the Minister that it does not extend to voting for them.
Our starting point on the retirement age must be the demographic pressures we face. UK National Statistics data show that in 2008, males were expected to live to 78.1 years and females to 82.1 years, yet by 2011, life expectancy had jumped to 90.3 years for men and to 93.8 years for women, and we could expect to pay almost as many pension cheques as pay cheques. One of my reasons for supporting the linkage—in the main— between public sector pension schemes and the state retirement age is that there is a huge gap between the contribution rates of the employer and employee and what is drawn out as a pension.
The NHS pension scheme tiered employee contributions data, which are published by the NHS, show that the employer pays about 14% and the employee about 8.5%. My rudimentary maths leads me to conclude that 22.5% goes in. Members who took part in the Bill Committee evidence sessions will remember the British Medical Association’s interesting contribution, not least because the BMA said that doctors should pay less and the lowest-paid should pay more for their pensions. The BMA confirmed that the average pension out in the NHS was 49%, so if the contribution rates are putting in only 22.5%, but 49% is coming out, that 26.5% gap has to be covered from somewhere, and it is being funded by the taxpayer. If that taxpayer gap is going to grow because of the demographic time bomb—people are retiring at the same age, but living longer and drawing pensions longer—it will start to be completely unsustainable, undermining the public sector pension schemes in total. That is why the Government are right to link the normal pension age with the state retirement age.
As I said, I have some sympathy with the thrust of the amendments. I acknowledge that the Government have gone some way to recognise the physicality of the work of the police, the fire service and the armed forces by having a lower retirement age of 60. However, I gently ask the Minister to revisit the impact of the physical nature of some of the roles within those categories, although not all the roles, because there is a huge difference between a police officer on the beat, in a territorial support group or in the computer-aided dispatch call centre.
On Saturday, I met one of my constituents, who is a sergeant in the local territorial support group. He is 42 years old and physically very fit. He explained that his job involves being the guy at the sharp end outside the gates of Parliament when we have serious disorder. He is the guy in full riot gear who has to wade into civil disobedience. He is the guy who goes in the front door when the police have to go in and arrest a violent criminal. The physicality of that job requires him and his colleagues to pass tests to ensure that they are physically up to the job. There are two tests in particular, and one is called the bleep test. Anybody who goes to a gym may know that this is where one has to run faster and faster to get between two points before the bleep cuts one off. On top of that, the sergeant explained that he has to do a shield test, which is where he and his colleagues, in full riot gear, have to be able to run 1 km in not more than six minutes. He explained to me that that, at his age, he is getting towards the limit of his physicality. Expecting a sergeant in the TSG to be able to pass the bleep test or a riot shield run in six minutes or less for 1 km at the age of 59 is perhaps asking too much.
I am reasonably fit, but I have 10 years on the sergeant. I have accepted the challenge of doing the shield run—of trying to run 1 km in not more than six minutes in full riot gear. Perhaps the Government and Opposition Front Benchers would like to join me. If they are keen to take up the challenge, I will happily arrange it. Both the Minister and the shadow Minister have 10 years on me as well.
Whips, of course, are entitled to take part—they might enjoy dressing up with the truncheon.
On the question of physicality, I am not suggesting that the Government have got it wholly wrong. I am suggesting that if, at some point in the future, we have empirical evidence that such physicality has an impact on those particular jobs, the Minister—I am sure he is rushing off to check the data—might revisit the rules to see if that physicality can be reflected in those specific roles within those specific categories.
Many years ago I took the bleep test and I can only describe its physical demands as a form of hell. The hon. Gentleman is right about the demands on the police, but what about other public sector workers? It has been put to me by nursery staff, school staff who work with small children, nurses and other NHS staff that they have very physically demanding jobs. Their jobs are not as potentially violent as the job he has just described, but they are demanding. Does he accept that we need to look carefully at the impact on those people too?
