Clause 20 - Consultation and report

Public Service Pensions Bill – in a Public Bill Committee on 20th November 2012.

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Amendment moved (this day): 66, in clause 20, page 11, line 11, leave out ‘significant’.—(Chris Leslie.)

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole 2:00 pm, 20th November 2012

I remind the Committee that with this we are discussing the following:

Amendment 67, in clause 20, page 11, line 35, at end insert

‘or in the case of the Local Government Pension Scheme the period of 26 years beginning with 1 April 2014’.

Amendment 68, in clause 20, page 11, line 40, at end insert—

‘(d) the scheme’s definition of pensionable earnings;

(e) ill-health benefits;

(f) early retirement rights.’.

Amendment 69, in clause 20, page 11, line 41, leave out subsection (6).

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

Good afternoon, Mrs Brooke. What a pleasure it is to have you in the Chair. I do not wish to belittle in any way Mr Benton’s contribution, but it somehow feels as though we are on the home straight. We obviously have some significant proceedings still to be conducted, but we are in the final week—according to the programme order at least—of the Committee stage. I can feel the enthusiasm in the room; it is quite palpable.

I was mid comment on amendment 68, which, as with the rest of this group of amendments, relates to clause 20 and consultation and reporting when a change may be made that affects the accrued benefits of members of public service pension schemes. Amendment 68 seeks to add to subsection(5) some additional elements that ought to be protected, which would then require the responsible authority to consult those affected and to use, as the Minister described it, this enhanced consultation procedure. In other words, there should be meaningful and genuine consultation, rather than just the tick-box consultation that people have sadly grown used to in the past few years.

It is important that we focus on Ministers’ decisions to protect certain elements of pension schemes but exclude others. The Minister said that if there were changes that alter the extent to which the scheme is a career average revalued earnings scheme or if members’ contribution rates or benefit accrual rates are affected, those are deemed as protected and consultation must be meaningful with a view to reaching agreement—so far, so good. However, other important factors of pension schemes, including the scheme definition of pensionable earnings, ill-health benefits, and early retirement rights,  are excluded. Those elements are important, and it is disappointing that they are not subject to the protections in clause 20.

As the Bill stands, the responsible authority could make adverse and retrospective changes, and any form of non-retrospective change to the definition of pensionable earnings, ill-health benefits, or early retirement rights would require the most superficial of consultation exercises only. I will give some examples. If scheme rules were changed to reduce the ill-health benefits that would apply, if somebody were to fall ill, to ensure that their income is protected in retirement, particularly if it is early retirement, that would not be subject to proper consultation. If changes were made to the age at which early retirement could be taken, the same is the case.

We touched on the issue of the definition of pensionable earnings earlier, and if that is changed, benefits and accrued benefits could be reduced. It is interesting that the Bill mentions protecting “benefit accrual rates” under the scheme, but it does not say that any issues that affect benefit accruals more generally would be subject to the enhanced consultation arrangement. The Opposition have some serious concerns about the significant impact that an alteration to the definition of pensionable earnings could have on benefits being accrued. Simply referring to the “rate” covers quite a narrow area of potential benefits. I am quite worried that if pensionable earnings definitions are changed, benefits will be reduced. It would not be treated as a protected element and it could affect the overall level of benefits that are available. We therefore think that for the avoidance of doubt, as well as ensuring there is proper scope for those elements of constituent parts of pension schemes that should be part of this proper consultation process, it would be far better to add on those elements as we have set out in amendment 68.

Amendment 69 brings us to line 41 and this rather disappointing subsection which provides that any changes that flow from the employer cost cap are not afforded the protections under the consultation arrangements envisaged in clause 20. Subsection (6) states:

“references to a change to the protected elements do not include a change appearing to the responsible authority to be required by or consequential upon” that employer cost cap. The wording is particularly interesting but I will come to that in a moment. We have already had a debate on clause 11, where the Government are allowing member contributions to be increased or benefits reduced, including retrospectively, so the scheme can stay within the specified margins of the employer cost cap. We do not have a problem with the operation of the employer cost cap, but it is important that scheme members understand how it works because it all depends on where it is set and at what level it kicks in. There could be significant changes to their accrued benefits—their deferred wages—if there are changes which seem arbitrary and could cut across their earnings in retirement.

