Local Government Pensions
The next item of business is a debate on motion S2M-4253, in the name of Colin Fox, on local government pensions. Before we proceed to the debate, I will allow a few moments for members to leave and enter the chamber.
As long as it is not part of my seven minutes, Presiding Officer.
No, it is not. Your seven minutes will start when I call you, Mr Fox. That is what we do in these circumstances.
The motion that is before the Parliament was passed unanimously at Labour's Scottish conference in February. I hope, therefore, that Labour members in particular will support their party policy today.
More than 1 million workers went on strike on 28 March in the biggest industrial dispute that Britain has seen for decades. They made clear to all their anger and determination to defend their pension rights from attack. I was on the picket line that day, as were all my Scottish Socialist Party colleagues. I also attended the Edinburgh strike rally. I congratulate all the workers across Britain who took part in that day of action. The Scottish Socialist Party stands proudly alongside local government workers in this dispute. I am grateful that it has been noted that the SSP is the only political party to back the strike, attend the picket lines and support the strike rallies.
The question that 1.5 million local government workers continue to ask is: why are our pensions under attack at all? The Government and employers argue that, as everyone is living longer and the baby-boom generation is soon to retire, we face a demographic time bomb and a pension fund into which too few people are paying and out of which too many people will take. Indeed, the recent report from Adair Turner proposed that the way around the problem is for workers to pay more of their wages into the fund, to work longer—perhaps to 68 or 70—and to expect far less of a pension in return.
The SSP rejects that proposition. We do not accept that the money does not exist to pay a decent pension to everyone when they retire. The local government pension scheme is perfectly capable of meeting its future obligations in Scotland. We also reject the notion that the reward for better health and greater longevity is that people work longer and expect less on retirement—when it finally comes. Perhaps uniquely in the debate, the SSP retains the view that the retirement age should be reduced, not increased. The best way for working people to celebrate living longer is to spend their retirement in dignity and free from poverty. That is what people want.
At every opportunity that is afforded to them, the Chancellor of the Exchequer and Labour members stand up and tell us that Britain is having the longest period of uninterrupted economic growth it has ever had. We can see clearly the signs that the rich and the wealthy are benefiting; those signs are all around us. However, Labour members cannot applaud record profits and economic boom only to turn round and say that the money does not exist for the poorest among us to expect even a meagre pension.
Frankly, the facts and figures do not back up the argument that Labour members make. Britain spends only 5.5 per cent of its gross domestic product on pensions, whereas the average across the European Union is 11 per cent. The average pension for a member of the local government pension scheme is £3,800 per annum. The average pension for working-class women, who represent the overwhelming majority of scheme members, is £31 per week, which is a ludicrous and scandalous sum of money.
I remind members that the state pension is £87 a week, which is just 20 per cent of average earnings. On the other hand, the average company director retires at 60—if not 55—and takes home a pension that is 26 times that of the average local government worker. Last year, the combined profit of the banks in Britain was £35 billion and the combined profit of the oil companies BP and Shell was £25 billion.
The cuts that Labour made to corporation tax resulted in an £11 billion loss to pension funds. The pension holidays that the top FTSE 100 companies took between 1988 and 2002 resulted in a loss of £28 billion from their pension funds. It is ridiculous to say that the money does not exist to pay for decent pensions or to allow people to retire at 60.
The mood of working people is angry and betrayed. They are determined to fight for what is theirs. I remind members that pensions were not granted by philanthropic Governments or employers; they were fought for and won by previous generations of working people. Indeed, in recent years, by not matching contributions, by abandoning final salary schemes and—in some cases—by bankrupting pension schemes altogether, employers have ratted on their side of the deal.
The issues at stake in the debate could hardly be bigger. The rule of 85 is not the real issue; in some ways, it is the thin end of the wedge. The Government is using a relatively unused clause of the local government pension scheme as a precursor to wider attacks on pensions. It is iniquitous that local government pension scheme members are being denied the right to retire at 60 when that right is afforded to teachers, civil servants and other public pension scheme members.
The Scottish Executive has said that the legal advice that it has been given is that the rule of 85 contravenes European law. I ask the Executive again—as many members have done recently—to put into the public domain today the advice that it was given. The Executive's argument is nothing more than a fig leaf to cover its intention to make further attacks on local government pensions.
The political choice on the matter is clear: it is a question of whether current pension rights are honoured and we go forward to improve them, or employers rat on their obligations and take away from working people that which they have worked for and earned.
Some on the right pour scorn on the pension rights of local government workers, and say that those rights are better than those of private sector workers. The people who bleat the most tend to be company directors such as Digby Jones, the director general of the Confederation of British Industry, who will retire at 60 with a half a million pound pay-off and a £90,000 pension. That is utter hypocrisy.
Workers in all sectors deserve better pensions, and I remind them that we get nothing in this life without fighting for it. The lesson from local government workers' pensions for those who do not have similar schemes is that workers should join a union and campaign to retire at 60 and enjoy a full and decent retirement.
