Andrew Lansley attacked public sector pensions shake-up

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Health Secretary Andrew Lansley has privately attacked the Government's public sector pension shake-up, it was revealed today.

In a letter to Treasury Chief Secretary Danny Alexander, he condemned elements of the reforms as "inappropriate" and "unrealistic".

The changes would hit women health workers particularly hard, and do not meet the coalition's "commitment to maintain gold-standard pensions".

The damning critique, obtained by the Daily Telegraph, was penned two months ago after a paper describing the proposals was circulated to the Cabinet.

Mr Lansley's views are likely to be seized on by unions, who have threatened national strikes over the controversial issue in the autumn. Previously Tory ministers were thought to be supportive of the plans.

Under the reforms outlined by Liberal Democrat Mr Alexander last month, public sector workers will retire later, contribute more to pensions, and receive payouts based on average career earnings, rather than final salary.

The letter from the Health Secretary - who oversees Britain's biggest public sector employer - was sent two months ago.

Referring to the document distributed to ministers, he said: "The paper ... assumes that public sector workers, many of whom are women, will work a 48-year career (to get a full pension).

"In the NHS currently, the average full time career for those taking a pension is only 18 years and it seems unrealistic to suggest that pension scheme design should be based on the assumption that a predominantly female workforce would need to work full-time, 48-year careers in future to receive a full pension.

"It is also difficult to see how this meets our commitment to maintain gold-standard pensions."

Mr Lansley criticised other parts of the proposed reforms - drawn up following a Government report by former Labour minister Lord Hutton - for being particularly unfair to NHS workers.

Many health workers already pay more for their pensions than civil servants or other Government employees.

"We face a real risk, if we push too hard, of industrial action involving staff groups delivering key public services," he wrote.

"There is also the risk that lower-paid staff in particular will simply opt out, leaving HMT (HM Treasury) with reduced receipts in the short term while still having to pay for past pension promises.

"In the NHS, if it appears that we intend to significantly reduce the value of future accrual we also face the risk of opt-out from higher-paid groups as well as the lower paid. GPs for instance pay both employer and employee contributions and can choose to invest them elsewhere or take them as pay.

"This would create a significant fiscal pressure in the short to medium term and in respect of lower-paid staff who opt out would increase pressure on the social security budget in the longer term."

A technical part of Mr Lansley's argument suggests that the Government will actually reduce the amount of money it puts aside for workers' pensions - rather than simply limit the future increase in cost as had previously been thought.

The Health Secretary wrote: "These accrual rates (the amount people will earn in a pension for each year they work) imply a significant reduction in the employer contribution rate. This would result in a further substantial reduction in the value of the public sector reward package on top of the increase in employee contributions, the move to CPI (inflation) and the previous government's changes."

He added: "All the accrual rates modelled would result in lower employer contributions if employee contributions remained at the level set out in our plans."

With the proposals as they stood it was "difficult to see how a negotiated agreement could be reached with the trade unions", according to Mr Lansley.

"My concern is that we are hampered ... by not having reached an agreed position across Government on how we will respond to Hutton."

Mr Lansley's letter was sent at the height of the controversy over NHS reforms he had championed. Protests from Liberal Democrats and health experts were widely seen as having forced him into a climb-down on key elements of the package.

Shadow work and pensions secretary Liam Byrne told the Telegraph: "We now know that there is a deep split at the heart of Government on these pension negotiations.

"People will want to know why Andrew Lansley has sat on his hands when he secretly believes that other Cabinet ministers are seeking a head-on confrontation with public sector workers. This is chaotic and reckless government."

A Department of Health spokesman said: "Things have moved on since this was written.

"Last month the Chief Secretary set out the Government's commitment to protect the low paid and ensure low and middle income earners get a pension at retirement broadly as good as they get now.

"And less than ten days ago the whole of Cabinet signed up to the need for pension reform and agreed to further talks taking place on a scheme by scheme basis."

"The Government is committed to public service pensions remaining among the very best available. But people are living longer, which means pensions are costing taxpayers more. So It is only fair that public service workers pay more towards them."

TUC general secretary Brendan Barber said: "This is a letter that could have been written by any of the union negotiators.

"Mr Lansley endorses almost every point the unions have made. He confirms that the Government is grabbing money from public sector workers to pay down a deficit they did nothing to create, even at a time when their pay is frozen for two years and many are facing job losses.

"Most tellingly, he says the Government is trying to take so much out of public sector pensions and impose so many extra costs on workers that there is a very real danger that staff will simply opt out of their pensions.

"This would have the perverse consequence of making the deficit worse, as the Government will still have to pay current pensions but will get no benefit from the contributions of those who leave their schemes."

PA