Health and Sport Committee

Meeting date: Tuesday, March 27, 2012

Official Report 440KB pdf

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Subordinate Legislation

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National Health Service (Superannuation Scheme and Pension Scheme) (Scotland) Amendment Regulations 2012 (SSI 2012/69)

Agenda item 3 is evidence on the National Health Service (Superannuation Scheme and Pension Scheme) (Scotland) Amendment Regulations 2012. The item follows a request from the committee for oral evidence from the Scottish Government on the negative Scottish statutory instrument. I welcome the Cabinet Secretary for Health, Wellbeing and Cities Strategy, Nicola Sturgeon; Chad Dawtry, who is director of policy, strategy and development in the Scottish Public Pensions Agency; and Eleanor Guthrie, who is a senior policy manager with the Scottish Public Pensions Agency. I invite the cabinet secretary to make brief opening remarks.

I take no pleasure whatever in speaking to the regulations. I recognise—from the number of people in the public gallery—the strength of feeling on the issue and I understand the reasons for it. As members will be aware, the Scottish Government has repeatedly made clear our opposition to increasing employee contributions at this time and in this way, and we have called repeatedly on the United Kingdom Government to rethink its policy. At a time of pay freezes, increases in national insurance contributions, higher VAT and rising inflation and fuel costs, we believe that it is wrong to require public servants to increase their pension contributions. Indeed, we go further than that and consider that pensions should be within the remit and decision-making power of this Parliament—not the UK Parliament.

As members will be aware, the UK Government has refused to change its policy. On 5 September last year, the Chief Secretary to the Treasury wrote to the Cabinet Secretary for Finance, Employment and Sustainable Growth to make it clear that the Scottish Government budget would be cut to the tune of £8.4 million for each month beyond April this year in which the increases were not implemented in the national health service, teachers’, police and firefighters’ schemes. That would reduce the Scottish budget by about £100 million in 2012-13, more than half of which would come from the NHS budget, which would have a serious impact on front-line services.

It was therefore with considerable—I stress “considerable”—reluctance and regret that the Scottish Government decided that the increases to the four schemes would have to be implemented from April this year in order to avoid passing on to our public services and communities the £100 million reduction in the Scottish budget that we would otherwise face.

We have put in place protection for the lowest-paid people. For example, nobody in the NHS scheme in Scotland who earns below £26,557 per annum full time will pay a single penny more. To put that in context, that means that 47 per cent of the NHS workforce will not face increased contributions in 2012-13.

I stress that the regulations apply to 2012-13 and that we have not yet taken decisions for 2013-14 and 2014-15. The position for those years will be considered in the context of negotiations with scheme stakeholders on the terms for a reformed NHS pension scheme in Scotland, which we expect to be in place in April 2015. In fact, those discussions will kick off tomorrow at a meeting of the Scottish terms and conditions committee, which I will attend.

That is all I want to say by way of introduction. We are going down this road with considerable reluctance, and the situation that we are in stems from the fact that pensions are, substantially, a reserved matter. That, as well as its practical implications, are things that the Government regrets.

Am I correct that the NHS pension scheme is currently in surplus? If so, what is the surplus? Underlying that is a question about whether the proposed additional contributions are to maintain the balance of the scheme or are part of a deficit reduction contribution that is being levied specifically on public sector workers.

10:15

The answer to your first question is yes: the NHS pension scheme is in surplus. In this year, 2011-12, £887 million is going into the scheme and £810 million is coming out. The projected figures for 2012-13 are £879 million and £883 million.

As I and my fellow ministers have said previously, the UK Government’s policy of increased pension contributions is not about the sustainability of pensions but about deficit reduction. It is wrong to seek to reduce the deficit at the expense of public sector workers in that way.

However, the position that we are in is as I narrated it in my opening remarks: if we do not implement the increases from April, the NHS budget alone will take a hit of £4.6 million every month. On other occasions and in different contexts, we have discussed around this table the pressure that the NHS budget is under. In all conscience, I cannot allow the NHS budget to take such a hit, because that would hit front-line public services.

I made the point in my opening comments that only NHS staff who earn more than £26,500 per annum will pay increased pension contributions in 2012-13, so the 47 per cent of the NHS workforce who earn less than that figure will pay no increased contributions in the year ahead.