For there not to be a requirement, certainly in clause 11, for the Treasury to consult when setting directions for that cost cap is bad enough; but then for the clause 20 provisions deliberately to exclude elements that might flow from the cost cap, as it affects the scheme contribution rates or benefit accrual rates, seems to underline the expectation that many in the public sector will have that the employer cost cap is not simply about scheme  viability or balance, but is a way of finding opportunities to grind down and erode the benefits to which they might be entitled. Without any form of consultation on changes from this employer cost cap arrangement and without any form of proper parliamentary scrutiny if benefits are to be reduced or contributions increased as a result of the cap, the provision moves too far out of the realms of what should be decent relationships between the employee and employer sides, as part of the mature conversation we should be encouraging between stakeholders involved in making sure that these new schemes are viable.

Clause 20 does not require member consent to make changes to protected elements. It merely requires consultation with a view to reaching agreement and the laying of a report before Parliament so that it can be properly scrutinised. We see no good reason for the Government to exclude changes made under the employer cost cap from what are still pretty modest protections under clause 20. Ministers have tried to characterise this as some sort of lock when it is simply a requirement to consult, albeit with a view to reaching agreement. But that does not force an agreement to be made. It simply provides this extra level of parliamentary scrutiny. A Government majority can push things through, as we have seen time and again. It is not a protection that gives any guarantees to those on the employee side.

It is a shame to have this exclusion for changes flowing from the employer cost cap. That is the point I wanted to come to in respect of the wording of subsection (6). It does not just say, “Thou shalt not have this level of consultation if things appear”

“to the responsible authority to be required by…(employer cost cap).”

It says that if anything looks as if it is “consequential” to the employer cost cap, that also is excluded. So I am slightly concerned that issues relating to benefit accrual rates, member contribution rates and even the extent to which a scheme is a career average revalued earnings scheme, might themselves be affected by questions arising from that employer cost cap arrangement.

In other words, the supposedly protected right to be consulted on those matters might be eroded if somebody in the “responsible authority” says, “Well, actually these are indirectly impinged upon by the operation of clause 11 on the employer cost cap, and therefore out goes the requirement to consult.” Obviously there would be a right for individuals involved in the scheme to contest that, but it would be a very messy judicial review experience and not very desirable at all.

It would be far better if we could ensure that the cap was set in a way that at least gave people the chance to be consulted and to have their say on how it will affect them. That would also be a healthy process. Some scrutiny of operation of the employer cost cap arrangement would not go amiss. Often, scrutiny allows officials and others to reflect—once, twice, a few times—and ask, “What exactly are the downstream consequences of these things?” A consultative requirement is not just for the benefit of the employees affected; it is also part and parcel of ensuring that proper attention and thought goes into the design of schemes in the future.

There is also a concern about the way in which the employer cost cap can be enacted by Ministers. That was alluded to by my hon. Friend the Member for  Kilmarnock and Loudoun in her comments on clause 11. Given the wide discretion the Treasury has granted itself in the drafting of clause 11 (3) in particular, there is nothing to ensure that the cap is set in a moderate way. The Treasury could set the cap in such a low way that it is very easily exceeded, triggering increases in employee contributions and decreases in employee benefits; and of course, all that would happen without any meaningful consultation whatsoever.

There is a flaw in the way the Bill has been designed. As I say, the employer cost cap arrangement may well indeed be the right and proper thing to produce, but it just seems so unnecessarily miserable of Ministers to refuse people at least the right to be consulted about that arrangement, especially if they are feeling adverse effects, not least in the retrospective context of their deferred wages.

I am sure the Minister will understand where we are coming from in trying to provide at least some balance in the protections for members of public service schemes. I commend the amendment to the Committee.

Photo of Iain McKenzie Iain McKenzie Labour, Inverclyde

Twenty-five years would seem a long time in anybody’s reckoning, but as far as pensions are concerned it is actually quite a short time. I know that from experience of looking at a pension many years off, and then seeing it coming starkly closer with every year of employment. So 25 years is a long time, but pensions are long-term plans. Pensions should be looked upon not as a gift from employers but as deferred pay, remembering that employees have contributed for many years with the expectation and hope that as they near retirement, they can look forward to the expected level of pension.

That is why I believe that any reforms should last a generation. They should give comfort to those entering employment and establishing a pension that there will be no changes for the next 25-plus years. The clause does not deliver on the required commitment or offer any comfort in that respect. We are all planning for retirement, and at the end of our working life we expect to receive the level of pension that we have accrued over the years.

