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Standing Orders etc. (Machinery of Government Changes)

[Relevant documents: The Fourth Special Report from the Innovation, Universities, Science and Skills Committee, on the future of science scrutiny following the merger of DIUS and BERR, HC 662. ]

2.8 pm

The Parliamentary Secretary, Office of the Leader of the House of Commons (Barbara Keeley): I beg to move,

    Business, Innovation and Skills

    Department for Business, Innovation and Skills


    Science and Technology

    Government Office for Science


Mr. Deputy Speaker (Sir Michael Lord): With this we shall discuss the following: Motion 5— Parliamentary Pensions

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Amendment (a) , at end add

Barbara Keeley: On the machinery of Government changes, the House will be aware that when changes are made to the structure of Departments, a Government motion is needed to make the necessary consequential changes to the structure of departmental Select Committees. The motion therefore reflects the creation on 5 June of the new Department for Business, Innovation and Skills, which takes on the responsibilities of the former Departments for Business, Enterprise and Regulatory Reform and for Innovation, Universities and Skills. Shortly after the new Department was created, the Select Committee on Innovation, Universities, Science and Skills published a report recommending the re-establishment of a Select Committee on Science and Technology. That reflected the final recommendation of the former Science and Technology Committee, which was abolished in 2007, when the Department for Innovation, Universities and Skills was created.

My right hon. and learned Friend the Leader of the House received a letter in support of the proposal from the chief executives of the Royal Society of Chemistry, the Institute of Physics, the Institute of Biology and the Royal Academy of Engineering and from the executive secretary of the Royal Society. I am pleased to say that the Government accept the Committee’s recommendation. The motion provides for the re-establishment of a Science and Technology Committee as part of the family of departmental Select Committees and it has a remit to examine the expenditure, administration and policy of the Government Office for Science.

Dr. Brian Iddon (Bolton, South-East) (Lab): I am grateful to my hon. Friend for giving way so early in her speech and to the Government for having listened to the learned societies’ call to re-establish the Science and Technology Committee. It is being re-established today, however, as a departmental Select Committee, whereas it was a free-standing Committee before, with cross-cutting oversight of all Departments, including outside agencies. Will my hon. Friend confirm that, despite the Committee being set up today as a departmental Select Committee, it will still have the remit of the former Science and Technology Committee?

Barbara Keeley: I shall address in due course the good point that my hon. Friend has just made.

The motion and the steps to be taken reflect the position between 1992 and 2007, when the Science and Technology Committee was appointed to examine the work of the Office of Science and Technology, part of the old Department for Trade and Industry. The role of the Government Office for Science is somewhat narrower than that of the old Office of Science and Technology. Although the interpretation of the Committee’s terms of reference is a matter for the Committee itself, the Government hope that it will take a wide-ranging approach to its remit, examining the full scope of science policy and related matters across the Government. That approach certainly worked well for the old Committee, which
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conducted inquiries into subjects as diverse as evidence-based policy making, classification of illegal drugs, regulation of hybrid embryos and the work of the research councils.

There is an argument for establishing an explicitly cross-cutting Committee with its own Standing Order to examine such issues, and we are sympathetic to that idea, but at this stage in the Parliament, the new Committees can be expected to run for only seven months from October, so we think it right for us to revert to the old status quo, retaining the existing membership and chairmanship of the two Committees, but changing their titles and terms of reference.

Dr. Evan Harris (Oxford, West and Abingdon) (LD): Like the hon. Member for Bolton, South-East (Dr. Iddon), I am a former member of the Science and Technology Committee and a member of the current Innovation, Universities, Science and Skills Committee. I welcome what the Minister said, particularly her interpretation that it should be possible for the Committee to consider how science is dealt with across Government Departments. As she said, the focus on evidence-based policy making means that there is a role to play in scrutinising the Government carefully in respect of their treatment of evidence at large across Departments. That is one of the reasons why I welcome this motion today.

Barbara Keeley: That is another well-made point.

The Government will, of course, be happy to reconsider the position in the next Parliament if the Committee’s experience suggests that any change is needed.

Peter Luff (Mid-Worcestershire) (Con): As Chair of the soon-to-be Business, Innovation and Skills Committee, may I say how much we welcome the pragmatic approach adopted by the Government on this issue? I promise my Committee’s wholehearted and pragmatic support for the arrangements that the hon. Lady has outlined to the House this afternoon.

Barbara Keeley: I thank the hon. Gentleman.

The second motion concerns pensions. Public service pension schemes must be affordable and sustainable in the long term. The cost of the parliamentary pension scheme has risen, mainly because of increased longevity. Today we are considering changes to the scheme that will limit the impact of that increase on the taxpayer.

Barry Gardiner (Brent, North) (Lab): I entirely accept that the costs of the scheme should rise to reflect increased longevity. However, will the Minister explain the gearing effect of the three different regimes, which are based on accrual rates of one fortieth, one fiftieth and one sixtieth of final salary respectively? A Member would have to live for 3.54 years, 3.95 years and 4.76 years beyond retirement age to achieve the annual amount put in by the 5.9 per cent., 7.9 per cent. and 11.9 per cent. pensions respectively, given what their funds should have created in the meantime.