The Scottish Socialist Party rejects new Labour's manifesto of pay more, work longer and expect less in return. We support index-linked pensions and a £150-a-week pension for all now, rising to two thirds of the average wage. The Scottish Socialist Party hopes that a negotiated settlement that is acceptable to union members can be agreed in the dispute, but it must meet certain demands, maintain the right to retire at 60, not reduce the present pension rights and address the diabolical level of pensions that are paid out to the vast majority of local government pension scheme members.
I move,
That the Parliament notes with concern the Scottish Executive's announcement on 17 January 2006 to abolish the Rule of 85 for members of the local government Pension Scheme (LGPS) in Scotland; recognises that the proposed changes will have a detrimental impact on many working people who support vital public services, often on low wages, in a wide range of occupations in Scotland, including workers in local government, the Environment Agency, police support, cleaning and waste companies, the voluntary sector, bus companies, higher education and others; notes that this decision means that LGPS members are denied the same rights and protections as members of other public sector pension schemes which have agreed to allow retirement at the age of 60 on a full pension; further notes recent comments made by EU Commissioners on this issue indicating that changes to the Rule of 85 would not necessarily be a requirement under EU legislation and previous assurances given to COSLA and the relevant trade unions that the Rule of 85 for members of the LGPS in Scotland would be retained; recognises that members of the LGPS contribute to the scheme and want to ensure that there is a viable and sustainable future for it; further recognises that the financial standing of Scotland's LGPS is significantly healthier than schemes elsewhere in the UK and therefore calls for a distinctive approach, and further calls on the Executive to review and publish its legal advice regarding the Rule of 85 and to work with trade unions and COSLA to find a settlement which protects local government workers' pension rights.
The debate provides a welcome opportunity to set out once again the Executive's position on our legal obligations under European law and our strong desire to ensure that local government workers receive fair and equitable treatment. It also provides a welcome opportunity to repudiate the carpetbagging nonsense that we have heard from Mr Fox. Money is not the driver. Why would it be the driver for removing what Mr Fox has just described as a little-used benefit? The firm legal advice that is available to us, which we have tested extensively, tells us that the rule of 85 in the local government pension scheme breaches the European directive on equal treatment in employment and occupation. Without the European directive there would be no legal impediment to keeping the rule.
Will the minister give way on that point?
Not at the moment.
It would be easier if the legal position were different. We are fully aware that it creates an anomalous situation for some local government workers, particularly when compared with recently negotiated conditions in other public sector pension schemes. I have said previously and I say again that we are earnestly seeking a fair and equitable solution that will stand up to legal challenge. If we simply sought a quiet life or popularity, we might prefer to ignore the legal advice and do nothing. However, to do so would mean, in our view, that local government workers who felt that their position had been protected would be vulnerable to a legal challenge that would effectively strip away the rule of 85. We are not prepared to mislead, be disingenuous or ignore our legal obligations in the interests of short-term popularity.
Does the minister accept that the directive contains a number of provisions to exempt particular pension schemes? Does he not consider that paragraph 5(1) of schedule 2 to the consultation draft of the Employment Equality (Age) Regulations 2006 would provide an exemption because it deems different approaches on age and length of service to be permissible under the directive?
I am aware of various articles of the directive and appreciate the fact that Mr Swinney draws it to our attention. It is clear that our legal advisers are equally aware of those articles. So far, we have not been able to provide a legal solution that allows us to apply a derogation that our legal advisers believe would stand up to legal challenge. I stress again that we do not want to give local government workers the impression that we have found a solution when, in reality, the solution would be subject to legal challenge and they would ultimately lose their position in any event.
The Scottish Executive is as committed as the trade unions and the employers—the Convention of Scottish Local Authorities—to negotiating a new local government pension scheme from 2008, and we are clear about our aims. First, the scheme should be sustainable and affordable. Secondly, and just as important, it should focus more directly on improving conditions for women and lower-paid workers. I have instructed the officials of the Scottish Public Pensions Agency to work closely with the trade unions and the employers in the tripartite group to seek a solution on which local government workers can depend. The next meeting of the tripartite group is tomorrow.
The minister says that he is earnestly seeking an honest solution to the dispute, which everybody welcomes. Will he guarantee that the honest and earnestly sought solution will seek to protect the local government workers' current pension rights, which are at the centre of the dispute?
That is, of course, exactly what we are trying to do. I have already made that perfectly clear. In case it was not picked up, I will say it again: without the European directive there would be no legal impediment to retaining the rule of 85, but the directive exists. The rule applies only to a relatively small number of people whose age and service combines to reach a total of 85. However, the directive removes that condition. We are aware that that is an anomalous situation. We have acknowledged that publicly and I am happy to do so again. We are searching for a solution and will continue to do so.
We know that there are differences in legal opinion and I have instructed my legal team to explore them actively. I have made it clear to our officials in the Scottish Public Pensions Agency that we need a Scottish solution and that that solution should happily and most desirably conjoin with any United Kingdom solution, but it does not necessarily have to do so.
I am pleased that tomorrow's meeting will take place against the background of the suspension of industrial action. I urge trade union leaders to convey to their members that an earnest and sincere search is going on in Scotland to find a solution—which we would like to find sooner rather than later—but also to bear in mind that the directive will not take effect until October 2006.