If changes are made late in a person’s employment life, they will have little time to adjust to a new level of pension if anything untoward happens. Most recently, women who were born in the early ’50s were told virtually at the last minute that their pensions would not be what they had assumed, and they had little time to make the necessary adjustments. I am sure that, like me, many hon. Members received representations from their constituents who fell into that bracket, who felt that the measure was unfair and that it would put them in difficulties in the years ahead.

The use of the term “significant adverse effects” is particularly worrying, because it offers an opportunity to avoid consultation rather than engaging in it. Significant adverse effects for one person might not be significant adverse effects for another. Those at the top end of the salary range probably would not see as much of a significant adverse change as those at the bottom. Pensions in the public sector encompass an average of between £5,000 and £7,000 a year, and the majority of employees  earn a salary of £20,000 or less. The measure will especially hit those who are on lower salaries and those who work part time. Again, that would mostly affect women, who tend to take up part-time occupations in the public sector.

Pensions are all about trust between employee and employer. An employee has to be able to trust in the link between what they are paying in and what they can expect. They have to be able to trust that their employer will stand by them and that they will leave employment with their expected pension. Conservative Members repeatedly cite the private sector as an example. Yes, it is an example, but it is an example of how to smash and shatter employees’ trust and adjust pensions at will, forcing many employees to leave their employment for fear of their pension being further reduced. I have some experience of that, because my previous employer used such a tactic to great effect to reduce its headcount, adjust its work force and make a massive saving over the years.

We do not want to replicate that situation in the public sector. It is essential that employees have confidence in their pension and confidence that if any adjustments are to be made, consultation will take place. That consultation must take place over a period long enough to allow them to make adjustments, so that they do not retire on poverty pensions that put them in real trouble later in life, where the Government will have to pick up the bill at the other end and supplement low pensions.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East 2:15 pm, 20th November 2012

I apologise for missing the start of the sitting. In evidence sessions and earlier debates, one issue that came up several times was the need to reassure people that although the Bill will fix a normal pension age, which will be lower for only a small number of specified groups, they will not have to retire at that age. People need reassurance that although that is the normal pension age, they should not get too upset, worried or anxious if they find it difficult to continue working because of personal or health circumstances, because they would be able to retire at an earlier age, albeit in many circumstances with a reduced pension. That is an important safeguard for many people. There are many examples of people who might find their type of work difficult on health grounds and have a lot of scepticism that they could reasonably do another job.

Although nobody wants anyone to have to retire early, we have to accept that many people, despite the longevity issues that we are struggling with throughout the Bill, are not that fortunate and will want to leave work early. The relevance to the clause is that arrangements for early retirement on health grounds are not protected elements requiring consultation. Amendment 68 aimed to insert additional circumstances to be protected, one being early retirement and another ill health. It is important that we consider making such a change.

We must remember that there is nothing that says that a future Government or scheme cannot make the changes. It simply says that a scheme must consult before making the changes, and ensure there is a level of consensus. Groups that might be particularly affected include nurses and carers, who find lifting and other tasks beyond them, as well as more obvious categories such as police and fire officers, who have a lower retirement  age in the Bill but might still be unfit in some circumstances for the job and unable to reach the level of physical fitness we would hope for.

If it is possible for a scheme in future to alter the arrangements for early or ill health retirement and make it more difficult for people to take such retirement, the answer given to concerns expressed earlier about a fixed retirement age begins to disappear. People could find that not only is this not the fixed normal pension age for the calculation of the pension, but the other things that they might have hoped would help them if they needed to retire early could also be changed, and without consultation. The additional provisions suggested in amendment 68 would close that anxiety and make people feel more confident that the fact that a normal retirement age is fixed will not make it difficult for them.

Photo of Nick Gibb Nick Gibb Conservative, Bognor Regis and Littlehampton

I listened carefully to the hon. Lady’s well made contribution to the debate. Does she not accept that clause 20 constitutes an enhanced consultation and report process? That is what is referred to in paragraph 132 of the explanatory notes to the Bill. This measure is meant to implement the 25-year protection of pensions.

