House of Lords Votes to Undermine Public Service Pension Schemes
Prospect is urging MPs to overturn a House of Lords amendment that breaks promises about public service pension reform and threatens the future of these schemes.
On 23 March, Conservative and Liberal Democrats Lords supported an amendment to the Pension Schemes Bill that would require the government to publish a review of the affordability and fiscal sustainability of unfunded public service pension schemes.
While a review may seem innocuous, subsequent reporting by the Telegraph about how “Gold-plated public sector pensions could be reduced as early as next year after peers demanded a review into their fairness to taxpayers” gave the real game away.
It is particularly disappointing that the parties behind this amendment had both previously given scheme public sector workers a 25-year guarantee that no further reforms would be needed.
The then Chief Secretary to the Treasury, Danny Alexander, said, “If reform along these lines is agreed, I believe that we will have a deal that can endure for at least 25 years and hopefully longer.”
In any event, all the information that the amendment calls for, and proof that these reformed schemes are already fiscally sustainable, is already in the public domain.
The OBR’s latest long-term projections show that the cost of these schemes will fall from 1.9% of GDP in 2023/24 to 1.4% of GDP in 2073/74.
The debate on this amendment in the House of Lords demonstrated the widespread misunderstanding of, and hostility to, these schemes amongst some parties (particularly, it must be said, amongst Conservative peers).
Many Lords believed these schemes were becoming increasingly unaffordable and that this was intergenerationally unfair. But the opposite is true, future generations will pay less for these schemes (as a percentage of their earnings) than today.
One Conservative peer even went as far to say that further reform, breaking the 25-year guarantee the Coalition government had given, was necessary to avoid a situation like in Greece where the government could not even afford to pay retired members.
The Bill returns to the House of Commons on 15 April and Prospect is lobbying MPs and Lords to oppose the proposed review and to drop it from the Bill.