I assure the employers, the trade unions and, most important, the local government workers that we will use the coming days and weeks to work closely with the employers and the trade unions to find a solution that is fair, equitable and legally robust.
I move amendment S2M-4253.1, to leave out from "with concern" to end and insert:
"the current issues surrounding the future of the Local Government Pension Scheme (LGPS); recognises that these issues will impact on a wide range of public sector workers; recognises that members of the LGPS contribute to this scheme and want to ensure that there is a viable and sustainable future for it; notes that the correct manner for dealing with the consequences of any changes to the LGPS, or any disagreement in legal opinion in respect of it, is through open and fair discussion with trade unions, employers and the Scottish Public Pensions Agency, and therefore welcomes the decision of the trade unions to suspend strike action as a result of the constructive dialogue which is currently taking place."
The minister said in his speech that he was committed to finding a negotiated solution. I welcome those remarks and the fact that the discussions can take place without the threat of strike action, but the minister's interest in a negotiated solution was not apparent when he answered Carolyn Leckie's parliamentary question on 17 January and unilaterally announced in the middle of a negotiation that involved all parties that the Government's view was that the rule of 85 had to be abolished. It did not strike me as sensible and measured negotiation for the Government to announce halfway through a dialogue with various parties that it had come to a conclusion that was not to the liking of the trade unions.
This might strike some people as pretty obvious, but it was impossible to begin negotiations to try to find a replacement for the benefit until we had declared our intentions. Therefore, we declared our intentions with the sole aim of moving on to negotiate some form of replacement for the rule of 85 for local government workers.
Mr McCabe makes my point for me. The Government had concluded that the rule of 85 was all over and done with, but I do not take that view. If we have an issue with the rule, we should not discuss its replacement with trade unions, but should discuss with the European Commission whether there are issues with the rule of 85 that have to be addressed. We should not hoist up the white flag and say that it is all over and that we have to abandon the scheme.
The minister said that he must have a robust solution that is not vulnerable to legal challenge. He is right, but there is a fine line between those careful remarks about ensuring that we have a robust legal position and scaring people that if they defend their existing pension scheme arrangements in the rule of 85 they might be legally vulnerable in future.
There are competing legal opinions on the subject. In my intervention on the minister, I cited paragraph 5(1) of schedule 2 to the consultation draft of the Employment Equality (Age) Regulations 2006, which would provide for different pension schemes for employees of different ages and with different lengths of service. If the rule of 85 is not about that and if paragraph 5(1) would not encompass it, I do not know what the exemption is designed to achieve. The Commissioner for Employment, Social Affairs and Equal Opportunities, Mr Špidla, pointed out to my colleague, Ian Hudghton MEP:
"Article 6(2) of the Directive allows Member States to provide that the fixing for occupational pension schemes of ages for admission or entitlement to benefit "
on the basis of age and length of service
"does not amount to discrimination on grounds of age."
That comes from a European parliamentary answer given by a member of the European Commission, which I would have thought is fundamental to our discussion.
Some weeks ago, the minister was quoted—sorry, I should not say that the minister was quoted, but what he said did lead to a front page headline in The Scotsman that read "McCabe folds on pensions". That was a rather ungracious headline, but the article included the interesting comment that the minister was seeking a derogation from the directive to preserve the rule of 85. Unless I have missed something in the letters pages of The Scotsman, that line has not been corrected by the minister. On 30 March I asked the First Minister whether the Government was seeking a derogation. I hope that Mr McCabe or Mr Lyon, if he is summing up, will be clear about whether the Government is seeking a derogation or whether the position that Mr McCabe outlined is the case—that is, that the Government does not support the rule of 85 and thinks that we have to work on something else.
I would love to take an intervention, but the Presiding Officer would probably contemplate throwing me out, and not for the first time.
It is important for the minister to confirm whether the Government is seeking a derogation. If it is, we are making genuine progress. There may be ways of preserving what I think is an important element of the local government pension scheme.
As Colin Fox rightly said, relatively few people are affected by the change, so we have to ask why we had a strike. The answer is that the unions and people who work in local government find it difficult to get ministers to address the issues about which they feel strongly. I simply say—and I have said it before—that I do not think that the minister has done the Executive any favours in his handling of the situation, which has caused grief and distress to many people who are dependent on public services. They are the innocent victims.
The minister's amendment states that he is looking for
"a viable and sustainable future"
for the local government pension scheme and that he wants an
"open and fair discussion".
If that is the case, why on earth was there apparently a unilateral decision by Government to change the rules without any such discussion? I hope that the minister will answer that question.
I point out to the member that the question of the rule of 85 was first mentioned in a consultation document in 2004.
In that case, perhaps the minister will tell us what progress he has made with the discussions in the time leading up to today, but that is another point, presumably.
Sustainability is the issue, but of course it is not just the Scottish Executive and local government that are having difficulties with pensions. The chancellor, Gordon Brown, has attacked both public and private sector pensions annually to the tune of £5 billion or so. Many unions have pension schemes that are managed by the City and they have been attacked. It is almost as if the Labour Party—both south of the border and in Scotland—is unwilling to help people to look after their future concerns when they retire and to have some comfort to look forward to.
