Senior ministers are fighting to block plans for a huge improvement to MPs' generous pensions packages at taxpayers' expense.
Alistair Darling, the Secretary of State for Work and Pensions, and Andrew Smith, the Chief Secretary to the Treasury, are trying to ensure that MPs pay for any improvement to their pensions. There are fears of a public relations disaster for the Government at a time when final salary pension schemes are being axed.
Tony Blair is also thought to be concerned at the plans to improve MPs' pensions so they accumulate one-fortieth of their final salary towards their pension each year rather than one-fiftieth.
The change means MPs will be able to claim a full pension after just 27 years in Parliament, compared with 33 years as at present.
MPs voted for the change, with "additional cost to be borne by the exchequer" by 215 votes to 175 in July last year, despite the recommendations of the Senior Salaries Review Board, which argued against the increase.
Prominent Labour backbenchers who supported the move included Tony Banks, Gwyneth Dunwoody, Ann Clywd, Jean Corston, Frank Dobson, Bob Marshall-Andrews and Tony Lloyd.
Decisions on MPs' pay and conditions are traditionally made on a free vote of the House of Commons. But senior ministers believe a vote to offer a substantial increase in MPs' own pensions would be blamed on the Government.
Now ministers are tying to reverse the change before an order implementing it is laid before the House later this year. A senior Whitehall source said: "It is an issue we are dealing with."
Mr Darling and Mr Smith are thought to be involved in negotiations with Robin Cook, the Leader of the House of Commons, aimed at defusing the row.
John Butterfill, chairman of the Treasury, defended the proposal to make the taxpayer fund improved pensions yesterday, saying that MPs had the worst pension of any legislature in the Western world.
He admitted that "this is obviously not the best time to make this suggestion" but blamed the Government for the problems of final salary pension schemes across the country. There are a lot of ways in which our scheme is less generous than existing public-sector schemes.
"There is no other parliament in the Western democratic world that has an accumulation rate of more than one-fortieth, whereas ours remains one-fiftieth."
But Professor Steve Webb, the Liberal Democrat work and pensions spokesman, who voted against the boost to pensions, said: "There is a danger that it will reinforce the message that we are out of touch and not registering the interests of our constituents."
David Willetts, the shadow Secretary of State for Work and Pensions, abstained on the pensions vote in July, and said yesterday he did not favour increasing MPs' pensions.
He said: "I'm not opposed to people having a good pension, but the problem is that occupational pension schemes are closing and fewer and fewer people have the opportunity to enjoy the sort of pensions that MPs enjoy.
"Because of the burdens of tax and regulation that the Government has imposed on pension schemes, people's pensions are suffering. It's a free vote issue, but it will rebound on the Government because it will remind people of the tax it has imposed on pension funds."Reuse content