That point leads into my next question. I am advised that the pension rate will be levied on the basis of the pro rata full-time salary. Many staff—particularly women—are part time. If someone has a pro rata full-time salary of £30,000 but earns only half that, because they work only half time, their percentage will be that for £30,000 and not the lower rate. You were careful with your words in saying that nobody who earns less than £26,500 full time will pay an increased contribution, but if I am correct the effect on many part-time women workers in the health service will be punitive. I would like confirmation of whether there is an anomaly that will be particularly punitive for part-time women workers.

I was not being “careful” with my words; I was being honest with the committee.

I was suggesting nothing else.

I referred deliberately to full-time salaries. The premise of Dr Simpson's question is correct: it is standard practice in public sector pension schemes to levy the pension rate on full-time salaries.

It is important for me to be clear: I am not defending the pension contribution increases. I really wish that we in the Parliament were in a different position and that we had control over our resources and our pensions policy, so that we could take different decisions. Believe me—it gives me no pleasure to find myself in the current position, but it is the reality in which we live right now.

As I said, tomorrow we will with NHS stakeholders kick off scheme-specific discussions for the longer term, for the same reason why we are having today’s discussion, which is that we are required to work within a financial envelope. However, we have made it clear that we are open to negotiations on how we can do things differently in Scotland, if there is the will to do that. I hope that the discussions will be constructive and will allow us to get to a different position.

I fully appreciate the Scottish Government’s position and I understand that you do not wish to cut the NHS budget by about £50 million. Nevertheless, that choice is open to the Scottish Government. You say that you are unhappy about the situation—I appreciate and understand that—and that the UK Government has put you in a particularly difficult position, but the choice is still for the Scottish Government to make. If the scheme is in surplus by £77 million this year, which is more than the loss that the NHS budget would experience, is that surplus accessible to you? Why cannot you decide to postpone the increases for a year because the scheme is in surplus?

The figures are cash-flow figures and relate not to pensions paid out, but to future pensions commitment—

I understand that, but there is still a surplus in the pension scheme.

Richard—let the cabinet secretary finish.

Sure, there is a surplus—but the solution is not quite as simple as offsetting in the way that you suggest.

As regards the premise of your question about choices, a choice to take £50 million out of the health budget is not—given its implications—one that I consider to be possible in the context of the financial environment that we live in. I am sure that if I were reducing the health budget by £50 million, I would be getting fairly severe criticism from members who hold the point of view that Richard Simpson is putting forward. It is understandable that he is doing so; that is not a criticism.

The situation is not of the Scottish Government’s making. As I have said, I wish that we had control over our own resources and our own pensions policy; perhaps the Parliament will get those powers in the not-too-distant future. I do not take any pleasure in being put in this position by the UK Government, but for as long as the UK Government controls such matters, that will be the reality of the world that we live in.

Good morning, cabinet secretary. I agree totally with the comment that you have just made. People can make choices when they control their own affairs, their own money and what they can do with that money. The Scottish Government is being forced to make cuts by the UK Government because it is trying to reduce the deficit. I totally disagree with the way in which it is forcing us to do that.

I understand that, in a submission to the Scottish Government, Unison has suggested that the efficiency savings of more than £175 million that have been made in health could be used to not implement the increases in pension contributions, but you have said that the money from the efficiency savings needs to be invested in front-line services. That is my first point.

I turn to the local government pension scheme, which we are refusing to—

I am sorry, Richard. That is not a matter for this committee.

Okay.

No one who earns less than £15,000 a year will face an increase in their contribution. Can you confirm that no one who earns between £15,000 and £21,000 will have to pay more than half the average increase in contributions?

I will come back to that point.

Your first point was about efficiency savings. Efficiency savings that are made by NHS boards are reinvested in front-line services. If some of the efficiency savings money were to be used to plug a gap in pensions, that amount of money would not be available in the future for front-line services, so the hit on front-line services would be the same, regardless of how it came about.

I have no criticism whatever to make of Unison or any other union that is campaigning against pension contribution increases. I fully understand their position. However, the choice that I face is—to use Richard Simpson’s terminology—Hobson’s choice. If I were to take the other route, I would cut £50 million a year from the health budget. As well as having understandable concerns about pension contributions, unions including Unison rightly make representations on the size of the NHS workforce and the other implications of the efficiency savings that the health service makes, and I would simply be increasing that burden. I do not consider that we have much of a choice: we have been backed into a corner by the UK Government. I do not like that and I desperately hope that we can get into a different position for the future, whereby the Scottish Parliament and the Scottish Government are the decision makers not just in name, but in reality and in substance.

