Lord Davies of Brixton (Lab)

I am glad that we are having this debate now, but only as a taster for a proper debate at a proper time—I am quite surprised that the clerks accepted this amendment as being within the scope of the Bill. I have no objection to a debate on public service pensions; I encourage one. I feel totally comfortable with having a debate on public service pensions, because I think they are eminently defendable. I accept very little of what the noble Lord has said, and the doom and the gloom that has been expressed, and a proper opportunity to have that debate would be very welcome, but I shall focus on the need for a review. Of course, as we have been told, my noble friend Lord Hutton of Furness undertook an independent review of public service pensions in 2010-11. That review was established by the coalition Government; they set it up, they accepted its recommendations and they gave a guarantee. In a Written Statement on 20 December 2011 about Civil Service pension arrangements, the noble Lord, Lord Maude of Horsham, who was then an MP and Minister for the Cabinet Office, gave “a guarantee, outside of the scheme designs parameters”— that is what the benefits were— “of no further reform for the next 25 years” I do not know what people think a guarantee means, but to me it means no more changes for 25 years. Of course, the Statement was repeated in your Lordships’ House and the noble Lord, Lord Wallace of Saltaire, repeating the Statement, also gave a guarantee for the next 25 years. I mentioned to both noble Lords that I would be quoting their words in this debate, and it would be worth asking them what they think the word “guarantee” means. A guarantee was given to public service workers as part of their terms and conditions of employment. It was not just a policy objective; it was part of their terms and conditions of employment. I think that to make changes without breaking the guarantee would be an extremely bad approach to the settlement. I agree with very little of what was said criticising public service pensions, but I think there is a need specifically to understand the arrangements. First, retirement age will increase in line with state pension age. That is an adjustment mechanism. The more important adjustment mechanism is that there is a cap on employer costs, and it is members who stand the risk of having their benefits cut if the cost escalates. None of that was reflected in the remarks made so far. That cap, as has been explained, is calculated using a discount rate, and that discount rate is determined in a way that adjusts for economic changes. As mentioned, a higher discount rate reduces the cost of future benefits. At the same time, a lower discount rate increases the cost of benefits. If the cost of benefits increases, as part of the settlement that was reached, members’ benefits have to be cut or their contributions increased. That is the nature of the settlement that was reached in 2011. I think it is totally wrong to mislead the Committee about the nature of the deal that was done. Am I allowed to say “mislead”?