Taxpayers to boost MPs' pension fund

Geoff Hoon announces increase in Treasury contribution to MPs' pensions

Friday, 31, Mar 2006 12:00

The government was accused of hypocrisy last night after announcing that taxpayers would have to cover a major shortfall in MPs' pension fund.

Treasury contributions will increase from 24 per cent to 26.8 per cent to cover a near doubling in the fund deficit from £25.2 million on 2002 to £49.5 million this year.

Leader of the House Geoff Hoon made the announcement in a written statement on the last day before MPs retired for Easter recess yesterday, and said the fund had been caused by "lower than expected" investment returns and because people were living longer.

He insisted, however, that the decision was based on recommendations made by the government actuary, which ministers were obliged to implement.

The announcement comes just weeks after ministers rejected the parliamentary ombudsman's call for it to compensate thousands of workers who lost their pensions partly on the basis of inaccurate, unclear and inconsistent government information.

It also came on the day that ministers promised to press ahead with plans to scrap a rule that allow existing local government workers to retire at 60 – plans that prompted almost a million employees to come out on strike on Tuesday.

Unison general secretary Dave Prentis said the move to scrap the so-called rule of 85 was "provocative, premature and unnecessary", and a further round of strikes by council workers are expected at the end of this month.

Last night, the Taxpayer's Alliance said Mr Hoon's announcement was evidence of "total hypocrisy", with chief executive Matthew Elliot saying: "MPs can't criticise public sector strikes and then use taxpayers' money to top up their own pension schemes."

Liberal Democrat work and pensions spokesman David Laws said the Treasury's contribution to MPs pensions was "way in excess of almost all employers in the private sector" and set a bad example.

"There must be an independent review of all public sector pension schemes. MPs should then set a proper example by reforming our very generous scheme, before asking other paid workers to do so," he said.

Mr Hoon's statement was followed by the announcement that MPs and ministers are to have a pay rise of two per cent, staggered so that one per cent will be paid from this weekend, and the remainder from November 2006.

This will mean the basic pay of an MP will increase from £59,095 to £60,277 in November, cabinet ministers' salaries will rise from £133,997 to £136,677, and Tony Blair's pay will rise from £183,932 to £187,610.