Richard Lyle’s second point goes back to the point that Richard Simpson made. I think that the figures that you quoted are for policy across all schemes. The figure that I gave in response to Richard Simpson’s question is specific to the NHS. The £26,500 figure that I quoted, below which there will be no increase, is a whole-time, full-time figure.

I appreciate that you are not involved in the banking side, but I return to the question that Richard Simpson posed about the fact that the NHS pension scheme is in surplus. I note that most pension schemes rely on the value of shares, and the share market is volatile at present, given the problems that the UK has faced in the past number of years. Do you agree that the fact that a pension scheme is in surplus now does not necessarily mean that it will be in surplus in the future?

I ask Chad Dawtry to comment from the Scottish Public Pensions Agency perspective and to give a wee bit more explanation of the point about the surplus and accounting in relation to pension schemes.

It is probably a good thing to recognise that the NHS scheme is what is known as an unfunded scheme, or a pay-as-you-go scheme, so it does not have any investment funds backing it up. It relies on the Government of the day to stand behind the pensions promises that have, in effect, been bought with previous contributions.

As far as the surplus is concerned, it rather depends on the demographics of the scheme. In recent years, we have seen a number of schemes, such as the teachers’ scheme, change from a position in which there was a cash-flow surplus of income over expenditure on pensions. As Richard Lyle rightly suggested, that will change over time as the pensions promises that have been built up over many years fall due.

Thank you.

I have great sympathy with health service staff, Unison and their campaign. I will summarise where we are. I note that the UK Government knows that the health scheme is in surplus. Unison states in its submission to us that it seeks a Scottish solution to the issues of the long-term sustainability of pensions, but the Barnett formula is being used as a gun to the head of the Scottish Government, and is getting in the way of that to the tune of £550 million over the spending review period.

It seems that you’re damned if you do and damned if you don’t: either you take money away from front-line services, or you place an increasing burden on NHS staff. Neither is a choice that you wish to make, but you must choose one. I agree with you that protecting front-line services should take priority—it is with a heavy heart that I say this—over avoiding increasing the cost burden on NHS staff.

I mention the Scottish solution for which Unison is calling because you mentioned that you hope to have had by 2015 negotiations with health sector trade unions on a new Scottish scheme. Is the Barnett formula a barrier to long-term sustainable health service pensions? Whatever discussions you have with Unison about how to structure pensions, you have to look over your shoulder to a UK Government that is saying, “If you do it this way, we’ll take £50 million from you, and if you do it that way, we’ll take £150 million from you.” Is the Barnett formula tying your hands and preventing you from finding a Scottish solution in respect of sustainable public sector pensions?

Let us just say that the Barnett formula does not make it easy. Today, we are talking only about the contribution increases for 2012-13; we are not talking about anything beyond that. As I said in my opening remarks, we have deliberately taken no decisions for years 2 and 3 of the scenario. For as long as we, as a Parliament, are funded as we are, if we go outside the financial envelope of the UK Government in terms of pension contributions or the overall cost of a pension scheme, that money will be docked from our budget. If we have a pension scheme that is in any way more costly than the UK Government’s, we have to pay for it, and the money has to come from elsewhere in our budget, with the associated impact on front-line services.

I mentioned the STAC committee meeting that will take place tomorrow, and we have said that we are keen to negotiate on the longer term, but as I said, for as long as we are funded in the current way, we need to keep our eye closely on the financial envelope. However, we are keen in those discussions to maximise the range of issues that we are able to consider in negotiations—including, for example, the issue of normal pension age and state pension age—and to look at second and third-year contribution increases to see whether there are different ways of doing things. I do not want to say any more about that just now, because to do so would be to pre-empt the result of negotiations that are under way, but the Government is willing to try to get a better package put together, if that is at all possible. That said, we need to stay within a financial envelope: if we do not, the impact on front-line services will happen further down the line

10:30

Does the fact that this is a one-year pension increase mean that you are hopeful of, or optimistic about, finding another way to ensure future long-term sustainability? More important, will that involve the UK Government reconsidering its position on the issue and our continuing to make representations on the matter?

