Public Sector
The next item of business is a debate on motion S4M-01348, in the name of Mary Scanlon, on the role of the public sector.
10:31
I begin by acknowledging the valuable contribution that the public sector makes to the economy and society in Scotland. It is that hugely valued contribution by public sector workers that makes the potential strikes so devastating, particularly for the most vulnerable. Public sector staff make their contributions in their working lifetimes, and their pensions should be based on fairness, quality and sustainability in retirement. I understand that this could be the first focused debate on public sector pensions in the Parliament, although I appreciate that we are the warm-up act for the Government’s debate on pensions in two weeks’ time, for which I fully commend the Government.
Earlier this week, the Scottish Parliamentary Corporate Body agreed to progress to the next stage of the external security facility to ensure that democratic business continues in the Parliament despite any security threats. I hope that all parliamentarians will ensure that their duties within this democracy and Government continue on 30 November should the strikes go ahead while negotiations continue.
In five years’ time, the United Kingdom is due to spend £33 billion a year on public sector pensions. That is the same as the budget for the Scottish Parliament. Any politician who thinks that the figure can continue to rise must be explicit about where the money will come from. There is no doubt about the urgent need for reform against the background of people living much longer than when the funds were set up. Labour’s legacy was state spending of £4 for every £3 in revenue, with the UK Government having to borrow £1 in every £4 just to keep the lights on, pensions paid, teachers in schools and doctors and nurses in hospitals. That simply cannot continue, given the huge national debt, of which we are all aware.
The former Labour minister Lord Hutton reviewed pensions in the UK and concluded that there is a clear case for change. He stated:
“The responsible thing to do is to accept that because we are living longer we should work for longer.”
I also agree with Rachel Reeves, Labour’s shadow chief secretary to the Treasury, who set out three key tests for a fair agreement on pensions: affordability, fairness and sustainability. I believe that the current proposals, which are under negotiation, meet those three tests. While I am being consensual, I also agree with Ed Miliband, who described strike action while negotiations are on-going as a “mistake”.
Will the member take an intervention?
I will make some progress, if the member does not mind.
As recently as 2 November, the UK coalition Government placed a new offer on the table of an 8 per cent increase in the accrual rate, and it is committed to continue working constructively with unions for a settlement.
Having read the Labour amendment, I think that it is important to set out the facts. Most public sector workers will see no reduction in the pension that they receive on retirement, with many low and middle-income earners receiving a larger pension income on retirement. Any worker within 10 years of retirement will see no change to the age at which they can retire and no change to the amount of pension that they will receive when they retire.
After all the reforms, people in the public sector will still have significantly better pensions than those in the private sector, especially given the former Labour Government’s tax raid on private pension funds of around £5 billion a year, which took up to £100 billion out of private pension funds.
It is obvious that Scottish Labour has not read or understood Lord Hutton’s report, so let me give some examples of the proposals.
Will the member take an intervention?
I would like to give some examples so that I can put the member right.
A nurse with a salary at retirement of £34,000 would receive a pension of £23,000 if the reforms were introduced; under the current scheme, they would receive £17,000. A teacher with a salary at retirement of £38,000 would receive £25,000 under the proposed scheme; under the current scheme, they would receive £19,000. A hospital porter with a salary at retirement of £14,600 would receive pension benefits of £12,000 under the new scheme, as opposed to £9,000 in the existing scheme.
Perhaps Labour is going on strike because some people will receive less. A senior civil servant, of whom there are many, with a salary of more than £100,000 would receive £37,000 under the new proposals compared with £44,000 at present. The hospital porter’s pension increases, whereas that of the top civil servant is reduced. The lowest paid and people who are 10 years from retirement will be protected and public sector pensions will remain far better than those in the private sector.
It is worth noting that the settlement will not require further negotiation for a generation. The Government is not proposing any increase in the total employee scheme contribution rates in addition to the proposed 3.2 percentage points already announced.
We value the contribution of the public sector, but it is worth comparing public sector pensions with those in the private sector, which is so critical to the recovery of our economy. After the proposed reforms, public sector pensions will still be among the best, with a guaranteed pension that very few in the private sector could ever dream of.
In February this year, an Audit Scotland report highlighted the differences in contribution rates and levels among public sector schemes. There is no doubt that the Scottish Government will have to tackle the issue soon. I welcome the last line of the Scottish Government’s amendment—it is probably the only line that I agree with.
The Scottish Conservatives encourage constructive debate and chose this subject for debate as there needs to be an open and honest discussion as well as a more realistic approach to public sector pensions. The Prime Minister has given a commitment to members of Parliament at Westminster that they should face exactly the same changes to their pensions as those imposed on public sector workers.
We should remember that, without reform, public sector workers would retire much earlier than private sector workers. Is that fair? Two thirds of private sector workers are not even members of any pension scheme.
The taxpayer contributes three times more to civil service employees’ pensions than the average private sector employer pays into its employees’ pensions. Is it right and fair that private sector employees contribute through taxation to a pension scheme that is far more generous than they could ever dream of?
I am glad that Mary Scanlon has given me an opportunity to make my point so that she can establish whether I am wrong before she replies to it.
Mary Scanlon talked about Lord Hutton’s recommendations. He said that the move from the retail prices index to the consumer prices index would result in a 15 per cent cut in pension benefits not just for people in public sector schemes but for people in private sector schemes. Does she think that that is fair? Does she agree with Lord Hutton that that move represents a significant cut in benefits in private pension schemes?
You have less than one minute, Ms Scanlon.
I appreciate that, Presiding Officer.
When it comes to a cut in pension scheme benefits, the biggest cut that anyone could ever see is the £100 billion that Gordon Brown took out of the private sector and occupational pension funds, which affected people the length and breadth of Scotland.
On 30 November, instead of Labour members standing shoulder to shoulder with the strikers outside the Parliament, they should be face to face with people across Scotland, apologising for the £5 billion annual raid on private sector and occupational pension schemes, which reduced the tax value of those funds by more than £100 billion.