The minister dealt with the legal position, although it would have saved some angst if he had said what he said a wee bit earlier. It is interesting that 29 members signed Janis Hughes's motion on the local government pension scheme, which also called for
"open and fair discussion with staff"
and called on the Scottish Executive
"to initiate urgent discussions with COSLA and the relevant trade unions to achieve a solution agreeable to all."
Of the 29 members who signed the motion, 24 were Labour members. That shows that Labour members think that the handling of the matter has not been terribly clever.
I am not going to score brownie points against the minister, because we agree that any pension system should be fair, understood, agreed and sustainable, whether it is in the public sector or the private sector. It is important that we look to the future. We have to address the fact that we have an aging population. We have to ensure that people have some dignity when they retire and that people can expect that their savings will be worth something when they retire. If people contribute to a pension, they have a right to expect that their share of the pension fund will be sustained.
I hope that the minister meant everything he said about sustainability. If that is what he is seeking to achieve, we support his position. Equally, however, we have to consider who pays for local government pensions. The council tax payer is being squeezed badly every day of the year by the Scottish Executive, with huge increases in council tax. Will council tax payers pick up the cost of any changes to the pension scheme? It would be helpful if the minister explained when he winds up how pensions will be funded in future.
I am grateful to the unions for taking the sensible stance of saying that they will not strike in the meantime but will get around the table. I encourage the minister to join them.
Before I arrived in the Parliament I did not fully appreciate the meaning of the phrase "the luxury of opposition". However, we have a prime example of it this morning. The SSP motion might have been intended to grab a headline or two, but the negotiating moves by the unions and by local and national Government both north and south of the border have left the motion providing little more than the proverbial chip-wrapping paper, which is where all yesterday's news ends up.
As far as the Liberal Democrats are concerned, we need to stay within the law in dealing with the rule of 85. As the minister stated, doing otherwise could expose employees to financial claims. A legal challenge to the directive is being considered in England and, if it is successful, we will support the outcome. At the same time, the Liberal Democrats support the Scottish Executive's moves to resolve the issue with a Scottish solution through constructive dialogue. That includes consideration of the best way to introduce transitional protection measures. Despite facing bigger financial hurdles down in England, Richard Kemp, the leader of the Liberal Democrat negotiating team there, stated last week that he was sure that there could be a successful outcome to the negotiations that recognised both the increased longevity of staff and the rights of LGPS members.
It is important not to get the rule of 85 out of proportion. Although there are many thousands of people in the scheme, most of those who take early retirement do so under restructuring or early retirement packages. As other speakers have said, the rule is little used. In Scotland, figures for the past five years show that less than a quarter of employees leaving local authorities accessed the rule of 85.
I am sure that Labour members will be interested to know that the member thinks that a Labour party motion is chip wrapping, but they can take that up with him. There is little evidence that members understand the effect of abolishing the rule of 85, which will remove local government workers' right to retire at 60 on their full pension. If the Executive's proposals stand, they will lose a third of their pension. Does Mr Arbuckle support that?
That was a premature intervention, if I may say so. I will come to that point.
We should remember that the rule of 85 is divisive. I would have thought that the SSP in particular would have recognised that in its motion. In its current state, the rule discriminates against many people, especially women who have had breaks in their working life. The exclusion of part-time workers from the local government pension scheme until 1993 was also divisive. One pension holder in five suffers because of a broken work record.
Today's debate is part of a much bigger unsolved problem with pensions that the UK Government—for whatever reason—has not yet dealt with fully. At Westminster, the Liberal Democrats' pensions spokesman, David Laws, referred to that two months ago when he described the UK Government's attitude to pensions as a "dog's dinner". I agree with his view that there needs to be a coherent and comprehensive policy on long-term pension reform and that it should be introduced as quickly as possible. Any delay in putting through properly costed reform of pensions would be unfair, not only to those who are on the brink of receiving their retirement payments but to those who have to pay for them.
We move to the open debate. I want to fit everyone in, so each speaker will have a tight four minutes.
We are debating an important issue. The solidarity that the local government workers who went on strike on 28 March showed is testament to the strength of feeling about the matter. The strike reached into all parts of Scottish life and I am sure that every one of us felt its effects in some way. It reminded us how vital the workers who are involved are. A decision to strike is never taken lightly, particularly when many of the workers involved have low-paid jobs.
As Mr Davidson kindly reminded us, I lodged in January a motion that called on the Executive to initiate urgent discussions with COSLA and the trade unions to find a solution to the pensions dispute. As he said, that motion attracted widespread support from across the parties and showed the level of support for such discussions and for finding a satisfactory solution to the problem.
As I said, many local government workers have low-paid jobs, and the salaries of many are less than they would be entitled to expect in the private sector. The local government pension scheme has often been held up as an incentive for people to stay in public service when they could easily find more financially rewarding employment elsewhere.
The scheme covers far more people than just those who work directly for local authorities; it includes police support staff, higher and further education staff and staff in the community and voluntary sector. It is particularly hard for members of the scheme to accept that they will no longer be protected when they consider the agreement that was reached last October to protect other public sector workers. I accept the need for serious pension reform, but it is unfair that employers should be able to move the goalposts after an employee has started to pay into a scheme without putting in place another mechanism.
