Police Pensions (Hansard, 24 February 2003)

§ 1. Mr. Tim Boswell (Daventry)
If he will make a statement on the cost of police pensions. [98756]

§ The Minister for Policing, Crime Reduction and Community Safety (Mr. John Denham)
Forces in England and Wales estimate that their police pension bill for 2002–03 will be around £1.2 billion. That has been matched by the £1.26 billion allocated for pensions in the total funding formula. However, the Government are aware that pension costs cause police authorities concern, and we are reviewing the way in which pensions are financed and whether the scheme could be modernised for future entrants.

§ Mr. Boswell
I thank the Minister for that response. I acknowledge that Northamptonshire's settlement this year is less ungenerous than some recent settlements. 2 Does he accept, therefore, that it is disturbing that the police authority has had to put up its precept by more than 25 per cent. for the second successive year? The chief constable has said that a major contributory factor has been the cost of police pensions. Will the Minister assure the House of some future relief from this treadmill for hard-pressed council tax payers?

§ Mr. Denham
We recognise that pension costs are a concern, but they represent the lifetime service of police officers in previous years, and we must honour that commitment. We should not reward forces—Northamptonshire is not one of them—that have been slack in their handling of early medical retirements in years past.
The hon. Gentleman referred to precepts. Northamptonshire has chosen to employ additional police officers and community support officers over and above the increase in officer numbers funded centrally. It is for the police authority to decide what should be done to meet the needs of its local community. I hope that the hon. Gentleman will support his authority in doing that.

§ Mr. David Kidney (Stafford)
The Government's pensions Green Paper makes many constructive statements about funded pension schemes. Why should there not be a fully funded police pension fund over time?

§ Mr. Denham
If we were overnight to replace the existing pay-as-you-go pension scheme with a funded scheme, the Government would have to find about £25 billion to establish that. I suspect that Members would feel that there were more immediate policing priorities to which such money should be devoted.

§ Mr. Elfyn Llwyd (Meirionnydd Nant Conwy)
Further to the question put by the hon. Member for Daventry (Mr. Boswell), is it not correct that between 50 and 60 per cent. of any annual allocation to police 3 authorities goes straight into pensions and salary increases that have been centrally agreed? Is not it time to review the whole position? There is a huge burden on council tax payers, and it is disingenuous of the Government to talk about percentage increases when most of the money goes overnight.

§ Mr. Denham
I remind the hon. Gentleman that the Government have put more money into the system through the funding formula for police pensions than the total cost that we estimate was paid out on police pensions or will be paid out this year. There are two problems. The first is how individual forces could be better protected from short-term fluctuations in pensions if, for example, a large number of officers were all to retire in the same financial year. The second is to ensure that forces continue to bear down on unwarranted early ill-health retirement, which adds significantly to pensions bills and to the costs on local people.

§ Mr. Lindsay Hoyle (Chorley)
Obviously, my right hon. Friend will be aware that council tax payers in Lancashire and in many of the northern police forces are subsidising police forces in the south because of the ceilings and floors on increases. Money is trapped, that is the problem. Will he hold discussions with other Departments to ensure that we get the funding that we should be allocated, instead of having to subsidise the south.

§ Mr. Denham
In introducing the new funding formula, we have tried to be fair to all forces. That is why there is a ceiling on increases of 4.9 per cent. and a floor that ensures that no one gets less than 3 per cent., which is above inflation. We should not forget the background to this issue, which is that the police service received a 10 per cent. increase in funding in 2001–02 and a 7 per cent. increase for 2002–03, and had an overall rise of 6.2 per cent. in the coming year, and a 16 per cent. increase in the current spending review settlement. Whatever the detail of the formula, no one can claim that the Government are not putting significant extra resources into the police service. That is why we have record numbers of police officers, and those numbers will continue to rise.