We would not be going into negotiations if we did not want to find a different way. Because negotiations have not started, I cannot say whether that will be possible, but the Government—I know that I speak for my ministerial colleagues with regard to the schemes that they are involved in—is willing to seek common ground and to find a different way.

We continue to make representations to the UK Government. Although I do not think that there is any immediate prospect of the UK Government changing its policy on this—there is certainly no sign of that on the horizon—that does not mean that we will not continue to make our views, which reflect the views of the public sector in Scotland, abundantly clear to it.

Has anyone suggested where the £50 million might come from, should the regulations not be imposed?

There has to my knowledge been no such suggestion. My experience is that there are never too many people who want to make those kinds of suggestions—understandably so. That is not a criticism; no one likes to consider where the impact of any cut might be felt. Over the lifetime of the Government, we will be increasing the health budget in what are very difficult circumstances. However, taking £50 million out of the budgets that we have set in the comprehensive spending review would be a difficult challenge and, indeed, it is the reason why I am sitting here this morning having this discussion.

This is not a question; I simply note that evidence that has been taken by the committee consistently shows that efficiency savings in the NHS must be reinvested in the service in order to deal with sharply increasing demands that result from demography or health sector inflation.

Good morning, cabinet secretary. For the committee’s benefit, can you provide illustrative examples of the kind of pension that NHS employees currently receive and the pension that they would receive in the future?

I can provide the committee with as much detail on the matter as it wants. According to figures for 2010-11, the average NHS pension is £7,057.

What would be the projected future pension under the changed arrangements?

In terms of the actual negotiations—

I understand that the figures are available from the UK Government, so I assume that you have them.

The UK Government will certainly have figures for the reforms that it has concluded—

Yes.

We, however, have not concluded those discussions, so we do not have the figures for Scotland.

Do you expect the figure to be greater than £7,057?

That will depend on the conclusion of the negotiations, which will—as I have said—kick off tomorrow.

Do you expect the figure to be greater than £7,057?

That really is a matter for negotiation.

Would you expect it to be lower than £7,057?

I am not going to sit here and give you a purely speculative figure—which it would be, given that we have not concluded the negotiations.

Thank you.

Gil—do you have a question?

Yes—sorry, convener; I was intrigued by that line of questioning.

It seems to me that the surplus offers a short-term solution, and I have two questions on its possible use. First, would there be punitive measures from the UK Government if the surplus were used in Scotland, or could it be used in Scotland without any effect? Secondly, if the surplus were used in the short term, would that have an impact on the long-term viability of the scheme?

I will ask Chad Dawtry to come in on the accounting point.

In effect, the surplus is not owned by the Scottish Government. The financing arrangements mean that the UK Government handles the money so, in effect, we pass it through to the UK Government on an accounting basis.

The letter to the finance secretary from the Chief Secretary to the Treasury, which I think has been published and everybody has seen, was very clear. It said that if the increases were not applied, the Scottish Government budget would undergo deductions to the tune of £8 million a month. There was no dubiety or room for misunderstanding on that point.

Are you saying that, even if it were practically possible to use the surplus, punitive measures would kick in?

Yes.

So Scotland should be in line with England. Is that what the policy is driving at?

If we do not implement the increased contributions from 1 April this year, our budget will be cut by the corresponding amount. If we do not implement them in all schemes, the deduction will be £8 million-plus; if we do not implement them just in the NHS scheme, the deduction will be £4.6 million a month.

Thank you.

I will return briefly to Richard Lyle’s point about the viability of the scheme and the projections on the surplus. Mr Dawtry said that, although the teachers’ scheme has been in surplus in the past, the surplus has declined over the years. I just want to be clear that you do not expect that to happen in the NHS scheme, because presumably the surplus could increase.

On the basis of scheme demographics—obviously, tens of thousands of people have built up pensions promises over time and will be retiring over the next few years—that is exactly what will happen.

Are those projections that you have published or that you can share?

We can clarify the projections that we have for the committee, although I cannot give you them just now.

That would be useful. I wanted to ask the cabinet secretary about the opt-out, which is clearly a big concern for a lot of us. If people’s contributions are increasing, they might be more likely not to bother paying in as that extra money is simply too much for them. Do you have any sense of the likely scale of the problem? Has the Government modelled that at particular rates, for example if 30 per cent or half of the workforce opted out?