The hon. Gentleman makes a good point. I do not rule out the possibility where there is empirical evidence that people’s ability to work and progress is affected by the physicality of that profession. One difficulty is that those in some of the roles described in the Bill will have limited opportunities to move into other less physical roles. That is another consideration. If there are roles in the NHS where the physicality affects people’s ability to perform that role and where no other avenues are available to them, that is a fair point, but in most roles there will be opportunities to move into less physically demanding roles. Unfortunately, in the armed forces, police and fire service, there are limited opportunities to move out of front-line roles. It is the House’s duty to protect those who protect us.
People are living longer and many, albeit not all, are remaining fitter for longer. It is suggested that we amend the Bill to enlarge those categories in the public sector, but what about those in the private sector—people who work in private sector nurseries, for example—who face exactly the same issues as Bill Esterson just raised?
My hon. Friend makes a good point, but if he revisits some of the private sector schemes, he will find that they rely on actuarial and physical evidence provided by various medical boards, and that the retirement age in certain private sector schemes already reflects the physical demands of certain roles. In an intervention, I mentioned, rather light-heartedly, people such as steeplejacks and jockeys, but there are other roles whose physical demands are reflected in certain private sector pension schemes, which already have mechanisms in place.
Does my hon. Friend not accept that those pension schemes are fundamentally different from the types we are debating? The former tend to be defined contribution schemes rather than defined benefit schemes. Does that not have an impact on the flexibility of those schemes and their ability to take account of those issues?
My hon. Friend makes a good point. He knows my views and is tempting me down the path of debating the future of defined benefit schemes. I have been entirely consistent on this point: for many years, I have said that all defined benefit schemes are no longer sustainable, whether in the private sector or public sector. That is a debate for another time and is certainly not pertinent to the amendment, but I share his view that perhaps we need more wholesale change and a larger debate.
In supporting specific exemptions where physical demands can be proven, I am not undermining the broad thrust of ensuring that our public sector pensions are sustainable. I have long argued that the contribution rates of both employee and employer do not match: what goes in does not match what comes out. That has driven my long-held view that defined benefit schemes are no longer fit for purpose. Having said that, this Bill is a major step forward in making sure that our public sector pensions are sustainable. We have a duty, however, to protect those who protect us and we ought to revisit this point where there is hard empirical evidence that physicality, in certain roles within those categories, can be proven to be detrimental to people’s health after retirement. I am not suggesting that I will support the amendment, but I am urging my ministerial colleagues to revisit the matter.
I have rehearsed at length the point about physicality. I am sad that the Minister is no longer with us, but I hope that he will address that point when he winds up. Should empirical evidence emerge, I hope that we can revisit this subject.
The amendment seeks to place two additional occupations into the Bill, and they have been mentioned on both sides of the Chamber. They are those of prison officer and psychiatric nurse. Clause 9(2) lists the three occupations to be enshrined in the legislation as exemptions from subsection (1)—they have been discussed by various Members and there seems to be some agreement—which are
“fire and rescue workers who are firefighters…members of a police force, and…members of the armed forces.”
I fully support people working in those occupations and the courageous work they do on a regular basis. I fully understand why they are included in the Bill and support their inclusion, but for the very same reasons I wish to amend the Bill to include prison officers and psychiatric nurses.
It is widely accepted that prison officers and psychiatric nurses have to deal with some of the most dangerous, dysfunctional and disruptive people in society on an almost daily basis. Expecting these categories of worker to work above the age 65 is totally and utterly unjustified; in fact, when we look at it in great detail, the decision seems absolutely outrageous. Mike Freer mentioned a constituent of his, a very fit police officer from the territorial support unit who explained exactly how he kept himself in peak fitness to do his job. We cannot expect people in the Prison Service to be grappling with prisoners at the age of 65 and above, but the Bill as it stands would allow that.
Currently, prison officers regularly have to take five different tests: a grip strength test, an endurance and fitness test, a dynamic strength test, an agility test and a static shield hold test. If a prison officer fails any of those tests, they fail the entire health and fitness test. The current regime is therefore rather stringent. If clause 9 is agreed to unamended, it will mean many prison officers and psychiatric nurses either dying in service or retiring on ill health grounds and not having a very healthy lifestyle thereafter.