Amendment 68 would add three additional protected elements. In reality, would the hon. Lady not accept that no Government could change any element of a public sector pension scheme without all the unions, other vested interests and those who look after the interests of public sector employees knowing about that change and voluntarily putting forward their views to Government?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

The hon. Gentleman almost suggests that there is no need for the clause at all, but if that were the case, why put in the enhanced consultation? Clearly, the Government’s view is that, given the nature of the changes and the level of commitment given to obtain that agreement, the settlement will endure.

We all know from our postbags that a lot of public sector workers feel that the ground has been cut from under their feet. They feel that what they had been paying towards and what they had expected when they started their jobs has been taken away. People in that situation have been, in some cases, pulled reluctantly to reach the agreements, but one of the cornerstones that has been stated over and over again—the Chief Secretary to the Treasury has been particularly strong on this, and said this when speaking on this subject—is that there will be a guarantee of permanency. As part of that, this provision, for consultation, is there in clause 20.

The arguments that exist for protected factors, which are already in the clause as it stands, apply to further issues for the reasons I have given. In a situation that has not been easy for anybody involved, it is important that we give people that confirmation now.

Consultation, and consultation rights, are important. Although sometimes people will find out about things at some point and raise an issue, if a clear consultation process is not built in from the start, people find that they start at the back end of that process. There should be a clear obligation to consult, making sure that the issues are brought to the attention of the people who need to know.

In an earlier intervention, I raised a question on the use of the word “significant”. It cannot have precise connotations, but if we are not careful, we will end up in a situation where there will be a lot of dispute. One person’s notion of what is significant may be considered just a small change by others, or it may be that it affects only a few people. That is the other question about significant: is it significant in relation to the nature of the change, or is it significant in relation to the number of people who may be affected? If only a small group is affected by a change, they may be affected in a way that matters a great deal to them but it may not be considered to be a significant change in the grand schemes of things where there are thousands of members.

Photo of Iain McKenzie Iain McKenzie Labour, Inverclyde

My hon. Friend makes many good points. Does she agree that the attraction for many to stay in public service employment is not that they will be on inordinate amounts of money each month, but that they will have a reasoned, decent pension waiting for them at the end of their employment?

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

There is absolutely no doubt, as my hon. Friend says, that that was the tradition. Nowadays, it is attacked on the grounds that the differential that existed in some respects between public and private sector salaries is not quite the same as it was. Nevertheless, one of the reasons for that is that many of the lower-level public service jobs have been outsourced and are not included in that count any more, so like-for-like comparisons have to be done with care.

People are prepared to do a lot of jobs in the public sector that are neither glamorous nor high-paid. I give the example of the remaining people who work as home helps in my authority—they are now called carers. I say “remaining” because a lot of them no longer work for the local authority; they work for private companies on an outsourced basis. However, those who still do are doing a hugely important, intrinsically hard job for not a very high wage. Pensions are one of the things that they have got, and women in particular fought very hard for pensions at a time when they often did not even get included in schemes because they were not working full-time hours. We fought very hard to get pensions for those sorts of jobs, and we certainly do not want to see them taken away or diminished even more than they have been.

I do not buy the argument that people in the public sector should be content because they still have something that people working in the private sector do not have. I know this is slightly off the point, but the more I look into some of the issues about private sector pensions—the way they have been sold and mis-sold, and the kind of provision that people have—the more appalling the situation seems. The result is, of course, that in the end the state has to pick up the tab a lot of the time anyway, because the private sector has not made provision. That is a whole other story, and one that no doubt we will be coming back to in due course.

Photo of Graham Evans Graham Evans Conservative, Weaver Vale 2:30 pm, 20th November 2012

I agree with a lot of what the hon. Lady has said about private sector pensions. Does she not welcome the Government’s decision to bring career average pensions into the public sector,  therefore putting in something that, relatively speaking, helps lower-paid workers, who historically have had a worse deal with their pensions than those at the very top? These Government reforms mean that those at the top do not quite get the pensions that they have had historically, because of the career average that the Government have introduced.

Photo of Sheila Gilmore Sheila Gilmore Labour, Edinburgh East

The career average has some clear advantages for some groups, and that is why a lot of trade unions and employee groups have come to accept it, even though their initial responses were anxious as they were thinking that everything would be changed. One constituent of mine, who had apparently done quite a bit of work in his union on pensions, said that whether career average is good or bad basically depends on revaluation and on accrual rates; so it is dependent on how well those are structured. Certainly, that reform will be of advantage to a lot of lower-paid workers in pension schemes. I do not think we are saying that we would want to throw that away again.