I will let Chad Dawtry come in in a second on that. The opt-out concern is legitimate and it was one of the concerns that we expressed to the UK Government. The reason for trying to deliver protection for those at the lower-paid end of the scale is to try to minimise the potential for opt-out. I have already quoted the figures, and I will not repeat myself, but that is the reason. I will let Chad answer the point about the modelling.

The threshold that has been set reflects lower-paid staff. We already know from some of the information that we have on the scheme that, generally speaking, lower-paid staff have lower participation levels in the scheme. That is a matter of concern. It also recognises a particular point in the pay spine at which newly qualified staff join the NHS, as we have a fair amount of anecdotal evidence that, if people do not join the scheme on day one, it is harder to get them to think about it again in the future. There has been a deliberate policy to try to resolve that issue.

Finally, has the Government considered at this stage—perhaps it will be part of the negotiations you spoke about for future years—whether something can be done about your pay policy? If my maths is correct, the figures that Richard Simpson identified suggest that—we will leave aside whether they work full-time or half-time hours—someone who is paid a total of £14,000 could pay a higher contribution rate than someone who is paid £15,000 or higher. Surely that could be ameliorated through an adjustment to the pay policy that would offset that increased contribution.

Obviously, the bulk of NHS staff are paid within the UK agenda for change system. Up until now, we have had UK pay arrangements in that respect. We can perhaps look at these things in the negotiations that are about to start, so I am happy to consider your point.

Looking at this from the union’s perspective, I am worried. What confidence can the workforce have about the negotiations on years 2 and 3? I know that you genuinely want to get the right solution. If we have not been able to get there in year 1, surely there will be a level of cynicism and a belief that, once you agree it for one year, it will just roll on into years 2 and 3.

I see this from the union’s perspective as well. It is not my policy that I am sitting here talking about. It is a policy that we are bound into because of the way in which this Parliament is funded and because of the devolved-reserved split in responsibilities. We go into these negotiations for the longer term with an open mind, a willingness and a desire to find common ground and a meeting of minds. However, if members of the committee have reservations about the ability to do that within the cost envelope, I look forward to those members who are expressing understandable concerns joining me in arguing for the Parliament to have genuine choices for the future when it comes to pensions. That would demand not just pensions policy being devolved but the Parliament having a funding system in which we have control of our own resources. I simply ask those who are expressing understandable reservations about and hostility to the position that we find ourselves in to think that through to the logical conclusion.

There are some other questions before we bring people in for second questions.

On the demographics and the financial viability of the pension scheme, is it a particularly Scottish focus or a UK focus?

It is a general focus. The committee will probably be aware that Lord Hutton conducted a review on behalf of the UK Government, and there is quite a lot of information in his interim report and in his final report that sets out that detail.

But when we talk about the NHS scheme, is it a UK scheme that we are talking about and not a Scottish one?

The demographic implications are the same in Scotland as in the rest of the UK.

Yes. The cabinet secretary has led us to a point that the committee may consider, which is how we could expand the choices, whether through greater devolution or—this is the cabinet secretary’s position—something further than that. Has there been any risk assessment or evaluation of members’ benefits if the majority of the members of the scheme went somewhere else and there was a smaller scheme? Would that be a good outcome or a bad outcome?

I am not quite sure how best to answer that. At the moment, the negotiations are predicated on taking forward something that is based, at least loosely, on the UK Government’s scheme.

Yes, but the cabinet secretary has invited us to look at something for the future, which I presume would be the majority of NHS pension members going somewhere else. What would the impact of that be?

I am not convinced that that is—

I am not sure that I understand your question.

Maybe I have misunderstood the cabinet secretary. I thought that she was saying that we could have a stand-alone Scottish pension scheme for the NHS that would be better able to avoid these circumstances and better able to provide and maintain the pension at a cheaper rate. Is that not what I heard?

Are you referring to the negotiations that we are about to embark on, or are you talking about the scenario of a Scottish Government having independent powers over pensions and the resource decisions that come with that?

I have not heard a description of how things would be better with a smaller number of people in the pension scheme, with all the liability that would be involved.

I may not have explained that properly: there is already a separate NHS scheme in Scotland, if that is your point. I apologise for not making that clearer.