I move,
That the Parliament recognises the very valuable contribution that the public sector makes to the economy and society; accepts that, while government has an obligation to ensure that public sector employees are well rewarded with good quality pension schemes, there is an urgent need for reform, believing that the proposed reforms will ease the burden on taxpayers and still leave public sector employees in a far better position than their counterparts in many private sector schemes, and further believes that the planned strikes by the unions on 30 November 2011 are a deeply irresponsible action at this time and will do nothing to help Scotland’s recovery from the recession.
I call John Swinney to speak to and move amendment S4M-01348.2. Mr Swinney, you have seven minutes.
10:41
It is a pleasure to speak on behalf of the Government in this debate and to begin by welcoming Mary Scanlon to her new post. This is new territory indeed—it will be a novel experience for those of us on these seats who are accustomed to debates on the economy to face Mary Scanlon. I am glad that the reshuffle has provided us with Mary Scanlon.
I was a bit surprised by the title of this debate, which was advertised last Thursday as “The Role of the Public Sector”. I thought that we would perhaps be treated to the early thinking of the new Conservative leadership in Scotland on the approach that we should take to running our public services—an explanation of why the Thatcherite reforms that have been taken forward south of the border, involving the privatisation of the national health service, are the way that we should proceed in Scotland. But, no, the Conservative party has returned to form and, rather curiously, has focused on a particular aspect of the role of the public sector, which is of course the live and important topic of public sector pensions. I will come on to discuss some of the issues in that regard.
I thank Mr Swinney for mentioning the new Conservative leader. Given the nature of this debate, is he aware that not long ago the new Conservative leader was apparently a placard-wielding striker at the BBC?
That just goes to prove that every individual has a right to protest and to strike and, moreover, to change their mind about these issues.
I am grateful that the cabinet secretary reminds us that every individual has the right to change their mind. Will he urge the Cabinet Secretary for Parliament and Government Strategy to change his mind about the proposal to schedule a debate on public sector pensions that is specifically timed to ensure that only MSPs who cross picket lines can participate?
No, I will not encourage the cabinet secretary to change his mind, because it is entirely appropriate that Parliament sits on every day that it is due to sit and addresses issues that matter to and affect the people of our country. I look forward to savaging on 30 November the Conservatives and the Liberals for their approach to public sector pensions. I will use the opportunity of that occasion in Parliament to do exactly that. It would be helpful if Mr Harvie was here to add his voice to the arguments in that respect. [Interruption.]
Order.
Before we move on to pensions, I want to spend a few moments discussing the public sector. Despite all the warm and considered words in Mary Scanlon’s opening remarks, she then went on to attack public sector workers in virtually everything else that she said.
I want to make it clear that the Scottish Government values enormously the contribution made to our public services by public sector workers. We are committed to a process of public sector reform that is predicated on four principal themes: integrating public services at a local level; ensuring that we enhance the development of our public sector workforce to maximise its capability and effectiveness at a time of financial constraint; ensuring that we have an open, transparent and rigorous performance culture that challenges public services to improve their performance and boost the outcomes for members of the public; and, crucially—this is for the benefit of Margaret Mitchell—focusing extensively on preventative intervention. Any analysis of public sector reform and the condition of our public services demonstrates that unless we intervene early to arrest some of the long-term problems that affect individuals and circumstances in Scotland, we will continue to have significant burdens on public services that will be difficult to meet.
Does the cabinet secretary agree that although focusing on preventative spend is all very well, what really matters is outcomes, and that that is where this Scottish National Party Government is failing dismally?
That is just complete and total rubbish. If Margaret Mitchell looks at the Government’s national performance framework, which she derided in her earlier speech, she will see a programme of constant improvement in the effectiveness of public services. The Government will continue to focus on that to improve the outcomes for the people of our country, and we will challenge vigorously any attempts to misrepresent the focus on preventative spending in the way that Margaret Mitchell has done.
I have set out very clearly the Government’s disagreement with the United Kingdom Government’s approach to public sector pension reform. There is a clear argument, which is at the heart of the Government’s amendment today, that all public sector pensions should be “fair, sustainable and affordable”. We accept that argument and we believe in Lord Hutton’s proposal that there is a great deal of substantive and considered thinking to be done about how to approach the long-term sustainability of public sector pensions.
The problem is that the approach to that debate, which by its nature must be focused on negotiation and agreement with trade unions, has been contaminated by the cash-grab of the 3.2 per cent increase in pension contributions that has been required by the UK Government. That has made the debate on the question of public sector pension reform all the more difficult to sustain because, essentially, it has added a financial burden on public servants who already face acute financial challenges at this time. That is why the Government has set out its opposition to that proposal. Our ability to do something different in Scotland is constrained by the UK Government’s threatening approach, as it says that it will reduce our budget if we do not accept the increases in contributions that its proposals require of us.
The Scottish Government will welcome the opportunity at the end of this month to set out in more detail and over more time all our thinking on public sector pensions and to make clear and reinforce the many areas in which we disagree with the UK Government’s approach. I stress the importance of our continuing dialogue with employer representatives and trade unions to ensure that we have a sustained approach to public sector pension reform.
We accept and understand the reasons why people feel the necessity to strike at this time. We do not agree with that action, because we believe that dialogue should be the way that we proceed.
You must close, please.
The Scottish Government will firmly set out to Parliament on 30 November our principal reasons why the UK Government is taking the wrong course. We will make that position abundantly clear to Parliament.
I move amendment S4M-01348.2, to leave out from “accepts” to end and insert:
“believes that pensions must be fair, sustainable and affordable; considers that the 3.2% increase in contributions proposed by the UK Government is a cash grab that has more to do with deficit reduction than fair pensions; acknowledges that these increases come at a time when households are under financial pressure due to rising costs, and encourages the Scottish Government to continue to engage in full and extensive dialogue with trades unions and employers’ representatives on the future of pension provisions.”
I now call Richard Baker to speak to and move amendment S4M-01348.3. You have a very tight five minutes. We have absolutely no spare time left in this debate so people must stick to their time.
10:49
I, too, welcome Mary Scanlon to her new post, but I must say that the Conservative motion today might be best described as a “Life on Mars” motion. While everyone else is looking for the way forward to steer Scotland from recession, the Tories are harking back to the 1980s and their disregard for the trade union movement. I note, however, that not only did Ruth Davidson strike in her previous career as a journalist, she seems to be boycotting parliamentary business already. She is just out a week early; perhaps she will be out with us on 30 November after all.