I worked in the national health service for 20 years and I will be entitled to an NHS pension, which is protected. That is not the case with local government pensions, which is surely wrong. It may be true that the rule of 85 has not affected many people in recent years, but it is unfair to change the provisions of the scheme for those who have already signed up without providing alternative provision. For those reasons, I support local government workers on the matter.
However, as today's debate takes place precisely when delicate negotiations are being undertaken, it is unhelpful. Of course I have every sympathy with the issue at stake, but the best way at this time to find an agreeable long-term solution is through negotiation. Resolution will be achieved only by all the parties involved reaching agreement, not by any discussion in the Parliament.
Will the member take an intervention?
No. We have already heard from Colin Fox.
The minister said that he has worked with and listened to all the parties involved in the argument. I sincerely hope that he continues to do that. Only by continuing dialogue and meaningful negotiation will a solution that is acceptable to all be achieved. I sincerely hope that that happens sooner rather than later, as the minister said. I welcome the trade unions' decision to suspend further strike action in the meantime.
A public debate about pensions in general is taking place. Some people have erroneously tried to draw a distinction between circumstances in the private sector and those in the public sector. Public sector pensions are there to be defended and it is right to defend them. Members of such schemes contribute towards their pensions.
Colin Fox was a little wide of the mark when he referred to private companies' profits. If private companies made no profits and dividends were not paid into pension schemes and capital values did not increase, schemes would be in crisis, so profits are required.
Will the member take an intervention?
Colin Fox has had his opportunity to speak.
The local government pension scheme is real, unlike the NHS pension scheme, to which Janis Hughes referred, which is paid for from current revenue and not from investment in funds. In that sense, there is a distinction between public and private sector pensions. However, the local government pension scheme and several other public sector pension schemes are real pension schemes in which people invest money for their future. That money is invested in Government stocks and in the stock market, so we need a successful economy to maintain those schemes.
The health of pension schemes north and south of the border could be different for a variety of reasons. However, all schemes have been exposed to Gordon Brown's raids through taxation changes. Local authorities north and south of the border might have taken different pension holidays—perhaps the deputy minister could advise us about that. Private pension schemes have suffered because companies took pension holidays and failed to contribute when stock markets and dividends were high; at least part of the pensions problem results from that. The other main cause of the problem is that Gordon Brown has chosen to have an on-going raid on the pension funds for all our futures.
I am concerned that we have missed an opportunity to engage with European Union law. I would like the deputy minister to give us a clear-cut answer on whether a derogation for the rule of 85 has been sought from the European Commission. That deserves a clear-cut answer of yes or no. If the answer is yes, unanimous support will be given. If the answer is no, we will be extremely disappointed and we will have to divide, perhaps unnecessarily.
Failing to engage properly with the processes that relate to directives from the European Commission ill behoves us all. The issue should have been spotted in advance and we should never have reached the current point. I do not believe that anyone who is involved in the tripartite talks wanted to reach this point. Had we been more aware of what was coming from the European directive, it could have been headed off. We all need to engage with the stuff that comes out of Europe, because it has consequences, which are often unintended.
Public sector workers have never expected high wages, but they do expect their pensions to be safe. Local government workers were therefore right to be outraged by the proposal to scrap the rule of 85 and give existing LGPS members only limited protection. Members of the pension scheme faced having to keep working until they were 65, even though they had paid the required proportion of their salary into the scheme and planned for their retirement for years.
It is hard to imagine the Executive making a bigger mess of things. First, as we have heard, it sabotaged on-going negotiations between COSLA and the public service unions by stating that the rule of 85 would be scrapped and insisting that it had no choice under EU law. If that is the case, why did Katharina von Schnurbein, the EU spokeswoman on employment, social affairs and equal opportunities, state categorically that the LGPS's existing terms were entirely compatible with the proposed directive on equal working conditions?
As has been said, we have seen probably the biggest single-day strike since 1926. The Executive went into back-flip mode and claimed that it would seek a derogation from a law that I would say is in no danger of being broken. The Executive's behaviour from start to finish has been a humiliating farce. The Executive must commit to supporting decent pensions for local government workers and to preserving their rights and their flexibility to take early retirement.
As we have heard, the debate must be seen in the context of wider pension issues and the erosion of pensions in the public and private sectors. The Blairite agenda has been to push people towards greater individual reliance on the vagaries of the stock market. That gambles with people's futures. We have seen the impact of the stock market's recent poor performance on individuals who are retiring, the impact of Equitable Life's performance and the high-profile collapse of several company pension schemes. That we still allow businesses to gamble with their employees' pension funds seems to be inconceivable, but time and again when a business goes bust, the pension scheme goes with it, leaving workers high and dry after many years of paying for their retirement. The ghost of Robert Maxwell still seems to haunt British boardrooms. That is why it is important for the state system to remain the bedrock for pensions in this country despite the attempts of successive Governments to whittle it down and undermine it.