10:45

Just to get some clarity on the full-time equivalent and part-time equivalent situation, could you say whether someone who is on £14,000 and working part time would be subject to the 8 per cent contribution rate that is laid out in part 2 of the scheme?

They would be subject to the contribution rate that is relevant to their whole-time equivalent pay. Someone on £14,000 might be working two thirds time, half time or whatever, so they would pay the whole-time equivalent rate.

It is clear that the rate of 8 per cent will have a serious impact on those low-paid workers. Is that being considered in the negotiations?

Yes. It is worth pointing out that there is tax relief on that contribution, so those workers would not pay the full 8 per cent.

But is that issue being seriously considered by the Scottish terms and conditions committee?

Absolutely.

Cabinet secretary, you referred to making representations to the UK Government on flexibility and on the choices that would be available to us to make without incurring any penalty. What was the nature of those representations? Have you met the Secretary of State for Health?

I met Andrew Lansley a few weeks ago, and pensions was one of the issues that we discussed. Most of the Scottish Government’s representations on pensions have—as you would expect—come through the Cabinet Secretary for Finance, Employment and Sustainable Growth in the form of representations to the Chief Secretary to the Treasury. The chief secretary’s letter, to which I have already referred, came out of that dialogue.

I understand.

Cabinet secretary, you said that you believe that the motivation behind the UK Government’s planned changes is more to do with deficit reduction—what might be termed a naked cash grab—than the sustainability of public sector pensions.

I note your and the Scottish Government’s commitment to ameliorating the impact of those changes on low-paid workers who are employed in the NHS. Can you confirm that the full impact of the changes in the period to 2014-15 could result in a cumulative reduction of more than £0.5 billion in the Scottish Government’s budget over the spending review period if it does not pass on those increases to public sector workers?

To be clear, the UK Government intends to make savings of £2.8 billion across UK-wide public sector schemes from April 2014. It is doing that through increasing employee contribution rates by an average of 3.2 per cent in three annual increments—40 per cent, 40 per cent and 20 per cent—starting in April this year. That saving is already built into the cost envelope.

If we did not apply the increases for future years, and did not make any corresponding offsetting savings, our budget would be reduced by the same order of magnitude that I have said would apply if we did not increase contributions this year. What that would amount to over the spending review period is in the realms that you have just mentioned.

Is the better package that you hope may arise from negotiations with the health service unions based on flexibility from the UK Government, or are you assuming that there will be no such flexibility?

There is no flexibility from the UK Government with regard to the overall cost. If we arrive at a package that costs more—to use simplified language—than the package that the UK Government has negotiated, that extra cost will come out of our budget in the same way as the cost of not applying the increases in 2012-13 would do.

I am deliberately not getting into the realms of what might or might not be possible through negotiation, because the negotiations have not commenced yet. It is clear from my comments about cost envelopes, and who bears the burden of going outside those cost envelopes, that the Government is willing to try to find flexibilities, but those are flexibilities that will come from our negotiations with the unions, not flexibilities that are being offered to us by the UK Government.

That is clear. Thank you.

I should have said earlier that I am a member of the NHS pension scheme. Fortunately, I am at the stage at which I do not have to make contributions, as I am a retired member of the scheme.

Within the envelope of the regulations, would the Scottish Government be allowed to amend the contributions in any of the sections? For example, 3,000 staff in the NHS are employed at a rate above £100,000 a year, and some are on considerably more, if we include the pensionable distinction awards. I think that Scottish Review said that one doctor was earning £260,000. Would it be practical to say immediately that distinction awards were non-pensionable as a measure to provide a pot of money to support part-time, less well-off workers? Is that within your powers?

The simple answer to your overarching question is yes. However, in our consultation document on the pension increases, we said clearly that we did not want an outcome in which anyone in any of these pension schemes had to pay more than their counterparts down south. To reduce contributions in some groups, in order to stay within the cost envelope, would increase contributions in other groups. We said that we did not want to do that. If there is willingness on the part of stakeholders, that is an issue that can be discussed as we go forward.

I do not say this to make it sound as if it is all okay, but it is worth pointing out that, of all of the schemes, the NHS scheme is the one that has the highest level of protection, in terms of the thresholds that we spoke about earlier.

Sorry, I do not understand the last point. Protection from what?

I referred to a salary figure of £26,500; that is the highest level at which protection applies in any of the schemes.