My hon. Friend is doing a fine job of explaining the concern of people who work in the Prison Service or in psychiatric health. Ashworth hospital and HM Prison Kennet are in my constituency, and people working at both have expressed exactly those concerns to me. Does he think that, as well as potentially leading to damaged health and increased disability, the Bill will discourage people from entering the Prison Service and that part of the NHS?
That is absolutely right. When anybody looks to take up a new employment opportunity, they look at a whole array of things. The public sector is changing by the day—although the Prison Service and the NHS now involve not just the public sector, but the private sector. People look at how their pensions will end up and what the pensionable age is, which we have also been discussing this afternoon. That is a huge consideration for many people who want to choose their profession early on in life. This measure will put people off becoming prison officers.
I know a lot of prison officers and psychiatric nurses, and they are very committed people. They come to see me in my surgery and they say, “Mr Lavery, I am 50. How am in going to manage to do this job in 15 years’ time?” The measures in the Bill mean that they would have to do just that. We need to scrutinise this. We cannot have people over 65 years of age doing that kind of work. It is absolutely nonsensical. I really hope that we can reach an agreement today to look at that situation again.
An added problem in the prison service is that the work force are growing older, because the prospect of doing the job does not excite people any more, and the prison population is getting not only younger but more dangerous. Violence is on the increase, and an average of eight prison officers are assaulted every day of every week. Not long ago, it was recognised that prison staff had a life expectancy of only 18 months after retirement, yet the Bill gives them no consideration. The Government have still not provided any evidence that front-line prison staff could work in an operational role over the age of 65, yet they are still considering that option.
May I gently ask the hon. Gentleman to remind the House that prison officers in Northern Ireland also run a particularly grim risk? After a gap of almost 30 years, a prison officer, David Black, was murdered recently in rush-hour traffic on a busy motorway on his way to work. Prison officers in Northern Ireland run an additional risk. It is an absolute disgrace that prison officers are not exempted in clause 9.
The hon. Lady makes a powerful point. Prison officers in Northern Ireland have had a particular problem with security for decades. They have the same security problem here, although it is definitely not as bad as the problem experienced during the troubles in Northern Ireland. Nevertheless, prison officers put their neck on the block at all times. I have been out socialising with members of the Prison Officers Association when they have been approached by ex-convicts. They were out having a decent time, and those people were coming up to them. They addressed the prison officers very politely, but I have to say that they looked rather strange. I would not want them coming to talk to me. We need to look at the security of the people who work in the Prison Service. As I have said, we need to protect those people.
The hon. Member for Finchley and Golders Green said that members of the police force were highly trained, and that they needed shields and other forms of protection. He said that they were out on the front line when there were problems, and that they would get stuck in to try to resolve them. Prison officers and psychiatric nurses do that on almost a daily basis, and it is not very pleasant for them. There are also problems in the Prison Service and the health service, when prisoners are not only violent but spit in people’s faces and when blood is thrown at people’s faces causing all sorts of distress.
It is common sense to try to ensure that prison officers and psychiatric nurses are added as part of the exemption under clause 9(2), just as we rightly wish to protect police officers in their daily duties. Our brave armed forces and our firefighters are other examples, so we should look to protect the prison officers and psychiatric nurses, whose duty is solely to protect us, in the same way.
I will not press my amendment to the vote, as I do not want to divide the House. Should I say that we are too conciliatory on this issue, and should I say that Members of all parties seem to agree—albeit to different degrees—on it? Rather than split the House on it, I gently ask the Minister at least to consider the amendment to ensure that psychiatric nurses and prison officers are included in the provisions of clause 9(2).
I shall make a brief contribution and oppose amendment 2, tabled by Opposition Members, which would leave out lines 22 and 23 of clause 9— essentially subsection (1)(a) and (b)—and insert in its place
“65, or current pension scheme age if lower”.