Our current state pension scheme is based on the system that was established in 1911. It is therefore time to rethink what we are doing. We no longer live in a world in which there is full employment for men and in which women tend to stay at home. In 1911, life expectancy at birth was 51 for men and 55 for women. We still base our pension scheme on those assumptions.
Andrew Arbuckle was right to say that it is time to grasp the nettle and implement proper pensions reform. We need to introduce a citizens pension as the first stage towards having a general citizens income for all. We must get rid of the complex means-testing morass of the state pension scheme with its in-built discrimination against couples, disincentives to save and failure to maintain living standards. I look forward to the day on which this Parliament considers how we can introduce a pension scheme that is fit for the future in place of a scheme that is based on decisions that were taken in 1911. That is what we owe pensioners for the future.
Like many members, I think that we would be doing a great disservice to our constituents who are members of the local government pension scheme if we did not seek to form a cohesive vision of the way forward. Members have made some suggestions, but we should also take into account the skills of many shop stewards in the trade union movement and ensure that there is co-operation with the tripartite group to which the minister referred.
I have reflected on the representations about the loss of service conditions that various unions have made. I have been a member of the Labour Party for 23 years, since I was 16, and am proud that we have ensured that conditions have been taken into consideration over the years. I always respect the rights of individuals to make representations to their elected members. Many of us have received representations on the issue that we are discussing and we should give measured consideration to those representations as well as show leadership.
Since members of the Scottish Parliament were sworn in on 6 May 1999, the issue of compliance with European law has touched the Parliament in many areas—it has affected fishing quotas and housing issues, for example. However, too often, some members think that only the Executive is responsible for considering compliance with European law. All of us must ensure that such compliance is considered. Members have said in the chamber that we should ignore compliance with European law. Some have said that they do not care about it in the first place. Some have said that they do not want to be part of the European Union and that we simply should not care about compliance at all.
Paul Martin and I are members of the Local Government and Transport Committee. Does he agree that compliance with European legislation on the provision of lifeline ferry services has been damaging to the people of Scotland?
In the minutes that are available to me, I will focus on the local government pension scheme; Tommy Sheridan and I can discuss the issue that he has raised when there is an opportunity to do so in the Local Government and Transport Committee. We should not ignore whether we are complying with European law, but a wider debate on compliance is needed. We should reflect on issues relating to compliance after the debate.
I welcome the fact that the minister has committed himself to having an open dialogue, but members seem to be concerned when we discuss the possibility of reforming the local government pension scheme. I am not frightened of reform. It would be interesting to find out how many of my constituents have benefited from the rule of 85. Not many directors of education or people who are on salary scales that have led to their benefiting from the rule of 85 live in Glasgow Springburn. I would welcome reform of the rule of 85 and the involvement in that reform of domestic assistants and the many other workers in my constituency who have not benefited from the rule of 85. We should not be frightened of reform.
Will the member take an intervention?
I do not have enough time.
In conclusion, I am proud of my party's links to the trade union movement, which will continue. We have delivered the minimum wage, which was a pipe dream for many union members over the years. I assure union members that we will work closely with them and that we will ensure that Executive ministers work closely with them to resolve the issue.
It goes without saying that pensions are an extremely important and emotive issue, so it is hardly surprising that the trade unions have been concerned about events in the past few months. However, it is important to keep the matter in perspective. Tom McCabe was correct to say that the number of people involved is quite small. In Glasgow, for example, only 51 people in a local authority that employs 36,000 people have sought early retirement since 2001. That said, it is understandable from the trade unions' perspective that, as people wish to retire earlier and the age make-up of the population changes, there should be concerns about changes. I understand the concerns that COSLA and the trade unions have expressed.
The minister has brought some difficulties on to his own shoulders. His somewhat abrasive negotiating style has certainly not helped. In turn, he might think that the matter has been complicated totally unnecessarily by the actions of his colleague down south, the Chancellor of the Exchequer, who, as Brian Adam properly pointed out, has made a sustained and prolonged raid on pension funds that has removed from them some £38 billion. That is profoundly unhelpful.
Andrew Arbuckle was correct to say that we must consider pensions overall because pensions will become an increasingly important issue in the years ahead. There seems to be a lack of political will to face up to what the problems are likely to be.
I am familiar with the local government pension fund because one of my duties in Glasgow City Council was to sit on a committee of three that administered the Strathclyde pension fund. I assure members that the responsibility that was involved was heavy. Mark Ballard seemed to suggest that we should abolish the stock market. I assure him that the decisions that were taken on stock market investments were taken after the deepest consideration, because such decisions impact heavily on the lives of many people whose means in retirement will not be significant. There are issues in that context. It is clear that we must be careful.
Tom McCabe was correct to say that considerable legal complexities are involved. Notwithstanding the comments of the estimable Frau von Schnurbein, the issue is not simple. The Executive is correct to want to seek its own legal advice and we look forward to seeing what is determined, as it is vital. It would not be proper to do anything today that is likely to pre-empt the results of that inquiry.
In the end, we need a scheme that is fair, sustainable, affordable and not likely to cause us difficulties with the European Commission as a result of breaching European rules. We support the Executive's amendment.