The decision to raise the issue of public service pensions as part of Tory business today merely highlights the failure of the Tory-Liberal coalition to deal properly with pension reform. Instead of working in partnership with the trade unions to try to reform and future proof pensions and ensure decent provision for workers in retirement—we agree with what the cabinet secretary said about the potential in the Hutton proposals—we are being treated to one of the worst-handled negotiations in Government history. We still hope that action can be averted by sensible negotiations between the Government and the trade unions, but thus far there have been months of dither and delay by the UK Government, and we are still waiting to be told what many of Danny Alexander’s most recent proposals mean in detail.
Let us be clear: the unions understand that pension reform is needed. Every trade union takes the position that pensions need to be looked at in a fair and progressive way, but we have seen a series of botched announcements from the coalition, which concluded with Francis Maude’s latest brainwave that the unions could go out on strike for 15 minutes and the Government could then carry on with business as usual, as it were. Mary Scanlon neglected to refer to the change from the RPI to the CPI for the uplifting of pensions, which will have a serious effect; the required 50 per cent increase in annual contributions; the fact that those increased pension contributions will be required for up to eight years longer; and that pensions will be payable to retired workers for up to eight years fewer. Very significant changes are being proposed.
The Tory motion describes the planned strikes as “deeply irresponsible”, but who are the civil servants who are so “deeply irresponsible”? Who are the far-left militants who are determined to smash the state? Perhaps the Tories mean the FDA, which was formerly known as the First Division Association and is now described as the senior public servants union. Some 81 per cent of its members have voted to back strike action. Even the trade union of Sir Humphrey and Sir Peter Housden has had enough. Perhaps Sir Peter will even tear himself away from his blog for long enough to stand by the brazier with his colleagues. Who knows? That is the extent of the hash that the coalition has made of reform. Even senior civil servants who work in Her Majesty’s Government have voted to go on strike.
However, it is not the Sir Humphreys or even the Sir Peters of the public sector who will get hit hardest. Rather, it is the lowest-paid public sector workers who will see the biggest cuts in their pay because of the proposed increase in contributions. In fact, those who earn the least will end up paying much more relatively. It is the refuse collectors, dinner ladies and care home and nursery workers who will get hammered, not the mandarins. Alongside that, the decision, which was taken without consultation or negotiation, to change from the RPI to the CPI for the uprating of pensions will mean a reduction of at least 15 per cent in the real value of pensions even before any further changes are implemented.
There is inherent dishonesty in these changes. They are not about making pensions more sustainable. Rather, they are a clumsy attempt to cut the deficit by hitting public sector workers. It is not so much a reform as a ruse—and a badly played one at that. If the Tories want to cut the deficit, they could back Labour’s plan for a levy on bankers’ bonuses, but I expect that we shall hear scant support for that from Conservative members—indeed, I already hear Mr Johnstone grumbling. The Tory motion glibly talks about the strikes doing
“nothing to help Scotland’s recovery from the recession”,
but it is the UK Government’s botched economic strategy that is cutting growth and increasing unemployment.
It does not have to be that way in Scotland. The Scottish Government is not doing enough to take a different approach here, but it can do so, and it can take a different approach on pensions, too. It falls to Mr Swinney to make decisions on a number of pension schemes. Indeed, we encouraged him to take a different approach on the local government scheme, and it is right that he did so. Different choices can be made for other schemes, although we acknowledge that those choices are not easy.
We support much of what the Scottish Government has said about public sector reform, but the choices that it has made on public sector jobs also affect those who will strike on 30 November. Those people put up with a great deal of pain, including from thousands of job losses—those losses have been proportionately more in Scotland than in the rest of the UK—before reaching the difficult decision to take action. It is not action that is lightly taken, but it has the support of the Labour group in the Parliament.
We move to the open debate. Speeches should be a tight four minutes. Unfortunately, we will have to stop the clock on members at four minutes.
10:54
I welcome Mary Scanlon to her new role.
In speaking in support of the cabinet secretary’s amendment, I agree with him that this Trojan horse of a motion has nothing to do with the role of the public sector. Instead, it is a naked attempt by the Conservatives to exploit their prejudices about public sector pensions provision in the same way that Gordon Brown exploited his prejudices about the private sector in 1998. No matter how much we might accept the smooching of the first part of the Conservatives motion, with its references to the public sector’s “very valuable contribution” and its employees’ “good quality pension schemes”, we cannot escape the Con-Dem jackboot.
The motion mentions the “urgent need” for pension reform. As speakers have pointed out, the reforms are set out in the Labour peer Lord Hutton’s formidable report, which has unwittingly unlocked the safe and allowed the Tory and Lib Dem coalition in London to make its smash-and-grab raid on public sector workers’ contributions in order to reduce its deficit more quickly—
Will the member give way?
No—I have only four minutes.
This smash-and-grab raid is a means of not only reducing the deficit more quickly but dismissing the sustainability of long-term pension schemes.
What did Lord Hutton say about pension reform? In a speech that he gave in March at a National Association of Pension Funds conference, he said:
“it’s a question of what reforms we need to make to ensure the sustainability of good quality public service pension schemes. And this is reform for the long-term, not in response to the fiscal pressures currently facing the country”.
He went on to say:
“public service pensions are a vital part of our national savings system”.
I agree partly with Labour that, if public service employees leave their professions or curtail their contributions—that might well be part of the Tories’ tactics—the subsequent lack of sustainable and substantial contributions to and savings by pension funds will result in reduced investment by those funds and will further damage a discredited economic strategy by a London Government—and for what?
I go back to Lord Hutton’s speech. He said:
“the fact is that public service pensions are not ‘gold-plated’ ... half of public service pensioners receive less than £6,000 a year.”
Moreover, in paragraph 4.27 of his interim report, he says:
“Net of ... contributions ... payments peak at about 1.5 per cent of GDP in 2010-11, before falling to below 1.1 per cent”
of gross domestic product
“by 2059-60.”