That would drive a coach and horses in many ways through one of the Bill’s key provisions, which is to have a link between the normal pension age and the state pension age. I think that is an important way to minimise the risk of longevity to the taxpayer.
Paragraph 4.5 of the final report of Lord Hutton says:
“It is generally assumed that longevity will continue to increase in the future, but there is significant uncertainty about the scale of any future changes.”
He goes on to say:
“Increases in life expectancy have historically been… underestimated” when the calculations have been made.
In paragraph 1.2 on page 22, Hutton says:
“As a result” of this underestimation,
“pension costs…have been much higher than originally expected.”
He cites the example of a female pensioner in the NHS scheme who would retire at the age of 60 in 2010, and says that she would be expected to spend around 45% of her adult life in retirement, compared with about 30% for pensioners who retired in the 1950s. That is the issue that Hutton is trying to address. Spending 45% of one’s life in retirement is simply not sustainable for any pension scheme—even one backed up by the vast coffers of the state sector.
Page 9 of the Hutton report states:
“The main risks within defined benefit schemes are: investment; inflation; salary”— because salaries can be put up without actuaries being aware of the rises—
“and longevity risk. While government, as a large employer, is capable of bearing the majority of the risk associated with pension saving…present schemes involve too much risk for government and the taxpayer.”
He went on to say:
“There should be a fairer sharing of risk between government” and scheme members. It is that risk that amendment 2 would push back to the taxpayer.
Hutton says that the increases in life expectancy have been recognised within the state pension scheme, and he therefore recommends that we should follow that lead when it comes to helping members bear pre-retirement longevity risk. That is why he recommends the link between the state retirement pension age and the normal pension age. Recommendation 11—it is in a shaded box, which will please the shadow Minister—states:
“The Government should increase the member’s Normal Pension Age in the new schemes so that it is in line with their State Pension Age.”
Lord Hutton also says:
“The introduction of the link to the State Pension Age, which will initially move Normal Pension Ages to 65, will move the proportion of adult life in retirement for public service pension scheme members back to about a third: roughly where it was in the 1980s. The current State Pension Age of 65 is already the Normal Pension Age for most new entrants to public service pension schemes.”
Teachers, for instance, have a 2007 scheme and a pre-2007 scheme. For those who joined before 2007 the normal pension age is 60, while for those who joined after that date it is 65. Lord Hutton goes on to say:
“In the long term, the timetabled increases in State Pension Age should help to keep the proportion of adult life in retirement for members around this level”
—that is, a third—
“on current life expectancy projections.”
I believe that amendment 2 is a mistake, and would increase risk disproportionately for the taxpayer.
I am glad to have an opportunity to speak briefly about amendments 29, 30 and 31, which stand in my name and which would exempt Scottish schemes from the requirement that new schemes should link pension age with state pension age. Amendment 33 is simply a definition of what is meant by “Scottish scheme”—namely a scheme relating to those in local government, teachers, NHS workers, firefighters or the police—for the purpose of clarifying the other amendments.
On Second Reading, it was clear that the linking of normal pension age to state pension age was a central bone of contention. It has certainly been the main topic of concern mentioned to me by constituents who will be affected by the proposed changes, including teachers, NHS workers and prison officers. It has also been the top priority for unions and other staff representatives taking part in negotiations. It has been the key sticking point in those negotiations, and has caused a great deal of anxiety and uncertainty among employers.
As has been pointed out by other Members, many people who do physically demanding and stressful jobs will struggle to work into their late 60s. The change will create real difficulties and hardships for those who develop health conditions as they age. It will also make life much more complicated for employers who will have to work around and adapt to the physical limitations of employees who should really have retired.
The reason this is such an acute issue in Scotland is very simple: our life expectancy is almost two years lower than the UK average. In fact, ours is among the lowest life expectancy levels in Europe. Even given recent improvements and an upward trajectory, male life expectancy in Scotland is only 76 years and female life expectancy just over 80. We also have an unenviable health record. I have previously referred to the widening gap between rising life expectancy and what is defined as “healthy life expectancy”—the years before the average age at which people develop serious physical health problems that impair their normal day-to-day life. At present, women in Scotland have a healthy life expectancy of only 61.9 years, while for men the figure drops to 59.5. In other words, people are already having to work beyond the age at which they can expect to be in reasonably good health.