Paul Martin made the important point that compliance with EU directives is an issue for all of us. It is not just for the Government but for all members to exercise our responsibilities properly. The directive in question emerged from the European Council on 27 November 2000, so we cannot blame Westminster for the current situation; it was our responsibility to scrutinise it. I would prefer us to be sitting on the European Council and putting a Scottish voice from a Scottish perspective into the discussions rather than relying on the United Kingdom Government to do that.
That brings me to Andrew Arbuckle's comment that the UK Government is making a dog's dinner of pensions issues. As the Executive's approach is exactly the same as that of the UK Government on the local government pension scheme, I assume that the Executive's position is, similarly, a dog's dinner in Mr Arbuckle's view. If it is not, that will be another case of that terrible word that begins with H and ends with Y in which Mr Arbuckle is such a specialist, especially on the issue of Tay road bridge tolls, to give another example.
Janis Hughes made an important point of principle on pension matters, which is a substantial point on which we must reflect in our discussions. When an individual contributes to a pension scheme, we cannot change the basis on which that contribution is made without an appropriate transitional mechanism and due support for the arrangements to which that individual has contractually signed up. I have some experience of the subject from my former employment, and I believe that any private pension company that decided unilaterally to change the terms of somebody's pension entitlement would be condemned by every political party in the Parliament for breach of the terms and conditions of the contract into which the individual had entered. Therefore, I do not think that it is reasonable for the Government to take an approach that undermines the basis on which an individual has signed up to a certain pension scheme.
Mark Ballard referred to the comments that were made by the EU spokesperson on 22 January. She said:
"The directive has no influence on pension value or pension age. It is completely up to the member state. If they think it is reasonable for people to retire at 60, under EU law that is perfectly legal."
I accept that that is not a detailed legal opinion, but there are plenty of detailed legal opinions that support the point of view of the EU spokesperson. In the interests of open scrutiny of this point, we need to see all the legal opinions on which the Government is relying. If it is possible for the Attorney General to publish perhaps the most significant legal opinion of all time, in relation to the decision to go to war with Iraq, it is important that we have at our disposal the legal opinion on this issue, which is important to the members of the local government pension scheme albeit that it is of a slightly different order to the war in Iraq.
In the parliamentary answer that I quoted earlier from Mr Špidla of the European Commission to my colleague Ian Hudghton, the commissioner said:
"The Commission has had no meetings with the Scottish Executive on the ‘85 year rule' … nor has it had any contact with members of the Scottish Executive on this matter."
The sooner that the Scottish Executive starts talking to the European Commission about the issue in detail, to protect the interests of the members of the local government pension scheme, the better. The approach that has been taken by the Government is cack-handed. There needs to be a reasoned negotiation based on open dialogue, with the publication of legal opinions. We must have swift action from the Executive on that point.
This is an extremely important debate about the future of local government pensions and the rule of 85 in particular. That has been reflected in the serious speeches that have been made in the chamber this morning. As David Davidson rightly said, this is not a subject for scoring brownie points on; it is far too serious for that.
As Tom McCabe stated in his opening speech, if we simply sought a quiet life or popularity, we could ignore our legal advice and do nothing, in the knowledge that local government workers who felt that their position had been protected would still be vulnerable to a legal challenge that would, effectively, strip away this condition. That is not a position that any responsible Government or employer could adopt. That is why we are striving to find a fair, equitable, sustainable and legally robust solution to the problem.
Will the minister take an intervention?
I must make progress. Many important questions have been asked by members, which I hope to address.
I stated earlier that the firm legal advice that is available to us, which we have tested separately in Scotland, tells us that the rule of 85 in the local government pension scheme breaches the European Commission's equal treatment in employment and occupation directive. The current rule of 85 provides for some members to retire with an unreduced pension before their normal pension age. The factor that decides who can access that benefit is a combination of age and service; hence, if there were two members who had given exactly the same service, it would be solely their age that would determine which one qualified under the rule. That is where there is a slight difference from the arguments that have been put forward about other schemes. It is a separate issue. It is not about money; it is about dealing with the way in which the rule works.
In his opening speech, Mr Swinney asked why we are not using derogations and quoted one from the directive. We acknowledge that the directive already contains certain exceptions, which are otherwise known as derogations. That is what John Swinney alluded to. We have always said that we are looking for ways in which those exceptions can be used to allow transitional arrangements to be put in place to give protection to members. We have to justify the use of them objectively, but members should be assured that we are seriously considering the use of those exceptions, or derogations, in order to come up with a sustainable solution.
Brian Adam asked about the state of the local government pension scheme in Scotland. It is in a healthy state, as local authorities up here did not take pension holidays.
Both Janis Hughes and Paul Martin made strong speeches about the need for protection. Paul Martin made an important point about compliance. I take it that members from most parties will agree that compliance is an issue that we need to take seriously and work towards. That is why we believe that there needs to be a change to the scheme and why we are committed to working with the trade unions and the Convention of Scottish Local Authorities to negotiate a new local government scheme from 2008. The Scottish Public Pensions Agency is working closely with trade unions and employers to seek out a solution, and the next meeting of that tripartite group takes place tomorrow.