There is no mention of a blatant short-term cash raid to bring forward and accelerate the timescale for meeting the above objective. Of course, as Mary Scanlon said, we need to discuss and debate pension changes, but we must do so over time. The Hutton report certainly provides a basis for those discussions.
I believe that a strike will achieve little. However, it is not “deeply irresponsible”; it might be understandable and it is certainly regrettable. The people who will suffer will be public service customers and public sector employees themselves. However, the situation is not helped by the kind of crocodile tears and grandstanding that we saw from the Labour Party yesterday; the Labour Party is not and never will be the guardians of public sector employees. Labour members’ political posturing on such matters confirms that they are still in a time warp. In other words, they are 1970s Klingons.
Churchill said:
“To jaw-jaw is always better than to war-war.”
That is why we call on the unions and the non-union members in Scotland’s public sector to engage with our—their—Government on seeking a meaningful dialogue and way forward on future pension provision.
10:58
First of all, I thank the Tory party for lodging a very important motion that gives us the opportunity to debate something that we probably do not debate enough these days: our political ideology and philosophy.
Throughout the 19th and 20th centuries, the pioneers of the labour and trade union movement agitated and campaigned for the collective and public provision of services through friendly societies, municipalities and co-operatives. Such an approach, which was taken in direct response to the market’s failure to provide and the resulting poverty, squalor and ill health in which many were left, culminated in the creation of the national health service, the welfare state, council housing programmes and many of the services that are available now. Our services were developed out of that realisation and the desire for a fairer, better community, in which all our people, irrespective of wealth or status, would be looked after from cradle to grave. That is something that the market could not and will never deliver.
Public services are the glue that binds our society together. They act as a civilising force. They bring us into the world, cure us when we are sick, provide us with shelter and social welfare, educate us—well, they educate some of us—and look after us in old age. How we support public services—whether we support them—what resources we provide for them and the extent of our commitment to maintaining and improving them are determined by our political philosophy.
Given the current attack on public services by the Tories and the job losses caused by the SNP, we have some indication of how the UK and Scottish Administrations see our public services. We see attacks on workers’ terms and conditions, a blitz on local authority jobs, police support staff cut, nursing posts lost and wages frozen in real terms as inflation rises. We see Osborne and Cameron use the global economic crisis as a cover for their ideological assault on the public provision of services. In doing so, they peddle myth after myth.
Let us have a wee look at the current situation with pensions. It was not public sector workers or their pension funds that caused the economic crisis; that was down to the bankers.
Will the member take an intervention?
I have four minutes—not a chance.
It was down to the greed of the bankers and their accomplices.
It was down to the Labour Party.
I hear Mr McLetchie blame the Labour Party. I am sure that it was not the Labour Party that caused the crisis in Iceland, Ireland, Spain, Greece, Portugal and Italy, or maybe he has better information.
All socialist Governments.
We know who it was. It was down to the irresponsibility of the bankers and Mr McLetchie’s friends, not the teachers, cleaners and hospital staff who are legitimately defending their jobs and pensions. The rise in pension contributions is not going to pay for pensions; it is going directly to the Treasury.
Another myth is that public sector pensions are gold plated, but nothing could be further from the truth. The average is £7,800 per year and, for a woman working in local government, it is £2,800—hardly gold plated. It is also said that, as a nation, we are getting older and we cannot afford our pensions. Wrong again: by 2060, it is predicted that pensions will represent only 1.4 per cent of gross domestic product, down from 1.9 per cent today. Of course, if we tackled the tax avoiders and evaders and introduced a Robin Hood tax on speculation, there would be no need for any of this at all. As I said earlier, it is about our philosophy and what type of society we wish to see. We all know the type of society the Tories wish to see—a cheap-labour, divided and deskilled society and a society flogged off to the highest bidder.
We should be investing in our public services. My colleagues and I will be supporting our public sector workers on St Andrew’s day. There is still time for the rest of the parties to join us. They will be welcome.
11:03
Yesterday, when this subject was very briefly debated through the unusual means of a business motion, for a moment I felt as if I was in Westminster, not because of the issue that was being debated but because of the exchanges between Labour and Conservative members, the attitudes that were being expressed and the tone that was being taken in all the contributions. I was glad that there was the buffer zone of the voice of reason in the middle. That intemperate set of exchanges reflects what has been going on between the UK Government and the unions as well, which seems less like dialogue and more like monologue conducted through a megaphone. As with the rest of Westminster’s deficit reduction plan, it has the distinct smell of ideology rather than reason.
There are some redeeming features and the concessions have certainly been welcomed all round. It was not so long ago that left-wing publications were talking about the value of career average rather than final salary pensions for people on low incomes that tend not to progress greatly over the course of their careers. It is interesting that it was accepted that the public sector tends to have better pensions than the private. If that were an indication that the UK Government wants to address the issue by levelling up rather than by levelling down, we might not see so much of private sector workers being set against public sector workers and instead look at the underlying issues of long-term security and pay.
No wonder there is resentment from the unions—the problem is not just the impact of these changes but the whole way in which the issue has been approached and the breach of trust. The proposals include a commitment to no further reforms for 25 years but, as the Royal College of Nursing took pains to point out in the briefing that it circulated, it was only in 2008 that there was an agreement with the previous UK Government that aimed to ensure sustainability in public sector pensions, which we are told is the underlying motivation. The UK National Audit Office report in December 2010 estimated that the overall saving to the UK taxpayer from that agreement was £67 billion. Between that and the switch from the RPI to the CPI, which has already happened, the long-term cost of public sector pensions has reduced by almost 30 per cent.
In the earlier deal, staff in the public sector agreed to pick up costs for the growing pension bill, should it happen, as people lived longer. However, again according to the RCN, in the last year for which figures are available, the NHS pension scheme across the UK paid out £6.3 billion but took in £8.4 billion. That is not to give a permanent clean bill of health to the pension scheme, but it is hardly a picture of a scheme in crisis.
The figures come from 2009-10, before the current UK Government took office. As the RCN notes,
“it is difficult to get an exact figure”
for the balance now. That lack of disclosure does not build trust. Public sector workers and their unions can ask, rightly, what the UK Government is trying to hide. If the argument is on sustainability, it is not one that I heard today and, frankly, the case has not been made.
