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CPI/RPI Pensions Uprating

I join hon. Members in congratulating the hon. Member for Hayes and Harlington (John McDonnell) and the Backbench Business Committee on bringing this important issue before the House. It affects a large number of our constituents, which is why I am more than happy to debate it for the seventh time in this House, both in Committee and in the Chamber. I also join the hon. Gentleman in sending our good wishes to the Chair of the Work and Pensions Committee, who co-sponsored the motion, but is unfortunately unable to be with us today following a fall. We wish her well with her recovery. There are two sets of issues for us to consider today: the right measure of inflation for uprating pensions, and the impact of the changes that have been made. They are two separate issues. The first concerns the fact that each year we have systems in place to recognise that the cost of living goes up and that we need to measure that increase so that we can keep people's living standards from falling owing to inflation. The measure of inflation historically used has been the retail prices index. As for what has happened, in the summer of 2010 the Chancellor of the Exchequer indicated that the Government would use the consumer prices index for uprating benefits, tax credits and additional state pensions—and, through the statutory link therefore, public sector pensions. The Department for Work and Pensions had to make a judgment on whether we would impose the consumer prices index on private sector pensions. To return to the point that I made in an intervention on the hon. Member for Bolton North East (Mr Crausby), I want to make it clear to the House that if somebody was saving in a pension with the retail prices index in their scheme rules, they have lost nothing. We had to judge whether to use a statutory override to allow those schemes to rewrite their scheme rules. We decided not to do that, because we believe in pension promises. In other words, people who saved in a private pension in the expectation and belief that their scheme rules did indeed say ““retail prices index”” will get a pension revalued where they said ““revaluation””—and indexed where they said ““indexation””—by RPI. The question of whether the changes are retrospective is an important one. For example, a public sector worker did indeed have a right to indexed pension, and they still do. The right to that indexed pension is crystallised when they retire and is indexed every year by the measure of inflation that the Secretary of State of the day believes prices increased by the previous year. I entirely accept the point that some of the scheme literature did not always say that. However, let me quote the High Court judges who looked into what the scheme rules said:"““No reasonable reader of this material could have thought that this index””—" that is, RPI—"““would be used for up-rating purposes whatever the changes to it that might develop or whatever schemes for measuring price inflation might emerge in the future.””" Therefore, the High Court judges, who have been referred to in this debate, did not find that to be a criticism, and the trade unions that have appealed against the High Court judges have not appealed on that point. Although we absolutely want scheme literature to be as accurate as possible, the scheme rules are what give people the right. The scheme rules in the public sector gave people a statutory right to a link with whatever we were doing with additional pensions, and we have kept that right—we have kept that promise. My right hon. Friend the Member for Runnymede and Weybridge (Mr Hammond) was quoted—I think by the shadow Pensions Minister—as saying that pensions indexation should be honoured, and indeed it should, in line with the rules of the scheme. That is what people sign up to, and that is what we have honoured.