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Baroness Crawley: My Lords, I am delighted to be able to agree very much with the noble Baroness. There have been suggestions in the media and elsewhere that the Red Ensign is about to be replaced by the European Union flag. I hope that my original Answer has put paid to those rumours. We see neither need nor appropriateness in such a suggestion.
The noble Baroness is right that as sovereign flag carriers within the European Union there are important shipping issues where we can do a lot. That does not necessarily mean that we have to have more directives or more legislation. However, we can work together more effectively to keep standards high within the European Union for all our sovereign ships.
Lord Harrison: My Lords, does my noble friend agree that the Opposition's desire to keep the red flag flying here is consonant with their flagging interest in the European Union?
Baroness Crawley: Follow that, my Lords. The Red Ensign has been around for a very long time—since 1625, I think, or thereabouts; the date is a little uncertain. The careless language which the noble Baroness has picked up and quite rightly run with is not in fact in any proposal from the European Union—it is in the press release about the proposal from the European Union. Nowhere in the proposals on maritime safety—and we are not taking all of those on board anyway—is there one which says that there will have to be a European Union flag. That is in the press release. We cannot be responsible for careless talk in Commission press releases.
Lord Tebbit: My Lords, will the noble Baroness take it from me that her robust defence of the Red Ensign is reminiscent of the Prime Minister's robust defence of the British rebate?
Baroness Crawley: My Lords, we have kept the rebate.
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Lord Dykes : My Lords, taking us back onto dry land, I wonder whether there is not a strong case for the Government to encourage the use of the European Union flag alongside the Union flag on more and more public buildings in Britain in order to increase the enthusiasm.
Baroness Crawley: My Lords, the suggestion to have a European Union flag alongside the sovereign flags—in our case the Ensign—has been made a couple of times. It was made in the European Parliament in the early 1990s and I believe that a Spanish MEP has picked it up again recently. But it has never had any support, and neither will it this time.
Lord Clinton-Davis: My Lords, does my noble friend appreciate that gossip is not the best of designs? She stressed the importance of high qualities of seamanship. What is being done, first, to recruit more British seafarers than hitherto and, secondly, to ensure that those high qualities of seamanship are being adhered to?
Baroness Crawley: My Lords, my noble friend is right to raise this matter in that, during its highly successful presidency, the UK brokered an agreed Council conclusion reviving EU maritime employment and promoting the attractiveness of seafaring as a career.
Lord Hanningfield: My Lords, we have talked a lot about the Red Ensign. Could not the Minister do something to encourage its further use? I gather that now only about 20 per cent of the UK-owned fleet fly the Red Ensign whereas a few years ago the figure used to be 100 per cent. They all fly flags from other countries. Cannot the Government do more to promote the Red Ensign?
Baroness Crawley: My Lords, I shall certainly take that on board.
Viscount Trenchard: My Lords, can the Minister also say what the Government's policy is on flying the EU flag at British missions abroad? On calling on the British Ambassador in Tokyo in December, I was struck to observe the EU flag flying from the flagpole outside his residence. Does the Minister not agree that that gives the impression that Her Majesty's Ambassador represents EU rather than British interests?
Baroness Crawley: My Lords, I do not agree with the noble Viscount; I do not think that it gives that impression at all. I believe that flying the flag in missions is simply a recognition that we are members of the European Union. My briefing is to do with the sea rather than dry land.
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Public Sector Pensions
2.52 pm
Lord Sheldon asked Her Majesty's Government:
What estimate has been made of the liabilities of public sector pension schemes as at 31 March 2005.
Lord McKenzie of Luton: My Lords, the unfunded public service pension liability as at 31 March 2004 was estimated to be £460 billion. HM Treasury will publish a new estimate when all pension scheme resource accounts for 2004–05 have been audited and published. At the last reporting date, the liabilities of local government pension schemes across the UK were around £120 billion with assets of around £90 billion.
Lord Sheldon: My Lords, I thank my noble friend for that reply, but as life expectancy is likely to increase rather more than the proposed increases in the ages of retirement, how are the liabilities of the pension schemes going to be met?
Lord McKenzie of Luton: My Lords, my noble friend touches on a very relevant point. It is clearly important that the public sector pension liability is kept under control and close surveillance, particularly bearing in mind that something like 8 million current and former public servants are covered by these schemes. But the key measure of affordability is the long-term sustainability of future cash expenditure. The long-term public finance report published alongside the PBR indicated that pensions are currently 1.5 per cent of GDP. On the projections, by 2050 they will be 2.1 per cent of GDP, which is perfectly sustainable.
Lord Peyton of Yeovil: My Lords, the blanket of an Answer which the noble Lord has given to his noble friend underrates the seriousness of the problem and also underrates the deserts of his noble friend, who deserves a much better Answer than he has had.
Lord McKenzie of Luton: My Lords, I am not sure whether there was a question in that, but I thought that the point about the long-term sustainability of public service pensions was dealt with absolutely as asked.
Baroness Noakes: My Lords, may I pursue the point made by my noble friend? The Minister gave figures as at March 2004—that is, £460 billion. Does he not agree that that figure is clearly out of date not only in terms of time but in terms of life expectancy assumptions and also in terms of the discount rate used in those calculations, which was wholly unrealistic for public sector liabilities? Does he not agree that the true figure is now well north of £700 billion?
Lord McKenzie of Luton: My Lords, as I indicated, when the full set of pension scheme accounts are published, as at 31 March 2005—I think there is one set to go, which should be laid before Parliament by the statutory deadline of 31 January—these matters will be updated. In respect of those pension scheme
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accounts that have been laid, the notes to these accounts made it clear that FRS assumptions are being used, and that the discount rate from 1 April 2005 onwards would be 2.8 per cent. We act on the basis of best advice from the government actuary.
Lord Newby: My Lords, the Minister said in his first answer that it was very important that public sector pensions as a whole should be kept under control. Does he acknowledge that it is important that all parts of the public sector are treated equally in keeping public sector pensions under control? Will he ensure, in going forward in that, that no category of public servants—for example, the judiciary—get special beneficial treatment?
Lord McKenzie of Luton: My Lords, it is important that all public servants are treated fairly and appropriately. Beyond that, I hesitate to go into particular matters.
Lord Forsyth of Drumlean: My Lords, given that the private sector is being required, quite rightly, to take account of its future liabilities as regards pensions obligations in its accounts, is it not time that the Government took this rather more seriously, not just in respect of the unfunded liabilities—which could be enormous, depending on the assumptions made about inflation—but also in respect of the truly enormous increase in off-balance-sheet funding through PFI and other schemes? The Chancellor does not take account of those in looking at his future liabilities, which he is already unable to meet.
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