Looking ahead to next week, I think that it is a shame that there is not greater unity in the chamber. This Parliament is at its best when it is united, and there would be much better outcomes for public sector workers if the Labour Party did not approach the SNP with the same ideological objection as the Conservatives approach the unions.
Next week, thousands of workers throughout Scotland will take to the picket line because of an ideological cash grab on their livelihoods. The Scottish Government has been working a lot more constructively, and I hope will continue to do so.
Mr Biagi, could you come to a conclusion?
As they strike on Scotland’s national day, public sector workers might want to reflect on how matters would have been different if the real decisions on pensions had lain with Scotland’s national Parliament.
11:06
I am pleased to take part in today’s important debate.
As usual, we Conservatives are dealing with the difficult issues head on. We are not afraid to do that in the interests of our economy and, especially, our pensioners in the public sector. The subject is one that requires long-term strategy rather than short-term fix, and Francis Maude has a very good record of finding solutions.
I praise the role of public sector workers, especially in my region of the Highlands and Islands. Our teachers, policemen, firefighters, doctors and nurses and all the other public sector employees do superb work. We also recognise the pensioners’ contribution to society more generally in all the extracurricular, voluntary and community activities that so many undertake. They are a major element of the big society on which we all depend, and they deserve decent pensions—the increased pensions that Mary Scanlon quantified in her excellent speech—and a Government that plans ahead to deliver them.
The fact of the matter is that the UK Government is having to deal with the dreadful state of the public finances left by the last Labour Government. I commend its efforts in doing that. If we had not taken the decisive action of deficit reduction, our economy would be facing the Italian scenario, with Italian bond yields above 7 per cent again this week, despite efforts to secure a new Government, compared with UK yields of around 2 per cent. On that basis, in the future I would rather be a British pensioner than an Italian one or, for that matter, a Greek one.
People now realise the enormity of the crisis that we face in western Europe. It started as a liquidity crisis, mutated into a solvency crisis and has now become a systemic crisis. That means that the economic infrastructure is crumbling and severe measures are necessary now to avoid a far worse scenario in years to come. That is the reality.
Part of reconfiguring the public finances must involve genuine reform of public sector pensions, which the previous Labour Government patently failed to achieve. The proposed phased rise in employee contributions will average 3.2 per cent from April 2014, but the rises will be staggered according to salary with high earners paying the biggest rises.
Will the member give way?
I am sorry; I cannot do that at the moment.
Even after the changes, public sector pensions will still be miles above the average in the private sector.
The UK Government’s pension reform plans are realistic, practical and detailed, and the Government has responded to specific concerns by, for example, confirming that no worker within 10 years of his or her retirement on 1 April 2012 would see either an increase in the age at which they retire or a decrease in the pension that they receive.
It is a cop-out for the SNP Government to claim that more time is required to assess the proposals. We must act now in the interests of future pensioners. Any responsible Scottish Government should recognise the economic circumstances and support the UK Government’s plans.
I will take that intervention from Patrick Harvie.
I am grateful for that.
The member mentioned the urgency of the situation and the requirement for extreme measures. Why, then, does he think that the UK Government is working so hard to prevent Europe from shutting down the tax havens?
As usual, Patrick Harvie shoots off after another red herring. All I know is that the UK Government is trying to plan for good pensions for people in the future.
I urge the trade unions to reconsider the strike action on 30 November, which will be disruptive for families and communities. Everyone should get back round the negotiating table and engage on the issue. The Parliament should send out that message loud and clear. Nobody likes paying more for anything, but the alternative to reforming public sector pensions is to burden further the general taxpayer disproportionately for years to come, which would be a dereliction of responsibility that no Government should accept.
11:11
The motion states:
“That the Parliament recognises the very valuable contribution that the public sector makes to the economy and society”.
It goes on to say that
“there is an urgent need for reform”,
and that the Parliament believes
“that the proposed reforms will ease the burden on taxpayers”.
Let us get it right—public workers are taxpayers, too, and in very large numbers. They contribute directly to the Treasury through taxation and, on top of that, provide the staffing in schools, hospitals and the transport system, among other services, that enable the public sector to carry out its activities. Those same public sector workers and others will suffer as a result of the proposals.
We all know what the reaction has been to the proposals. I welcome the fact that Danny Alexander has accepted the need for concessions, even if no members of his party are present in the chamber. Those concessions include the proposal that employees who are within 10 years of retirement will have no changes made to their anticipated benefits. It is right not to penalise those who are least able to change their pension planning but, even among that group of people, there are widespread concerns about the UK Government’s perceived divide-and-rule strategy.
We should remember that the average local government pension is less than £5,000 a year. The average pension for female NHS workers is only £5,000 a year, but the median pension for women is much less than that. Although teachers, firemen and police do better than that, they are a relatively small percentage of the total number of people in public pension schemes. Half of all women pensioners who have worked in the NHS get a pension of less than £3,500 a year. That does not strike me as largesse or excessive. We should also remember the impact of the change in indexation for inflation from the RPI to the CPI.
Will the member give way?
Sorry, but I have only four minutes.
A Government that spends money on a properly funded pension scheme for its public workers is simply recognising its responsibilities. That must be our aim. There is a lot of merit in Lord Hutton’s proposals but, whatever the merits, given the record fuel prices, VAT rises and high inflation, now is not the time to penalise ordinary workers. We believe that the proposals are another example of the poorly thought out deficit reduction plan.
As the cabinet secretary said, we know the consequence of the Scottish Government failing to introduce the planned increased contributions in the NHS, fire, police and teachers schemes. We must continue the dialogue and press the UK Government for a change in policy. In the absence of that, there is no alternative. However, the fight should be not with the Scottish Government but with the UK Government.
The NHS pension scheme was reorganised in 2008 and, in the short term, it has a surplus of contributions over benefits paid out. As Marco Biagi alluded to and as the British Medical Association suggests, the contributions to the scheme currently exceed the benefits that are paid out by £2 billion a year. It is hard to avoid the conclusion that increasing contributions amounts to a deficit reduction mechanism above all else. As the BMA and others have said, there is a risk that implementing the proposals will cause large numbers of folk to walk away from their public sector pension schemes, which would leave the schemes worse off than before.
