---

Pensions Bill [HL]

My Lords, as a new Member of the House I am somewhat in awe of speaking against a very formidable lawyers’ lobby, although I am married to a solicitor. However, I am delighted to be the only person—it seems—to come to the assistance of my long-standing noble friend Lord McNally. I am reluctant to suggest that the esteemed noble and learned Lord, Lord Mackay, is the shop steward of judges, but I am less reluctant to hold back in respect of the noble and learned Lord, Lord Falconer, who has form in this respect. Despite the assurances of the noble and learned Lord, Lord Mackay, that judges are not outside the tax system, noble Lords on this side of the Committee will remember the noble and learned Lord, Lord Falconer, defending judges being a special case in not having the tax-free limit imposed on their pension funds. The judges’ pension scheme is very generous. The formula is 20 out of 40 contributions: a judge on £170,000 will get a pension of £85,000 after 20 years’ contributions. This is on top of the provision that they will have made earlier in their careers. Most critically, the value of the contribution paid by the state is 32.6 per cent. At Second Reading, two arguments were used against changing this very generous benefit. The first argument, put by the noble and learned Lord, Lord Mackay, was that we will undermine the excellence of our judicial system. I am sure that nobody wants that. The second argument, which has been emphasised today, is that we will break the spirit of the legislation that says that any salary payable to judges may be increased but never reduced. I would like to deal with both these arguments. Nobody in this House would want to undermine the excellence of our judiciary. However, by accepting that the change can be applied to new judges, the amendment would abandon that concern as it would defend only sitting judges. The fact is that everyone in the outside world is having their pension schemes adjusted as defined benefit schemes prove too expensive, too beneficial and simply not sustainable. It is not easy for anyone. I accept the argument that judges cannot go back, but many people who face the prospect of losing their defined benefit scheme if they move jobs cannot go back either. There is a strong argument there. Barristers 20 years ago were dependent on Equitable Life for their pensions, and the current judges’ scheme must seem more attractive to aspiring judges. The man on the Clapham omnibus will find it perverse if judges are not required to make some adjustment to the cost of their increasingly generous relative pension scheme, provided that everyone else in the public sector is doing so and they are doing it because they want to retain their defined benefit scheme. We know how defined benefit schemes have ended, and not only for new entrants in the private sector; many in existing schemes have lost them in mid-career. This was really the whole point of the Hutton report. An argument that has not been put, although I accept that other arguments have been put forward, is that we are making a PR gesture here. The argument has also been made that a lot of judges go into the profession because of their commitment to public service. I think that the standing of judges will be ridiculed if they are not prepared to accept some phased-in adjustment of their contributions. I turn to the argument that we cannot change the salaries or the benefits. During the course of someone being in the judges’ pension scheme over the 20 years that they can be in it, their benefit improves each year that they are in it. The increase in longevity over the 20 years means that, on average, at the end of it they will probably have three years’ more pension than they would have had when they went in. Those three years are worth about £12,200 a year, assuming an average pension of £85,000. Judges are entitled to be treated fairly and not to have the rules changed adversely against them; I think that that is what the noble and learned Lord, Lord Mackay, said at Second Reading. I maintain that it is not right to say that we are breaking the spirit of previous High Court legislation, because for people in these schemes the benefits are improving each year that they are in. By asking them to make a contribution, we are getting them to make a contribution towards the increased benefit that they are getting while they are in the scheme. The special pleading of highly paid groups cannot be accepted when we are asking for significant changes to be made for lower-paid staff; whether they are low-paid university teachers or local government cleaners, they are all having their pension schemes changed. One of the things that they are agreeing to, because it has been set out, is that they have to accept higher contributions, accept a higher pension age or have a partial move away from the defined benefit for existing members. We are not asking for anything more than some form of higher contribution, and that is reasonable. The terms of trade have changed. No lawyer can argue that contracts cannot be renegotiated if conditions change. You have to be very straight-faced and skilled to argue that the forces of change should not be appropriately applied when everyone else is being asked to face up to this new reality against the background of a national financial crisis, both in the state finances and in pensions.