That is why it is so important that, as is acknowledged in the clause, elements such as accrual rates are protected. My point was that we should go beyond simply protecting the elements that are listed in subsection (5), and look at other issues that could affect people quite substantially, to make sure that we can genuinely move forward, and to give people the confidence that this settlement will last, and that, should it ever be reopened, it would be reopened with the fullest possible consultation and involvement.

As I have said before, we cannot predict what will happen in the next 25 years. There may be further significant advances in longevity, for example, which may be a major driver for wanting change. However, it is also the case that we have not resolved a lot of the health problems that people suffer, both after they have passed normal retirement age and before that. In many ways, we are building up a quite substantial problem with regard to people who simply are not as fit as others when they reach that age, and so need protection. I urge the Committee to consider those points very carefully.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I welcome you to the Chair, Mrs Brooke. I welcome the case that the hon. Member for Nottingham East has made, and I shall respond to it now in some detail, as he raised some important points. I also thank the hon. Members for Inverclyde and for Edinburgh East for their contributions, and also my hon. Friends the Members for Bognor Regis and Littlehampton and for Weaver Vale for their excellent interventions, in which they made some important points.

In a moment I will come to the individual proposals set out in the amendments. However, I will first take a moment to respond to the general thrust of the arguments advanced. The provisions in the clause deliver on the Government’s belief that the new public service pensions represent a settlement which should last for 25 years, perhaps even longer. It is important to the Government that their commitment in this regard should be embedded in the primary legislation in order to give reassurance to members of these schemes. Some will argue that it is inappropriate that such a commitment should be in the Bill as it represents an attempt to bind  the hands of future Governments and Parliaments. However, we are determined to see it remain as a sign of our commitment.

The guarantee is as strong as we could make it without improperly binding future Parliaments. There are, however, practical implications to be taken into account. The clause should allow for commonly held expectations for these pensions, but it should not do so at the expense of a practical delivery of these schemes in the real world. As has been mentioned, there must come a point past which we entrust the future of public service pensions to future Administrations. The clause strikes the right balance.

Amendment 66 seeks to remove the word “significant” from the clause. This would make every regulation that implements a retrospective, adverse change to member benefits subject to the additional protections in clause 20, regardless of how minor that change might be. We have discussed the issue of retrospectivity at length so I will try to avoid going over too much old ground. Like the legislation it replaces, the Bill contains a power to make retrospective changes. What I will say again is that we believe that almost all retrospective changes will either be minor or technical in nature, or beneficial to members. It will be exceptional for retrospective changes to have adverse effects on scheme members. Where they do, we believe that those effects would generally be very minor, that is to say, not significant.

Such changes do not have a real likelihood of creating genuine or substantial unfairness. Therefore, the Government do not believe it is appropriate that all such retrospective changes are automatically debated, let alone subject to the enhanced consultation requirements and parliamentary report processes set out under this clause. Such an arrangement would be impractical. I am afraid that a similar argument applies to amendment 68. The Government have given considerable thought to the elements that could be included within this clause and we consider that those currently listed are the right ones.

Combined with a functioning cost cap, where a significant reduction in the cost of the scheme would see beneficial effects for members, the protection of the listed elements should give scheme members the assurance that they rightly desire and deserve. The inclusion of further elements, as suggested in the amendment, would, I am afraid, make it much more difficult for the scheme to operate in practice. Each element included under this list would represent a restriction on the ability of schemes to respond flexibly and appropriately to changes in circumstances. I therefore urge hon. Members not to press this amendment to a Division.

Amendment 69 seeks to remove subsection (6) from the clause. This subsection excludes any changes made to the schemes as a result of the employer cost cap mechanisms, from the protections set out in earlier subsections. Let me be clear. This is not intended as a back door through which changes can be smuggled without being afforded the considerations by the proper parties. Clause 11 sets out that there will be a period of consultation before any decision is made on what action should be taken to address any breach in the cost cap. The clause allows for a default adjustment to be made to the scheme if agreement cannot be reached.  But subsection (6) clearly envisages that scheme regulations will provide a process for interested parties, including the responsible authority, the scheme manager, employers and members to reach agreement on how to adjust the scheme to bring its costs back into line before such a default adjustment would be made.