I am sorry, but Mr. Speaker has asked me to keep my remarks brief. I hope that the hon. Lady will bear with me.
A large number of people end up taking early retirement or receiving disability benefit in later middle age. The TUC has done some sterling work in highlighting the large proportion of people who are in that position. Many are having to retire early on reduced pensions, in some cases at a significant cost to their employers. When workplace pressures have contributed to the premature collapse of an employee’s health, that becomes a very costly exercise for everyone involved. I am thinking particularly of prison officers.
We know that people in physically demanding occupations and those on lower incomes die significantly earlier than affluent people in white-collar jobs. Andy Sawford mentioned that earlier. Our public sector encompasses a range of occupations, from civil service desk and office jobs to the work done by people such as prison officers, paramedics and nurses, which places intense physical demands on them.
Although the Bill has acknowledged the physical strain that is placed on some workers, such as firefighters and police officers, it does not take proper account of the human limitations of our work force as a whole. In applying such a broad brush to changing demographics, it takes no account of occupational and geographic variances that cut across other aspects of social class. We can legislate on paper as much as we like, but forcing people to work until their health caves in is not a sustainable long-term solution for pensioners. A little more pragmatism from the Government would go a long way, not only in enabling meaningful negotiations to progress, but in designing genuinely sustainable public sector pension provision in the Scottish context for the longer term. If we do not get the design of schemes right, public sector employees are likely to lose confidence in the process, and we will run the risk of individuals choosing to opt out, with all the negative unintended consequences that entails, with additional cost to the state through means-tested benefits.
My amendments would allow the Scottish schemes to reflect the realities of Scottish circumstances, such as the persistently low life expectancy, and would provide a key flexibility in negotiations with employers, unions, and others. They would exempt Scottish schemes for which the Scottish Government have devolved responsibility from the link to the state pension age and enable meaningful negotiations to proceed with employers and unions, in the interests of not only public sector pensioners but all of us who use and value public services. I shall test the view of the House on amendment 29 and, given the debate we have had on this subject, I hope Members on both sides of the House, including Members representing Scottish constituencies, will support the amendment.
It is a pleasure to follow Dr Whiteford, who made some important points about Scotland.
I oppose Opposition amendments 15 and 16. It was absolutely right for the Government to continue to recognise the specific nature of the roles played by our fire and rescue workers who are firefighters and members of our police forces and armed forces, and it is right that that is reflected through having a lower retirement age. I pay tribute to the Government for recognising that and for pursuing it through legislation.
Members have talked about the issue of physicality. I agree that it is an important issue, but we should not have a specific provision on it in this Bill. In setting pensions, we have a hope that masquerades as a realistic assumption: people are living longer and we are increasing the retirement age, and we hope that people will perform their work as easily in their later years as in their younger years. We hope that is the case, but it cannot be assumed. If people do not save, they run the risk of having a period of poverty, because they might not be able to continue their work until their pensionable age, so there will be a gap in their earnings. As a nation, we have indebted ourselves over the past 20 years far more than any other country. People in this country have not saved to protect themselves financially.
I do not think this specific issue is pertinent to the Bill, however, as it covers all types of employment and all regions—not only Scotland, but the rest of the United Kingdom, too. I therefore ask the Opposition not to push their amendment to a vote as I believe a broader debate would be more appropriate.
The hon. Lady has spoken eloquently and passionately about that point. I do not know whether she was present earlier when I expressed my personal view, but her point may fit in with it. In addition to the issue of physicality, in undertaking their work the people employed in the careers identified in clause 9(2) put their lives at risk. If that is the case for prison officers in Northern Ireland, too, they should be included, and I would be interested to hear what my hon. Friend the Economic Secretary has to say about that.