The Tories have raised concerns about people in private pension schemes. In the current financial climate, we must accept that few of those schemes are prospering and annuity rates continue to fall. However, the answer to that dilemma is not to penalise the public sector at this difficult time for ordinary folk. As the Scottish Trades Union Congress has said, nothing in the Government proposals will improve the situation of those in private schemes. I welcome the cabinet secretary’s suggestion about continued dialogue, and I urge members to support his amendment.
11:15
I agree with Roderick Campbell that the matter is largely the UK Government’s responsibility. I could not disagree with much of what John Swinney said, nor could I disagree with much of what is in his amendment. However, I urge him to face up to his responsibilities, listen to the trade unions and engage with them in a constructive discussion to determine what more can be done within his remit.
Will Hugh Henry give way?
No.
As John Swinney said, the debate is disappointing and the Tories have reverted to type. When they talk about the public sector, they want to focus on one narrow aspect. It is a shame that Mary Scanlon, who is a decent human being, comes to the Parliament to portray the Tory party in its usual form.
Jamie McGrigor said that the Conservatives are confronting the matter head on. Yes, they are. They are confronting the cleaners, nurses, teachers, local government workers and other public sector workers head on and making them pay dearly. They are making them work longer, pay more and receive less.
Will Hugh Henry give way?
No.
However, the Tory party is not confronting head on the bankers, financiers and hedge fund managers who funded it generously in the run-up to the previous election. It is not dealing with the bonuses, obscene pensions and obscene pay for those at the top. It has double standards.
Mary Scanlon was right in one respect. She said that the pension reforms are coalition policy. It is telling that there is not a single Liberal Democrat present in the chamber to participate in a debate about a policy for which they have direct responsibility. That is an abrogation of responsibility and cowardice of the worst type.
The Liberal Democrats provide a human shield for the Tories’ crude and cruel policies. The hapless Nick Clegg is, in fact, the General Haig of this political generation, leading his troops to slaughter. They are heading into oblivion and disaster while providing cover for the Conservatives. It is about time that they showed a bit of gumption and courage and took full responsibility for their actions.
We have heard a lot today about what should or should not happen on 30 November. Neil Findlay eloquently set out the ethos of the trade union movement. Trade unionists whose pay has been frozen, who face heavier workloads and who face paying more for pensions that will pay less do not take the decision to go on strike lightly. They do so on account of desperation because the Conservative-Lib Dem coalition Government will not listen to them. They do it reluctantly.
When so many workers across so many trade unions stand together to say that something must be done, we should not demean or demonise them but should listen sympathetically to what they have to say. The Parliament should send a much clearer message to those workers that it will support them in their justified action for fairness, decency and dignity in their retirement.
11:19
The first part of Mary Scanlon’s motion is welcome in that it stresses the value of the public sector. However, we must judge the Tories on their deeds and not their warm words.
The public sector is crucial to the social fabric of Scotland and to enabling the country to flourish. As Neil Findlay and Roderick Campbell said, public sector staff earn modest pensions. The reality is that the vast majority of public sector workers provide services in the full knowledge that they will never come anywhere close to the earnings of local authority or NHS board chief executive officers.
The myth of excesses and largesse is widespread among commentators and policy makers alike. The question that must be asked and which still requires an answer is this: why does the UK Government, in order to fund deficit reduction, continue to pursue damaging reforms to public sector pensions, which will, in effect, cut workers’ pay by an extra 3.2 per cent?
In the face of £3.3 billion of cuts that Westminster has passed down for the spending review period, the SNP Government has done all that it can to protect the pensions of people who work in the public sector. The Scottish Government has faced difficult decisions and, despite all the odds, John Swinney has managed to find the necessary balance to maintain jobs across the public sector and not to add to the burdens on Scottish families.
The Scottish Government has reluctantly had to ask public sector workers to accept another year of frozen pay. Ministers have led the way by freezing their own wages for the past four years. I wish that things were different for people across Scotland whose wages are not increasing in line with inflation but, as the Finance Committee has heard, the pay freeze is essential to maintain staff levels and to fight off the spectre of mass unemployment.
I have several questions for the Conservatives to answer in summing up. How many people do the Tories expect to walk away from public sector pensions as a result of the 3.2 per cent cut to their pay? How many will move into the private sector? How will that affect the pension schemes’ viability and sustainability? Do the Tories accept that, in each of the past five years, Scotland’s spending on pensions as a share of gross domestic product has been lower than that of the UK? In 2009-10, Scotland’s figure was 15.1 per cent, versus 15.7 per cent for the UK as a whole. That means that pension schemes in an independent Scotland would be in a much better position.
Which of the following do the Tories believe have helped to support families through the recession? Is it the VAT increase, the national insurance increase, petrol price increases or significant pension contribution increases? Where does Danny Alexander’s rather tactless letter to the Scottish Government—in which he threatened to remove £8.4 million a month from the block grant if the contribution changes were not imposed without any meaningful consultation—fit into Cameron’s respect agenda? That amounts to a threat of £550 million in cuts over the spending review period to 2015.
As I said, we are seeing drastic reforms to disability living allowance, housing benefits and public pensions. The UK Government seems to be hell-bent on a ruthless ideological agenda. The truth is that every worker who provides a service on which others rely—whether in the public or private sector—is essential to the commonweal and to the economy. No one will dispute that the private sector is a creator of wealth and jobs, but its importance as a wealth creator cannot be viewed in isolation: teachers educate the nation’s workforce, and nurses and doctors treat employees who fall ill.
Mary Scanlon’s motion refers to “the burden” of pensions “on taxpayers”, but perhaps of greater concern is the growing burden of unemployment benefit as a consequence both of disastrous economic mismanagement by successive UK Governments, and of Tory cuts to public spending at any price to society. It should be clear to all public sector workers that only if they embrace independence for Scotland can they rid themselves for good of Tory dogma and of the slash-and-burn approach to funding our services.
I thank back benchers for keeping to the tight time allocations and I ask front benchers to do the same.
We move to closing speeches. Richard Baker has a maximum of four minutes.
