John Swinney attacks UK government over public-sector pension reform

Published on Wednesday 22 June 2011 19:00

FINANCE secretary John Swinney yesterday condemned UK government plans to claw back a £9 billion pension deficit by increasing the contributions made by public sector workers.

He urged the Westminster government to reconsider its plans to make better-paid staff put an extra 3.2 per cent of their earnings into their pension schemes, arguing that UK ministers were taking the wrong approach.

Mr Swinney argued that increasing contributions would put more pressure on hard-pressed households but declined to say what level of contribution the SNP believed ought to be made by public sector workers to plug the pensions gap.

The Conservatives and Liberal Democrats accused the finance secretary of "shirking" the issue and postponing difficult decisions.

Mr Swinney criticised the UK government while making a statement to Holyrood on its pension reforms, which have led to threats of large-scale industrial action by public sector unions. But he did not believe there was a case for industrial action while negotiations were taking place.

The reforms were launched by the UK government after a report by the Office of Budget Responsibility forecast that the gap between the money coming in and the benefits being paid out would more than double to 9bn in the next four years.

The coalition has proposed that public sector workers retire in future at 66, which would mean up to six years longer in the workplace for some employees. Under the reforms, better-paid staff would also have to pay up to an extra 3.2 per cent of their earnings into their public sector pension schemes in 2014.

Mr Swinney told MSPs: "At a time of a public-sector pay freeze, rising inflation, increases in National Insurance contributions, higher VAT and significant rises in fuel prices, and at a time when consumer confidence is low and we need to kick-start the economy, we believe that it is wrong to require employees to increase their pension contributions.

"We think it is a short-term policy primarily geared towards deficit reduction that will have significant and negative implications on the long-term retirement provision of some of the lowest-paid individuals in our society."

He added that the devolution settlement meant there were "constraints on our ability to develop and apply our own solutions in Scotland".

Control over civil service pensions is entirely reserved to Westminster. Occupational pensions policy is also reserved. Scottish ministers have power over NHS, teachers', local government, police and firefighters' pension schemes - although changes to NHS and teachers' schemes require Treasury consent.

Conservative MSP Gavin Brown asked Mr Swinney to set out what level of contribution he would support. Mr Brown said: "We know the Scottish Government don't like that average rate to be 3.2 per cent, but what do they think it should be? Are they going to argue that should be zero? Do they think it should be somewhere between zero and 3.2 per cent? I think we deserve to know."Mr Swinney said the level should be negotiated between unions and government.

But Lib Dem leader Willie Rennie said: "Mr Swinney said that he will not 'shirk consideration' of pension reform, but the rest of his statement was full-on shirk."