Other Members want to contribute to the debate, so I will not give way to the hon. Gentleman. He might have an opportunity to speak later.
If we are to change the retirement age for the careers in question, we must undertake those physical tests as well. My hon. Friend Mike Freer, who is of a similar age to me, has said that he is going to do the police test, and I have agreed that I will do the firefighter test. I reiterate his challenge to the shadow Minister and to the Minister, both of whom are at least a decade younger than us, to sign up to do those tests if we are to proceed with the Bill at the end of Third Reading. I would be very grateful to hear them accept that challenge, and indeed to hear the Government Whip, Greg Hands, do so.
I wish to speak in support of amendments 1, 2 and 9. Amendment 2 is straightforward: it seeks to ensure that people are not forced to retire beyond the age of 65, as most of our work force have planned to retire then. On the argument that the amendment is unaffordable, let me remind hon. Members of what Hutton said about the 2007-08 changes. He said that they are likely to reduce costs to taxpayers of the pension schemes by £67 billion over 50 years, with costs stabilising at around 1% of GDP or 2% of public expenditure.
The other issue involved here is what our priorities are. The last figure I had for how much the unfunded public sector pension schemes were costing us was for 2009-10, when it was less than £4 billion. Some 60% of gross tax relief on pensions goes to higher rate taxpayers—that is £22 billion. The cost of providing tax relief to the 1% of our population who earn more than £150,000 was double the amount we are funding with regard to the public sector unfunded pensions—that is £8 billion.
So the fact that we are willing to subsidise the higher paid—the rich—while forcing others to work longer and cutting their pensions at the same time reflects our priorities. That is why I have tabled the amendment: I do not accept the settlement or the Government’s rationale for these proposals.
Amendment 1 was eloquently discussed by my hon. Friend Ian Lavery, and I must declare an interest at this point: I am an honorary life member of the Prison Officers Association. One point that the POA made, which we made on Second Reading, is that if we increase the pension age for prison officers, we lose money because more of them will become injured and more will go off sick, and more cost will be incurred in compensation. The actuarial figures are there almost to prove it, so it is anomalous not to include prison officers. The point about psychiatric nurses is the role they play, particularly in institutions such as Broadmoor, where they are dealing with the most difficult cases—physical challenges—within the NHS. I find it bizarre that we are expecting police officers to retire “early” at 60—I hope we do not go to that—because of the physical nature of their jobs in dealing with criminals, yet when those criminals go into prison it appears that they no longer provide a physical challenge to the officers dealing with them then. The situation is anomalous, which is why I support the amendment to include psychiatric nurses.
I also tabled amendment 9, and this is specifically for the Fire Brigades Union. As my hon. Friend Chris Leslie has said from the Front Bench, the Government have set up, in agreement with the unions, the working longer review in the NHS and the physical assessment in respect of the fire service. Evidence is piling in to those reviews—independent academic evidence, and details of physical tests that have been undertaken—to demonstrate that it is tough to do the job at 55, let alone at 60. I have seen some of the evidence put forward in the fire service review. When the previous Government increased the retirement age to 55 it was on the basis that there would be more firefighters doing preventive work and people could be redeployed into that work. This year, only 15 posts nationally have been available for redeployment, so redeployment is not an option. These people are still out there doing that physical job, and it is unacceptable to push the retirement age to 60. That is why amendment 9 would ensure that the pension schemes would be able to take into account the reviews currently taking place and that we would be able to adhere to a lower retirement age, particularly for firefighters and others as they are justified.
I am interested to hear what the Government’s responses will be, so I shall finish on this next point. Overall we seek to ensure that there is justice in the Bill, and that is certainly not the case at the moment. I reiterate that the Bill is increasing the contributions and increasing the length of time that people will be working. Given the life expectancy in my constituency, a large number of my constituents will not reach retirement age. Already, a third of all members across the schemes retire within three years of when they should normally do so because they cannot physically continue in the job. They therefore live on reduced pensions and in some poverty. My constituents will contribute more, work longer, most probably have a reduced pension at the end of it and have to retire early. That is an unjust deal when we are subsidising the wealthy through tax relief on their pensions.