11:23
As expected, the debate has been sharply polarised, but a number of speeches were thoughtful and persuasive. Hugh Henry described passionately and persuasively the flaws in the coalition’s policy and the Liberal Democrats’ unfortunate position as a human shield for the Conservatives in the exercise. We welcome Liam McArthur, who has joined us for the end of the debate, at least.
Neil Findlay talked about the importance of the changes to pensions and about job losses, to which I will return. I agree with a number of SNP members—Roderick Campbell, Paul Wheelhouse and Chic Brodie—that some changes threaten the sustainability of pension schemes that are otherwise performing well. That highlights the great flaws in the UK Government’s policies and proposals. However, I disagree strongly with Chic Brodie about what should happen on 30 November; we should ask trade union members what they want the Parliament to do on that date.
I take issue with the Conservative members who have defended the UK Government’s position. Let us be clear—the increased contributions will not go back into schemes to make them more sustainable, but will simply go to the Treasury. It is part of an economic plan by the UK Government that is failing to such an extent that even the International Monetary Fund has urged George Osborne to prepare a plan B.
For all the travails of the euro zone—which the UK Government now blames for the economic woes in this country—we in Scotland have one of the weakest growth rates, as does the UK.
The UK Government is making a cash grab from public sector workers, many of whom are poorly paid, which will mean another reduction in spending in our economy. It is quite clear that the Conservatives simply do not get it: their economic strategy is not working.
Of course, we agree with a number of points that were made by Scottish National Party members today. We appreciate that there are difficulties associated with delivering alternative approaches to pensions here—although it is in the gift of the Scottish Government to do that—but there are other aspects behind workers’ decision to take the action on 30 November for which the Scottish Government is responsible. Those include the extent of the job losses in the public sector in Scotland, the cuts to local government budgets, which will mean further job losses and—as we heard only recently—teachers having to purchase equipment for their classrooms because education budgets are being cut again due to the council funding settlement. The Scottish Government has made choices that are making life for public sector workers far harder. We urge the Scottish Government to make different choices that we believe will also benefit the wider Scottish economy.
Nevertheless, the content of the Scottish Government amendment is in line with our thinking on the pensions debate. We would have liked the chance to debate Patrick Harvie’s amendment, which reflects strongly our views on this important matter. Of course, we will not support the Scottish Conservative motion today. In failing to recognise the impact of the proposed changes to pensions on public sector workers, the motion—and that party—does not properly recognise the contribution that those workers make to our society and our economy. Although we hope that industrial action can yet be avoided through proper negotiations, the motion does not recognise their right and their need at this time to take proper industrial action to protect their rights to fair pensions and to protest against an economic strategy that is hurting them and families across this country. I moved the amendment in my name because we support the trade unions. We support the action on 30 November.
11:27
I thank colleagues for a lively debate on an important issue and I extend my welcome to Mary Scanlon in her new role.
The views of Conservative party colleagues are no particular surprise because, despite warm words and efforts to disguise it, those views seem still to be founded on the notion that the public sector is part of the problem, rather than an essential ingredient in achieving economic prosperity and social wealth, as Rod Campbell expressed well in his speech.
That is not the view of the Scottish Government. As Mr Swinney set out at the start of the debate, we recognise and are taking action on the importance of public sector reform. We are not shying away from the many challenges with which we are presented and which are made even more challenging by the financial constraints that have been placed on us by the UK Government, one half of which—the Lib Dems—was not here today to participate in this important debate, the subject of which is affecting many people across Scotland. The UK Government appears to be incapable of considering the economic damage that its policies are causing, or of changing its course.
We believe that such challenges are best faced in partnership and collaboration wherever possible—a point that Chic Brodie made. The best way to get the best results is by engaging and showing respect, not by diktat. On partnership working, we agree with what Richard Baker and Hugh Henry said in their opening remarks. Another area where we find agreement with Richard Baker is in his welcoming of the Scottish Government not doing to local government what the UK Government has done to us regarding local government pensions. That is welcome—it is better late than never, given the comments that his colleague Paul Martin made yesterday.
What we need—rather than a piecemeal approach—is a measured and coherent approach to public sector pension reform. That is the best approach for achieving potential once-in-a-generation changes.
Let me be clear: the Scottish Government is committed to public sector pensions that are affordable, sustainable and fair to public sector workers and taxpayers alike. We recognise that a case has been made for longer-term reform and we will consider that once we have greater clarity on the UK Government’s proposed reforms and their impact on Scotland. However, we will do that to a timetable that suits Scotland’s interests rather than those of the UK Government.
We think that it is wrong to increase public sector workers’ contributions to their pension schemes at this time and in this way. It is a naked cash grab that is geared towards reducing the UK deficit and will do nothing to address the sustainability or fairness of pensions over the longer term. We have made abundantly clear our principled opposition to the UK Government policy of increasing employee contributions at a time when public sector workers face pay freezes, significant increases in national insurance contributions, higher VAT and rising inflation and fuel costs.
In response, the Scottish Government is taking a number of positive steps to address the challenges: the living wage, no compulsory redundancies, the council tax freeze and the abolition of prescription charges are all policies to protect families and provide security at a time of uncertainty.
Given that the Government recognises the need for the long-term reform of public sector pensions, does the minister agree that they are not sustainable?
We believe that we have a once-in-a-generation opportunity to look at the matter as a whole instead of taking the piecemeal approach that the UK Government is taking, in which the unions are coming blind-sided into negotiation agreements.
The UK Government’s position is absolutely clear. Danny Alexander’s letter of 5 September confirmed that if the Scottish Government does not implement the increase in pension contributions, he will cut the Scottish budget by more than £100 million in 2012-13 alone, which is not a sustainable position. That would have a knock-on effect on Scottish public services, thereby making the necessary reforms much harder to achieve. Therefore, and regretfully, unless the UK Government can be made to think again we will implement the increases in pension scheme contributions for 2012-13 for the NHS, teachers, police and firefighters schemes.