As Dr Simpson has made that declaration, I had better declare that I, too, am a member of the NHS pension scheme.

I do not know whether we all need to do that now. I am in the teachers’ pension scheme. My wife is a practising nurse, so she is in the NHS pension scheme. It goes to show that the issue is not a distant concept to MSPs and that we have friends and relatives who are directly affected by it. That is important, particularly for Unison members in the public gallery, who are following proceedings.

I do not know whether I have to declare that my sister is a member—

Please do not. If no one else does, I will not mention all of my family.

Bob Doris’s point is important. There is probably no one around the table—

I think we got the point.

I am not a member of the NHS pension scheme—I do not think that we all need to declare that either.

It is not a flippant point, so I hope that the cabinet secretary will not take it as one, but has the Government modelled the cost of the likely industrial action arising from the changes? We are saying that if we take one choice, there will be a cost, but it is likely that the alternative will not be cost free either.

I do not take that as a flippant remark—indeed, I do not take any of this flippantly at all—but all your question does is to underline the Hobson’s choice faced by the Scottish Government as a result of the constraints on our decision-making powers. I do not want industrial action in any part of the NHS, because I do not think that such a move is in the interests of those who work in or rely on the health service. However, the reality is that, if I were not sitting here proposing these regulations—reluctantly and with great regret—I would probably be sitting before you being questioned on how the NHS was going to absorb a £50 million reduction in its budget. That is the situation that we are in. I do not like it, but it flows from the governance of the Parliament, of its resources and of pensions.

If the NHS cannot take a £50 million reduction, what sort of cost would it be able to absorb?

We are about to embark on negotiations; as I have said, they kick off tomorrow. I have been very up front about saying that, if we do not want to place a cost on the NHS, we will have to stay within the cost envelope. However, I am not going to constrain those discussions or start to speculate about such territory before I have even sat down with stakeholders—as I will tomorrow—to set out how we will proceed with the negotiations.

So the committee should accept that there will be a cost.

I have said that our starting point is the need to keep within the cost envelope and to see whether we can do things differently within it. Beyond that comment, however, I will say no more. I am not going to constrain the discussions before they get under way, because it would be wrong of me to do so.

I am sure that we all look forward to a successful outcome to the negotiations and hope that we avoid industrial action. I thank the cabinet secretary and her colleagues for their attendance and for answering our questions.

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Community Care (Joint Working etc) (Scotland) Amendment Regulations 2012 (SSI 2012/65)

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Community Care and Health (Scotland) Act 2002 (Incidental Provision) (Adult Support and Protection) Order 2012 (SSI 2012/66)

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National Assistance (Sums for Personal Requirements) (Scotland) Regulations 2012 (SSI 2012/67)

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National Assistance (Assessment of Resources) Amendment (Scotland) Regulations 2012 (SSI 2012/68)

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National Health Service (Optical Charges and Payments) (Scotland) Amendment Regulations 2012 (SSI 2012/73)

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National Health Service (Free Prescriptions and Charges for Drugs and Appliances) (Scotland) Amendment Regulations 2012 (SSI 2012/74)

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Food Hygiene (Scotland) Amendment Regulations 2012 (SSI 2012/75)

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Personal Injuries (NHS Charges) (Amounts) (Scotland) Amendment Regulations 2012 (SSI 2012/76)

The next item is formal consideration of SSI 2012/69 and eight other negative instruments. Members will have received a cover note setting out the purpose of the instruments.

The Subordinate Legislation Committee has drawn only SSI 2012/75 to our attention on reporting grounds as it raises a devolution issue. Do members have any comments on the nine SSIs, particularly SSI 2012/75?

Convener, I wonder whether you can clarify the process. If we do not give notice of lodging a motion to annul now, do we still have time to do so?

Yes. As we discussed at the pre-meeting briefing, we are simply noting the position. The issue remains live and any MSP who wishes to lodge a motion to annul the pensions regulations—SSI 2012/69—can do so between now and 17 April.

That is very clear, convener.

On SSI 2012/75, given that Michael Matheson’s letter explains the situation, I do not think that we need necessarily agree with the Subordinate Legislation Committee. I am quite happy to agree to the instrument.

Taking into account Richard Lyle’s comments, does the committee agree that we do not wish to make any recommendations on the instruments at this stage?

Members indicated agreement.

10:59 Meeting suspended.







11:00 On resuming—