Agreement, of course, is even stronger than consulting

“with a view to reaching agreement”, as will happen under clause 20. It would seem perverse for the Government to seek to restrict the scope of the discussions that would take place in the case of a breach of the cost cap by placing certain elements under a separate, less stringent consultation regime. Given those assurances, I hope that the hon. Member for Nottingham East will agree that amendment 69 is not necessary, and I urge him to withdraw it.

Labour Members may be pleased to hear, however, that I see more benefit in amendment 67. Clause 20 is drafted to provide one aligned 25-year period for all schemes. That has significant benefits, the most important of which is that all those involved would have the same clear understanding of the effect of the clause. However, there may be merit in considering whether we could do more to reassure scheme members, particularly those of the LGPS, that the Government are committed to implementing the schemes as they have been set out. I will need to give that further thought as there will be implications for any other case where a new scheme may choose to open before April 2015 and proper consideration would need to be given to the date on which the 25-year period might start. There is a case for amendment 67 and I will certainly look at it carefully.

Given those comments, I urge the hon. Gentleman to withdraw all four amendments.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I am glad that we have had a good debate. To outsiders, it may seem like simply talking about talk and about who is going to talk to whom and at what particular point in time. However, as my hon. Friends the Members for Inverclyde and for Edinburgh East said in their contributions, the extent to which people are involved in having a voice in the design of their pension scheme and the extent to which they have any control—never mind the opportunity to have a say—over how the scheme evolves is incredibly important. It is important in ensuring that members retain their confidence in the scheme and remain as members, which is necessary for the scheme’s viability and good financial health. It is therefore important to look at the consultation provisions, and we may discuss those in the clause stand part debate.

I am sorry that the Minister does not like amendment 66, but it is an important provision to have in the Bill if possible. My hon. Friend the Member for Edinburgh East said, quite rightly, that the definition of “significant” is very much in the subjective hands of the person making that judgment, and it would therefore be better to ensure that we consult on anything that has an adverse retrospective effect on scheme members. It is not a particularly onerous thing to have that requirement in the Bill. We have made the point about the concept of significant change previously, and it is unnecessary for the Government to caveat their offer on consultation. It seems unnecessarily mean to take that parsimonious approach to consultation, and they could do a lot better.

I am glad that the Minister says he will give further thought to amendment 67. It concerns what appears to be a drafting anomaly in the Bill, and it is excellent news that the Minister will take a look at the way that the timing of the closure of the old local government pension schemes and the arrival of the new schemes might align. I would be happy to withdraw amendment 67 on the grounds that he will give it further thought. It is an anomaly in the way that the Bill is drafted but I do not think it was the Government’s intention to have this strange one-year window when no protections would apply to the local government pension schemes. The Minister’s comments were welcome and I am glad that we were able to shine a spotlight on that anomaly.

I am afraid we are not in agreement on amendments 68 and 69. Commenting on amendment 68, the hon. Member for Bognor Regis and Littlehampton said that union representatives of employees would voluntarily make their case regarding the definition of pensionable earnings, ill health and early retirement rights. That is not the point we are making about clause 20. We are simply saying that those elements are as valuable a part of the new schemes and should be subject to that consultation, which is only to ensure that it is done with a view to reaching agreement. That is the way the arrangements ought to be put forward, with those aspects regarded as protected elements.

The Minister says that will make it more difficult for those involved. That is part of the design of ensuring that we get good changes, rather than ones that are shoddy and ill thought through. It is important to have an opportunity for dialogue about the arrangements. That is why we think it is worth having those elements in the Bill. I am not convinced by the Minister’s comments to exclude those aspects as set out in amendment 68.

Similarly, I do not agree that the deletion of subsection (6) would cause vast detriment or upset the design of the Bill in the way that the Minister says. He pointed out that in clause 11(6) there is a provision for procedures to be put in place to reach agreement, and that that is a stronger provision. That is a permissive provision. It says,

“scheme regulations may provide for” those procedures to reach agreement, not that they must provide for those procedures to reach agreement. That is not a level of protection; it is very loose and permissive protection. That is why we felt it better to ensure that the employer cost cap arrangements at least came under the auspices of the consultation requirements in clause 20. If the Government are to have free rein to put in the cap, decrease member benefits or increase employee contributions, it is important to have good, meaningful consultation. That is not asking for the world; it is simply asking for good practice. I am sorry that the Minister did not feel able to move on that issue.