We are aware that there are differences of legal opinion and our legal team has been instructed actively to explore those. It has also been made clear to officials that this is a Scottish initiative. Although it would be preferable if it was aligned with a UK solution, it does not necessarily have to be that way.
I welcome the fact that industrial action has been suspended. That will allow breathing space for the serious negotiations to take place. I am sure that all members hope that a successful outcome can be achieved. Ministers have been in constant dialogue with the trade unions and COSLA for some time in seeking solutions and they stand by to continue those discussions.
Ministers are acutely aware of the genuine concerns of local government workers about the future of their pension scheme. We are also aware that, as a responsible Government, we must have regard to our legal obligation to comply with European law. We are committed to finding a solution that is both sustainable and affordable, and which focuses more directly on improving conditions for women and low-paid workers.
It is appropriate to remind members what the debate is about. It is not about fetishistically hanging on to a particular rule; it is about protecting the rights of local government pension scheme members and the financial package to which they are currently entitled. The fact is that the Executive has unilaterally announced a breach of those scheme members' contract and a diminution of their rights and entitlements without their consent. They may agree to a change in their contract, but it is up to them to do that in advance of any such change. It was inappropriate of the Executive to announce to Parliament through an answer to a written question from me that it intended to abolish the rule of 85. At the same time, the Executive was in tripartite negotiations but was not telling the unions. That is outrageous.
Let us remember what the decision is about—it means that the right to retire at 60 with full pension entitlement under the rule of 85 will be removed. That will mean the loss of a third of a pension. Given that the average pension of a woman in the local government pension scheme is only £1,600, she will lose a significant amount of money.
I say to Andrew Arbuckle that the solution is not to accept a diminution; the solution is to make the deal better. The test of any solution that the Executive, or the Westminster Government, proposes will be the value of the alternative to every member of the local government pension scheme. Do the Governments propose to reduce the overall value of the scheme? Will the value stay the same, or will it increase? It will need to increase if it is to address the discrimination that women face—that is the only solution that will address the problem. Alternatively, is it being argued that some of the value of the scheme to members needs to be lost in order to equalise it? If that is the case, those making that argument should be honest about it. I do not want to equalise people down; I want to equalise them up.
What about the people who say to local government workers that we cannot afford the current provisions of the scheme? The minister used in his motion the words "viable" and "sustainable", but that makes me very suspicious. We do not hear the words "viable" and "sustainable" in relation to the MSP pension scheme. After just eight years' service, we are entitled to £8,000 a year. We do not hear those words in relation to the pension scheme of members of the UK Parliament, but the taxpayer bailed them out of a deficit after which they took the opportunity to increase their rights and entitlements. We do not hear those words in relation to the pension of I'm all right Jack, the First Minister, who is guaranteed 45 grand a year even if he is kicked out next week. We do not hear those words in relation to company directors who are paid 45 times more than their staff. Let us get real about those people's pensions and start talking about what is viable and sustainable about their packages. If those kinds of pension rights and entitlements are good enough for them, they are good enough for local government workers and for all workers in the private and public sectors. It is disgraceful to argue that the local government pension scheme for low-paid workers is not viable or sustainable.
Westminster MPs argued that their pension scheme needed to be retained because the precarious nature of the average parliamentary career meant that they deserved a better pension deal. With that sort of cheek and hypocrisy, their careers are not precarious enough.
This situation is about the political will to make priorities. Do we pay for pensions and workers or do we invest £25 billion to develop a new Trident or, as the Labour Government has done, spend £11 billion to give pension tax relief to the richest 10 per cent of the population?
When the argument turns to life expectancy, we all know that actuarial reports are based on English and not Scottish life expectancy. Unfortunately, we die younger in Scotland, so those reports make the Scottish pension scheme even healthier than the healthy state in which it is already reported to be.
The smaller someone's pension, the earlier they die. That is just not acceptable. Unfortunately, that means that because of the rights in Jack McConnell's pension scheme, he is likely to live as long as Methuselah.
Let me make a correction. The Government and the taxpayer would be worse off by £2 billion without the existence of the local government pension scheme and the contributions of its workforce. So why are we hearing those words "viable and sustainable"?
This whole episode and the spurious arguments made by the Executive to justify what is being done are the worst example of the Executive kow-towing to Westminster come what may. I might be more persuaded of its concerns about forms of discrimination if it spoke out and paid up to women who have been denied equal pay and to young people discriminated against by the minimum wage legislation, or if it stood up to Westminster against discriminatory asylum and immigration laws. The Executive's protests are a bit rich.
The Executive has got its knickers in a twist over the abolition of the rule of 85. COSLA and Unison are prepared to publish their legal advice, which contradicts the Executive's assertions, but the Executive is not prepared to publish its legal advice. The Under-Secretary of State for Trade and Industry helpfully makes explicit statements to Parliament on the EU employment directive and its flexibility—when it suits that Government's objectives, of course—and those too contradict the Executive's statements.
I say to the Executive: publish the legal advice and let us see it. Let us see the colour of its money, let us see whether it will back up its statements on local government workers' pension rights with action and let us see the value of its proposals, because that is the crucial consideration.