Public Service Pensions: Government Contributions

Jim Shannon Excerpts

Wednesday 19th December 2018 Westminster Hall

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

I beg to move,

That this House has considered the reduction in Government contributions to public service pensions.

It is a pleasure to serve under your chairmanship, Sir Christopher. This debate is important to highlight the impact, across the public sector, of the reduction in Government pension contributions.

The Government are implementing a further reduction in the discount rate for public service pension schemes from 2.8% to 2.4%, which will take effect in 2019-20. Clearly, the reduction in Government contributions to public sector pensions is going to increase the strain across the public sector. Although the changes will have an impact across public services, for the purpose of the debate I will focus mainly on the police and fire services.

The reduction in Government contributions to public sector pensions will clearly add further strain to our frontline services, which have faced huge financial challenges, following eight years of Tory austerity. By 2021, police services will be expected to find around £420 million in order to set a balanced budget—that could mean losing a further 10,000 police officers. The change is also estimated to cost fire services £150 million by 2023, which is roughly equivalent to the cost of running 150 fire stations for a year.

To provide a bit of background, in the 2016 Budget the Chancellor announced a discount rate reduction from 3% to 2.8%, with effect from April next year. The Treasury decided more recently, however, that a further reduction—to 2.4%—was required. In September 2018, the Government said that the Departments and devolved Administrations would need to meet, in full, the increase in costs in the 2016 Budget announcement. The Treasury has advised that public bodies will be supported in meeting unforeseen costs in the 2019-20 financial year, when the changes first take effect, but compensation beyond the first year cannot be guaranteed.

Public service providers would have to increase employer contributions to the Treasury with no guarantee that additional moneys would be compensated beyond 2019-20. If public bodies were not compensated for the increased contributions beyond the first year, that would mean an indirect spending cut. Affected employers will therefore be forced to make costly changes without any certainty that Government funding for frontline services will be proportionately increased in years to come.

[Jim Shannon (Strangford) (DUP)]

I thank the hon. Gentleman for giving way and for securing this important debate. Does he agree that although it is right and proper that NHS funding is ring-fenced until 2023-24, other frontline services, such as firefighters and the police, must also have the same protection as a matter of right, in recognition of the type of work that we call on them to carry out—to protect and serve?

[Gerald Jones]

I agree. All our emergency services do important work on our behalf, and that work needs investment. They cannot do that important work while worrying about how they are going to fund it.

There are significant concerns that the Treasury has introduced the changes as back-door spending cuts for already tightly squeezed public bodies and those delivering public services. In 2016, the trade union for senior civil servants, the FDA, said:

“It’s only three months since departmental budgets were set and yet departments are now expected to deliver an additional £3.5bn of savings in 2019/20 through another efficiency review…By announcing a change to the discount rate on public sector pensions—without any consultation—they are effectively removing a further £2 billion from public services and transferring it to the Treasury to give the illusion of a surplus”.