Lib Dems force government climbdown on MPs' pension increases

by Stephen Tall on June 25, 2009

As the BBC reports:

Plans to raise taxpayers’ contributions to MPs’ pensions have been dropped, ahead of a Commons debate. A planned increase had been accepted by all parties in March but the government now says it will accept a Lib Dem plan to freeze the amount from public funds.

The proposal would have seen MPs’ own contributions rise by £60 a month, but the Lib Dems said taxpayers would have paid £750,000 more than last year. All party leaders have indicated that MPs’ final salary schemes must end.

The cost to the Treasury of MPs’ pensions has risen from £9.8m in 2003 to £12m last year. Over that period, MPs themselves were asked to contribute only an extra £700,000.

The Lib Dems’ shadow work and pensions secretary Steve Webb led the party’s charge against Labour’s plans:

Until we have proposals for long-term reform, we simply cannot ask the taxpayer to make an increased contribution this year. The system of MPs’ pensions clearly needs an overhaul, and the report later this year of the Senior Salaries Review Body should set out a way forward.

“With millions of people facing economic hardship and worries about their own pensions, it is quite wrong to ask them to do more to contribute to MPs’ already very generous pensions.”

For those who like to do the math themselves, by the way, the party issued the following ‘notes to editors’ to explain the position. Well, this editor has failed to quite grasp them, so here they are unvarnished:

1. In 2008/09, Exchequer contribution to MP Pensions was 18.1% for ongoing liabilities and 8.7% to clear the deficit from when the taxpayer took a ‘holiday’ on contributions.

2. In 2009/10 with no further action, the figures would rise to 23.1% + 8.5%.

3. Harriet Harman proposes capping the first figure at 20%, and that is what her motion would do, by increasing MP contributions by just over £60 net per month.

4. But this still leaves the taxpayer putting extra money in – nearly three quarters of a million pounds more this year compared with last. The Liberal Democrat amendment takes the total figure back to the 26.8% it was last year (compared with 28.5% which is the Government’s figure).

Update: Steve Webb has blogged the inside story of Downing Street’s pensions U-turn over at his The Webb Log.