I want to address a couple of issues and reinforce some of the points made in Committee. It is not good enough to say that the normal retirement age does not matter because people can retire early if they need to, as they will retire on much lower pensions—that is what actuarial reduction means. Those with many chronic conditions might have several years of suffering with the condition that has made them retire. That is not good enough.
The way in which the Bill is formulated fixes the retirement age in a way that makes it very difficult to introduce the flexibility that might be required by some scheme reviews. There will be a battle every time a review shows that there should be a lower retirement age, as the Government will be able to point to the Bill and say that that age cannot be moved as that is what Parliament voted for. However, amendment 16, for example, would allow the degree of flexibility required. Many people already do not work in the years running up to the normal retirement ages, not just across the public sector but in the private sector, too. As many are living on reduced incomes and having to dip into any savings they might have put aside for retirement, they are much more likely to become dependent on other state support in older age.
We have the big issue of longevity, but underneath that lies the fact that a substantial proportion of the population cannot even work until the normal retirement age, particularly men between 60 and 65 in many private sector jobs. Those people are already living on reduced incomes, so if we keep increasing the retirement age more and more people will be in that position.
We have had a good debate on this set of amendments, but I am afraid that for reasons of time that are beyond my control I will not have an opportunity to respond on all of them. The main theme in this group is the link between the new normal and deferred pension ages and the members’ state pension age. That will help manage the financial uncertainties associated with longevity changes over the long term. It was a key recommendation of Lord Hutton’s report and is one of the foundations of the Bill.
The average 60-year-old is now living 10 years longer than in the 1970s. Although that is to be celebrated, it would be irresponsible not to react accordingly to ensure that pension provision is sustainable. Clearly, no Government can allow such a trend to continue unchecked.
In the short time I have, I shall deal with the amendments in the order in which they have been selected and I will start with 13, 14 and 15. The deferred pension age in the new schemes is vital given the vast number of public servants who claim deferred pensions. That is why the Bill sets the deferred pension age in all schemes as equal to the state pension age, including in the police, firefighters and armed forces schemes. As Members are aware, a normal pension age of 60 in the police, firefighters and armed forces schemes is in line with Lord Hutton’s recommendations and recognises the unique nature of the work involved.
The amendments proposed by Chris Leslie cannot be accepted by the Government, for two reasons. First, it would be unfair to other hard-working public servants, both those in active service and deferred members whose pension ages would be the state pension age. Of course we value the work of all our police, firefighters and armed forces, but once those people stop doing those jobs, there is no reason for them to be able to take their deferred benefits earlier than everyone else.
I am sorry, I do not have time.
There is no reason for those workers to be able to take their deferred benefits earlier than everyone else because they are no longer exposed to the unique characteristics of their former employment and no longer need an earlier pension age in respect of them.
Secondly, we must consider the cost. As we are all aware, the costs of pensions are increasing owing to increases in life expectancy. The state pension age link for deferred benefits is a crucial means of getting those costs under control. For example, if a firefighter leaves service at the age of 30 to work, say, as a civil servant in an office for the rest of his career, should his pension still be available unreduced at the age of 60?
Debate interrupted (Programme Order,
Question negatived .
The Deputy Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E ).
Amendment proposed: 29, page 5, line 21, after ‘section 1’, insert
‘(other than a Scottish scheme)’.—(Dr Whiteford .)
Question accordingly negatived.
The Deputy Speaker then put forthwith the Questions necessary for the disposal of the business to be concluded at that time (
Amendment proposed: 16, in clause 9, page 5, line 29, at end insert—
‘(2A) Subsections (1) and (2) shall not apply in relation to any category of public service worker as the Secretary of State may by order specify following the publication of a scheme specific capability review.’.—(Chris Leslie .)
Question put, That the amendment be made.
The House divided:
Ayes 232, Noes 294.