Barbara Keeley: My hon. Friend will not be surprised to learn that I cannot answer that off the top of my head. However, I will ensure that an answer to that specific question will reach him.

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Mr. Christopher Chope (Christchurch) (Con): As the Minister will know, the issue of increasing pension costs because of longevity also applies to the police pension scheme. Why in the case of the police pension scheme will the whole cost of longevity be borne by the taxpayer rather than by the contributions of the police themselves?

Barbara Keeley: If the hon. Gentleman waits for the rest of what I am going to say, he will see that issues need to be resolved and discussed, and that a wider debate needs to be had. This short debate is probably not the time for that. I am happy to take interventions, Mr. Deputy Speaker, but people will have time to make speeches this afternoon.

Sir Nicholas Winterton (Macclesfield) (Con): No doubt my hon. Friend the Member for Christchurch (Mr. Chope) will pursue the matter of the police pension. I had correspondence with the Minister’s predecessor, the hon. Member for Rhondda (Chris Bryant). She has replied on his behalf, confirming that the Treasury, as the employer of Members of Parliament, took a contribution holiday of 14 years from the parliamentary contributory pension scheme. The Minister confirmed that to me, but she did not say how much the taxpayer and the Treasury were saved as a result. How much has that holiday affected the deficit that the pension fund has recently faced?

Barbara Keeley: We can look at that issue in the wider debate as we go forward. However, as I have to keep emphasising, the key thing is not to go back in time. We are where we are in terms of the pension scheme. The real factor is that its cost is escalating because of longevity. There were both Labour and Conservative Governments between 1989 and 2003. The question was not about a pensions holiday, but about reducing the Exchequer contribution when there was a surplus. That situation does not pertain now. The key thing is for us to focus on the feelings of the public about their funding of our scheme. That is what I am really talking about today.

Barry Gardiner rose—

Sir John Butterfill (Bournemouth, West) (Con) rose—

Barbara Keeley: I am not going to take any more interventions at the moment. My speech is short, but it is important that I get through it. We have until 5 o’clock, and I really must make progress.

Sir Nicholas Winterton: My hon. Friend the Member for Bournemouth, West (Sir John Butterfill) is chair of the trustees of the parliamentary contributory pension fund.

Barbara Keeley: Indeed; there are Members with great expertise in the Chamber, and I am sure that they will make their contributions. However, it is important that I lay out the position.

The changes proposed in the motion before the House will cap the Exchequer contribution in line with the resolution of the House in January 2008. On 24 January 2008, the House endorsed the recommendation of the Senior Salaries Review Body that the cost to the Exchequer of the accrual of benefits should be limited to 20 per cent. of payroll. That figure excludes payments to pay off the deficit identified in the 2005 valuation of the fund; the two elements have been treated separately.

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The Government Actuary published his valuation of the scheme in March 2009, and he advised that the Exchequer contribution would need to increase from 26.8 per cent. to 31.6 per cent. of payroll if no other action was taken. As I mentioned, that is primarily because members of the scheme are living longer and pensions are therefore payable for longer. On 31 March this year, my right hon. and learned Friend the Leader of the House announced in a written statement that the Exchequer contribution would be capped at 28.7 per cent. of payroll. That was in line with the recommendation of the Senior Salaries Review Body, as already endorsed by the House. My right hon. and learned Friend proposed a set of changes that would make the necessary savings of 2.9 per cent. of payroll, and proposed that those be backdated to 1 April 2009.

The changes consist, first, of an increase in member contribution rates, which will yield a saving of 1.7 per cent. of payroll. Secondly, the scheme’s maximum pension limit of two thirds of final salary is to be applied to all scheme members in future. That change will yield savings of 1.2 per cent. of payroll. The increase in member contribution rates will mean that scheme members will have a choice of paying 11.9 per cent. of salary for an accrual rate of one fortieth; 7.9 per cent. for an accrual rate of one fiftieth; or 5.9 per cent. for the new accrual rate of one sixtieth, which is coming in shortly. All those are laid out in the motion.

The other proposed change will mean that, from 1 April 2009, no member of the scheme will be able to build up further benefits in excess of the two-thirds limit. Only a small number of scheme members can currently do so. It is important to make the point that, on average, an MP in the House serves just over 12 years. The motion therefore brings forward the interim measures necessary to cap the Exchequer contribution immediately, in line with the January 2008 resolution of the House.

Sir Nicholas Winterton: The Minister has just mentioned a matter that has an impact on me, so I declare that interest.

Will it be worth while for an MP over the age of 65, who has reached the maximum two thirds of final salary, to continue to contribute to the scheme, or will they in fact be making a contribution for no return? If there are to be limited returns, what will they be?

Barbara Keeley: The point is to set a limit so that people in that situation will not be able to accrue further benefits. The vast bulk of members of the scheme are those who have entered the House newly or in the past couple of Parliaments. The average service of an MP is just over 12 years, so as I have said, only a small number of members of the scheme are in that situation. [Interruption.] I can get the hon. Gentleman a detailed answer to his question, but we are getting into a lot of detail, whereas I am laying out general principles. As I have said, the motion brings forward the interim measures necessary to cap the Exchequer contribution immediately, in line with the January 2008 resolution of the House.

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