We have discussed the significant question and will come to that again later.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 68, in clause 20, page 11, line 40, at end insert—

‘(d) the scheme’s definition of pensionable earnings;

(e) ill-health benefits;

(f) early retirement rights.’.—(Chris Leslie.)

Question put, That the amendment be made.

The Committee divided: Ayes 5, Noes 10.

Division number 7 Decision Time — Clause 20 - Consultation and report

Aye: 5 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Amendment proposed: 69, in clause 20, page 11, line 41, leave out subsection (6).—(Chris Leslie.)

Question put, That the amendment be made.

The Committee divided: Ayes 5, Noes 10.

Division number 8 Decision Time — Clause 20 - Consultation and report

Aye: 5 MPs

No: 10 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Annette Brooke Annette Brooke Liberal Democrat, Mid Dorset and North Poole

I recommend that we do not have excessive repetition as we have had lengthy discussion.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

I will, of course, follow your excellent recommendation, Mrs Brooke, and keep it short. I have already set out the Government’s broad position on the provisions contained within clause 20, so I will simply summarise the key components of the clause. It is concerned with establishing, in law, the commitments we have made to set a high bar for changing the core elements of the new public service pension schemes.

The Government believe these reforms to be a settlement for a generation and a package that can endure for at least 25 years. The key elements of these pensions will receive two layers of protection. First, any proposed changes will undergo consultation with a view to reaching agreement with the individuals who are considered to be likely to be affected. Secondly, a report detailing the justifications for the changes must be laid before Parliament. The key exception to that is a case in which changes might be required as a result of the cost cap mechanism  set out in clause 11. In such a case there are separate processes for the engagement of all key parties, as set out in that clause.

I would like to correct something I said when we debated clause 11. I believe I stated that the clause did not allow for a default adjustment to be made to the scheme if agreement cannot be reached, but I meant, of course, to say that the clause does allow for a default adjustment to be made to the scheme if agreement cannot be reached.

To provide added reassurance on the issue of retrospectivity, which we have discussed at some length, the protections that I have mentioned have also been extended to any case where regulations are laid that contain retrospective provisions that appear to have significant adverse effects on members of the scheme.

Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury)

I will not detain the Committee long. The drafting of clause 20 is quite an interesting innovation in legislative terms, because the idea of consultations with a view to reaching agreement is quite an untested concept in primary legislation. It inspires me for future amendments to think about ways in which we might enshrine such concepts elsewhere, but I digress.

The notion of a protected period of 25 years is interesting. The agreement is supposed to extend for that 25-year period, but it is also impossible for legislation to bind future Parliaments, as the Minister has quite rightly said. We are therefore reliant on the word of Ministers, and the word of Conservative Ministers in particular in this regard. Let us be honest, it is not likely that the Liberal Democrat component of the coalition will sustain itself for a 25-year period. Without in any way being disrespectful to the Liberal Democrats, Mrs Brooke, it is important that we get Conservative Ministers to make it clear that future Conservative Administrations would also adhere to this 25-year commitment. We can have nothing particular in legislation, only the Minister’s word. Although the Chief Secretary to the Treasury said that he wants this agreement, we have not heard that from the Chancellor of the Exchequer or this Minister. That is a point that we have to extract from leading Conservative policy makers such as the Minister as the Bill proceeds.

I still think that this is an inadequate clause, as shown by the amendments that we tabled, but it is an interesting one. Many stakeholders will want to keep the Government’s feet to the fire on the promises that they are making, even if they are only limited ones such as those set out in clause 20. We will not oppose the clause as it stands, but it is inadequate and we might want to return to it later.

Photo of Sajid Javid Sajid Javid The Economic Secretary to the Treasury

The hon. Gentleman referred to the Government’s commitment to ensure as best we can, and with the caveat he has accepted—that no Government can bind future Governments and parliamentarians—that this legislation will endure for a generation. At this point I remind him that the Chief Secretary to the Treasury, who speaks for the Government on this issue, told the House:

“I believe that we will have a deal that can endure for at least 25 years and hopefully longer.”—[Official Report, 2 November 2012; Vol. 534, c. 929.]

He said something similar on Second Reading. The hon. Gentleman should take that as a reassurance of the Government’s intentions.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.