Despite the announcement by the Chief Secretary to the Treasury of an improved pension reform offer on 2 November, we are concerned that the UK Government is taking a piecemeal approach to this significant issue. Not only has it introduced short-term contribution increases in a way that has contaminated discussions about longer-term reforms, but it also appears to be realising its policy proposals bit by bit. That is either a deliberate way of stifling debate, or it is evidence that the UK Government’s proposals are simply being made on the hoof. Indeed, if we look at the various twists and turns in the UK Government’s short-term proposals, it is possible to see a pattern that begins with a set of principles that are subsequently abandoned in favour of the bottom line.
In a very impressive speech, Marco Biagi noted that the approach that is being taken by the UK Government—its lack of meaningful engagement with others in terms of using the opportunity to look at pensions in the round—represents an opportunity lost.
Rod Campbell helpfully pointed out the gender concerns with regard to the pensions issue. His speech included some good points that were well made.
Paul Wheelhouse also made some excellent points and posed some pertinent questions that need to be addressed by the coalition Government. I look forward to hearing the Conservatives’ responses when they sum up the debate.
Although we can find common cause with the public sector on the short-term increases in contributions and can understand the frustrations around the proposals for longer-term changes, we believe that striking is the wrong choice. We will make a strong case as to why these clumsily handled reforms are wrong and we will send a strong message to the UK Government that it must think again.
11:33
It is not surprising that this has been a fairly highly charged debate. However, as Neil Findlay and Jamie McGrigor said, nothing should distract us from facing up to a hugely challenging issue. If politics is about anything, it is about the ability to make tough decisions, even if at times they are unpopular. We, on this side of the chamber, are certainly not going to apologise for measuring up to that challenge.
We should start from the understanding that there is clear cross-party agreement that the pensions status quo is not sustainable, especially in Scotland, where the public sector is a bit bigger than it is south of the border. There is a fundamental need for reform. Originally, it seemed that politicians on all sides had accepted the conclusion in Lord Hutton’s interim report of October 2010 that there is both a short-term need to address the pensions issue, resulting from the imbalance between the employer and employee contributions and the problem of an ageing population, and a long-term need to redesign the pension schemes completely so that they are less of a burden on the taxpayer and less open to the wide variations received by employees. There is both a short-term and a long-term issue.
None of us doubts the emotional context of the debate, nor the fear of some employees that the increased contributions that they will be asked to make will create difficulties for them in their personal financial decision making. However, I am afraid that I cannot accept Richard Baker’s assertion that the lowest-paid people will come off worst. The Westminster Government has given a guarantee that people who earn under £15,000 will not have any increase at all.
Nobody doubts that this is a difficult issue. However, to do nothing is not an option. That is why it is important to understand the facts as well as to appreciate the strong feelings.
Liz Smith says that the lowest-paid people are not getting a bad deal. Will she concede that she is comparing apples with pears and that the comparisons should be made with people who will be working up to the age of 68, as opposed to people who are retiring now at the age of 60?
Forgive me, but I think that there are two issues there. First, the assertion was made that we are not looking after the lowest-paid people. That is, frankly, not true. The minister is referring to a measure for change within the whole pensions structure.
The facts are important. The cash-terms expenditure on paying out pensions to public sector pensioners over the past 10 years has increased to £32 billion—no one needs to be reminded that that is roughly the same amount as the Scottish budget. Secondly, as Mary Scanlon rightly said, the taxpayer contributes three times more to an average civil service pension than the average private sector employee pays in to a pension. Thirdly, that average public sector pension remains at £5,600 a year, compared to only £3,900 in the private sector.
Despite some of the protestations in this chamber, we are clear that moving towards a career-average scheme would be fairer, as everyone would receive broadly the same amount for every pound that they contribute and it would guard against the risks that come from individuals jumping on to higher salaries in the later stages of their career.
We should not forget that that is also a logical step that is in tune with some of the greater flexibility that is likely to be a feature of future employment trends, similar to those that were described by Graham Donaldson when discussing the future of the teaching profession.
Could Liz Smith address an issue that troubles members on the SNP benches, which is that the short-term decision about increasing contributions has contaminated the ability to secure Lord Hutton’s well-argued case in relation to pensions reform? Does she not accept that the coalition has made a fundamental error in taking that approach?
All the Westminster parties are clear that there is a short-term need to deal with the funding of pensions, which we face because of the serious economic difficulties that we were left with by the Labour Party. However, there is obviously also a longer-term provision to change the structure. I make no apologies for raising both of those parts of the approach because, as Mary Scanlon pointed out earlier, we must ensure that the pensions system is not only sustainable in the long term but can deal with some of the difficult issues that we face just now.
I will finish on what is perhaps the most controversial issue of all: the impending strike action, on which there have been heated exchanges. No one doubts the difficulty that we face, particularly given the backdrop of tough economic times. No one doubts the strength of feeling on all sides. We respect that. That is why the Westminster Government has been at pains to have constructive engagement with the unions and why it saw the need to make a substantially improved offer. The negotiations are on-going and, as other parties have said, at Westminster and in this chamber, while they are on-going it is not appropriate for strike action to be taken.
It is incumbent on all of us to understand that, although feelings are running high, the problem cannot just be swept under the carpet. We must deal with it. We must confront it. We must get some kind of sustainability for the future.
I support the motion in Mary Scanlon’s name.
On a point of order, Presiding Officer. I understand that as a member of a small party I will not always be able to move amendments or to participate in debates. I respect the decision that was made, even though Liberal Democrat members chose not to take part at all.
However, given that I have been unable to participate in this debate, I must ask you about the discussion that will take place in the Parliamentary Bureau next week. I will have no representative during that discussion, and you are the only person who can represent the interests of all members. I ask for your assurance that you will represent the interests of members who wish to give the unions the support that they have asked for on 30 November and will make it clear to the Parliamentary Bureau that scheduling a debate that is specifically designed to exclude those members from debating this issue is not acceptable.
I thank the member for his point of order. I point out that the members who were called in the debate had all requested to speak in the debate before Mr Harvie did. There was simply not enough time, in what was a very short debate, to call Mr Harvie.
On the Parliamentary Bureau, it is open to the member to come and discuss that issue with me at any time. If he wishes to ensure that his views are represented to the bureau, I suggest that he write a letter to the members of the bureau so that they are made well aware of his concerns.