§ Mr. Bob Dunnasked the Prime Minister if she is satisfied that the value of index-linked pensions for public sector 286W employees is adequately taken into account in contributions and levels of pay.
§ The Prime MinisterArrangements in different parts of the public sector vary widely and I am not satisfied that the difficult problem of the value of index-linked pensions has been adequately considered in all of them.
I am therefore setting up an independent inquiry to consider and advise on how such pensions might be valued. Sir Bernard Scott has agreed to be chairman. Other members will be Sir Alex Jarratt, Professor Harold Rose, Mr. Robert E. Macdonald and Mr. Gavin Laird.
It is my hope that the inquiry can be completed within three or four months. I am sure it will want to consider representations both from those directly concerned and from others. It would then be for the Government and other public sector authorities to decide, in the light of the advice given, whether and what changes in present arrangements would be desirable. Any such changes would of course have to be considered by the managements and unions and staff associations concerned.
The full terms of reference will be as follows:
Having regard to the need to ensure that full account is taken in all areas of the public sector, whether by contributions or salary abatement, of the value of inflation-proofing of occupational pensions, and of relative job security; taking due account of arrangements in the private sector:
- (a) to consider the assumptions and methods used by the Government Actuary where he assesses the value of differences in inflation-proofing of occupational pensions;
- (b) to consider the relative degree of security in the full inflation-proofing enjoyed by public sector employees compared with those in the private sector, and the additional value to be placed upon it;
- (c) to consider how to assess the relative job security enjoyed by employees in the private and public sectors;
- (d) to report their findings and suggest what valuations or methods of valuation would be appropriate to take account of these factors in determining pay and other conditions of service. "
§ Mr. Lathamasked the Prime Minister whether she is satisfied with the current level of pay settlements in the public sector, particularly those which arise from review bodies or from the Clegg Commission; whether she will give an assurance that all such settlements will be financed within cash limits, involving 287W compulsory redundancies if necessary; if she will take steps to achieve a more modest level of public sector settlements in the next wage round; and whether she will make a statement.
§ The Prime MinisterThe present level of pay settlements across the whole economy is too high. The settlements in the public services which followed the previous Government's references to the Clegg Commission have reduced the level of public services the country can afford. The Government's response to the review body reports for the Armed Forces and doctors and dentists has already been made clear. So far as the treatment of the Armed Forces for cash limit purposes is concerned, I made it clear in my answer to the hon. Member for Bodmin (Mr. Hicks) on 29 April that we were considering the consequences of the review body's recommendations for cash limits and that an announcement would be made in due course. Otherwise it is our policy that all public sector pay settlements should be contained within cash limits.
As the Chancellor of the Exchequer said on 20 May in his speech to the Confederation of British Industry, inflation will be falling over the coming year and pay settlements must reflect this trend. This applies as much in the public as in the private sector. Public sector employees must recognise that lower increases are essential if we are to reduce inflation and avoid higher unemployment.